Danny Blanchflower has a forthcoming book chapter critical of the role of academic economists during the crisis. I post it here for debate rather than as an endorsement of everything in it. An illustrative quote is below.
“I am greatly concerned that the economics profession has had so little involvement in the major issues of the day. That has resulted, in my view in some of the worst economic policy errors in a generation. Economists need to focus on real policy questions rather than simply on publishing trivial technical extensions in academic journal. I suspect that will also mean a movement away from theoretical papers with no data to papers that involve empirical testing and the search for patterns in the data.”
153 replies on “Blanchflower on academic economics during the crisis”
On a related but separate note we should probably also discuss the issues regarding the role of academic economists raised in Inside Job. What if the academic economists are compromised – either through extreme idealogical bias or through paid work for entities that may be affected by their policy formulations?
How much of that did we see in Ireland? In fact, how much do we still see?
I know who got the 95 mark question right.
” Economists need to focus on real policy questions rather than simply on publishing trivial technical extensions in academic journal.”
Can haz PDF pleez?
@ Liam Delaney
Quite brilliant! As an outsider trying to understand what goes on in the seraglio of academic economic study, Blanchflower seems to me to hit numerous nails on the head.
I noted in particular his references to Blanchard and haiku. Blanchard is notable in recent days as involved in the new wisdom to the effect that the IMF got it wrong. The president of the European Council, Van Rompuy, is an exponent – in Dutch – of the latter.
It boils down, IMHO, to the conclusion that “political” should never have been taken out of the description of the discipline.
Sorry about that!
” … particularly when the prime need is to break our existing habits of thought”
Liam, I sussed ‘it’ in 2007 – which is probably why I ended up in your class! It was not really that difficult. Just had to read a lot of non-mainstream stuff. And not having an existing habit of thought (about Political Economy) was quite useful.
By the way, on the rubbish being touted with regard to “breaking the pernicious links between sovereigns and banks”, what are the experts to make of the refusal of Santander to take over the Spanish branch network of RBS?
Does this means that such a link does not exist in Spain? Or only partially?
Or is the reality that under the existing system of what I believe is called “fractional banking”, the relationship between sovereigns and their banks is a symbiotic one i.e. unbreakable. Lessening the dangers to the host, requires better control of the junior partner. In present circumstances, it is difficult to know which is which.
I was trying to be provocatively pompous.
I bow to the expert.
Thought you were on about Knoblauchnacht there for a moment.
Should have known.
(All in the interests of science!).
Ireland is not alone in seeking an explanation for woes of its own creation abroad.
As a help to academic economists in their descent from their ivory towers.
Some key extracts.
“The history of other currency unions shows that there are various ways of progressing towards fiscal union. The degree of centralisation of budgetary instruments and the arrangements for fiscal solidarity against adverse macroeconomic and financial shocks differ across currency unions. The
EMU’s unique features would justify a specific approach.”
Amen to that!
“In a context where supervision is effectively moved to a single supervisory mechanism, a common resolution authority with an appropriate backstop would come to be required so as to ensure that resolution decisions are taken swiftly, impartially and in the best interest of all. During the transition phase and after the establishment of an effective SSM, the ESM will have the possibility to recapitalise banks directly, relying on appropriate conditionality.”
No joy there with regard to “legacy” issues but see below in relation to creation of “safe assets”!
“One of the functions of such a new fiscal capacity could be to facilitate adjustments to countryspecific shocks by providing for some degree of absorption at the central level. In the EMU, the response to a symmetric shock affecting all countries simultaneously should primarily be provided
by monetary policy, whereas in the context of country-specific economic shocks, the response falls primarily on national budgets. The European Stability Mechanism is a crisis management instrument and was not designed to perform such a shock absorption function. Moreover, low levels
of cross-country labour mobility and structural impediments to price flexibility make economic adjustment mechanisms less effective than in other monetary unions. Asymmetric shock absorption at the central level would represent a form of limited fiscal solidarity exercised over economic cycles, improving the economic resilience of the EMU. Elements of fiscal risk sharing can and
should be structured in such a way that they do not lead to permanent transfers across countries or undermine the incentive to address structural weaknesses.”
In short, no transfers such as would occur in a federal state.
“A safe and liquid financial asset for the euro area
It has been suggested that establishing a genuine euro area safe and liquid asset could contribute to limiting the negative feedback loops between banks and public finances, which has been one of the sources of contagion in the current crisis. In this context, the pooling of some short term sovereign funding instruments (e.g. treasury bills) on a limited and conditional basis could be examined further. This would require a greater degree of common decision-making on budgets, building on the provisions in the ‘Two-Pack’ regarding the examination of draft budgetary plans and the ex ante coordination of debt issuance. Proposals have also been made to deal with the existing stock of sovereign debt on a conditional and temporary basis through the gradual roll-over into a redemption fund of the legacy debt that has been accumulated by most Member States in the run-up to and during the financial and debt crisis.”
The description “negative feedback loops” is appropriate. N.B. Final sentence.
“Credible deposit guarantee schemes can play an important preemptive role in the stability of the financial system. The legislative proposal harmonising national deposit guarantee schemes is an important step towards achieving this objective. It establishes a strong general principle for such schemes to be sufficiently financed by contributions from the financial sector, while ensuring a
level playing field across different schemes.”
Your depositors are your depositors! And your banks should fund the schemes to protect them!
All in all a very impressive document.
Thanks. Loverly provocative realist stuff.
Worth perusing Sinn Féin’s Jobs Plan – Enterprise Policy for the 21st Century
“Sinn Féin believes that this government is making the wrong choices and disproportionately placing the burden of paying for the debts of the golden circles on those who can least afford it.
“These are socially responsible and realisable proposals.
“Today, in this Jobs Plan, Sinn Féin presents a real, detailed jobs stimulus strategy that will invest €13 billion into job creation and retention, and create an average of 156,000 short and long term jobs.
“It has been a mantra of Sinn Féin that you cannot cut your way out of recession.
“The money is there; in the National Pension Reserve Fund, the European Investment Bank, the private pension sector, and in the money the government plans to cut from its capital budget spend.
“This is not rocket science.
“The scandal is that this government will continue to fritter away the money in the NPRF; put money into toxic banks, and pay off unguaranteed bondholders, while older citizens lose home care supports, and there is one reduction after another in wages; support for lone parents; carers; citizens with disabilities; the blind and the unemployed. […] “There will be those who disagree with our proposals. That’s fine. Let them do so constructively and provide their alternative.”
@all at all
‘In the case of the labour market, our preoccupation with price-mediated market clearing as the natural equilibrium condition may be a serious error’. Robert Solow.
“That has resulted, in my view in some of the worst economic policy errors in a generation.”
That document is surely going to rank up there with those ‘worst economic policy errors’. It is dreadful stuff.
That any policy document could consider a euro wide bank resolution scheme while leaving deposit guarantees at national level, shows the utter idiocy or deviousness of the people writing the document.
It is a straightforward recipe for protected deposit flight from countries in any kind of difficulty, to more stable countries, leaving the final losses with the remaining small depositors of the troubled bank, just as at present.
Now for real double speak:
“Elements of fiscal risk sharing can and should be structured in such a way that they do not lead to permanent transfers across countries or undermine the incentive to address structural weaknesses”
Deposit flight constitute ‘permanent transfers’, mostly to core economies.
Where is the proposal to stop these ‘permanent transfers’.
The document is a complete Schaeublesque negation of the June Summit proposals.
Germany 10 The rest 0.
15 comments in and nobody has blamed this on the CPA. Must be a record…
@ brian lucey
Good point! Probably because the elephant in question has now been forced to the front of the public debate as opposed to fulminations about it in the blogosphere.
CMc restates in his usual persuasive manner the case for the prosecution in the Sindo this morning.
The problem is that it is incomplete. Countries in the EA, and notably Germany, may have not done enough, or even be stalling on things that shoud be done, but the debate cannot ignore what they have actually succeeded in doing, notably the establishment of the EFSF/ESM.
Or what they are trying to negotiate for the future.
@ Joseph Ryan
For all I know, you may well be right about the document in question. But, like it or lump it, this is the basis on which the countries of the EU will negotiate next week and it may be safely assumed that it represents where Van Rompuy thinks an eventual compromise may lie. That is his job.
The operational aspect is summed up in the following paragraph;
“Building on this interim report and taking into account the exchange of views at the 18-19 October European Council and its conclusions, a specific and time-bound roadmap for the achievement of a genuine Economic and Monetary Union will be presented at the 13-14 December European Council.”
There will, on the evidence, be no white smoke next week.
@ Joseph Ryan
FYI, a recent contribution by two economists, one mentioned by Blanchflower, de Grauwe, who are actually making a useful contribution and succeeding in clarifying issues without the use of impenetrable formulae of dubious value.
I did read the DeGrawe article and believe that he is spot on both in the defensive mechanism that would be used by Germany (and all nations) in the event of breakup.
I accept your point that the above referenced document will form the basis of discussion. But it simply is nowhere near what is required to resolve the ‘crisis’.
I would share the view of CmC in today’s paper, of Germany’s obstructive stance in relation to possible solutions. The Geroge Soros (New York Review article , I think) has a similar themes to the CmC article.
The problem now, for most of Europe at least, is that the crisis has entered a new phase. A phase of zero or negative growth in the medium term, that is and will be devastating to many people in Europe.
Traditional ‘muddle along’ politics or economics will not be enough to turn that situation around. Many people, and ultimately most people, will lose confidence in ‘Europe’ as a force for good or improvement and will blame ‘Europe’ for the situation that they find themselves in. The real danger now is that not only the EZ but the EU itself will be lost in the maelstrom of EZ breakdown.
Personally, I now believe that Germany has made a decision to disengage from the EZ, but for historical reasons does not want to be first to break ranks. But every policy choice will be influenced with that ultimate goal in mind.
As many commentators are now publicly saying (Soros, McCarthy), a more honest policy position is required from Germany.
@ Joseph Ryan
Your are fully entitled to your opinion and, indeed, I do no disagree with the broad thrust of the article by CMc. The point that I am making is the debate in Ireland cannot be reduced to a battle of opinions about (i) how countries should behave (ii) what is required and (iii) how events will turn out. Rather, there should be concentration on the detail of what is actually being negotiated and consideration of it in a dispassionate manner. It is the failure to do this which leaves the bulk of the commentariat either tilting at windmills or playing catch-up with regard to events.
