This paper reconstructs the income – expenditure (IE) model to include a distinction between government purchases of output versus government production. The distinction has important consequences for output and employment multipliers. The paper also extends the IE model to incorporate a government job guarantee program (JGP), and the extended model illuminates the automatic stabilizer properties of a JGP. The model is then extended to include Kaleckian income distribution effects. That generates a novel Kaleckian balanced budget multiplier driven by changed composition of government spending. The paper concludes with some economic and political economy concerns about a JGP that are flagged by the model.
Archive for the ‘U.S. Policy’ Category
Government Spending in the Income-Expenditure Model: Spending Composition, the Multiplier, and Job Guarantee Programs
Friday, September 14th, 2018Three Globalizations, Not Two: Rethinking the History and Economics of Trade and Globalization
Tuesday, July 24th, 2018The conventional wisdom is there have been two globalizations in the modern era. The first began around 1870 and ended in 1914. The second began in 1945 and is still underway. This paper challenges that view and argues there have been three globalizations, not two. The first half of the paper provides empirical evidence for the three globalizations hypothesis. The second half discusses its analytical implications. The Victorian first globalization and Keynesian era second globalization were driven by gains from trade, and those gains increased industrialized country real wages. The neoliberal third globalization has been driven by industrial reorganization motivated by distributional conflict. Trade theory does not explain the third globalization; capital’s share has increased at the expense of labor’s; and there can be no presumption of mutually beneficial country gains from the third globalization.
Globalization Checkmated? Political and Geopolitical Contradictions Coming Home to Roost
Tuesday, July 24th, 2018The deepening of economic globalization appears to have ground to a halt and the process may even unravel a little. The sudden stop has surprised economists, whose belief in globalization has strong parallels with Fukuyama’s (1989) flawed end of history hypothesis. The paper presents a simple analytic model that shows how economic globalization has triggered political and geopolitical contradictions. For the system to work, politics within countries and geopolitics across blocs must be supportive of the system. That is missing. The model is applied to a global economic core consisting of the US, China, and the European Union. It is revealing of multiple tensions, fracture lines, and contradictions. Within the US, globalization has delivered economic outcomes that have estranged the electoral bases of both major political parties. It has also delivered outcomes that are inconsistent with the US neocon geopolitical inclination. President Trump is a product of those forces, and he will likely prove to be a historically significant figure. That is because he has surfaced geopolitical contradictions that cannot be swept back under the rug. Ironically, his biggest impact may be on the European Union, particularly Germany, which is being compelled to recognize the neocon nature of the US and the vulnerabilities of dependence on US exports and technology. China was already aware of its vulnerabilities in those regards.
Modern Money Theory (MMT) vs. Structural Keynesianism
Friday, April 6th, 2018A journalist sent me some questions about MMT. My answers are below.
1. What are the major flaws you see within Modern Monetary Theory?
(A) I like to say that MMT is a mix of “old” and “new” ideas. The old ideas are well known among Keynesian economists and are correct, but the new ideas are either misleading or wrong.
The essential old idea, which everybody knows, is government has the power to issue money. We used to talk of “printing” money. In today’s electronic world we talk about “keystroke” money created by electronic credit entries.
Everyone knows that because government has the capacity to create money, it can always pay its bills and debts by printing money. But having the capacity is not the same thing as saying it should, which is the beginning of where MMT goes astray. (more…)
Is the US hypocritical to Criticize Russian Election Meddling?
Monday, March 26th, 2018Thomas Carothers has recently written an article in Foreign Affairs, the prestigious elite journal published by the US based Council on Foreign Relations. The article asks is the US hypocritical for criticizing Russian election meddling?
Given the place of publication, the unsurprising conclusion is it is not. The problem is the US is a champion meddler. Consequently, the argument crumbles every time Mr. Carothers reaches for substance. READ MORE
Re-theorizing the Welfare State and the Political Economy of Neoliberalism’s War Against It
Monday, February 26th, 2018This paper seeks to frame neoliberalism’s relation to the welfare state. At issue are competing views regarding the size and organization of the welfare state. The paper presents a new theoretical framework that distinguishes between modes of production and financing of the welfare estate. The framework helps understand both comparative country welfare states and the goals of the neoliberal attempt to refashion the welfare state. The paper then explores the political economy strategy behind the neoliberal campaign. It argues neoliberalism seeks to politically discredit the traditional welfare state and change the economic structure so that the latter becomes unviable. READ MORE
Trump and the Neocons: Doing the Unilateralist Waltz
Monday, May 29th, 2017The neocon factor dramatically changes the interpretation of the Trump administration’s unilateralist international economic policy chatter.
Donald Trump’s first one hundred days have revealed his inclination for unilateralism in international relations. That inclination reflects his opportunistic and bullying disposition, and it also fits well with his anti-globalization pose.
Trump’s unilateralism has also spawned a dangerous waltz with Washington’s neocon establishment. The opportunistic Trump looks to gain establishment support, while the neocon establishment looks to the opportunist-in-chief to implement its own unilateralist view of the world.
The waltz is clearly visible in recent military actions, but it also extends to international economic policy which is an area of budding neocon concern. A further twist is that neocon unilateralism can be exercised against both rivals and allies. Power is at the core of the neocon project, and power can be used to block rivals or bend allies. READ MORE.
The Real Reasons for Trump’s Anti-Globalization Circus
Wednesday, May 24th, 2017Trumponomics: How Trump skillfully used anti-globalization as bait to cover up his extremely neoliberal switch.
A key element of Trump’s political success has been his masquerade of being pro-worker, which includes posturing as being anti-globalization.
However, his true economic interests are the exact opposite. That creates conflict between Trump’s political and economic interests.
For political leaders around the world, understanding the calculus of that conflict is critical for understanding and predicting Trump’s economic policy, especially his international economic policy. [READ MORE]
Monetary Policy and the Punch Bowl: The Case for Quantitative Policy and Wage Growth Targeting
Friday, May 5th, 2017Federal Reserve Chairman William McChesney Martin famously declared that the Federal Reserve “is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.” This paper uses the punch bowl metaphor to analyze how the Federal Reserve can improve monetary policy so as to deliver shared prosperity with greater financial stability. The problem is the party starts earlier on Wall Street than Main Street, so the Fed may remove the punchbowl before the party reaches Main Street. Ensuring Main Street attends the party requires a new recipe for the punch, new serving rules, and a new punch master. Additionally, there is a deeper problem that the current neoliberal growth model has the economy addicted to monetary punch. Resolving that requires a cure that goes beyond the punch bowl.
READ MORE: Simple version here.
READ MORE: Technical version here.
Trumponomics:NeoconNeoliberalism Camouflaged with Anti-Globalization Circus
Thursday, April 20th, 2017A key element of Trump’s political success has been his masquerade of being pro-worker, which includes posturing as anti-globalization. However, his true economic interest is the exact opposite. That creates conflict between Trump’s political and economic interests. Understanding the calculus of that conflict is critical for understanding and predicting Trump’s economic policy, especially his international economic policy.
As part of maintaining his pro-worker masquerade, Trump will engage in an anti-globalization circus, but the bark will be worse than the bite because neoliberal globalization has increased corporate profits, in line with his economic interests.
Trump also expresses neocon unilateralist tendencies that play well with much of the US electorate. His neocon unilateralism is not a one-off temporary political aberration. Instead, it reflects intrinsic and enduring features of the current US polity. That has profound implications for the international relations order, and is something many Western European governments may not yet have digested.