Articles by Editor
DISCOUNTING means “economists have grossly undervalued the lives of young people and future generations”2 days ago
From The Guardian
discrimination by date of birth
Many economic assessments of the climate crisis “grossly undervalue the lives of young people and future generations”, Prof Nicholas Stern warned on Tuesday, before the Cop26 climate summit in Glasgow.
Economists have failed to take account of the “immense risks and potential loss of life” that could occur as a result of the climate crisis, he said, as well as badly underestimating the speed at which the costs of clean technologies, such as solar and wind energy, have fallen.
Stern said the economics profession had also misunderstood the basics of “discounting”, the way in which economic models value future assets and lives compared with their value today. “It means economists have grossly undervalued the lives of young people and
From Radhika Desai and Michael Hudson
We are now ready to approach the question of how these national monetary orders of capitalism relate to one another internationally. One key contradiction has powered the history of world money under capitalism. On the one hand, money is created by states or those delegated and controlled by them. On the other, there can be no world state under capitalism, and thus no world money. When dominant states nevertheless seek to foist their currency on the world as world money, they add new layers of contradictions and volatilities to the already unstable logic inherent in the geopolitical economy of capitalism (Desai, 2013), the “relations between [its] producing states” as Marx once put it (Marx, 1973, p. 886).
Dominant states and their
From Blair Fix
Political economist Chris Mouré has a new paper out in the Review of Capital as Power. It’s called ‘Soft-wars’, and it is a fascinating case study of the behavior of big tech.
The story starts in 2011, when Microsoft led a $4.5 billion consortium purchase of Nortel and Novel. Later than year, Google responded by buying Motorola for $12.9 billion. The funny thing is that Google then proceeded to sell off what it had just bought. By 2014, almost nothing was left of Google-owned Motorola. Nothing except patents. And that, Mouré thinks, was the whole point.
Mouré argues that this acquisition war was ultimately a battle over intellectual property. Google and Microsoft were competing to control the mobile market. And the way to do that was not to ‘produce’ anything. It was to
Prosecutors in Mexico seeking arrest warrants for more than 30 scientists
“The World Economic Association –with its 15,000 members-is committed to the development, promotion and diffusion of economic research and knowledge; advocating plurality of thought, method and philosophy. We are convinced that these activities can only be carried out in a context of freedom, exempt of intimidation and harassment. In this spirit we voice our apprehension for the 31 Mexican scientists and scientific administrators accused by the Mexican government of grave financial crimes. In this regard, we fully subscribe the concerns raised by the International Secretaries of the U.S. National Academies of Sciences, Engineering and Medicine in a public letter to the President of Mexico dated October 6, 2021″
From C. P. Chandrasekhar and Jayati Ghosh
It is by now well known that three decades of financial globalization have led to massive increases in income and asset inequalities in the United States and Europe. But in the developing world, the effects of financial globalization have been even worse: along with new inequality and instability, the creation of “emerging markets” to support investment in poor countries has undermined development projects and created a relationship in which poor countries supply financial resources to rich ones. This is exactly the opposite of what was meant to happen. Yet this growing disparity in per capita incomes across the global North and South is not a bug in the system but a result of how global financial markets have been allowed to function.
From Shimshon Bichler and Jonathan Nitzan
In 2012, we published a paper in the Journal of Critical Globalization Studies titled ‘Imperialism and Financialism: The Story of a Nexus’. Our topic was the chameleon-like Marxist notion of imperialism and how its different theories related to finance. Here is the article’s summary:
Over the past century, the nexus of imperialism and financialism has become a major axis of Marxist theory and praxis. Many Marxists consider this nexus to be a prime cause of our worldly ills, but the historical role they ascribe to it has changed dramatically over time. The key change concerns the nature and direction of surplus and liquidity flows. The first incarnation of the nexus, articulated at the turn of the twentieth century, explained theRead More »
From Terry Hathaway
Contemporary political and economic discourse sees capitalist systems characterised as market economies, and references to both The Market and markets are ubiquitous; markets are seemingly everywhere. This situation is distinctly odd, as while economic relations have been more and more characterised as “markets”, many economies have seen both the withering away of traditional marketplaces and the concurrent growth of hierarchically ordered non-market economic organisations (i.e. corporations).
