This paper presents a new formulation of conflict inflation labeled the “pass-through” approach, which contrasts with the existing “pressure balance” approach. The model generates Phillips styled inflation – unemployment dynamics that are a hybrid of Keynesian and NAIRU dynamics. Conflict inflation arises when economic activity rises above the consistent claims activity level, and it is subject to self-propelled conflict accelerationism. Immediately below that level, inflation holds constant at the expected rate. At low activity, accelerating disinflation can develop. Worker militancy, corporate aggressiveness, negative supply shocks, and upward commodity price shocks all contribute to conflict inflation. They do so via two channels. First, they increase the intensity of conflict by increasing the degree of income claims inconsistency. Second, they lower the activity level at which conflict inflation kicks in. Policy can affect the consistent claims economic activity threshold at which conflict inflation kicks in. However, there may be adverse interaction effects with aggregate demand. Conflict inflation is best addressed by unconventional policies, such as incomes policy. Institutional developments in the Neoliberal era have likely reduced the relevance of conflict inflation.
Archive for the ‘Political Economy’ Category
Rethinking conflict inflation: the hybrid Keynesian – NAIRU character of the conflict Phillips curve
Thursday, April 11th, 2024Europe’s foreign policy has been hacked and the consequences are dire
Tuesday, February 13th, 2024Europe’s foreign policy has been hacked and captured by US Neocon interests. That capture poses a dire threat to both European democracy and global security. The threat to global security is because Europe is now captive in the US Neocon war on China and Russia. The threat to democracy comes from European voters gradually intuiting they have been sold out, which helps explain their turn against the political establishment.
The consequences of hacking are simple and dire, but exposing it is difficult. The status quo is privileged and there is resistance to acknowledging unpleasant facts. This essay presents those facts.
What is Neoconservatism and who are the Neocons?
The starting point is understanding Neoconservatism and the Neocons. The former is a US political doctrine which rose to ascendancy in the 1990s. It holds that never again shall there be a foreign power, like the former Soviet Union, which can challenge US global hegemony. The doctrine gives the US the right to impose its will anywhere in the world, which explains why the US has over 750 bases in 80 countries, ringing both Russia and China.
(more…)Israel’s genocide, US assistance, and consequences thereof
Monday, January 15th, 2024South Africa has now presented its charge of Israeli genocide in the International Court of Justice (ICJ), and Israel has presented its rebuttal. Regardless of the ultimate judgment, a page has been turned. Israel’s actions in Gaza, assisted by the US, have changed the geopolitical landscape. The consequences stand to be dire and lasting.
The case against Israel
The case against Israel is stark and simple. The argument in descending order of import is as follows.
First, and foremost, is Israel’s disproportionate response and application of collective punishment. Hamas is a criminal terrorist organization, not a state. Israel has a right to appropriate self-defense, but it has no right to kill vast swathes of non-combatant Palestinians as it tries to combat a criminal organization. The indiscriminate killing constitutes a war crime and crime against humanity. It becomes genocidal when paired with denial of means of survival.
(more…)The corruption of US foreign policy & weaponization of antisemitism
Tuesday, January 2nd, 2024Below are three brilliant articles and one interview that help understand geopolitics at the beginning of 2024. In my view, they should be read by anyone interested in the geopolitical situation & should be required reading for students of international relations and international political economy:
US Foreign Policy is a Scam Built on Corruption, Jeffrey Sachs, Common Dreams, December 26, 2023.
Two Cheers for Isolationism, Jeff Faux, The Nation, November 17, 2023.
Please share (or even tweet) these items.
The theory of monetary disorder: debt finance, existing assets, and the consequences of prolonged monetized budget deficits and ultra-easy monetary policy
Wednesday, November 1st, 2023This paper introduces the notion of monetary disorder. The underlying theory rests on a twin circuits view of the macro economy. The idea of monetary disorder has relevance for understanding the experience and consequences of the recent decade-long period of monetized large budget deficits and ultra-easy monetary policy. Current policy rests on Keynesian logic whereby a large fall in aggregate demand warrants robust offsetting monetary and fiscal policy actions. That logic neglects potential monetary disorder being bred within the financial circuit in the form of inflated asset prices and leveraged balance sheets. That disorder is likely to develop long before inflation accelerates so that inflation targeting fails to protect against it. Political factors increase the policy danger as the benefits of disorder are front-loaded and the costs backloaded. The paper concludes with a policy discussion regarding how to prevent Keynesian goods market counter-cyclical stabilization policy from causing monetary disorder.
The menace of the myth of General Pinochet’s Chilean economic miracle
Saturday, September 9th, 2023September 11, 2023, marks the fiftieth anniversary of General Pinochet’s military coup against Chilean President Salvador Allende. While it is now widely recognized that Pinochet authorized large-scale human rights abuses, there is an accompanying narrative that he also unleashed an economic miracle via embrace of Milton Friedman’s “Chicago Boys” vision of a market economy.
