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Sergio Cesaratto’s New Book

Sergio Cesaratto has a new book which:

  • Introduces readers to the basics of heterodox and orthodox approaches in economics
  • Explains the problematic aspects of the European Monetary Union (EMU) from the standpoint of alternative economic theories
  • Highlights the conservative nature of the EMU and the economic and political difficulties of reforming it

with the further description:

This book discloses the economic foundations of European fiscal and monetary policies by introducing readers to an array of alternative approaches in economics. It presents various heterodox theories put forward by classical economists, Marx, Sraffa and Keynes, as a coherent challenge to neo-classical theory. The book underscores and critically assesses the analytical inconsistencies of European economic policy and the conservative nature of the current European governance. In this light, it examines the political obstacles to proposals to reform the European monetary union, as well as those originating in the neo-mercantilist German model. Given its scope and format, the book offers a valuable asset for researchers and members of the general public alike.

[the title is the book site at Springer]

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Glenn Greenwald On The American Press: My Resignation From The Intercept

… The Intercept’s editors, in violation of my contractual right of editorial freedom, censored an article I wrote this week, refusing to publish it unless I remove all sections critical of Democratic presidential candidate Joe Biden …

…

American media is gripped in a polarized culture war that is forcing journalism to conform to tribal, groupthink narratives that are often divorced from the truth and cater to perspectives that are not reflective of the broader public but instead a minority of hyper-partisan elites. The need to conform to highly restrictive, artificial cultural narratives and partisan identities has created a repressive and illiberal environment in which vast swaths of news and reporting either do not happen or are presented through the most skewed and reality-detached lens.

With nearly all major media institutions captured to some degree by this dynamic, a deep need exists for media that is untethered and free to transgress the boundaries of this polarized culture war and address a demand from a public that is starved for media that doesn’t play for a side but instead pursues lines of reporting, thought, and inquiry wherever they lead, without fear of violating cultural pieties or elite orthodoxies.

 

The Suspension Of Jeremy Corbyn

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So Labour under the new leadership of the rank imperialist Keir Starmer has suspended Jeremy Corbyn from the party with the campaign of smears about antisemitism.

Jeremy Corbyn is far ahead of any politician in the advanced world and one of the nicest human beings. He was strongly anti-imperialist and that explains the hatred of the establishment toward him.

Unfortunately, even people who call themselves leftists—such as Owen Jones of The Guardian—tried their best to stop him from rising to power. In the 2017 elections Corbyn was really close to winning the elections and since the conservatives in the UK didn’t have a majority, Corbyn had to be stopped at all costs. So the charges of antisemitism kept appearing in the media.

There was also an internal struggle led by the now leader Keir Starmer to stop Jeremy Corbyn from taking the side of leaving the EU. Corbyn was always anti-EU, as it’s an imperialist/neoliberal institution built on the idea of free trade. But around 2016, when it was becoming apparent that the leave side was going to win, the establishment started smearing everyone as racists and xenophobic. Labour is heavily neoliberal, so except Jeremy Corbyn and a few they all wanted to remain the EU. Corbyn erred by presenting himself as a remainer before the referendum. This gave the right-wing an opportunity to exploit the situation and present themselves as the party of the working class. They knew that people would vote for them simply because voters would want to protest, not because the working class supported Conservatives‘ policies.

Jeremy Corbyn was a bit cornered and he had to pander to the remain camp and it cost him the election in 2019.

You keep hearing that neoliberalism is dead but that’s all wrong. In recent times—during the lockdown—countries have adopted expansionary fiscal policies but it’s an illusion. The politicians themselves have made it clear that those policies are temporary and would return to restrictive fiscal policy soon. Neoliberalism is stronger than ever. The fall of Jeremy Corbyn is a proof of it. So has to be fought harder than before.

Source: Instagram

Do The Neochartalists Advocate “Printing Money”?

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The question is wrong 🤡

It’s commonly claimed by the opponents of neochartalism or “modern monetary theory” or “MMT”, that the theory advocates the use of “money-financed deficits” or “printing money”—the lowbrow language. This claim is because of a poor understanding of the theory and I say this as a critic. Many Post-Keynesians who don’t identify as chartalists also keep spreading this. Of course this isn’t the complete story as the neochartalists themselves create this confusion indirectly/unknowingly about their own theory.