“Personally, I now believe that Germany has made a decision to disengage from the EZ, but for historical reasons does not want to be first to break ranks. But every policy choice will be influenced with that ultimate goal in mind.”
I think you may be right. The extraordinary u-turns by Schauble and Merkel over the last few months on the question of Greece remaining in the EZ seem to demonstrate a desire not to be seen as forcing Greece out and nothing else.
The game is up in Greece….hence the delay in the report from the troika….allowing time for all to position themselves.
Interesting that an insider, the Swedish finance minister, believes its only a matter of time…..
“Greece could leave the eurozone within the next six months, the Swedish finance minister Anders Borg has warned.
“It’s most probable that they will leave,” Mr Borg said, speaking from the annual meetings of the International Monetary Fund in Tokyo.
“We shouldn’t rule out this happening in the next half-year.”….telegraph
9/20 posts from DOCM. Guess he’s the dork neuf. About as comprehensible and less entertaining.
The number of comments on threads has dropped a lot really..no wonder with this sort of septic spamming. There was a time when this was a blog worth reading. Now?
Sweden is not a member of the euro, does not participate in any of the discussions or institutions relating to it and is technically in breach of its treaty obligations with regard to it. It is doubtful whether advice or comments of this nature from a finance minister without skin in the game is either listened to or appreciated.
The peeve the Swedes have, in their attempt to both have their cake and eat it, relates to the difficult issue of managing the relations, under the deal being negotiated, between the countries of the Euro Area and those outside it. There is little comfort in the paper by Van Rompuy.
“The SSM (Single Supervisory Mechanism) should operate in a manner that is fully consistent with the Single Market. To this end, the existing European Banking Authority will maintain its role and its focus on establishing and
ensuring the implementation of a single rulebook in order to preserve the level playing field across the EU. It will also preserve its mediating role between the various supervisors. In this respect, the voting modalities of the EBA must be adapted to allow for fair representation and effective decision-making within the single market for financial services.”
Borg has already expressed extreme annoyance at what he sees as a risk to Sweden’s weight and influence resulting from the proposed new voting arrangements proposed by the Commission.
At least the Dork wasn’t poisoning the blog professionally.
@Liam — Danny is the Spurs legend. The author is David.
@ Gtfaway and BeeCeeTee
I do not normally dignify such ad hominem abuse with a reply but if you are looking to identify contributions that poison the atmosphere of a blog, I would suggest that you look to your own.
DOCM, I’m not talking about the atmosphere of the blog. I’m talking about poisoning the debate with a torrent of contributions that read like representation of the interests of an institutional client rather than a natural person’s perspectives and opinions. You are the only regular commenter that gives this impression, and it is worthy of comment.
Let us never forget the decisive role of the Irish association of soft-landing economists had on the destruction of the Irish economy. Hats off to all concerned.
We have had this conversation before. I do not comment on what motivates others to blog, the manner in which they do so or the number of their posts. I would be grateful if you would afford me the courtesy of doing the same.
@ Gtfaway: “The number of comments on threads has dropped a lot really …”
So you have noticed! Its nothing whatsoever to do with spamming. Its the paucity of commentary from, and negative engagement by the principals. Some folk posed serious questions to these latter. Zero response. You walk!
One of our main defences as citizens against institutional management of public discourse is our ability to recognise and broadcast that it is happening. So, no.
I came into (macro) economics in serious only about 1.5 years ago.
Coming from physics / engineering background, doing (mostly long-term) investment systematically, at some point realizing, that one needs to understand economics.
Reading some books, than old papers, more recent, especially NBER papers, trying to understand, analyze, quantitatively. Engage in blog / online discussions.
The picture of institutionalized “economics” , I now have, is very negative:
1. The “business cycle” economists completely failed to predict the present crisis. Even more severe, they do not even have a clue about what is important, debt levels, and the bubbles coming from them. I took it more as a kind of curiosity, when I read a GE risk engineer Warren Brussee “The second great depression, 2007 – 2020”, predicting it even before the real estate bubble was really developing in full. I looked at the descriptions of the central bank models, in detail, US FRB, EU SDGE, and I asked myself, what this garbage is. Mumpitz, from an physics/engineer point of view. And I do have a higher h-index than most economics professors.
2. The “long term growth” economists have no clue, how to foster that really. Even basic stuff like Cobb-Douglas, Solow 1957 does not match the facts, and have fundamental, mechanical flaws, if you take a closer look. Something folks like Krugman and Barro were apparently not aware at all in praising a 1992 paper about why Singapore will fail soon.
3. Chicago monetarist school? Drove Russia and Argentina into bankruptcy.
4. Krugman? The demi-god of so many economists. He wrote about many things, I am very interested in. In the moment you check his stylistic stuff, and try to apply it to anything real, it turns into complete garbage. Replace lacking facts with physics penis envy.
5. Present day peculiar things, like does language influence saving, apparently most economists cannot do some elementary statistical analysis. It reminded me strongly of a 1995 conference in Greece, where many presentations were just making wild interpretations of noise, systemic intellectual corruption on display.
Bruno Kreisky was once asked why Austria is successful: “We exported all our economists”.
I envied the US for their long term, seemingly consistent data series. Told others, first you have to understand them, and then try to understand more complex European situations. I did go into the details. I did ask Paul Krugman, Ryan Avent, and others for data sources and got valuable advice from them. But my analysis differs strongly from theirs.
How many economy nobel price winners have the US/UK, and how many Germans? Most of them regard our Ordnungspolitik as some kind of 200 year old milk maid rules, against the advanced Princeton stuff.
I believed that the IMF and OECD know what they are doing. Silly me.
But then, more and more, you see that most of their stuff is heavily biased. The latest is this Oliver Blanchard, producing, just in time, his (in)famous Box 1.1 (page 41) in the WEO October 2012, with the latest and the greatest numbers on fiscal multipliers.
Just to be annihilated by the FT http://www.ft.com/intl/cms/s/0/85a0c6c2-1476-11e2-8cf2-00144feabdc0.html#axzz29CmoGbFl
One day later. For completely shameless data massaging.
Bringing this back to the article here, the Academic economics is not in a crisis, it is bankrupt. Some parts may be saleable by a liquidator.
Coming back to the matter in hand!
What prompted me to link to the Van Rompuy paper was the opening sentence of the extract quoted in the initial post.
“I am greatly concerned that the economics profession has had so little involvement in the major issues of the day.”
The title of the Van Rompuy paper is;
TOWARDS A GENUINE ECONOMIC AND MONETARY UNION – An Interim Report
This must surely qualify!
What on earth are you talking about?
To paraphrase Georges Clemenceau who said that “war was too important a matter to be left to the military”, economies are too important a matter to be left to economists.
LOL, this sentence has certainly something. I am certainly not the only from the science/engineering, who found, that making some chips a little faster is good, but the area, where folks can really screw up the life of people is economics, and needs a little more attention.
But this Clemenceau was also the guy, who wrote the Versailles treaty, a carthignem peace, John Maynard Keynes didnt want to be a part of “The economic consequences of peace” 1919, I warmly recommend to read.
It is, of course, a famous text.
Herewith a link to the blog of Gavyn Davies of the FT which underlines the fact that no particular era has a monopoly on disastrous errors of economic policy.
I doubt if the Swedish Finance Minister said that it is highly probable that the Greeks will leave the EZ out of a sense of annoyance with Von rumpoy or the Commission. The opinion he expressed is that of an “insider” and therefore is more credible than many opinions from the likes of Citibank.
@ genauer: “The picture of institutionalized “economics” , I now have, is very negative”
Economics, viewed carefully with the constructs of any of the sciences: chemistry, physics or biology, is nonsense. It cannot be otherwise.
re Gavyn Davies article in FT;
It seems to me that there is nothing wrong with such a proposal. The BOE would merely replace government bonds on its balance sheet with printed money. Or at least that is one possibility. That would mean that it would not be left with a ‘negative’ balance sheet. Further, as far as I recall Karl Whelan has already correctly dismissed the notion of any real importance being place on a ‘negative’ central bank balance sheet.
[ However there would be no fiscal saving to the total State entity,as interest payments by Govt are income to the BOE in the case of bonds it holds.]
One area where I would disagree with Davies is the notion that such cancellation amounts to a helicopter drop of money. It doesn’t. Subsequent decisions of the central bank in dishing out the money may be in the realm of helicopter drop but not the process of cancellation of government gilts it already has in its possession.
Further, could I say that the notion of helicopter drop, as often referred to, is in fact no such thing. The most recent attempts at QE worldwide have proven this. The new money ‘eased’, resulting from the failure of the transmission mechanism used, has simply got stuck on bank balance sheets.
The harsh fact is that if the amount of money already created in QE, had been loaned to individuals on three to five years loans, we would no longer have an economic crisis. The reason being that the money would actually have been spent on good and services.
Any inflationary effects could then have easily been taken out of the systems through increased taxation, which was badly needed.
In relation to the forthcoming summit, the linked Guardian article makes depressing reading;
Particularly the last paragraph
“The Anglo-Franco-German ménage à trois is shifting into a tricky phase that will shape the Nobel peace laureate’s future. The smart money has to be on a Berlin-Paris accommodation that allows Hollande to save face while advancing the German federalist agenda. It will take a while but the direction of travel is clear. But where will it leave Cameron and Britain?”
It looks like we are en route from Merkozy to Merkhollande (or Merkoland !!!).
Another restructuring for Greece?
They have won the Nobel peace prize, not the Nobel prize for economics.
Europe is further from peace now than at any time since 1945. Ask Vince Cable.
@ Brian Woods Snr,
the problem is, the psycho folks, the social studies something, I and most can practically just ignore, without any harm, economics not so.
And their is also a lot of not so clever things going on in physics today , “not even wrong” : – )
My general physician (without a doctor, we have that here in eastern Germany) tried to “order” me to take some pills this summer, I then showed him some (english) papers, he can not read nor understand, and told him he can stuff it.
My view of economics is not, that it actually needs more equations, and numeric artistry, some things I am actually pretty good at, but a lot more common sense.