The reason that markets can be both seen everywhere and exist practically nowhere is due to two points. First, “markets” have been defined according to abstract principles – often product similarity or price uniformity – that do not include place. While abstraction is not an
From C. P. Chandrasekhar
China’s Evergrande group, identified as the world’s most indebted property company with accumulated liabilities in excess of $300 billion, missed an interest payment instalment due on September 23, 2021 on bonds borrowed through US dollar bond markets. Though the company enjoys a 30-day grace period to pay up and avoid being in default, the absence as yet of any clarification on the missed instalment has increased uncertainty. Markets seem sceptical that the firm would meet in full the $129 million of interest payments on its bond issues due this month and the $850 million due by year end. Evergrande’s share prices have collapsed by more than 85 per cent over the last year.
An Evergrande default and possible bankruptcy can have repercussions in China as well as
From Terry Hathaway – http://www.paecon.net/PAEReview/issue97/Hathaway97.pdf
Watson (2018) shows that within neoclassical economics the shifting definition of the market has led to three conceptualisations of the market that are rolled into one another; the descriptive concept, the analytical concept, and the formalist concept. The descriptive concept can be seen in Smith where the idea is of “the market literally as a marketplace, with all the hustle and bustle of people going about their business” (ibid: 21). The analytical concept is the most common economics textbook account and is used to describe market-clearing dynamics. It stems from neoclassical thinking about partial equilibrium in a single product market. Finally, the formalist concept is the concept deriving from general
From Blair Fix – http://www.paecon.net/PAEReview/issue97/Fix97.pdf
Putting a fence around something and calling it “property” is step one of capitalization. But property alone is not enough. Romans had property. So did most feudal kingdoms. But these societies did not have capitalization. To capitalize property, there is a second step. You must mix property with finance.
The word “finance” evokes a sense of awe – a sense of other-worldly complexity. But at its heart, finance is simple. It is the act of reducing property to a number – a price. Merge property and finance, and you have capitalization. How this merger happened historically is complicated. But let’s again reduce history to an apocryphal story. To paraphrase Rousseau:
Having enclosed a plot of land, the first capitalist took
From John Komlos – http://www.paecon.net/PAEReview/issue97/Komlos97.pdf
A good economy would not have 150,000 deaths of despair a year with life expectancy declining even before Covid (Figure 7) (Case and Deaton, 2020). When traditional social structures of support dissolved for working class whites there was nothing to take their place and despair accumulated. The family was gone, the unions were gone, neighborly love was gone, the churches were no longer relevant, the government looked the other way, and the gig economy did not offer enough income to succeed in the marriage market. For these folks there was nothing to grasp onto except a bottle, the trigger, or a hypodermic needle.
Source: (Arias and Xu, 2019, Xu et al, 2020, Arias, Tejada-Vera, Ahmad, 2021).Note: The estimate forRead More »
From Radhika Desai and Michael Hudson
As a new Cold War against China began, it was clear that the pandemic was altering the international balance of power fundamentally. For former US Treasury Secretary, Lawrence Summers, it was likely a “hinge of history”: “[i]f the 21st century turns out to be an Asian century as the 20th was an American one, the pandemic may well be remembered as the turning point”. It would erase 9/11 and 2008 from memory and rank alongside “the 1914 assassination of the Archduke, the 1929 stock market crash, or the 1938 Munich Conference” (Summers, 2020).
However, Professor Summers misses the point. The twentieth century actually was more an attempted American Century than an accomplished one (Desai, 2013) and the shift away from it is looking more certain and
From Shimshon Bichler and Jonathan Nitzan
This note contextualizes the ongoing U.S. policy shift toward greater ‘regulation’ of large corporations. Cory Doctorow (2021) and Blair Fix (2021) are optimistic about this shift. We doubt it.
The Limits of Power
Large U.S.-based corporations are extremely powerful, but the growth of their power has decelerated considerably.
