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.
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.
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.
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?
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.
Nineteenth century society was based upon the two pillars of liberal capitalism and representative democracy. The economic and the political sphere were separate. This is the clue to its rapid downfall. For the expectation that such a state of affairs could be anything but transitory was an illusion. A society containing within its orbit a separate, self-regulating and autonomous economic sphere is a utopia.
The subject matter of these lectures is a vast and unique event: the passing of 19th century civilization in the short period that elapsed between the first and the second wars of the 20th century.
At the beginning of this period, 19th century ideals were paramount, indeed their influence had never been greater; by its close hardly anything was left of that system under which our type of society had risen to world leadership.
The recovery of five lectures under the title The Present Age of Transformation, delivered by Karl Polanyi in Bennington College in 1940, is indeed serendipitous. It invites a comparison of the collapse of the 19th century liberal economic order in the Great Depression and its transformative consequences, with the contemporary unraveling of its neoliberal reincarnation and the rise of right-wing populist politics in the Atlantic heartlands of capitalism.
This week PRIME is publishing (as individual posts) the set of five lectures given by Karl Polanyi in autumn 1940 at Bennington College, Vermont, and entitled "The Present Age of Transformation". The lectures, together with introductions from PRIME's Jeremy Smith and Ann Pettifor, and from Professor Kari Polanyi-Levitt, have also been put together for ease of reference into a pdf "publication". We begin with the PRIME editors' introduction.
This week is PRIME’s Polanyi week. We are re-publishing – because of their topical as well as historical significance – a set of five lectures given by Karl Polanyi in autumn 1940 at Bennington College, Vermont, and entitled “The Present Age of Transformation”. The first three essays briefly prefigure the main themes of his major work, “The Great Transformation”, published in 1944.
We are publishing each of the lectures as individual posts, and have also compiled them into a pdf “publication”, including introductions from Professor Kari Polanyi-Levitt and PRIME's Jeremy Smith and Ann Pettifor.
Today the New York Times reports that the Japanese conglomerate SoftBank will buy an American private equity firm, Fortress Investment Group, that oversees $70 billion in assets. Fortress specialises in dealing with 'distressed assets' - i.e. assets procured cheaply because of forced sales, bankruptcies or other misfortunes. As the NYT explains, Fortress is "an entity that is regulated - if relatively lightly compared with, say a bank."
PRIME's director Ann Pettifor gave a lecture on 8th February 2017 on "The Production of Money" at the LSE, at the invitation of the Department of Economics and the Centre for Macroeconomics. The lecture was recorded by the LSE, and can be listened to as an audio podcast. Her new book (of the same title) is published by Verso and is available from the Verso website. Read on for the written text of Ann's lecture, which we also link to as a pdf.
The written version of the lecture is set out below, and is also available as a pdf here.
This week sees the launch of Ann Pettifor’s new book, “The Production of Money”, published by Verso, in which she explains how money is created, and how democracies can – indeed must - reclaim control over “money production” and restrain the out-of-control finance sector so that it serves the interests of society, as well as the needs of the ecosystem.
The book’s publication is timely, coming at the very time that minority President Trump announces his intention and measures to once more deregulate the US, and therefore the global, finance sector.
With the Fed talking up the likelihood of rate hikes in 2017 while other central banks are still in easing mode, the potential for a US dollar rout and a concomitant closing of the US trade deficit is pretty low. Therefore, given Donald Trump’s hawkish rhetoric, the potential for the incoming US government to label China a currency manipulator is high.
Earlier in the week U.K. Prime Minister Theresa May unveiled her vision for Britain’s exit from the European Union. She couched her outlook in positive terms, speaking of Britain leaving the EU but remaining in Europe. To get a better sense of how realistic her vision is in political and economic terms, I also asked Prime Economics Co-Director Jeremy Smith - an expert on EU and national constitutional issues - for his take. Here is the Q&A (18th January) that resulted.
Yesterday (15 January, 2017) there was a little flurry of tweets on the flaws of mainstream economics. This quickly morphed into an argument about whether the economics profession can as a whole, be blamed for a) the financial crisis b) Brexit or c) Trump.
The spat reminded me that I had not posted my recent Independent article on the profession here on the PRIME site. So herewith.....
Prospects for the UK economy outside of the EU depend on demand, which indirectly also depends on financial stability. The Leave agenda is for intensified financial and trade liberalisation, an agenda that will hit the buffers of weak global demand. There is little evidence of a material change in attitude to fiscal policy - what has happened will surely have happened anyway. Financial instability ($500bn QE pumped out each Qtr by G4 central banks, negative bond yields, effectively insolvent (absent public subsidies) global banks, low levels of lending, high real rates for risk-taking entrepreneurs, volatile FX) is the norm, inside or outside the EU. We have known this all along.
It is fundamental to current policy doctrine that low rates are regarded as mirroring weakness in the economy, normally understood through productivity growth. Under the dismal ‘secular stagnation’ hypothesis, weakness will prevail indefinitely into the future.
This narrative is the reverse of reality on both counts.
A debate between PRIME's Ann Pettifor and James Rickards, author of The Road to Ruin, took place at the Royal Society of Surgeons, London, on 30th November, 2016. The future of the international financial system was at the core of the debate, with Pettifor contesting Rickards' view that "gold is money" and that the economy can be compared to a biological system. Instead, she asserted, the economy is man-made and can be remade. The debate is about an hour long and can be viewed here.
The rise of populist, nationalist, and even fascist political parties is a predictable response to the ‘stark utopia’ of a self-regulating globalized financial system. A major incentive for pushing back on the war-mongering of political populism would be the introduction of policies for managing and regulating the global financial system to restore political, economic and social stability and balance.
This argument in turn is based on a simple democratic one: that elected governments have a duty to their people, and to their domestic economy – not to invisible players in global capital markets. Governments, like aeronautical engineers, have a duty, and are accountable for the management of the domestic economy and for keeping it safe for the population it governs. To abandon such duties is to vacate the nation’s political space and to invite populist, authoritarian parties to ‘take control’.