Is Financial Times Socialist Now?

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Few days ago, “The Editorial Board” of Financial Times published an article calling for “radical reforms”.

The article says:

Radical reforms — reversing the prevailing policy direction of the last four decades — will need to be put on the table. Governments will have to accept a more active role in the economy. They must see public services as investments rather than liabilities, and look for ways to make labour markets less insecure. Redistribution will again be on the agenda; the privileges of the elderly and wealthy in question. Policies until recently considered eccentric, such as basic income and wealth taxes, will have to be in the mix.

…

The leaders who won the war did not wait for victory to plan for what would follow. Franklin D Roosevelt and Winston Churchill issued the Atlantic Charter, setting the course for the United Nations, in 1941. The UK published the Beveridge Report, its commitment to a universal welfare state, in 1942. In 1944, the Bretton Woods conference forged the postwar financial architecture. That same kind of foresight is needed today. Beyond the public health war, true leaders will mobilise now to win the peace.

So what explains this shift?

The important point is that FT which just speaks for the ruling class hasn’t become left-wing, it’s just adopting a left-wing policy. The number one point of liberalism—the ruling class ideology—is to prevent a left-wing rise. Anything for that, including the use of left-lite politics, temporarily.

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Economics In Ten Episode On Joan Robinson

The latest episode of the podcast Economics In Ten is on Joan Robinson.

Description:

George Bernard Shaw once noted: ‘The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.’  What George forgot though was unreasonable women and when it comes to Economics, Joan Robinson was the unreasonable, brilliant woman and wow…did she make progress! Sadly in the male dominated economics world, she’s rather over-looked and this needs to change. She changed the way we thought about markets, she challenged economic orthodoxy, was part of Keynes’ inner circle and offered up her own growth theories. In this new podcast, you will find out all this and more! Guiding you through as always are Pete and Gav, your friendly neighbourhood economists with technical support from Nic (check out his app – cheeky fingers). Music comes from Jukedeck and you can create your own at jukedeck.com. PS Apologies for a brief sound outage that occurs around the 20 minute mark. You might think the podcast is over at this point but fear not you have another hour of fun/learning about the great Joan to go….

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Gennaro Zezza And Alan Shipman — Wynne Godley

There’s a nice recent six-page biography of Wynne Godley in The New Palgrave Dictionary Of Economics by Gennaro Zezza and Alan Shipman. Shipman had recently written a full biography on Wynne Godley’s life.

Abstract:

The chapter provides a brief biography of Wynne Godley (1926–2010), a British economist who informed the discussion of economic policy in the United Kingdom and later the United States. Godley was the main contributor to the development of the stock-flow-consistent approach to macroeconomics, setting out models based on rigorous accounting which allowed him to anticipate (ahead of more orthodox forecasters) adverse developments in the UK economy in the 1970s and 1980s, as well as the global recessions of 2001 and 2007–2009.

Alexander Zevin On Citations Needed

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There’s a new episode, of the Citations Needed podcast titled Episode 98: The Refined Sociopathy of The Economist and featuring Alexander Zevin on his book Liberalism At Large—The World According To The Economist.

The episode is about The Economist and also about the word “liberalism”.

From the transcript:

Alexander Zevin: One of the things that book tries to do is to bring the history of imperialism into the history of liberalism, and usually they’re not spoken about together. In fact, in many histories of liberalism you’ll get the impression that liberals were anti-imperialists, they were against the empire, but The Economist, and what I argue is the dominant strand of liberalism, isn’t. It’s consistently pro-imperial from the 1850s at the time of the Crimean War, and the Opium War in China, and the Indian mutiny, and many other conflicts all the way through to the present.

picture by Alexander Zevin

Excellent discussion of the connection of liberalism and imperialism.

Paul Krugman, Empire Man

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Paul Krugman’s article, Trump The Intimidator Fails Again, published Jan 6th in The New York Times a few days ago, shows how he is a rank imperialist.

