Al Campbell on Neoliberalism as an Attack on Labor

Izmir University Department of Economics Workshop on “The Great Meltdown of 2008: Systemic, Conjunctural or Policy-created?"

CEPR | Stimulus and Fiscal Consolidation: The Evidence and Implications

In a previous post, see here, Matias provided a graph that displayed the fiscal results for the US as a share of GDP from 1993-2014, along with a discussion of the misconception that democrats are nothing but tax/spend liberals. I thought it would be pertinent to post this paper by Dean Baker and David Rosnick providing conclusive evidence on the effects of stimulus packages and fiscal consolidation during the recent economic crisis.

From the abstract:

The first part deals with the most important literature on the subject, the consensus in the research of the past decade attests a clear counter-cyclical effect of stimulus packages during a prolonged recession. The second part deals with the impact of changes in government consumption and investment to growth. For this data for developed countries in 1980 are analyzed. Consistent with much of the previous literature have increased government spending during a crisis has a positive effect on economic growth. In addition, the period is simulated after the crisis, the multiplier effect is around 1.5. The third part focuses on the production potential, which has declined sharply due to the economic crisis. This would have to include a comprehensive model that analyzes the effects of an economic stimulus package with, since the effect could turn out relative to the size of the stimulus package as significant.

Read rest here.

Gerald Epstein: Too-Big-To-Fail Advantage Remains Intact For Big Banks

Gerald Epstein:

Yeah, well, I think there are some noteworthy things. First of all, just to explain what this means, what it means is that these largest banks, like Bank of America, Goldman Sachs, JPMorgan, and so forth get an advantage when they borrow money in the financial markets, because the people who lend them money believe that if they get into trouble, the government will bail them out, that the taxpayers will bail them out. And this has been known since at least 1984, when Continental Illinois Bank almost went under and the government bailed them out, and then the government said, well, we're going to bail out the 11 biggest banks that are too big to fail, and we're going to bail them out in the future. And, of course, that's exactly what happened in the financial crisis of 2007-2008. So when investors lend money to these big banks, we've thought for a long time that they expect that they're going to get bailed out if they get into trouble, so they'll charge less money to these big banks...

Mark Weisbrot on Economic and Social Policy and the Problems of the Eurozone and European Integration

By Mark Weisbrot

It was not because of the power of financial markets or because the Germans didn't want to "help" the Greeks that Europe suffered through about three years of recurring crises, in which the continued existence of the euro was thrown into question, until August 2012. It was because the European authorities were using these acute crises and did not want to resolve them until they had extracted certain "reforms" from the weaker European economies (and possibly even some of the stronger ones, if we consider the European Fiscal Compact and what the French government has been doing recently). We know this because as soon as the European Central Bank (ECB) wanted to do so, it put an end to these crises in a matter of weeks, in July-August 2012, by effectively establishing a ceiling on the interest rates of Italian and Spanish bonds - something it could have done at any time in the prior three years.

Read the rest here.

It’s the System Stupid!

By Hans Despain

On Thursday, December 13, 2012, The Guardian announced Queen Elizabeth finally received an answer to her question—“Did nobody see this coming?”—about the 2008 financial crisis.1 While she was touring the Bank of England, Sujit Kapadia, one of the bank’s economists, informed Her Majesty that financial crises are a bit like earthquakes and flu pandemics: rare and difficult to predict. An impressive answer indeed. Brilliant for its vagueness, spuriousness, and obtuseness. 

However, Kapadia is simply wrong not to have explained that many economists, financiers, and regulators anticipated and predicted the financial collapse. Additionally, metaphors of natural disasters are highly misleading. Financial crises are not inevitable occurrences, but historical, human-created, and contingent phenomena.

Her Majesty had asked: “Did nobody see this coming?” Perhaps she could have also asked three more questions: Does nobody see the suffering and socioeconomic injustices of oligopolistic-finance capitalism? Does no one see that the problems are structural and systemic? And is there no alternative to a system that generates continuous “quadruple crises”—the socioeconomic, political, environmental, and personal/psychological?

The conventional wisdom is “There Is No Alternative,” or TINA. For this reason most Americans simply acquiesce to capitalistic social relations and, like Sisyphus, are resigned to performing eternal tasks while enduring the “endless” quadruple crises generated by a pathological system. The most extraordinary aspect concerning the absence of an alternative is that it is fallacious. The capitalistic system itself must be transformed. To put it into a slogan: Capitalism Is No Alternative, or CINA.

Read rest here.

"The Endless Crisis" reviewed in Marxist Sociology Section (ASA) Newsletter

 

Book Review: The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China, by John Bellamy Foster and Robert W. McChesney

Review by David Fields and Daniel Auerbach

The Monthly Review, since its inception, has been carrying on some of the best works in Marxism. The analytical foundations of what has come to be called the Monthly Review School were set out by the economists Paul Baran, Paul Sweezy, and Harry Magdoff. The lucidly rich works like Monopoly Capital by Baran & Sweezy and Magdoff’s piece on Imperialism (along with Harry Braverman’s work on Labor and Monopoly Capital) have sustained Marx’s invaluable insights into the twentieth and twenty-first centuries.

Read rest here.

Time to Retire Greenspan and Trichet’s Pensions

From Dean Baker:

Remarkably, the two individuals who bear the greatest responsibility for the global economic disaster, former Federal Reserve Board chairman Alan Greenspan former president of the European Central Bank Jean-Claude Trichet, do not appear to be suffering at all for their failure. Both are living comfortably and continue to be sought out for their so-called expertise on economic policy. This should infuriate reasonable people everywhere.

See rest here.

Technology, distribution and the rate of profit in the US economy: understanding the current crisis

New paper by Deepankar Basu and Ramaa Vasudevan - published by CJE (see here - subscription required)

From the Abstract:

"This paper offers a synoptic account of the state of the debate among Marxist scholars regarding the current structural crisis of capitalism, identifies two broad streams within the literature dealing, in turn, with aggregate demand and profitability problems, and proceeds to concentrate on an analysis of issues surrounding the profitability problem in two steps. First, evidence on profitability trends for the non-farm non-financial corporate business, the non-financial corporate business and the corporate business sectors in post-war USA are summarised. A broad range of profit rate measures are covered and data from both the US Bureau of Economic Analysis (NIPA and Fixed Assets Tables) and the Federal Reserve (Flow of Funds Account) are used. Second, the underlying drivers of profitability, in terms of technology and distribution, are investigated. The profitability analysis is used to offer some hypotheses about the current structural crisis."

South facing unfavourable global conditions

By Ylmaz Akyüz

The high-growth performance of many developing countries in 2003 to 2008 and then their quick recovery from the 2008-9 global financial crisis was largely due to favourable external conditions, including the policies in developed countries. (This was analysed in the previous issue of South Bulletin). However, these conditions do not exist today and in fact the global conditions have turned unfavourable. Hence developing countries are now facing serious vulnerabilities and risks to their economic situation, with each category of countries facing their own specific problems. Developing countries have to consider changing their growth and development strategies, in light of the changing global situation.

Read the rest here.

Palley on the crisis and the policies for prosperity

Tom Palley has just published a new book of essays titled “The Economic Crisis: Notes from the Underground.” The book consists of short essays on the economic crisis; the economics and politics of globalization; monetary policy; global imbalances; and policies for restoring shared prosperity.