Monthly Archives: February 2022

Thomas Palley On NATO Expansionism And The Russian Invasion Of Ukraine

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Thomas Palley has written some fine stuff on the NATO/Russia/Ukraine. He had predicted a Russian invasion while at the same time identifying NATO expansionism as the root cause of the crisis, a totally rare combination!

In his latest blog post Ukraine: What Will Be Done And What Should Be Done? he is straight and accurate:

The inevitable has happened. Russia has invaded Ukraine. It was inevitable because the US and its NATO partners had backed Russia into a corner from which it could only escape by military means.

In effect, Russia confronted a future in which the US would increasingly tighten the noose around its neck by further eastward expansion of NATO, combined with military upgrading by the US of its Eastern European NATO proxies.

Accompanying that militarization was the prospect of a ramped-up propaganda war in which western media fanned the flames of public animus against Russia. Side-by-side, US government financed entities (such as the National Endowment for Democracy and the German Marshall Fund) would seek to influence European and Russian politics with the goal of regime change.

At this stage, there are two questions. What will be done? And what should be done?

Thomas Palley had predicted all this in two previous posts:

  1. A Crisis Made In The USA: Why Russia Will Likely Invade Ukraine, written Jan 16th,
  2. American Exceptionalism And The Liberal Menace: The US And Ukraine, written Feb 13th.

In Brazil, Lula’s Worker Party had initially blamed NATO expansionism but soon withdrew the statement. It’s not easy saying such things. And the sort of culture also discourages independent thought. Hence it’s important to denounce NATO expansionism if you really are anti-imperialist.

Marc Lavoie — Godley Versus Tobin On Monetary Matters

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The fourth Godley-Tobin lecture was by Marc Lavoie on February 2021. The video of the talk is on YouTube.

There is now a paper by the same title published with ROKE (Review Of Keynesian Economics).

It’s interesting how James Tobin had a lot of things right but yet his model has a lot of neoclassical economics.

In the paper Marc Lavoie argues how Tobin seems to get a lot of things right but those were just weapons for criticisms of extreme views such as of Friedman. Tobin didn’t actually believe in them. Wynne Godley’s models are quite successful in escaping old ideas, if you remember the ending line of the preface of the GT.

Houthakker And Magee On The Importance Of Income Elasticity Of International Trade

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There’s a 1969 paper Income And Price Elasticities In World Trade by H. S. Houthakker and Stephen P. Magee where they realise that nations may have a balance-of-payments constraint:

In the econometric analysis of international trade the emphasis has traditionally been on price elasticities. The practical and theoretical importance of price elasticities is beyond question, and we shall have something to contribute to their estimation, but it has also been increasingly realized that income elasticities are at least as important, especially in a growing economy. Thus Harry Johnson [7] has pointed out that under certain conditions the direction in which the trade balance moves over time depends critically on each country’s income elasticity of demand for imports and on the rest of the world’s income elasticity of demand for each country’s exports.

Johnson showed that if trade is initially balanced in a two-country model, if prices are constant and if income growth is the same in both countries, then the trade balance between them can still change through time if their respective income elasticities of demand for the other’s exports differ. In this case, the country with a higher income elasticity of demand for its imports than the foreign income elasticity of demand for its exports will experience more rapid import growth than export growth, a deterioration in its trade balance and eventual pressure on its exchange rate. For this country, even relatively slow domestic income growth may be insufficient to cure payments imbalances if the relative income elasticities are sufficiently adverse.

We shall show, in fact, that disparities in income elasticities appear to be significant in the case of certain countries whose balance of payments performance is either much worse or much better than might be expected on other grounds. The United Kingdom and Japan are polar examples; the United States is also in this category.

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References

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  1. Johnson, H. G., International Trade and Economic Growth (Cambridge: Harvard University Press, 1958).

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That’s not quite as sharp as Nicholas Kaldor’s work but yet some neoclassical economists acknowledging it is quite something.