Imagine a financial system such as in Canada where banks have zero reserve requirements and little bank settlement balances/reserves outside crises. The government can expand fiscal policy by simply raising government expenditure. You could think of the deficit in one period/year as “endogenous”, which will depend on how much taxes come in, which in turn depends on how the private sector responds to the stimulus (with complications of international trade). The difference between the two will be the “net borrowing” in the language of national accounts. If there’s a surplus, the government would be a net lender. But let’s assume it’s in deficit. The government has an account at the Bank of Canada and it will make this shortfall by issuing debt.

The private sector would have additional income and wealth because of the stimulus and the borrowing. Because: the stimulus would raise output and income of the private sector and also because the very act of deficit also adds to the private sector wealth.

Banks would lend more because of the rise in output would lead to more demand for loans, the central bank has a large control of the interest rates and could even set the whole yield curve. There’s no crowding out and the reserve requirement is zero! Banks would also also have more income and their capital-adequacy would improve to allow them to lend more.

Loans make deposits and in the aggregate they won’t be constrained really in lending although individual banks would need to fund themselves as not raising would cause them to have large overdrafts at the Bank of Canada, the central bank and they might run out of collateral to post at the central bank.

The private sector would decide how much of its wealth it wants to allocate in banknotes and how much in government bonds and other financial assets. If the private sector wants more banknotes, they’ll ask their banks which in turn would obtain from the Bank of Canada by going in an overdraft. The Bank of Canada would buy government bonds in the financial markets and bring the reserves back to zero from negative.

In other words, the amount of banknotes and government bonds that the private sector wishes to hold is entirely decided by the private sector. The phrase “money-financed deficits” implies that the Canadian government and the Bank of Canada decide how much this is and is misleading.

Anything here is a typical story in neochartalism. Although neochartalist would like to go more such as proposing “no-bonds” with all deficit spending from the beginning of time to be reflected in banks’ settlement balances at the Bank of Canada, it’s not like a strict requirement that neochartalism would only work with zero-bonds. They’d be comparatively happy with more fiscal expansion than no expansion or contraction or an expansion which is not much.

The main reason for the stimulus and the rise in output would be the act of increased spending of the government itself. Money vs. bonds decided by the private sector needs.

The reason neochartalists’ claim sound like “printing-money” in the lowbrow language is that the above dynamics is poorly understood by their opponents, because monetarism is a prejudice which affects almost everyone.

But to complicate that’s not all. There’s a Stephanie Kelton paper with the title Can Taxes And Bonds Finance Government Spending?

This misleads the reader into thinking that neochartalists are advocating “printing money” but the arguments above show how misleading the phrase itself is. What the “MMTers” are saying is that the government has a virtually large borrowing ability. The phrase “borrowing” makes us thinking that there is some sort of intrinsic constraint. Hence their rejection of the word “borrowing”.

To prove all this, neochartalists try to draw long T-accounts so that the reader is convinced that everything is fine, government deficit is actually mirrored as private sector deficit, the mechanics of central banking in trying to prove in detail how the government can raise as much funds as it wants, so that the reader is convinced there’s no hanky-panky.

But in an effort to prove that they go into overkill. So for example, typically governments can’t have overdrafts at their central bank because neoliberals have made this the law to “discipline” the government. So some positive critics such as Marc Lavoie would try to constructively critique them in a friendly way but others would simply dismiss them using this as an excuse. Neochartalists would respond to former saying that it still doesn’t constrain the government which is true but it’s not a perfect argument.

And in all this they also end up claiming horribly wrong things that taxes needn’t be increased. That is unfortunate as it gives their opponents an even bigger chance to dismiss them. Some like me have criticised them for this too but “MMT” has kind of become this catch-phrase for everything Post-Keynesian so the ones with bad faith exploit it to dismiss the whole of Post-Keynesianism.

More than that, the story falls short because in the case of open economy, the government has constraints, brought because of historic reasons causing large differences in competitiveness between nations. Trade imbalances can cause fiscal policy to be constrained and the international investment position to be unsustainable.

But this part is a digression for this post. The main point is that the claim that “MMT advocates printing money” is a lowbrow claim.

Another Thomas Palley Critique Of Neochartalism

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The new issue of Review Of Keynesian Economics (ROKE) is out. Thomas Palley has another critique of Neochartalism or “Modern Modern Theory”, tilted What’s Wrong With Modern Money Theory: Macro And Political Economic Restraints On Deficit-Financed Fiscal Policy. 

