by
Ann Pettifor
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When the Fed offered to buy a large number of securities held by banks, both mortgage-backed securities and government bonds, bankers exchanged these bonds – some of which were likely to be non-performing and therefore loss-making – for the equivalent of a bigger ‘overdraft’. This ought to have cleared up bankers’ balance sheets, and encouraged them to lend more into the real economy. But QE did not have that effect. In the UK bank lending actually fell. Instead the Fed and Bank of England (BoE) effectively provided the private finance sector with additional purchasing power with which financiers could go shopping for speculative assets in the FIRE sector: finance, insurance, and real estate. Lending into a weakened real economy, weakened further by austerity, was regarded by financiers as far less profitable and far more risky.
The key to tackling the problem identified by Adair Turner – the weakness of global nominal demand – is therefore expenditure, specifically, public expenditure that can be undertaken quickly: on the upkeep of roads and railways, on flood defences, on water conservation, on horticulture, and so on.
Of course, public expenditure has to be financed. The most prudent form of financing is loan issuance, not ‘deficit spending’ which implies permanent government overdrafts. Loan issuance, arranged by the government’s debt management office in concert with the central bank and fixed at low rates supported by central bank action, can finance ongoing government expenditure. Thanks to the multiplier, that expenditure on employment will quickly generate returns to the public treasury in the form of tax revenues for repayment of loans.
Keynes’s great contribution to monetary theory, and to the policies of his time, was based on his refutation of an important element of classical economic theory. He argued that the rate of interest was the cause, not as orthodox economists argued the passive consequence, of the level of economic activity. In other words, the level of investment, employment, and trade was caused by the rate of interest. If the rate was too high, the level of investment, employment and trade would fall. If it was low, the level of investment, employment and trade would rise.
Somewhat belatedly, the IMF in 2016 echoed the views of Professors Rey and Bhagwati outlined above, and issued a partial mea culpa in a paper titled ‘Neoliberalism: Oversold?’ [...]
[...]
None of this is news to the victims of neoliberal economic policies in many poor, heavily indebted countries, but the IMF’s mea culpa rattled the cages of many a neoliberal academic and media institution. This included the venerable Financial Times whose economic staff attacked the IMF and ‘its misplaced mea culpa for neoliberalism’, declaring that by far the most important ‘global economic issue is the persistent decline in productivity growth’. Ironic, given that many economists regarded the decline in productivity growth as a direct consequence of mobile capital eschewing investment in productive activity in favour of speculation in volatile financial assets. A state of affairs made possible thanks to neoliberal economic policies.
basically they said neoliberalism creates inequality which hurts growth
IPPR Progressive Review 25(2)
by
multiple authors
by
multiple authors
IPPR Progressive Review 25(2)
by
multiple authors
by
multiple authors
IPPR Progressive Review 25(2)
by
multiple authors
by
multiple authors
[...] they tended to reduce capitalism to the narrow idea of an economic system [...] capitalism is not an economy. It is something much bigger.
Think of it as something that would be as big as, say, feudalism. It's not about one sector of society, it's about how all the different sectors fit together. And that means that if you want to talk about capitalism, you can't talk about production without talking about social reproduction [...] ca't talk about the economy without talking about the political order that shapes and channels and supports the economy. [...]
[...] it's not that production has disappeared, but the geography of financialised capitalism is very different from the geography of those previous capitalisms. A huge amount of manufacturing is now located in the global South, in the so-called BRICS.
Those parts of the world used to be the hunting grounds for exactly the sort of extractivism and expropriation that you're describing. They were just places to be looted for dependent coerced labour, for land, for mineral wealth. So the form that capitalism took there was not premised so much on the exploitation of free labour power as on the expropriation of unfree, independent populations, who lacked a state to protect them.
I would describe financialised capitalism today as scrambling what used to be a sharper distinction between exploitation and expropriation. It used to be that expropriation was over there, and that was something that you did to people of colour, basically. Exploitation of the free worker, who receives the socially necessary costs of his, and maybe even his family's, own reproduction, that's whites, those are Europeans, that's over here.
These two worlds are completely scrambled now. There is plenty of exploitation over there and there's plenty of expropriation over here, and even the colour line that used to divide these things is mixed up, as workers in the global North, supposedly free workers, are often not paid the full socially necessary costs of their reproduction. They are forced to go into debt in order to meet their present day living costs.
So we have student debt, we have pay day loans we have credit cards, we have mortgages, microcredit. That's not even talking about sovereign debt, which is part of that scrambling. You can be exploited and expropriated at the same time, and most of us actually are. That strikes me as historically new. It's not that production disappears, but it's done by others.
this is SO GOOD
I would want to separate the question of the technology itself from the question of its social organisation. Who controls it? Who profits from it? Who decides how to use it, and where? These are the important social and political questions. [...] the problem with capitalism as a form of social organisation is that it completely removes all those questions from the collective self-determination of the people who have to live with this system. It just hands them off to 'market forces'.