Consider the following quote:

America did many terrible things during its reign as global hegemon. But we clearly stood for global rule of law, for a system that imposed common rules on everyone, ourselves included. The United States may have been the dominant partner in alliances like NATO and bodies like the World Trade Organization, but we always tried to behave as no more than first among equals.

“But”? 🤯

He’s openly confessing that the United States imposes an economic order on all countries but tries to justify it as some good thing.

It’s important for Post-Keynesians to highlight how imperialism works. To not start economics with imperialism is a huge disservice to the subject. The “liberal international order” is hugely constraining to poorer countries and instead of achieving economic convergence, leads to polarisation.

Imperialism works by controlling the narrative and getting countries to adopt neoliberal policies. Some countries agree to it while others are arm-twisted to do so. If they still don’t obey, the US government tries to intervene in the countries’ democratic process, such as by funding their opposition, and/or rigging elections. Or they face sanctions and isolation. In the extreme case, the US uses military to achieve its objectives—providing new markets for the US producers.

The role of economists such as Paul Krugman is to promote economic propaganda, to deceive the world into thinking that neoliberal policies achieve the best outcomes.

Back to the quote, notice the extreme language manipulation. Paul Krugman calls himself a “liberal” and calls a coerced system “rule of law”. Double-speak! No first among equals, as the rules of global trade are unfair, benefiting advanced countries, who have themselves enriched themselves with different rules such as import tariffs, quotas and direct imperialism, for example, the British occupation of India. Moreover, even currently, the rules of international trade are highly protectionist in many ways.

Asymmetric Protectionism

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Imperialism and free-trade is the most important reason for why some countries are rich and others poor. Because of the principle of circular and cumulative causation, they rarely catch up. Poor countries aren’t “underdeveloped”—it’s a misleading word—they’re exploited. Hence there’s a need for global rules to allow for convergence of fortunes of nations. The current rules of globalisation lead to polarisation and welfare of a few, not the many.

I recently recommended Ha-Joon Chang’s lecture series. It’s a long one—13 lectures followed by discussions.

In the discussion part of the talk Why Are Some Countries Rich And Others Poor, Ha-Joon Chang calls for asymmetric protectionism. The global rules are in favour of poor countries and not the rich ones.

Nicholas Kaldor was proposing “planned trade” in the 70s and the 80s and also a plan to have balanced trade. So a part of planned trade would be to allow poor countries to use tariffs and quotas without the fear of retaliation by rich countries.

Endogeneity Of Income Elasticities Of Trade

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Robert Blecker and Mark Setterfield have a new book, Heterodox Macroeconomics: Models Of Demand, Distribution And Growth.

In that there’s a chapter, Balance-Of-Payments Constrained Growth II: Critiques, Alternatives And Synthesis. It has an interesting section where income elasticities of trade are themselves thought to be endogenous.

There are of course many critiques of balance-of-payments constraint growth and Thirlwall’s law but the better ones are more about improvements than anything damaging for the theory. The ideas of Nicholas Kaldor stand.

As emphasised by the authors themselves (page 485), the endogeneity of income elasticities itself is consistent with the Kaldorian idea of circular and cumulative causation. 

Till now, circular and cumulative causation was thought via price effects:

Higher production → higher productivity → higher price competitiveness

But there’s no reason that success can’t increase non-price competitiveness itself, i.e., income elasticities.

The book discusses some of the studies.

It’s interesting to note that it was Paul Krugman who first proposed the idea that income elasticities aren’t fixed and that growth can lead to change in the elasticities. But he refused to accept the causality as implied by Thirlwall’s law. The right causality is both ways. Circular and cumulative causation!

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A 1957 James Meade Paper On The Effect Of A Free-Trade Area On Full Employment

I came across this interesting paper by James Meade arguing that free-trade might not be consistent with full employment for Europe.

Although James Meade’s argument isn’t perfect, the fact that he’s asking such questions implies that such ideas were known at the time. Totally forgotten now by economists. Another example is the Treaty Of Rome, from the same year, which had a full chapter on ensuring balance-of-payments “equilibrium”!