The “Pinochet economic miracle” narrative is profoundly misleading. Worse yet, it is a political menace for two reasons. First, it risks tacitly promoting the notion that dictatorship may be legitimate to the extent it offers a road to prosperity. Second, the Pinochet regime embraced Neoliberalism which promotes anti-democratic tendencies by fracturing society. The claim of a Pinochet economic miracle lends support to Neoliberalism, thereby encouraging acceptance of Neoliberalism despite its anti-democratic proclivities.
For those reasons, debate over Pinochet’s economic policy remains of vital importance. The fiftieth anniversary of Pinochet’s coup is an opportunity to challenge the pernicious miracle myth which is increasingly part of the conventional wisdom.
(more…)Broadening the application of hysteresis in economics: institutions, policy lock-in, psychology, identity, and ideas
Wednesday, August 9th, 2023This paper argues for broadening the application of hysteresis to institutions, policy lock-in, psychology, identity, and economic ideas. Hysteresis is an element of historical processes, and the real world is historical. That explains why hysteresis is pervasive and important. Hysteresis should be a fundamental building block of political economy. Expanding its application in economics is both an opportunity and a challenge. The opportunity is that it provides a means for incorporating political, sociological, and psychological forces which economics tends to neglect. That will enrich economics and can also provide a mutually enriching bridge to other social sciences. The challenge is introducing such concerns raises questions about the character of economics’ knowledge claims, which is likely to trigger resistance from economists.
Ukraine destroyed the Kakhovka dam: a forensic assessment
Tuesday, July 4th, 2023The Kakhovka dam was a massive two-mile-long structure that dammed the Dnieper River which bisects Ukraine. It was built by the Soviet Union in 1956 and raised the Dnieper by 16 meters (52 feet), creating the Kakhovka Reservoir. The dam was destroyed on 6 June 2023, resulting in massive flooding downstream on both sides of the river which created a social and environmental disaster. The city of Kherson, located near the river’s mouth with the Black Sea, was also flooded.
Both Ukraine and Russia deny blowing up the dam and blame the other. At this stage, all the evidence is circumstantial and conjectural, but a forensic assessment of that evidence overwhelmingly suggests Ukraine destroyed the dam. Despite that, US and Western European politicians and media have uniformly sought to implicate Russia as the perpetrator.
In multiple ways, the dam’s destruction echoes the 2022 destruction of the Russian-owned Nord Stream 2 pipeline. That pipeline was a piece of civilian infrastructure; was destroyed by an explosion; its destruction caused a massive environmental disaster; Ukraine denies any role; many European governments claimed Russia had blown up its own pipeline; and Western media either explicitly claimed Russia had done it (Time) or tendentiously sought to implicate Russia (New York Times, Guardian).
(more…)The forgotten case against Milton Friedman: an interview about inflation and the Phillips curve
Saturday, May 13th, 2023Milton Friedman revolutionized macroeconomics with his 1967 presidential speech to the American Economics Association (AEA), which presented a theory of the so-called natural rate of unemployment for the first time. That speech, which played a major role in discrediting the brand of Keynesianism that prevailed in postwar liberal economic policy thinking, remains one of the most frequently cited papers in all of economics.
Much less well remembered is the rebuttal to Friedman’s ideas issued by another future Nobel Laureate economist in another AEA presidential address, four years later: Yale University’s James Tobin. Tobin’s dueling theory of inflation held out the possibility of an alternative path for economics and macroeconomic policy, but it has seldom received the same recognition, or the same scholarly interest.
Causes and consequences of the Ukraine conflict: an eight-point primer
Sunday, March 19th, 2023(1) The origins of the Ukraine conflict lie in the ambitions of US Neocons. Those ambitions threatened Russian national security by fuelling eastward expansion of NATO and anti-Russian regime change in the Republics of the former Soviet Union.
(2) The Ukraine conflict is now a proxy war. The US is using Ukraine to attack and weaken Russia.
(3) Russia will eventually prevail. We may already be approaching “game over” because Ukraine’s forces have been eviscerated. Ukraine is now press-ganging military conscripts in Kiev and Lviv.
(4) Once Russia imposes its will, the US will be forced to step back but it will have achieved its strategic goal of weakening Russia and separating Western Europe (especially Germany) from Russia.
(5) Ukraine will be effectively destroyed. It will be half-occupied by Russia; hundreds of thousands of Ukrainians will have died; millions will have fled; and the Ukrainian Nazis will be in charge of what is left.
(6) We have all been played by the Biden administration and the US Neocons.
The biggest losers are the ordinary people of Ukraine. They were cheated by the US Neocons of the possibility of a peaceful accord with Russia.
But we have all lost, especially Western Europe. Higher inflation and energy prices today; lost future economic opportunities; a worsened outlook for climate change; a dangerously deteriorated global security outlook that includes risk of nuclear war; and renewed militarism that will disfigure our societies for decades to come.
(7) Western Europe’s political elites are deeply culpable for their capitulation to US Neocon pressures.
(8) The US is guilty of covertly provoking the war. But it will never be charged because this is a proxy war and it tacitly controls the International Court in The Hague. Instead, the court is being politically pressured to indict Russia, the goal being to foster anti-Russian public sentiment and make a political settlement more difficult. However, that also diminishes the court’s international legitimacy and standing.