50 or 100 years ago, people doing economy were most the times also busy in the real life, as investor or bailiff (wrong spelling, most likely).
With Krugman I realized, that he has no clue how CDS work, how to interpret the balance sheet of the japanese CD, how real people react to un-mooring inflation rates, it is just pure princeton Ivory tower.
@James Ryan, I dont like those people, like Cameron, the swedish (if greece blows up, they dont pay for the consequences), some canucks like Nick Rove, who are always easy to talk about, how to spend other peoples money.
No pay, no say. Wer zahlt, schafft an. No Taxation without representation.
@ Joseph Ryan
Thanks for the link! The Guardian article is pretty good. It identifies the most telling political element in the Van Rompuy paper viz. that the will-o-the-wisp of treaty revision has been sidelined.
“Crucially, what the proposals from Van Rompuy do not say is that the European treaties need to be reopened to make the mooted changes possible. That’s a climbdown by Germany, which has long been insisting on reopening the Lisbon treaty but has recently gone quiet on the issue. It is also a concession to France, where a refashioned treaty retooling the eurozone would have needed a referendum which Hollande will do his utmost to avoid.
The moves towards eurozone integration without a treaty revision put Cameron in a tight spot. His apparent scheme to negotiate a new minimalist British settlement within the EU and then put it to the vote either in a UK referendum or in a general election hinges on the Lisbon treaty being reopened.”
This, of course, apart from being the right thing, also avoids a major problem for Ireland. More significantly, it suggests that Berlin has abandoned the Merkel linkage of EMU with political union; an excuse for inaction rather than a real or realistic requirement.
I never suggested that he had. What I did suggest is that he did so because things are going in a direction which does not suit his country.
Economics isn’t just about policy, though. Blanchflower’s trivial technical extension is another man’s key insight. I can understand if he doesn’t want to name names, but can he be a little more specific? Almost exclusively macro, for example?
(Also, let Danny know that Brad DeLong may not be happy with the omission of the r from his name.)
the guardian article is certainly right on “But there is no sign of the Germans giving up”
Trying to stay on topic and coming back to “academic economics”
(in a mostly likely vain attempt of German discipline, you know : – )
A few years ago I thought about putting some general life time investment strategies into an excel sheet, with a few macros, and then trying to figure out a business model, to finance it. Made me thinking a lot more about how the lower 50 and 10% make certain decisions. And engage with the people. Told me some very valuable lessons.
Most academic economics treats those folks as well as the average retail investor as sheeples, on which inflation uncertainty has no influence, they are just “takers”. The way I know history, this doesnt work that way.
5 % inflation as an academic exercise for some optimum currency area, in theory only. Fleming-Mundell is another frigid academic model only.
But why should we be surprised? The greatest single failing of humanity is that we think we are twice as smart as we actually are. To err is human. To not admit it is stupid and to not learn from it is what has lead us to thousands of years of war
I knew the line.
on the gavyn davies piece,
thats what many here expected for the long run.
The inability to match outlays to revenue will result in more and more money printing. If this is then resolved in outright default or more likely in the US and UK inflation, solid and sustained, is a sure sign of political disfunctionality, and the exact way becomes secondary. The money should reflect some real world value, which it cant in that way. They have to stiff somebody for this.
And I will make sure that this isnt me. Thank you for the reminder.
I actually doubt the krugman “hyperinflation” ” losing access to bond markets”
But all empires we have data on ended with hyperinflation.
Anybody with counter examples here? I am interested !
Doesn’t make sense. He gave his opinion on the probability of a Greek exit…
That does not equate with differences his government has with the current EZ trajectory on on banking regulation and supervision.
In other words kiss strategy.
In the meantime Ambrose has a good article today..
From Venice to Washington.
By CHRYSTIA FREELAND
Published: October 13, 2012
IN the early 14th century, Venice was one of the richest cities in Europe. At the heart of its economy was the colleganza, a basic form of joint-stock company created to finance a single trade expedition. The brilliance of the colleganza was that it opened the economy to new entrants, allowing risk-taking entrepreneurs to share in the financial upside with the established businessmen who financed their merchant voyages.
Venice’s elites were the chief beneficiaries. Like all open economies, theirs was turbulent. Today, we think of social mobility as a good thing. But if you are on top, mobility also means competition. In 1315, when the Venetian city-state was at the height of its economic powers, the upper class acted to lock in its privileges, putting a formal stop to social mobility with the publication of the Libro d’Oro, or Book of Gold, an official register of the nobility. If you weren’t on it, you couldn’t join the ruling oligarchy.
The political shift, which had begun nearly two decades earlier, was so striking a change that the Venetians gave it a name: La Serrata, or the closure. It wasn’t long before the political Serrata became an economic one, too. Under the control of the oligarchs, Venice gradually cut off commercial opportunities for new entrants. Eventually, the colleganza was banned. The reigning elites were acting in their immediate self-interest, but in the longer term, La Serrata was the beginning of the end for them, and for Venetian prosperity more generally. By 1500, Venice’s population was smaller than it had been in 1330. In the 17th and 18th centuries, as the rest of Europe grew, the city continued to shrink.
The story of Venice’s rise and fall is told by the scholars Daron Acemoglu and James A. Robinson, in their book “Why Nations Fail: The Origins of Power, Prosperity, and Poverty,” as an illustration of their thesis that what separates successful states from failed ones is whether their governing institutions are inclusive or extractive. Extractive states are controlled by ruling elites whose objective is to extract as much wealth as they can from the rest of society. Inclusive states give everyone access to economic opportunity; often, greater inclusiveness creates more prosperity, which creates an incentive for ever greater inclusiveness.
The history of the United States can be read as one such virtuous circle. But as the story of Venice shows, virtuous circles can be broken. Elites that have prospered from inclusive systems can be tempted to pull up the ladder they climbed to the top. Eventually, their societies become extractive and their economies languish.
That was the future predicted by Karl Marx, who wrote that capitalism contained the seeds of its own destruction. And it is the danger America faces today, as the 1 percent pulls away from everyone else and pursues an economic, political and social agenda that will increase that gap even further — ultimately destroying the open system that made America rich and allowed its 1 percent to thrive in the first place.
You can see America’s creeping Serrata in the growing social and, especially, educational chasm between those at the top and everyone else. At the bottom and in the middle, American society is fraying, and the children of these struggling families are lagging the rest of the world at school.
Economists point out that the woes of the middle class are in large part a consequence of globalization and technological change. Culture may also play a role. In his recent book on the white working class, the libertarian writer Charles Murray blames the hollowed-out middle for straying from the traditional family values and old-fashioned work ethic that he says prevail among the rich (whom he castigates, but only for allowing cultural relativism to prevail).
There is some truth in both arguments. But the 1 percent cannot evade its share of responsibility for the growing gulf in American society. Economic forces may be behind the rising inequality, but as Peter R. Orszag, President Obama’s former budget chief, told me, public policy has exacerbated rather than mitigated these trends.
The Self-Destruction of the 1 Percent
Published: October 13, 2012
(Page 2 of 3)
Even as the winner-take-all economy has enriched those at the very top, their tax burden has lightened. Tolerance for high executive compensation has increased, even as the legal powers of unions have been weakened and an intellectual case against them has been relentlessly advanced by plutocrat-financed think tanks. In the 1950s, the marginal income tax rate for those at the top of the distribution soared above 90 percent, a figure that today makes even Democrats flinch. Meanwhile, of the 400 richest taxpayers in 2009, 6 paid no federal income tax at all, and 27 paid 10 percent or less. None paid more than 35 percent.
Historically, the United States has enjoyed higher social mobility than Europe, and both left and right have identified this economic openness as an essential source of the nation’s economic vigor. But several recent studies have shown that in America today it is harder to escape the social class of your birth than it is in Europe. The Canadian economist Miles Corak has found that as income inequality increases, social mobility falls — a phenomenon Alan B. Krueger, the chairman of the White House Council of Economic Advisers, has called the Great Gatsby Curve.
Educational attainment, which created the American middle class, is no longer rising. The super-elite lavishes unlimited resources on its children, while public schools are starved of funding. This is the new Serrata. An elite education is increasingly available only to those already at the top. Bill Clinton and Barack Obama enrolled their daughters in an exclusive private school; I’ve done the same with mine.
At the World Economic Forum in Davos, Switzerland, earlier this year, I interviewed Ruth Simmons, then the president of Brown. She was the first African-American to lead an Ivy League university and has served on the board of Goldman Sachs. Dr. Simmons, a Harvard-trained literature scholar, worked hard to make Brown more accessible to poor students, but when I asked whether it was time to abolish legacy admissions, the Ivy League’s own Book of Gold, she shrugged me off with a laugh: “No, I have a granddaughter. It’s not time yet.”
America’s Serrata also takes a more explicit form: the tilting of the economic rules in favor of those at the top. The crony capitalism of today’s oligarchs is far subtler than Venice’s. It works in two main ways.
The first is to channel the state’s scarce resources in their own direction. This is the absurdity of Mitt Romney’s comment about the “47 percent” who are “dependent upon government.” The reality is that it is those at the top, particularly the tippy-top, of the economic pyramid who have been most effective at capturing government support — and at getting others to pay for it.
Exhibit A is the bipartisan, $700 billion rescue of Wall Street in 2008. Exhibit B is the crony recovery. The economists Emmanuel Saez and Thomas Piketty found that 93 percent of the income gains from the 2009-10 recovery went to the top 1 percent of taxpayers. The top 0.01 percent captured 37 percent of these additional earnings, gaining an average of $4.2 million per household.
The second manifestation of crony capitalism is more direct: the tax perks, trade protections and government subsidies that companies and sectors secure for themselves. Corporate pork is a truly bipartisan dish: green energy companies and the health insurers have been winners in this administration, as oil and steel companies were under George W. Bush’s.
The impulse of the powerful to make themselves even more so should come as no surprise. Competition and a level playing field are good for us collectively, but they are a hardship for individual businesses. Warren E. Buffett knows this. “A truly great business must have an enduring ‘moat’ that protects excellent returns on invested capital,” he explained in his 2007 annual letter to investors. “Though capitalism’s ‘creative destruction’ is highly beneficial for society, it precludes investment certainty.” Microsoft attempted to dig its own moat by simply shutting out its competitors, until it was stopped by the courts. Even Apple, a huge beneficiary of the open-platform economy, couldn’t resist trying to impose its own inferior map app on buyers of the iPhone 5.