Figure 1, updated from our ‘Corporate Power and the Future of U.S. Capitalism’ (Bichler and Nitzan 2021), shows the earnings before interest and taxes (EBIT) of the top 200 U.S.-based corporations, ranked by market capitalization, relative to those earned by the average U.S. corporation. The top series confirms that this differential – which proxies the relative power of the top 200 firms – has grown exponentially,Read More »
From Blair Fix
I recently had a lively Twitter debate with Jonathan Nitzan, Shimshon Bichler and Cory Doctorow1 about the future of big corporations in the United States. The debate was prompted by Doctorow’s piece ‘End of the line for Reaganomics’, which I reposted on capitalaspower.com.
Doctorow argues that we may be witnessing a sea change in the way governments treat big corporations. Since the Reagan era, the US government has taken most of the teeth out of antitrust enforcement. The reason is not well known. In fact, I’m ashamed to admit that as a trained political economist, I didn’t learn this antitrust history in grad school. I learned it from Doctorow’s blog.
In Bork we trust
The antitrust story revolves around a judge named Robert Bork, who came up with a way to defang
Economists assumed that the economic process happens in an abstract, no-space and no-time historical void.29 days ago
From Andri Stahel and RWER current issue
What does modern economics have in common with medieval theology? At a first glimpse, very little. After all, economics presents itself as a science, based on the same mathematical principles and ideals of objectivity and empiricism on which mechanical physics is grounded and which, as is known, replaced medieval theological description of reality. Moreover, they apply to different subjects: heavenly, spiritual matters for theology, earthly matters for economics. Notwithstanding, if we look at how modern economics is practised nowadays and its ideological role in supporting free markets and the hegemonic social and political practices, striking similarities emerge.
In terms of method, since at least the end of the 19th century and early 20th
From Jayati Ghosh
Climate change is posing immediate threats to humanity, and indeed to all living organisms on the planet, in extreme weather events across the globe. Other environmental stresses include rising water levels or falling water tables, desertification and salination.
Agriculture—especially industrial agriculture requiring chemical inputs—is cause and victim of these changes. Cultivation patterns such as mono-cropping, with heavy reliance on groundwater and chemical inputs, have reduced the food sovereignty of poor countries and generated growing environmental problems.
These, along with the impact of climate change, have affected food security and caused more severe and widespread hunger, so that the number of hungry people in the world started increasing in 2015. That’s
Download whole issue
Has economics become a new theology? 2Andri W. Stahel
Beyond dollar creditocracy: A geopolitical economy 20Radhika Desai and Michael Hudson
A black-swan shock exposes the deep fissures, endemic imbalances,
and structural weaknesses of the U.S. economy 40John Komlos
Fuck the market 62Terry Hathaway
The ritual of capitalization 78Blair Fix
Economic hypocrisies in the pandemic age 96Raphael Sassower
The politics of economics 106Shu Shimizu
Putting Minsky into space: The geography of asset price
bubbles in the United States, 1994–2018 123John Posey
How financial bubbles are fueled by money creation a.k.a. bank lending:
An explanation for public education 143Ib Ravn
From C. P. Chandrasekhar
Carbon prices in the European Union (EU), or the value of one unit of an EU allowance (EUA) that gives the holder the right to emit one tonne of carbon dioxide (or its equivalent of other greenhouse gasses), are soaring. From 33.69 euros per tonne at the beginning of the year, the prices of EUAs traded through the EU’s emission trading system (ETS) had risen to a high of 62.75 euros on September 9, or by more than 80 per cent.
Since the ETS was created to generate market-driven price signals that would influence the volume of emissions by firms, a rise in market prices should be welcomed as it would trigger emissions reduction. Combining that with lower caps on total emissions, it is argued, would help move in the direction of goals for emission reduction being
From Nikolaos Karagiannis and RWER
This short article on neoliberalism comprises three brief sections which discuss key theoretical notions, general practical issues, and worldwide experiences respectively while offering a facts-based assessment. Brief concluding remarks end the article.
