Forgotten macroeconomics in the manifesto debate

The assessment of the impact of the policies in the election manifestos in the media is rather static as comments mostly ignore their positive impacts on growth, investment and productivity. This policy brief on the Labour Party's manifesto brings the forgotten macroeconomic principles into this debate.  The manifesto's economic policies can lead to higher private investment and productivity, and help to rebalance the economy.

Lessons for the Euro Area - a simple model of savings, debt & private spending

This essay articulates the reason behind the prolonged deflationary bias of euro area policies by means of a simple (“T-shirt”) model where private spending depends on desired savings and sustainable indebtedness.  The EU Commission’s belief that it is possible to create jobs without creating new debt underscores a serious conceptual fault and a delusion that the savings-debt constraint to spending can be ignored. As long as a cap on public debt remains, the euro area will continue to live dangerously and remain vulnerable to shocks.

Conservative budget deficits – on average, they’re over twice the size of Labour’s!

The Daily Mail shrieks at us today: “Tories claim Labour wants to drop a spending bomb of unfunded promises worth £45 BILLION that would wreck the economy and hit national security”. The story is complete rubbish - but aims to deflect attention from the Conservatives's own stunning record of fiscal failure.

Over the last 26 years - 13 years Conservative, 13 years Labour governments - the average annual overall deficit under Labour is less than half that under Conservative governments.  And the average annual current budget deficit under Conservative governments is around four times as large as that of Labour.

Is globalisation dead? 

While globalisation, or financial liberalisation is not dead, it is in decline, and deeply unpopular. Unfortunately, public anger and concern focuses on the tangible outcomes of free, unmanaged flows of capital, trade and labour, and not on intangible, invisible and unaccountable global finance. Advocates of globalisation as well as their opponents continue to draw attention to flows of trade and labour, thereby deflecting attention from that which is most causal of instability and insecurity: financialisation of the global economy.

Brexit, Article 50 and the UK economy:  discredit where discredit is due

In the wake of the formal invoking of Article 50 by Prime Minister, no one knows with certainty the impact on the UK economy of leaving the European Union. Claims of imminent damage and possible disaster should be treated at best as informed speculation and at worst as more of the dysfunctional fear campaign that proved such ineffective argument for “remain”.

In this anxiety-inducing context calls for calm are both rare and largely ignored

Making space for an economically democratic European Union

It is generally considered by lawyers and political scientists who study the EU that the Union has all or most of the attributes of a “constitutional order”, and that its Treaties are to be seen as providing a constitutional framework.

But many key economic and social policies are decided not through debate and elections, but via inflexible EU Treaties which lay down a specific economic ideology and policy framework. No matter how they vote, citizens are not allowed to choose a truly different set of economic policies. In the economic domain above all, there is a mismatch between the EU's constitutional democratic principles and the Treaties' detailed provisions.

 

New Bank of England data bring post-1979 'dear money' into even sharper relief

The Bank of England have just updated their incredibly useful historic data resource, not only adding another six years of figures to 2015 but also expanding greatly the range of information included. Of particular interest is a measure of UK corporate interest rates that extends back to the mid-1840s. 

Looking back over the 170 years, the only precedent to the dear rates of the second financial liberalisation (post 1979) are those of the first liberalisation in the 1920s - rates which Keynes warned should be avoided “as we would hell-fire”.

It's time to revive Europe's democracy - There Is A Real Alternative!

Joint press release from PRIME & the Rosa Luxemburg Stiftung Brussels Offce on the launch of new report : Bringing democratic choice to Europe's economic governance

The 60th anniversary of the Treaty of Rome offers an opportunity to reflect on what the European Union has achieved – and how problems can be solved. We share the European idea, and express our aspiration to work for a European Union which in the coming decades is truly a force for peace, prosperity, democracy and social progress. 

But despite its commitment to democratic values, one crucial area in which the European Union does not permit legitimate democratic choice is the economic sphere.

Flaky economics? Brexit, trade and the Treasury estimates

One of the more depressing aspects of the Brexit debate has been that once again the economics profession has not covered itself in glory. The predictions of economists were overwhelmingly pro-remain and not as soundly based as many assumed. Evidence viewed as pro-Brexit could be met by rudeness and we experienced this ourselves. A few economists supported the Brexit case but the middle ground seems to be under-populated, indeed hardly populated at all. This is a real problem since the general public needs neutral referees in such a difficult and fraught issue.

Bad Bank Proposal for India

There have been two main proposals to tackle the stressed asset problem of the Indian banks since the beginning of this year. Both proposals are based implicitly on the financial intermediation theory of banking. The alternative credit creation theory of banking opens up other possibilities. One such possibility, put forward here, is to create a "bad bank", with a partial Jubilee financed by zero coupon perpetual bonds.