Businessmen like to style themselves as the defenders of the free market economy, but as Luigi Zingales, an economist at the University of Chicago Booth School of Business, argued, “Most lobbying is pro-business, in the sense that it promotes the interests of existing businesses, not pro-market in the sense of fostering truly free and open competition.” ( Page 3 follows)
Page 3. The Self-Destruction of the 1%. NYTIMES
The Self-Destruction of the 1 Percent
Published: October 13, 2012
(Page 3 of 3)
IN the early 19th century, the United States was one of the most egalitarian societies on the planet. “We have no paupers,” Thomas Jefferson boasted in an 1814 letter. “The great mass of our population is of laborers; our rich, who can live without labor, either manual or professional, being few, and of moderate wealth. Most of the laboring class possess property, cultivate their own lands, have families, and from the demand for their labor are enabled to exact from the rich and the competent such prices as enable them to be fed abundantly, clothed above mere decency, to labor moderately and raise their families.”
For Jefferson, this equality was at the heart of American exceptionalism: “Can any condition of society be more desirable than this?”
That all changed with industrialization. As Franklin D. Roosevelt argued in a 1932 address to the Commonwealth Club, the industrial revolution was accomplished thanks to “a group of financial titans, whose methods were not scrutinized with too much care, and who were honored in proportion as they produced the results, irrespective of the means they used.” America may have needed its robber barons; Roosevelt said the United States was right to accept “the bitter with the sweet.”
But as these titans amassed wealth and power, and as America ran out of free land on its frontier, the country faced the threat of a Serrata. As Roosevelt put it, “equality of opportunity as we have known it no longer exists.” Instead, “we are steering a steady course toward economic oligarchy, if we are not there already.”
It is no accident that in America today the gap between the very rich and everyone else is wider than at any time since the Gilded Age. Now, as then, the titans are seeking an even greater political voice to match their economic power. Now, as then, the inevitable danger is that they will confuse their own self-interest with the common good. The irony of the political rise of the plutocrats is that, like Venice’s oligarchs, they threaten the system that created them.
@ genauer: “My view of economics is not, that it actually needs more equations, and numeric artistry, some things I am actually pretty good at, but a lot more common sense.”
Common sense is a ‘marginal commodity’! Gustav Schmoller demolished the ‘mathemization’ of economics.
Is there any academic discipline more fascinated with itself than economics? Physics maybe, but at least they have a history of achievement.
From RTE re today’s Nobel announcement.
“Last year’s economics prize went to US economists Thomas Sargent and Christopher Sims for describing the cause-and-effect relationship between the economy and government policy.”
The one thing economists have in spades is chutzpah. And lies.
Thanks for the link. Interesting article, especially this bit;
“We are told that Ireland has largely closed the gap already, showing what is possible. Indeed it has, but Ireland has one of the most open economies in the world. Its exports are 127pc of GDP. It has a fat trade surplus.
It has never been seriously uncompetitive in the euro. It does not have a misaligned currency. Ireland tells us nothing about Spain, Italy, Portugal, or indeed France.”
This quotation would be correct if he mentioned only Greece, Portugal and Spain. These countries were behind when they joined the EU and subsequently the euro and, apart from the artificial splurge period prior to the crisis, have remained there. The clear objective now is to limit the needed transfers to these countries. (It has been done before; through the creation of the Cohesion Funds from which Ireland also benefited).
Notice here a lot of commentators (both within and without the tent) seem to conflate macro theory with economics. Its not. Theres a whole other wide world out there, mostly concerned with observation, estimation, and nary a DGSE haiku in sight.
‘… Theres a whole other wide world out there ….’
Must admit Brian, the silence from the ontologically challenged is somewhat deafening …
Excellent article. Very interesting perspective.
Merdeolande, Yes that seems to be the destination at the moment.
@ Brian Woods Snr
Thanks for mentioning Schmoller! It was fun to read his wikis. A similar contemporary could be Deidre McCloskey. I sympathize with her view of modern economics as a “cargo cult”.
He did not attend most of his lectures, organized the “Verein für Socialpolitik” a very influential german group to this day, Krelle until the 90ties, Sinn since then, come from the top of my head.
I am certainly not anti-Equations, but anti stupid math and statistics.
Looks like the German attitude is hardening towards Greece again
It would seem that the Steve Keen evidence based view of the world is gaining more and more traction and the move away from theory based solutions to more practical ones looks to be one which will eventually become the new economic model. In time the world, in my view, will see Steve Keens work as the dawning of new age in economics both in pratical and educational terms. The change can’t come quick enough.
Opinion is torn between DOCM being a EUropeanized civil servant, a professional blogger for some European financial sector related organization or a satirical art project gone terribly, terribly wrong (The give away? No one seriously repeatedly recommends Stephen Collins for the insight of his opinion columns. No one) but it is not open to question whether DOCM is attempting to steer readers of this blog away from thinking about the primary political and economic issues highlighted by the current crisis and onto subjects closer to his heart (supply side reforms, European solidarity – financial sector style and the general necessity of fully embracing the gloriously neoliberal aspect of the EU)
Perhaps do not engage with him but just remark in your posting how many of the last postings have been from the financial sectors point man in the Irish blogosphere.
Speaking of which: This thread is now at 28% DOCM, DOCM has three times as many posts as the next most prolific contributor.
Might the game is up?
@ Shay Begorrah
Leaving aside the misplaced ad hominem remarks which have no place on any blog, your dedication to free speech and the right of others to express opinions is a sight to behold!
Thanks for the statistics. I had not realised that I was making such a large contribution recently. I have evidently too much free time on my hands.
@ genauer: Thanks also. I have read some D Mc Closkey. Bit quirky, but informative non-the-less.
DOCM provides a useful contribution and is obviously well informed. Who he represents is immaterial…we can all make up our own minds.
More puff from the IMF..
And in contrast, read Willem Buiter in the FT today. He classes us amongst the basket cases and has a fairly dire outlook.
Personally, I find docm’s contributions to this blog amongst the most useful. One of the reasons the blog is of practical use, and therefore maybe worth supporting, is that intelligent and informed contributors draw attention to links, interpretations or snippets of analysis that one might otherwise miss.
Its a sort of econonerds’ portal.
I rarely learn much from people who agree with me about everything.
Thank you for that!
On the point we were discussing in relation to the remarks by Borg on Greece, I came across this Reuters item which suggests that it may be kiss and make up time with regard to taking care of the concerns that Sweden has with regard to the EBA.
Gavin Barrett had an outstanding piece in today’s IT with regard to the likely future course of events. I would, however, add a seventh heading to his list; that Ireland will face some extremely difficult choices with regard to the dichotomy being in the euro and being closely integrated with the UK economy, including the financial sector.
I have to confess that I find the continued ad hominem attacks from a few quarters rather tiresome. As I have commented before, it says a lot more about the perpetrators than the victim and I simply cannot understand why they wish to let such a record exist anywhere on the net.
Your too strident too much too often. Less is more. A lot less. Try to let others have their say even if you finding it tiresome twaddle. Or are you perhaps paid by the word?
@ DOCM and fiatlux
Thanks for calling for calm.
After the repeated ad hominem attacks and the recent passionate plea of Shay on behalf of the Teheran regime, I was actually tempted to ask, on what payroll she is : – )
Instead I googled here, and after finding more ad hominems, against Kenda and others, in other places, also:
“Together with such characters as IRA Mafiosa Boss, Shay Begorrah ….”
Enjoy ! Friends of yours ?
“I am greatly concerned that the economics profession has had so little involvement in the major issues of the day. ”
A very old story. Only people peripheral to the main stream can comment on it. This has been true from the Old/New testament prophets, to Socrates, to Marx, to (dare I say) Assange to …
Actually the first economist learned that the hard way when he said ‘We should stop swinging from trees and walk upright’ and got the crap beaten out of him by his fellow chimps. A lesson passed down from one generation of economists to the next over the millennia. We are all descendants of that first prophet, who like those that followed viewed his status as a curse.
Don’t like it, don’t take the man’s money. Pack up your stuff and cross the Nile why don’t you.
Thanks for link.
I think Gavin Barrett is approaching the issues from an over legalistic point of view and on his 2 nd item…debt forgiveness/reduction I believe he is entirely wrong. We may get rescheduling on the Anglo bit but getting a write off is highly unlikely. The Germans are back in their Nein mood and Enda can say is fielder linn ( as he did of from NY last night) till the cows come home. Wishful thinking? Trust is one thing but if you misinterpret because you are anxious for good news/ spin it is likely to end up like peace in our time. Was it Neville that said that.
On that point, I am inclined to agree. But, in general, he provides a very useful summary of the main issues.
Back to the Peace Prize and Political Economy
Nobel Peace Prize
Oslo’s call to Europe
15 October 2012 La Repubblica Rome
The Nobel Peace Prize awarded to the EU is a double appeal, writes German philosopher Jürgen Habermas: to European leaders to save a Union that has broken down; and to its citizens, to show solidarity just as the crisis is undermining the European social model.
CARTOON OF THE DAY
Nobel Peace Prize
The wrong Nobel
15 October 2012 Le Temps Geneva
Without climbing too much farther up my own ass I think a useful rule of thumb from the twenty first century, where we are bombarded with information from different sources, is that its provenance is critical. The court of public opinion can take into account the defendants prior record and current associates.
To take an unrelated example there are many clever, well meaning anthropogenic climate change deniers, they are incredibly voluble for their comparative numbers and more or less utterly wrong – anyone who engaged with them was wasting their time and effort, time and effort that was needed elsewhere.
One of the ways that I as a layperson was able to evaluate that the deniers were noise and not signal was who they were. They were the same people who denied serially the dangers of tobacco, CFCs and lead in petrol, in fact almost exactly the same set of polluting industry funded schills and think tanks feeding autodidact libertarian patsys.
Lives were lost to their earlier campaigns of disinformation and lives will be lost because to their current one. Anyone who does not dismiss them because of who they were made a serious mistake.