I don’t agree with many things but it’s worth a read, as has his other critiques been. From a political economy perspective, the problem of the world is the the liberal international economic order which exists and is totalising. This imperialism needs to be overthrown and new order needs to be established. This is completely missed by the neochartalists because they tend to think that as long as a country’s currency is truly floating, fiscal policy can do the trick. Dismissing the constraints brought from international trade, this way.

Globalists need to be defeated.

Neochartalists also do all sorts of verbal gymnastics in throttling any debate about increase in tax rates. In fact Warren Mosler argues for removal of most taxes. Oh wow! How did us mortals miss such a simple solution to the problem of the world!

Basically neochartalists blur the distinction between two separate issues:

  1. Tax rates needn’t rise to increase domestic demand and output.
  2. Tax rates ought to rise for a fair distribution of the national income.

One can believe both (1) and (2) consistently as typically economies run at less than full employment. Neochartalists however use (1) to throttle the debate on (2).

But if you discuss these issues with them, they concede this but yet the next time seem to argue like before. Another way to see this is that they have no proposals to raise taxes even though they have all sorts of proposals everywhere.

Thomas Palley warns us against this hilarity. He says:

More generally, it is pure semantics whether taxes raise money to finance government spending, or taxes destroy money in order to create the space for reissue of money to finance spending. Taxation and spending occur simultaneously, and taxes are an intrinsic part of the system and cannot be done away with. Even when the economy is far from the full employment/inflation target, taxes are needed to finance the vast bulk of spending. Money-financed budget deficits provide some space at the margin for temporary additional spending, which eventually either has to be cut or be financed by some combination of taxes and borrowing when the economy’s constraints bite.26

…

  1. If the economy is away from steady state, and the inflation rate and the money–GDP ratio are both rising, then there will be additional temporary financial space along the traverse to the steady state.

Fiscal policy is hugely important and mainstream economists underplay the role of fiscal policy even after so much fiscal policy came to the rescue in this new lockdown crisis. But the problems are much deeper. Imperialism has to be defeated. A new international economic order with planned trade instead of free trade, together with coordination of policies (including fiscal policy) needs to be established. Without the imperial power of either the United States or other international institutions. But something democratic at the international level. Nor is neochartalists’ claims about the importance of fiscal policy original as there’s a tradition of Post-Keynesian economics stressing the importance.

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Perry Anderson On Brexit

The new issue of New Left Review is out and Perry Anderson has a 73-page essay on British state and society.

Some good description of Brexit:

In 2015, Cameron was returned to office without need of the Liberal Democrats, who were decimated at the polls, and in the wake of Labour’s renewed defeat, Corbyn was elected its leader in the first one-person-one-vote election in the party’s history. Within a year came the referendum, called and lost by Cameron on Britain’s membership of the EU.32 His decision to call one, product of long-standing divisions among the Tories, was designed to silence the Eurosceptic wing of his party, in a careless display of class insouciance that with united establishment support—extending from the City to the TUC, not to speak of all-party backing—victory was assured. But as in France and the Netherlands, a popular rebellion against the whole governing class led to the opposite outcome. Two thirds of the working class voted for Leave, a higher proportion than any stratum—including even the best-off—voting for Remain, on a larger turn-out than seen in years. London, beneficiary of the financial bubble and closer to Paris than Manchester by rail, voted heavily for Remain; the abandoned industrial North, hardest-hit by austerity, heavily for Leave. On the left, opinions had divided. Those in favour of Remain argued that the xenophobia of Brexiteers of the right made the EU a lesser evil, those in favour of Leave that departure would be a blow to the neo-liberal oligarchies on both sides of the Channel: each voting negatively against, rather than for, anything. But what would Brexit actually mean for the European Union, or for Ukania in parting with it? So far, all that was clear was that ‘Blairized Britain has taken a hit, as has the Hayekianized EU’ and ‘critics of the neoliberal order have no reason to regret these knocks to it’, against which the entire global establishment had inveighed.