Once more, why the "there is no money" mantra is false

This afternoon, PRIME's director Ann Pettifor is speaking at the Labour Party's 'The Future of the Scottish Economy' Conference in Glasgow.  

Ann's speech today focuses once again on the issue of why austerity is not the answer.  This raises touched on in her latest book, "the Production of Money", but the main lines of her argument were set out nearly two years ago (7 April 2015) in a blog article, "Is there no such thing as public money, only taxpayers money, as PM asserts?".  These arguments, as updated, still form the basic "speech-notes" for today.

‘Replete with folly and injustice’ – Hammond follows in Osborne’s footsteps

The media response to the Budget is always reliably low on content and high on hyperbole. Even by these exacting standards, 2017 has been a vintage year. Coverage has focused almost exclusively on the decision to raise National Insurance contributions for self-employed workers – with some side glances to the tax treatment of dividend payments. The macroeconomic implications of the budget have passed almost without comment.

Brexit and Sterling – disaster in the eye of the beholder

Many, and especially Brexit opponents, point to the sharp depreciation of sterling as evidence of imminent economic turmoil leading to disaster. For some, like David Blanchflower, former member of the Bank of England's Monetary Policy Committee, depreciation itself is disaster.

But while Brexit caused a transitory increase in the magnitude of turbulence, this comes from the system itself - financial speculation facilitated by lack of effective regulations.

Greece's still-falling GDP dispels creditors' "recovery" myth

The latest GDP figures for Greece, relating to Q4 of 2016, are disastrous. For Greece first and foremost, but also for the credibility of the EU and IMF's failed harsh austerity (but on the EU side no-debt-cancellation) policy.  Far from evidencing the long-promised recovery, they show a new decline in GDP – both on the previous quarter (after seasonal adjustment) and year on year.

Do real interest rates follow "historical norms"?

On the 'Bank Underground' website, Gene Kindberg-Hanlon makes a most welcome contribution to the evolving debate around real interest rates. Importantly, he dismisses the standard mainstream account of real interest rates conforming to economic growth:

“Global growth was much higher in the 1950s to 1970s than in the 1980s, yet real interest rates were significantly lower on average.”

And he observes that “The factors thought to account for the majority of the fall in real rates since the 1980s can explain none of the prior rise in real rates to their abnormally high level”. 

But with the conventional theory dismissed, it is replaced with a theory of real interest rate historical ‘norms’ which in turn fails to provide an adequate answer.

Greek Tragedy in European Theatre: the Economic Consequences of Depression Economics

Since 2010 the European Commission, the IMF and the Greek and European political establishment have imposed a full blown internal devaluation programme that in Greece has caused a depression unlike any seen in Europe since WWII. The main drivers of the programmes have been an exaggerated and cruel implementation of the neoliberal policy agenda, including cuts in wages and pensions, increases in taxation, the fire sale of public assets at fire prices and severe cuts in funding for an already underfunded health system.

The Karl Polanyi 1940 Bennington Lecture series in one go

Over the last week, we have posted the autumn 1940 series of Karl Polanyi's lectures as individual posts. Since they were always intended to be taken together, we have also compiled them as a single set in the attached pdf, "The Present Age of Transformation."

This e-publication comes with introductions by PRIME's Jeremy Smith and Ann Pettifor, and also by the distinguished economist and daughter of Karl Polanyi, Professor Kari Polanyi-Levitt. These introductions draw attention to the strong contemporary relevance of Polanyi's lectures.

 

Lecture 5: Marxism and the Inner History of the Russian Revolution

In our bird’s eye view of the last quarter century, we dated the setting in of rapid and radical change with the beginning on the Nineteen-thirties. The ‘Twenties we described as a conservative period still mainly dominated by Nineteenth century ideals.

Superficially, it might seem as if an exception would have to be made for the  Russian Revolution. But in actual fact, this great event was no more than the continuation of the French Revolution on Russian soil. It was only with the Five Year Plans and the collectivization of the farms that something essentially new entered into the history of Western civilization.

Lecture 4. Is America an Exception?

Within the last decade [this lecture was written and delivered, we recall, in 1940 - ed] free institutions have succumbed to the impact of sudden change in most of the countries where civilisation bore the imprint of the Industrial Revolution.

Must America go the same way? Or is there hope that she might be able to master her own future?

Lecture 3: The Breakdown of the International System

The failure of the international economic system was ultimately due to the same inherent weaknesses which characterized the national systems under a market economy. The view which makes autarchy responsible for the breakdown can hardly be upheld. On the contrary, it might be more justly argued that it was the failure of the international system which gave rise to autarchy.