Anyway, I should get my own blog before I deviate too much from the matter at hand but one persons “ad hominen” is another persons “learning from the lessons of history”.
Allah willing my controllers will whisk me away from Dublin before I am uncovered, but really I am surprised at you given your principled objection to the the illegal invasion of Iraq by the US and its allies.
Why? The successful campaign to invade Iraq after the September 11th attacks has even clearer similarities with the neoliberal attempt to blame the fruits of the global financial crisis on social democrats, an initial crisis which was effectively blow back from an earlier failed policy initiatives and then a shameless attempt to capitalize on the crisis to pursue policies that were in effect the ones that caused it (More fiscal pacts anyone? How about giving more power to the ECB? Perhaps we just did not privatize enough power companies?)
@ Shay: “…anyone who engaged with them was wasting their time and effort, time and effort that was needed elsewhere.”
Glow-Ball Warming aside. Your quote reminded me of this.
“How does it happen that economic transactions and social phenomena so often bring forth a favourable or adverse criticism which asserts that this is just, that unjust? When we have a correct answer to this, then it will be easy to draw further conclusions and to decide what force, weight and influence this approving or disapproving judgement will exercise retroactively on the social and economic phenomena”.
This is an English translation of a paragraph from a long 1881 paper by Gustav von Schmoller. It was reprinted in Annals of the American Academy: March 1894: 697-737.
It is a VIP paper indeed.
Coming from one of the self-appointed gendarmes of this website, that is very gracious of you.
Ad hominem remarks are not acceptable in any circumstances. I note that you could not avoid one even in your latest offering.
”I am greatly concerned that the economics profession has had so little involvement in the major issues of the day.”
But there is also the deeply concerning issue of politicised bodies pushing their agenda under veneers of economic motives.
Soros, Gurdjiev and so forth…
When the issues of national-self determination and the functioning of democracy are treated as if they were an obsolesence we have reached a very retrogressive and dangerous phase of history.
‘Common article 1 of the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights provides that all peoples have the right of self determination and by virtue of that right they freely determine their political status and freely pursue their economic, social and cultural development’
– has been replaced with:
‘Germany must choose between Democracy & Europe’
‘The Nation State has no future in a globalised world’
re- D O’Donnel & cartoon
“its advancements in peace and reconciliation, democracy and human right in Europe”.
Pax Europa – enforced with the modern warfare of indenture and democratic subversion.
re Joseph Ryan
‘Europe is further from peace now than at any time since 1945. Ask Vince Cable.’
Though the Lib Dems are Brussels’ UK reps.
There is a vested interest there in painting any alternatives as black as possible.
Does anyone think that enforced integration – for that’s the only way it can happen – is more or less likely to lead to conflict ?
Giver up yer aul governance or face the Blitzkrieg ?
We can have peaceful co-existence & voluntary interdependence WITH Independence. Most people were under the impression that it was this, and not the resurrection of the Ghosts of Empire Past, that they had consented to.
You citing Zingales: “Most lobbying is pro-business, in the sense that it promotes the interests of existing businesses, not pro-market in the sense of fostering truly free and open competition.”
Makes a very important point.
It reminded me, that present day german “tycoons”, like BMW Klatten, (working the shop floor incognito as Susanne Kant) do not get so much involved in collecting paintings, but more in fostering engineering and entrepreneurship, in large (SGL carbon, a TU Munich Institute) and small: stipends, micro credits for start ups, sometimes even personally getting involved in what I could call chicken shit.
There are similar stories about Deutsche Bank Herrhausen and the first prime minister of the free state Saxony, Biedenkopf, participating undetected in Wohngemeinschaften (the English roommate doesn’t cut the real meaning).
When Germany realized that we have some pretty solid entrenched large companies, but besides SAP not so much younger companies, we started to engage in nurturing all kinds of small start ups, and not just the latest web sites for pet food, as the best idea we can come up for fostering sustainable, robust, long term growth. A lot of them fail, or are not really profitable, or generate lots of taxes, but it turns the climate away from the classical corporate careers, from cradle to grave in a big corporation, I was used to.
We see that as long term more fruitful than low taxes for some Microsoft, Google tax cheating, Ireland engages in. When our economy minister with some 70 or so industry guys in tow went to Greece (photo voltaics would work much better there than here), they basically stood them up. Naaah, they don’t want to work for some foreign exploiters. A friend of mine, with some family size business, went on a similar, lower level, trip to Israel and it looks to bear some fruit.
I do not find much about such things in economic literature. Hints into that direction from everybody are very welcome!
We do not see the situation as a one team win, the other loses, like Eastwood’s halftime http://www.youtube.com/watch?v=_PE5V4Uzobc
We believe, we can all win prosperity by learning from each other, we sent our teachers to Finnland, to learn about their education system, the Bavarian Prime minister made it a very visible point, to go on an education trip to Switzerland, to learn more about direct democracy, when internal conflicts about project like Stuttgart 21 and extensions of airports became divisive. Adress problems early on, hear the other side.
And I think we have a couple of things, others can take a look on as well, to see whether there is something worth to copy.
That doesn’t mean you have to give half your board seats to the unions. I doubt that would work anywhere else : – )
How can I expect people to say “we” talking about Europe, one day, if they can not even use this word talking their own country?
I am somewhat at a loss, how you see discrepancies in my stance in the Israel / Iraq / Iran mélange.
Germany will not sent soldiers into that region, unless my people/embassies are attacked. Germany will not do anything that could harm Israel, in any way, shape or form, you all know the history behind that.
For our NATO allies, we have the finest German quality tanks, aircraft, ships and submarines, guns of all sizes, ammo factories to go with them, to buy as much as they can pay for, but we insist on payment, very much so. For all others restrictions may apply : – )
DEFENDING us and our allies, and opposing the second Iraq war, without UN coverage, standing for that before a local US supermarket, when that was not exactly popular, AND selling weapons to folks, who prevent the present Iran regime from annihilating Israel,
This is for me a very principled, consistent standpoint.
I am a learning person, at least I claim that : – ), but I think this is a point I have found very little reason to change anything over the last quarter century.
Coming to the last point:
Can anybody here direct me to what Irish kids learn, a curriculum (Lehrplan, as we say)? After the recent experience with Mickey Hickey here about: Martin Luther , when and what that was about, I am actually pretty interested.
Genauer. While (you claim) English is not your native tongue I find your posts gibberish and incomprehensible. Sorry.
The Primary School Curriculum (age 4 – 12) is truely awful. It would be a realy deep embarrassment to explain to you.
The Secondary Curriculum (age 13 -18) is heavily directed toward rote learning – though there are a wide variety of subjects on offer. My youngest son spent 2 years in a second-level school in Hamburg then one final year in Dublin. He described his experience in Germany as an open, student friendly and interesting curriculum. His experience in Ireland was of a closed, bureaurcratic friendly and boring curriculum. Our maths curriculae are dreadful, the sciences not much better. Quantity rules over quality.
It is difficult to place ‘blame’ for this sad situation – but it does not include individual teachers who appear to be doing their best in an impossibl situation. Political, religious and trades union vested interests appear to be the main problem.
Is Martin Luther a new pop star?
Remembering all the time that Genauer brings up Luther as a window to making statements about ‘taming’ catholics, mock-jokingly contrasting us & the greeks with central europe’s ‘protestant work ethic’, and so forth.
Constantly calls on the ‘we’ of europe while repeatingly making disparaging remarks about what he sees as negative traits attributable to it’s parts.
And, as with ‘anewdawn’, I’ve been wondering if you really are German or pretending to be an unpleasant one to provoke anti-german remarks…
Yes it’s time for the applied economists to come to the fore. They did an amazing job in the run-up to the crisis certainly. It’s time to see more from them. Like the ESRI and their terrific empirical work. They predicted the crash with awesome accuracy and warned us that the “soft landing” was nonsense. As did Trinity’s applied professors. If only we had listend to them…
May you point me to what specifically of my writing YOU don’t understand, and find incomprehensible?
Or do you just not like the content of what I am saying?
I worked for 7 years in the US, and I didn’t have any difficulties with communications from day one.
Or should I take your doubt about me having English as a second language, as a kind of unintended compliment?
Or do YOU have difficulties with sentences, going beyond simple SPO construction?
I welcome feedback from others.
Back to the real world. It appears that all of Greece is going on strike this week..even judges and lawyers…peculiar how our guys don’t feel the need to protest!!!!!
Since you ask, Genauer, there’s an air of an anglophone parodying pidgin-english; the incongruity of reasonably sophisticated usage dotted with token, elementary errors.
I strongly suspect that your English is better than the German of any Irish person posting here but we have wandered very far off thread.
That having been said…. here is where I go for the low down on the current economic war on Iran that is intended to build to a shooting war. Same players as with Iraq, just with better media management skills.
I like your paranoia, you can never be too careful.
Genauer should German translations of his last two posts make and themhere post.
Würden sie mich bitte darauf hinweisen, wo ich für SIE unverständlich war.
[Schlechtere, doppelte Wortwahl im Englischen, weil ich zu dieser Zeit müde bin: wo SIE mich nicht verstehen können, und mich unverständlich finden, so wie der Schäuble gestern mit seinem „Staatsbankrott“]
Oder mögen sie einfach nicht den Inhalt, von dem, was ich sage.
Ich habe sieben Jahre in Amerika gearbeitet, und habe vom ersten Tag an niemals Schwierigkeiten gehabt, mich verständlich zu machen.
Sollte ich den Zweifel, das Englisch nicht meine Muttersprache ist, als ein, vielleicht etwas unbeabsichtigtes Kompliment ansehen?
Oder haben nur SIE Schwierigkeiten mit Sätzen, die über die einfachst mögliche Subjekt-Prädikat-Objekt Struktur hinausgehen?
[Während sich jeder deutsche Bier Dimpfel auf dem Nockherberg über endlose Schachtelsätze vom ex-Dr von und zu Guttenberg erfreut]
Shay, are you now happy ?
I am never happy! Have a good night.
Economists are PR men for the banks. When not actively engaged in bank/government propaganda operations, they concoct fraudulent mathemathal zodiacs in an effort to disguise that their discipline is both scientifically and intellectually hollow.