More fine-grained analysis made clear the extent to which the Brexit result, though certainly multi-stranded in motivation, was the expression of a regional and social revolt in the North of England: Leave majorities were concentrated in former strongholds of Labour, now reduced to a hinterland of decayed industries and discarded proletarian households.33 There was hostility to immigrants in this part of the country, as elsewhere in Britain. However, that it was not the primary driver of the outcome could be deduced from Labour’s unexpected recovery in the election of 2017, once Corbyn campaigned on a platform amounting to a rejection of the whole neo-liberal order in place since the 1980s. In the face of a high Tory vote, he not only held most of the North, but swept the youth of the country by margins never previously approached by Labour, in what was now a second popular uprising against the entire British establishment. Yet Corbyn’s position remained tenuous in his own party, whose permanent apparatus and parliamentary delegation remained ferociously opposed to him.34 The small team around him lacked any preparation for government in what would be the predictable conditions of an implacable siege by capital and the media. There were no grounds for euphoria.

…

Britain’s liberal market economy—read: secular eversion—generated the two-fold revolt that produced Brexit. The victory of Brexit led to Conservative capture of a majority of the working class. Working-class expectations require concessions from a suddenly altered Conservative regime that Brexit impedes. The desertion of its proletarian base leaves Labour sociologically adrift in the eddies of a protean middle class. Its share of the middle class is attached to Europe, no part of it more passionately than the liberal intelligentsia. Attracted towards Labour by its stance in the cultural war over Europe, the English intelligentsia is alienated from it by what became of its own principal habitat under it. In Scotland, alienation of all classes of society from Labour has given power to a nationalism looking to Europe. Departure from Europe has both inflamed Scottish nationalism and entrapped it. The price of departure, indexed by the EU to political not economic considerations, has left Britain’s rulers answerless politically and, in all probability, the wells of Brexit further poisoned economically. No part of the current configuration is independent of the others. Their nexus is bound to dissolve, in one way or another. When or how is anyone’s guess.

…

32 Susan Watkins, ‘Casting Off?’, NLR 100, July–August 2016.

33 Tom Hazeldine, ‘Revolt of the Rustbelt’, NLR 105, May–June 2017.

34 Daniel Finn, ‘Crosscurrents’, NLR 118, July–August 2019.

New Left Review, 125

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UNCTAD Trade And Development Report, 2020

UNCTAD has released its annual trade and development report.

It emphasises the importance of Keynesianism and cites Post-Keynesian authors such as Joan Robinosn, Nicholas Kaldor, Wynne Godley, Francis Cripps, Marc Lavoie, Anthony Thirlwall.

From the summary:

From crisis to prosperity for all

Much more ambitious multilateral measures will be required if a global crisis is to be transformed into a global recovery:

  • Expanding the use of Special Drawing Rights (SDRs) to support national development strategies in developing countries through a truly internationally governed reserve system. At the very least, developing countries’ fiscal spaces should be backed by the equivalent of $1 trillion of SDRs to meet current liquidity constraints.
  • Financial support for boosting the health emergency response to COVID-19 in developing countries through a Marshall Plan for Health Recovery funded through increased official development assistance (ODA) commitments, international tax reform and enhanced multilateral financing mechanisms, on a scale to build resilience and boost recovery.
  • An international Public Credit Rating Agency to provide objective expert-based ratings of the creditworthiness of sovereigns and companies, including developing countries, and to promote global public goods. This would, moreover, help to promote competition in a highly concentrated private market.
  • A Global Debt Authority to stop a repeat liquidity crises from turning into serial sovereign defaults. Such an authority would build a repository of institutional memory on sovereign debt restructurings. It would also oversee the establishment of a global publicly accessible registry of loan and debt data pertaining to sovereign debt restructurings. In addition, it would develop a blueprint for a comprehensive and transparent international legal and institutional framework to govern automatic temporary standstills on sovereign debt repayments in times of crises and to manage sovereign debt workouts in a fair, efficient and transparent manner.

The title is the link. You can download find the PDF file in that link.

Glenn Greenwald Twitter Thread On Identity Politics As A Cover For Imperialism And Neoliberalism

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Glenn Greenwald has an excellent Twitter thread on how the “centrists” use identity politics as a cover:

He writes:

Contempt for it on the merits aside, one has to acknowledge the propagandistic genius of exploiting harmless-to-power identity politics as the feel-good cover for perpetuating and even strengthening the neoliberal order and further entrenching corporate and imperial power.

See the full Twitter thread and also a recent post, Identity Politics As A Neoliberal Alternative To A Left, where I mentioned him.