Neoliberalism gained momentum in the 1980s and became distinct and recognizable as an ideology by the 1990s as the “Washington Consensus”. Neoliberal theorists would suggest that their theories are universal in nature and that assumptions that underpin them are unimportant. This can only be true when the assumptions truly do not matter because they are compatible with all possible socio-cultural and institutional matrices. Neoliberalism seeks unrestrained accumulation of capital through a
Source “In the picture below I show the growth of $100 due to inflation using the traditional inflation metric (PCE deflator) used by the Fed in red, and an asset price adjusted metric, where the PCE deflator and the S&P 500 are equally weighted.”Read More »
From Duncan Austin and RWER
The “free market” advocate is in the dissonant position of wishing market actors to be the sole conferees of new property rights while also depending on the government to uphold a general rule of law which is the necessary condition for property to being meaningful at all. Indeed, because of the indispensability of the rule of law, we should be more accurate with our terminology. We never have “free markets”. We only ever have “enabled markets” – markets enabled by an authority capable of upholding the rule of law that gives property meaning. Language matters. “Free markets” is a highly misleading term – routinely deployed as an unassailable universal principle to cloak a more parochial agenda. Too often, what “free market” proponents are really advocatingRead More »
From Geoff Davies and RWER
Yet consider a model of the Global Financial Crisis of 2007-8 by Eggertsson and Krugman (2012), the latter a pseudo-Nobel prize winner. They made two models, one for before and one for after a crash, with the difference between the models being effectively that the amount of available credit was presumed to be less in the second. Nothing in the model determined the amount of credit, it was imposed from the outside. Their equations of optimisation did require sophisticated, though old-fashioned, analytical methods to solve, but that says nothing about the usefulness of the models.
Both models are equilibrium models. But if the “before” state of the market, with high prices, was an equilibrium state there would be no crash. Therefore the model must be
From Philip George
Until 1982 it was believed that stomach ulcers were caused by stress and lifestyle. That year,
two Australian scientists, Robin Warren and Barry Marshall, demonstrated that most gastric
and duodenal ulcers were caused by a bacterium, Heliobacter pylori. They cultivated the
bacteria which they discovered in biopsies of patients suffering from ulcers, after which
Marshall ingested the bacteria to prove that they caused gastric ulcers.
As this example shows, it is not uncommon even in science to try and explain real-world
phenomena using variables that cannot be measured, like stress. Such attempts inevitably turn
out to be incorrect.
In economics the most common of such fairy variables is “inflation expectations”; the other
popular one is of course “rational
From Tanja von Egan-Krieger and RWER
. . . the World Bank builds on a utilitarian definition of efficiency, which is of course a normative criterion. It is a criterion of judgement. The implicit aim is increasing the net value or total wealth. The World Bank refers to this idea in terms of a “social benefit”: “Even investments that are highly profitable for an investor will generate sustainable social benefits only if they are not associated with environmental externalities”.
An ethical reflection immediately raises the question for whom the net value is produced. Who does benefit from the increasing total wealth? From a utilitarian point of view this question doesn’t matter. The ethical maxim of classical utilitarianism is to maximise the sum of pleasure and pain and thereby the
From Richard Norgaard
. . . until early in the 19th century, merely two hundred years ago, an effort to intertwine reality and morality still existed in natural theology, the project to understand the character, will, and operating manual of God through the study of nature. Isaac Newton was both an accomplished moral philosopher and a path-breaking natural philosopher (Iliffe, 2017). The Physiocrats made moral arguments about who should be taxed based directly on what they understood to be physical realities (Schabas, 2007). Adam Smith wrote a treatise on astronomy to document his knowledge of natural systems before writing moral philosophy (Ross, 2010, chapter 7). Well into the 19th century, both natural and moral philosophy students as well as students of theology, medicine, and law
Source: Sighing for paradise to come | The EconomistRead More »
From Asad Zaman and WEA Pedagogy Blog
Reducing politics to rational calculation allows the destruction of entire countries, and killings of
millions, for the sake of political power or corporate profits. Today this “rationality” dominates
the world where corporations are busy destroying the planet for the sake profits.
Introduction: The dark underside of leading lights of the European Enlightenment has been skillfully concealed. Nearly all major enlightenment thinkers held abhorrent views about slavery, race, democracy, women, and equality. Even though their views are public, easily available in major works, there is a conspiracy of silence, and suppression of dissent. Even though there is an abundance of nauseating quotes from major Enlightenment thinkers, these remain hard to find .
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