It’s not a discipline. It’s an academic shell game.
just 10 seconds later, and I would have been in bed.
Are you realizing how happy you (anewdawn, mark, shay) make me?
So far I knew that my passive english, reading business texts, patents, scientific papers is good (upper 3%, tested). fast and precise.
But I thought my active usuage is much worse, and deteriorating into the night, and with some alcohol.
But , well, this here is probably just some evil Irish conspiracy, making me just think ….
Makes me go for the second,
completely unintented and unasked thing.
I said it here somewhere myself, humour travels real bad on the internet,
but I felt safe with using ‘protestant work ethic’ with respect to poland, which is a catholic as it can be, safely mocking a stereotype. Or so I thought. Calling Luther “verbose” with his 95 thesis, before. Expressing solid sympathy for Benedict XVI and his insight for some austrian anarchist, Paul Feyerabend. Lesson 2.
I am apparently not inducing any positive reaction to my very verbose “we” sermons, and how Germany learns from others. I am just getting on the nerves. That is not my purpose.
For tonight I am just happy with Lesson I.
Genauer you flip between pidgin and proper construction. Your a fraud or a troll. Give it up.
Back in the real world, from the Irish Times:
“Four of Europe’s five biggest automotive markets shrank last month, with drops of 11 per cent in Germany, 18 per cent in France, 26 percent in Italy and 37 per cent in Spain.”
We are definitely in a newer and more dangerous phase of this crisis. The knock on impact on employment will be seen shortly.
Is the delete button on your keyboard working. You may need to test it occasionally.
I know who the troll on this page is… it isn’t genauer.
Weve drifted a long way from the topic. Perhaps Liam time to close it down?
What puzzles me about this board is how people will insist on riding their hobbyhorses (and we are probably all guilty) into the threads regardless of the topic.
It would be useful to look at the Nobel – the prize is for work that is empirical, policy relevant, deeply thought out, and very pertinent. And yet the meme “economics is in trouble” persists. As I said, macro theory yep and the fact that the political was lost from political economy, yep. But outside that?
Of more concern to us should be how we keep people like Liam or Colm Harmon in the joint – people working on policy relevant empirical etc etc, all those good things that DB mentioned. Sneering, denigrating and downgrading is unlikely to feature highly in a structure that would keep them and their ilk.
Back to my editing – 10 papers this am. Empirical international finance is booming….
Being presented in IIIS today. Empirical, relevant, and I suggest not a single person carping will attend. Coz, its academic innit? Must be ivory tower mustnt it? All together now : Smart Green NanoEconomy….
@ brian lucey: “What puzzles me about this board is how people will insist on riding their hobbyhorses ”
Its all we have Brian. The principals on this site are in a silo with regard to the unfolding economic disaster in western, developed economies. Where are the 25? or the 45? or anyone of any note?
Today we may have passed a societal watershed: 10% of our fellows are in Food Poverty. That’s some heroic achievement. It could be solved (well not entirely). It should be solved (like PDQ). So where are the Soldiers and the Tribe and wasbeen Labourites?
I’d shut this site. It’s hoplessly useless. On the plus side, progressive-economy@TASC is worse.
“Where are the 25? or the 45?”
working on our CVs and scanning the escape committee magazines (those of us that can so contemplate 🙂 )
I’ve been somewhat critical of economists in the past also. I’m so surprised that after so many years of stagnant growth there’s very little analysis of how resolving the debt crisis under our debt-based system is such a contradiction.
If we repay our personal and business debts, the money used to do so no longer exists. I don’t see how we can get to a level of debt under this system which you might call sustainable.
I’m also surprised that no one is analysing the effect of mortgages reaching their limit of duration. To keep the debt based system running smoothly we need to take on more debt than we repay. To help this, mortgages have always been able to take longer and longer to repay – until now. As far as I can see we’ve reached the end of the useful life of this system and I think we can expect more out economists in discussing other ways we could create/destroy money much better.
@ brian lucey: Yes, of course, silly me! Any tips?
@Paul Ferguson: Do you have access to e-journals?
Hudson, M. 2000. ‘The Mathematical Economics of Compound Interest: a 4,000 year Overview’, Journal of Economic Studies, vol 27: Nos 4/5:344-363.
The UNCTAD 2012 Report (search for Heiner Flassbeck on The Real News).
Try “Our Finite World” Gail Tverberg. ‘Can we expect the economy to keep growing?’ April 26th 2012.
… also itulip.com had a piece with same title (27th? sept 2012)
Golem XIV has a 4-parter on ‘Why are we bailing-out the banks?’ I do not have the full blog address.
It goes on and on. Except on this site. Good reading!
Rogue nature of international finance pre-crash = rogue nature of international finance post-crash
squiggles galore; keep up the derivatives work (-;
@Brian Lucey: I think Blanchflower raises a good debate and, in his usual way, doesn’t mince words. There are good models in Economics of people who combine theoretical and policy relevance. Alvin Roth is a key example and it is particularly interesting that yesterday’s Nobel, as Justin Wolfers said, is a multi-generation Nobel, with strongly applied work following theoretical advances. People like Daniel McFadden, James Heckman, Angus Deaton, Daniel Kahneman and others strong examples of people who combine theory and empirics. A key point from the Blanchflower paper is the extent to which tracking indices is neccesary to be policy-relevant. I track some indices, in particular unemployment, but not to the extent that some of my colleagues do. There are other models of relevance, including the other big hat that Danny has wore, namely bringing in insights from other fields and showing what they imply for economics and economic policy.
People talking about the relevance of economists should separate 02-06 from 06 onwards. The legacy from 02-06 is not good. The link between academic economics and economic policy had drifted and contributed to the atmosphere that allowed a bubble to form. From Morgan Kelly’s first piece on, some of the contributors here have been providing a strong public service in countering spin and providing informed analysis. For example, I would have paid a good amount of money if neccesary to subscribe to the updates Karl Whelan was giving all the way through the crisis and we would have been a more ignorant country without them. Whether it effected change is a good point but being informed is a good in itself to a lot of people.
My clients are up in arms. How dare they let the cat out of the bag! This never used to happen with the previous regulators!!
Below is a reading list on some key papers and commentaries mostly by Irish academic economists (and some others) focusing on the economic crisis and potential solutions.
I dont do derivatives. But then a short glance at my research would show that : its all here http://brianmlucey.wordpress.com/my-research/published-research/
My last 10 published papers have been on financing irish SMEs, the triple causes of the crisis, how developing country firms can drive financial integration, portfolio management in a volatile world, sexism in the financial markets, another on financing irish SMEs, asian equity market integration, culture and investment, the role of the CEO in risk taking, gold-silver interactions and the risk profile of irish adults. Papers with a decent chance of being the next few include ones on the reaction of g7 equity markets to news surprises, oil and gold interrelationships, the relation of forward and spot markets in developing country currencies, where the gold price is made and what firms are exposed to commodity shocks.
Very few squiggles, all empirical, and im more a baysian manquee. But, thanks for reminding me why i quit this parish. I guess the quality of the debate hasnt improved really
@ Brian Lucey/Liam Delaney
In lightly moderated blogs, there is no answer to the conundrum that you raise or to the problem of abusive contributions. Indeed, the latter is the reason, I would imagine, why most academics choose not participate. It takes a certain level of masochism to do so. But if all chose not to participate, it would mean abandoning an exceptionally useful instrument to not particularly enlightened forces.
The point that Blanchflower is making, or, rather, the one that I honed in on, related to the comment by him;
“I am greatly concerned that the economics profession has had so little involvement in the major issues of the day.”
Speaking as someone from outside the tent, the major issue, IMHO, is that addressed by Edmund Phelps in an article in the FT in July.
One may, or may not, agree with him but he identfies the great divide that exists at present within the profession,or, at least, the macro-economics part of it. (He has, as you know, been a guest of the NUI Galway Law Society (!) and I endeavouring to get a hold of his speech).
I agree, of course, that the baby should not be thrown out with the bathwater and the discipline is far from being on its last legs. Its relevance to the real world has been confirmed by the choice of recipients for the recent Nobel prize (one of whom admitted that he had never been to an economics lecture in his life).
P.S. There have been some interesting developments in relation to Spain cf posts on the thread dealing with the Bucheit-Gulati paper.
@ Liam Delaney et al
Thanks for the list. I had not seen the earlier comments when I sent my post.
I’ve actually recommended your SME stuff to a few people …
The Public Sphere matters – even this little modest corner of it ….
Ta for list …
Keep posting. I may not always agree with your analysis, but many of the links you provide are very informative. It is up to people to develop their own opinions on the different subjects. More to the point, whether we like it or not, many of subjects linked to form the basis of current thinking in relation to the crisis.
The fact that you have advocated sharing the burden in a more equitable manner seems to have been lost on some.
IMHO, even though I do over post, this site is an excellent reference point for material and up to date comment on this dreadful political and economic crisis that we find ourselves in. I would never have come across Krugman, Eichengreen or DeGrauwe and many of the Irish economists were it not for this site.
To those who believe that economists have little to offer, it is worth reflecting that the existing policies being pursued purport to have an economic rationale behind them, however erroneous a rationale it may be.
I’d say nearly 20% of posts on this thread have been from one contributor to another encouraging them to keep posting, ‘no matter what everyone else says’..strange, but hilarious
Re- hobbyhorses. Guilty, certainly. But we all see things in a framework to which we’ll relate particulars.
As for the willingness of people to participate here, and notwithstanding that personality should be excluded from issue, there is also the just defence that there may be some cases of people taking it too personally when their firmly-held position is subject to a spirited rebuttal – without any personalising taking place.
We are daily subjected to commentary – economic, social & political – that is presided over by small affiliates with access to decision-makers and the media that is more often than not out of all relation to either their knowledge, talent or representativeness.
It could be possible that entering a forum outside of the sheltered-box of normal operations is far more of a factor than any other reason why some may stay away. The general tenor here is atypically genial, anyway.
Remember that we live in a country where George Lee as (then) RTE’s economics correspondant felt compelled to say on the national news that he couldn’t be expected to comment on causes & keep his job.
This thread reminds me a little bit of the trend towards stenography in journalism where the opinions and statements of politicians or pundits are reported but not analysed, or the American tradition looking for middle ground between parties when in fact one parties has arguments that are consistent with the facts and sensible and the other has ones that are inconsistent with the facts and fantastical.
It is not true to say modern macroeconomics has failed, and Blanchflower does not quite say this either, he quotes Krugman and Solow approvingly but scorns Lucas. He rhetorically asks whether Keynesianism is a better model but can not quiet summon up the courage (even after quoting pages of statistics) of saying “Yes, of course it is.” (though reading his journalism his membership of the reality based community is obvious).
So modern macro-economics has not failed, one part has and it is the strain dominant in the thinking of the ECB, the economists advising the Irish government, the centre right policy elite that currently misgoverns the EU, the apologists for the financial sector and the creditor countries.
Only by confronting the failure and self interest of Europe’s currently dominant strain of economics (and its beneficiaries and zealots) can we hope to change things, and that may require less cowardly collegiality and more righteous anger.
As a counterpart to DOCM’s approving nod to the failing economics of austerity here is an article in the UK Guardian highlighting that the problem with economics is a problem with economists favoured by the right.
@Brian Woods Snr.
‘I’d shut this site. it’s hopelessly useless.’
Not quite yet but getting there. Out on its feet definitely. Been coming for quite some time!
Maybe I expected a more informed and meaningful intellectual engagement about the 4 decade descent of the Production/Consumption economy and the investment of positive capital (not credit) versus the simultaneous rise of the Finance, Insurance, Real Estate and Education economy and its obsession with finanical returns leveraged with an ever expanding amount of credit.
Clearly I was mistaken. My informed opinion is that what we have here (the bloggers excepted) are a posse of Ignorant Experts. Time to walk.
thanks for the phelps link
and the several paper lists, interesting stuff.
is svitlana voronova by chance the daughter of V V Voronov, the crystal grower?
I am asking it here one more time, can somebody point me a Krugman paper, and write 2 or 3 sentences, why he/she believes, it is good?
@ richard fedigan and bw
It’s a bit like that basil fawlty question. And what did you expect to see from a torquay hotel bedroom? It is a pity James Joyce isn’t around to observe 2012. He probably would recognise a lot of things from 1904. This is an existential crisis. The DoF is probably not much different to how it was in the 50s. I don’t see much evidence of an education dividend beyond the mncs. The country continues to get shafted. A certain amount is self inflicted but it was ever thus. Emigration is back like in the 30s. Maybe it was naive to think adopting the modern project would change very old dynamics. And many people are more interested in gerry ryan’s love life.
“I am asking it here one more time, can somebody point me a Krugman paper, and write 2 or 3 sentences, why he/she believes, it is good?”
I liked his paper(s?) which won the Nobel. I’ve never read it (them?) but I would say it (they?) is (are?) good. Here is what Forbes had to say:
“Starting in 1979, Krugman published a series of papers that successfully tackled these and many other related questions. He postulated that consumers like variety in what they consume. For the same expenditure, their satisfaction is greater if they have a larger variety of products available. This creates the incentive for firms to produce a large variety of products. But the production of a new variety has setup costs. This leads to declining per-unit costs as a larger quantity of the variety is produced and places a limit on the number of varieties the market can profitably supply. A firm produces a new variety only if it can capture a large enough market to allow profitable sales.
I think your question is silly
you like papers you can not name, do not know whether it is one or how many, nor have ever read any of them?
Did you actually read one paper of anybody in your live?
of course, nothing by k-man though, which is unfortunate for the sake of this conversation
then I suggest you try some, and ask yourself: why is that good, what does it explain, predict, relate to the real world
Which one do you recommend, and can you give me a few lines why?
you could start with the ones referenced on the wiki page.
With the exception of his first one, with some simple multiple regression thing, well, ok, as some bachelor thing, I would say,
all his stuff is then highly stylized, avoids carefully any contact with real world data, and draws conclusions on focusing on just one of ,most of the time, several competing factors, makes some assumptions on exact dependencies, and then comes to some conclusion, you can basically never compare to reality.
But maybe I am missing something, or missed out on good papers, then me pointing to something, does not help exactly : – )
Thats why I am continuing to ask this question.
And just look at this Forbes text: is there anything non-trivial in it ?
I‘m going to be honest. I didn’t even read the Forbes article! : )
Just thought you were due a response
Forbes is a brilliant publication. I was very impressed by this bit:
“He postulated that consumers like variety in what they consume. For the same expenditure, their satisfaction is greater if they have a larger variety of products available. This creates the incentive for firms to produce a large variety of products. But the production of a new variety has setup costs. This leads to declining per-unit costs as a larger quantity of the variety is produced and places a limit on the number of varieties the market can profitably supply. A firm produces a new variety only if it can capture a large enough market to allow profitable sales.”
I could only add…and nobody had ever thought of that before!
That is an interesting paper you linked to. There’s lots of dross to filter, linkls like that are useful.
You should engage in some shameless self promotion and mention your own blog – I enjoyed the recent post on fiscal multipliers for dummys but I would note that the reception from the proprietors of the Irish Economy on the IMF’s recent conversion to sanity has been a mixture of barely disguised disappointment and denial.
The unreconstructed market spirituality of many of the sermons delivered at this parish might have something to do with the falling level of attendance (and the noisemaking during the services).
Heiner Flassbeck UNCTAD
Try not to weep.
Mr. Heiner Flassbeck has served since 2006 as Director of the Division on Globalization and Development Strategies of the United Nations Conference on Trade and Development (UNCTAD). He is the principal author and the leader of the team preparing UNCTAD’s Trade and Development Report. The Trade and Development Report is the flagship annual publication of UNCTAD covering both recent and longer term issues in the world economy, with particular emphasis on the implications for developing countries.
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Baltimore.
This is part two of our interview with Heiner Flassbeck. Heiner served since 2006 as the director of the Division on Globalization and Development Strategies of the United Nations Conference on Trade and Development. They’ve just issued their new report for 2012, and the basic thesis of this report is: this drive for, quote, competitiveness between countries—essentially, drive towards lower wages—is not really leading to competitiveness; it’s just leading to more transfer of wealth the top percentile and the sucking out of real demand across the globe.
And now we continue our interview [incompr.] talk a little more about why this is happening and what can be done about it. Thanks very much for joining us, Heiner.
HEINER FLASSBECK, DIRECTOR, DIVISION ON GLOBALIZATION AND DEVELOPMENT STRATEGIES, UNCTAD: Thank you for inviting me.
JAY: So is part of what’s happening here—because it seems to me rather obvious that if one looks at Europe and one looks at, you know, Greece and Spain and Portugal, I mean, it doesn’t take a rocket scientist to see that these austerity measures are not creating, quote-unquote, competitiveness; they’re creating years of deep recession. But has simply finance capital decided, at least sections of it that are the most powerful, that there needs to be a sort of fundamental structural shift which essentially comes down to—. You know, in the post-World War II years, in the opinion of some of these people, you know, workers simply got too much because of the strength of the workers movements in Europe, partly because of the Cold War politics; but now is the time to kind of take advantage of this crisis and have a fundamental shift in where income goes and, in other words, break down the social safety net of Europe and North America, and even if you go through some pain, the truth is the top percentile’s not going to feel that pain.
FLASSBECK: Yeah, I don’t think that it’s true anymore. That was true 20, 30 years ago when this whole campaign started with Reagan and Thatcher, when they started to de-unionize, so to say, their economies and they tried to reduce the power of labor. It only went rather well. It went for a time rather well, and the profits were rising, because there were financial bubbles. But now the financial bubble economy’s more or less over.
So the financial bubbles created the illusion with private households—and even with workers’ households—that they could get rich without working, they could get rich by investing in financial markets. And so they went on spending, and they were relying on rising house prices and so on. So—but this is over. This illusion is dead now.
And we always knew once the point comes where private households start to save—and that is what I said before: they’re saving now a reasonable percentage of their income because there’s uncertainty and they see their incomes are not rising, their incomes are stuck, they’re stagnating—at this moment of time, the whole calculus doesn’t work anymore, because you don’t get—you need demand to get profits, and if you don’t have demand, if the economy is stagnating, the profit mechanism’s also dead. So I think we have reached, really, a critical point where this old model, even if it is in the heads of some people, will fail.
JAY: Well, I guess you could say that in an overall sense. But when you look at individual enterprises, they’re taking tremendous advantage of this situation. For example, a company like Harley Davidson and others—we looked at three companies in Wisconsin that in the last year negotiated these two-tier contracts that are similar to what happened at General Motors, where new employees are coming in at half the wages of existing employees. And that’s spreading across the country. The trade unions have never been weaker. I was talking to a trade union leader recently who was saying there was a—she was involved in a discussion with other leading national trade union leaders. They’re expecting to lose another half of their membership in 4 to 5 years, and they’re already, in the private sector, down to something like 6 or 7 percent unionization. You know, we could be looking at the end of organized labor in the United States by the end of this decade.
FLASSBECK: Yeah, but the result would be, as I said, that you would destroy your own—your clients, you destroy the ability of your clients to buy your goods, and that is not reasonable in the end. So even if this calculus is there, it’s wrong. We have seen it in Europe. Germany has done exactly that. Germany has cut wages dramatically, and the—for the low-skilled workers, they were cut by half or so in some areas and regions, which was a good idea, but only for the export front, for the exporting firms with [incompr.] absolutely fixed exchange rate, or the Monetary Union. Under these special conditions it was for them really a bonanza, but for all the others it was a disaster. And now it’s a disaster for the export firms as well, because, as I said before, we have made our clients go bankrupt, which is not a good idea.
So it’s over. And for the United States, it is anyway. There may be some spots—clearly, there are some spots where people can earn. And that is what is happening, that is what is destabilizing the economy, because all companies are now going for competition in cutting wages. So who’s the best cutter of wages is going to win the game. But for the economy as a whole, it’s a disaster, it’s leading into disaster, because it’s leading into deflation and depression. That is what we have in the ’30s last century, namely, that everybody was cutting wages. We have competitive wage cuts all around the economy. We have competitive depreciation of currencies. And this will lead into disaster very quickly. In two, three years’ time we will have deflation and depression, and nobody can get us out of that anymore.
JAY: And what do you think should be done?
FLASSBECK: Well, we need a balanced combination, as I said, of intervention in the labor market to allow this—to not allow these destabilizing forces to work and to continue to work. We need to avoid the fiscal cliff in the United States. We need the rebalancing of fiscal policy in Europe. That means that [incompr.] surplus country, in particular Germany, have to do more. They have to stimulate the economy. And thirdly, we need to go on with monetary policy. But monetary policy’s over. I mean, what can they do more? They cannot do much more all over the place.
And only—but the core of the thing is you have to stabilize the labor market. Look at Japan. The balance sheets [incompr.] in Japan, they have done all this deleveraging, and they had the balance sheet recession. But that is over a long time. But nevertheless, they’re not going out of the stagnation, because the income situation is such: the incomes are stagnating or falling. And as long as incomes are stagnating and falling, you do not get consumption, and without consumption, there is no way that the big developed countries can get out of recession. For Japan, Europe, and the United States together, consumption is something like 85 percent, and you cannot replace that by any other demand component.
JAY: Well, I mean, we know the story of the scorpion and the fox. You know, the scorpion tells the fox to take him across the river, and the fox says, I can’t, you’ll sting me, and the scorpion halfway across stings the fox, and they’re both about to drown, and the fox says, why did you do it? And the scorpion says, it’s in my nature. Is it not just in the nature of capital that they will let us drown because they can’t imagine creating conditions for wages go up?
FLASSBECK: Sure. That’s right. That’s why you need a competent government. There’s no way out. It’s very clear there is no self-stabilizing mechanism in the market. The market is killing itself. That’s absolute sure. That is what I mean by the experience of the Great Depression. That was not government-made; it was the destabilizing forces in the market itself. So you need a competent government. If we don’t get competent governments—and when I say get, I mean a number of big countries are voting in short time. If we don’t get competent governments who understand this logic of the market, the destabilizing logic of the market, then there is no way out. That’s for sure.
JAY: And we’re not seeing that in the American election.
FLASSBECK: Yeah, we look the American election. We have in Germany election in Autumn next year. So we had just election in France. Unfortunately, it has not worked out in a way that we get an opposing force in Europe. And in Japan, the political situation is as fragile as the economic situation. So there is not much hope. But the United States could really make the difference; a new administration could make the difference.
JAY: But the new—.
FLASSBECK: Administration—when I say administration, I do not mean it must be a new president.
JAY: Right, because based on the last four years—I mean, he had said—President Obama had several opportunities to sort of go in the path or direction you’re talking about. Auto industry certainly was one. The other was the Employment Free Choice Act, EFCA, if that was supposed to change labor legislation. He promised to pass this, and that would have made it easier to organize unions that one would think would have some upward effect on raising wages. But then they never passed it.
FLASSBECK: Yeah, that’s right. That would have been necessary to stabilize the situation. But still it can be done. It’s not yet too late. One should remember there is an interesting story in a new book that came out called The Assumptions Economists Make. The author shows that in 1948 there was a kind of Detroit consensus in the automobile industry which said that the workers should systematically get the productivity increase plus an inflation compensation. So the compensation should rise with inflation plus productivity. This was a good formula.
If you revise it a bit and say it should be a productivity trend, a four or five years’ productivity trend, should be extrapolated one year or two years, that should be reflected in nominal wages plus the inflation target of the economy, then you get a perfect formula to stabilize a growing economy and to get back into a growing economy. We have to relearn this lesson.
JAY: Well, one of the things about that time, though, 1946 was the year when more American workers were on strike in the history the country or ever since. There was a massive demand on the part of workers and soldiers coming back from the war. So there was a lot of pressure to create some kind of plan that would create jobs. You don’t see that in the workers movement now. The union movement has never been weaker.
FLASSBECK: Yeah, that’s right. The union movement is weak all over the place in the world. It has been dramatically weakened by the mainstream theory in economics and that was executed by politics. But—and this this is the big but—we have the chance to learn the lesson now. The evidence is absolutely obvious that we have to turn around, that we cannot go on like this. And I hope that we’re not learning it the hard way, as in the depression of the ’30s, but that we have at least some enlightened economists and politicians who change the course before it’s too late.
JAY: So it sounds like your message for ordinary workers that might be watching this is that they need to get organized and fight for higher wages, not just for themselves, but the actual global economy depends on it.
FLASSBECK: Yeah, absolutely, all over the place. And they should really look at the elections as a chance to get the right politicians at least to get the right direction and to have a chance to be back into normal business. And normal business means rising wages in the next few years.
JAY: Thanks for joining us, Heiner.
FLASSBECK: You’re welcome.
JAY: Thank you for joining us on The Real News Network.
@ Brian Woods Snr.
‘It’s a pity James Joyce isn’t around to observe 2012’.
Or Eliot, at their dinner here ( in Paris ) in 1920.
‘We are the hollow men
We are the stuffed men…
We whisper together
Are quiet and meaningless
As wind in dry grass….
This is the way the world ends…… but a whimper’
@ RF: Ouch!!! Puts me in mind of “No Country for Old Men”. That geezer with that pneumatic ‘equalizer’ !!!
@ MH: I hope you know what you are doing; opening Pandora boxes and all!
Another very interesting article!
Flassbeck correctly identifies the cause of the crisis i.e lack of demand because of concentration of income and wealth at the upper percentiles, where people who save money rather than spend it.
However, he seems to think that the solution will come through organised labour demanding more of the cake. In this he is overestimating the power of labour and completely underestimating how long such a process would take, even if successful.
Worldwide the only solution is to put purchasing power back in the pockets of people who will purchase.
This can done only by very large increases in taxation, to be used almost exclusively, to give a working income to those that are currently ‘income-less’, thereby ensuring that virtually all of the extra taxation spent is recycled into the economies.
The issue of some of recycled extra tax being lost to individual economies, in a beggar thy neighbour system would be a problem.
An EU and US wide additional 10% tax on income over ~€60,000, to be used exclusively for capital investment projects might turn the situation around.
It would be the equivalent of a wartime tax.
The fact that the capital projects may not yield so called ‘capital return’ is largely irrelevant.
Right now, if the world built a million Western Railways, (Colm McCarthy’s favourite white elephant), it would we far more preferably in economic terms, than having that money sitting pretty in a bank account or in German bunds, where its value to society is more destructive that if the money were burned.
Ta for that update on Flassbeck …
Such faith in The Washington Consensus and the contitinuing dominance of Gadarene NeoLiberalism in the US and in the EU politicos who set the agendas …
…. apologies for not weeping but have lost faith in tears for quiet some time.
I note tha not a single comment to the Sinn Féin call for a stimulus from the NPRF that I linked to above …… methinks the local blind allegiance to the austerity consensus continues and that DOCM may be correct that there is no such beast as a capital-labour relation resident in Hibernia ….
Where’s that epistle on the capital-labouir relation that you flagged some time back?
fyi … The Washington Consensus! Game still on ..
US President Barack Obama’s performance in Tuesday’s debate was much improved, but he continues to miss the target. Even as his campaign ads attempt to paint challenger Mitt Romney as a cold-hearted capitalist, Obama allowed Romney to present himself as Mr. Average. This opens a door of opportunity for the Republican challenger.
@grumpy and Joseph Ryan,
It is a general characteristic of PR professionals (and similar) operating anonymous personas in blog comments that they seek to establish credibility by serving up plenty of added value to camouflage the PR payload. I think stripping back the camouflage is socially useful.
Here comes Dr „Class war“ Flassbeck again.
After he got fired with his communist boss Lafontaine from running the German finance ministry, expelled from the Social democrats, he used his connections and got a nice warm office Job at UNCTAD, which is completely useless since 40 years. Trade relations are done at GATT, WTO, without the communists clowns at the UN.
So he can wax about “long live the Revolution”.
The UAW controlled 1946 about 90% of the world car manufacturing. Since car manufacturing was stopped 1942, the world was thirsty for new ones. Nice monopoly situation to exploit, for a while.
Protecting people doing shoddy work, excluding non- union members, demanding sky high wages for unskilled labor, and all the tremendous advantages the US automotive industry had, went to waste.
The German and Japanese metal workers are most grateful to the UAW.
Now the UAW controls 200 000 auto jobs, the German “IG Metall” has 2.2 Mio members, with profitable jobs in prospering companies with excellent credit ratings.
Even after all the decline, the UAW could not resist driving GM into bankruptcy, and Chrysler is in the 4th bailout. Nice Job!
Even today there are stories about US metal companies, desperately searching for CNC operators, because people do not want to get grease under their fingernails and prefer to do “something with media”
Houses are pretty cheap these days in Detroit, halving in value even relative to the rest of the US, since 2000.
Now, where would you prefer to work, Daimler / Heilbronn, Volkswagen / Wolfsburg, or GM / Detroit?
The world lives in deep peace, there is plenty of capital desperately searching for profitable investment. Just not under the control of anti-democratic communist parasites like Flassbeck. The last thing we need are war –time taxes.
Personally, I couldn’t care less whether PRguy and docm are one and the same so long as they are either witty, a decent source of relevant links I might otherwise have missed, or both.
I think he/she/they has/have a very good ear for the insider’s perspective on what I might, once in a blue moon, too readily dismiss as Euroclaptrap. Being more sure about the Europhile line allows me to have more confidence my own view isn’t overly influenced by personal bias.
Even if you disagree with it you are at least being informed by a clued-in source what the other side are thinking.
I don’t think it matters that much but having read a lot of professionally partial stuff I suspect you are barking up the wrong tree on this.
I think what appears in the Independent and the Mail are far more likely to impact the political debate – witness the fact that apparently no politician or mainstream journalist has noticed and thought about the meaning in that context of the word “currently” in paragraph 1.28 of the Croke Park Agreement and I have been boring you all on here with it for about two years.
People might be overstating how much influence docm and PR guy exert over EU policy
Did I miss something?
I may be Spartacus from time to time but I am not docm.
I am also happy to be distanced from EU policy – I’m sure plenty more will want that in the years to come. The cock will crow three times and all that.
@ PR Guy
Some mistake surely.
You cannot be Voldemort.
Any sign of the bonkbuster ?
Accusations & counter-accusations.
Apologies for doubting ‘zee german.’ It all got a bit like ‘Allo ‘Allo.