nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2009‒02‒28
five papers chosen by
Karl Petrick
University of the West Indies

  1. "The Case Against Intergenerational Accounting The Accounting Campaign Against Social Security and Medicare " By James K. Galbraith; L. Randall Wray; Warren Mosler
  2. Economic growth, employment and poverty in the Middle East and North Africa By Mahmood Messkoub
  3. Compromising social justice in fairtrade?: case study of a fairtrade organization in India By Ranjana Das
  4. Global Financial Crisis: Causes and Lessons - A Neo-Schumpeterian perspective By Horst Hanusch; Florian Wackermann
  5. Banking Crises: An Equal Opportunity Menace By Reinhart, Carmen; Rogoff, Kenneth

  1. By: James K. Galbraith; L. Randall Wray; Warren Mosler
    Abstract: The Federal Accounting Standards Advisory Board (FASAB) has proposed subjecting the entire federal budget to "intergenerational accounting"--which purports to calculate the debt burden our generation will leave for future generations--and is soliciting comments on the recommendations of its two "exposure drafts." The authors of this brief find that intergenerational accounting is a deeply flawed and unsound concept that should play no role in federal government budgeting, and that arguments based on this concept do not support a case for cutting Social Security or Medicare. The FASAB exposure drafts have not made a persuasive argument about basic matters of accounting, say the authors. Federal budget accounting should not follow the same procedures adopted by households or business firms because the government operates in the public interest, with the power to tax and issue money. There is no evidence, nor any economic theory, behind the proposition that government spending needs to match receipts. Social Security and Medicare spending need not be politically constrained by tax receipts--there cannot be any "underfunding." What matters is the overall fiscal stance of the government, not the stance attributed to one part of the budget.
    Date: 2009–02
  2. By: Mahmood Messkoub
    Abstract: This paper  provides an assessment of economic growth, employment and poverty reduction in the Arab MENA region. Considering the high rate of unemployment (especially the youth unemployment) and poverty in most countries in the region employment and poverty impacts of growth are of particular concern to policy makers. In the short run for employment growth to be faster than output growth the employment elasticity of growth has to be greater than unity. This is an important condition that is rarely satisfied across all sectors and countries in the region, for good analytical and empirical reasons. For example growth in high productivity sectors will not boost total employment nor reduce poverty substantially in the short run, yet growth in high productivity sectors is essential for accumulation and long term growth. Moreover, if the poor were to benefit from an employment policy they should have been integrated in the sectors where jobs are created – the so called integrability condition of the ‘employment-poverty nexus. Public work projects have been one of the main short term instruments of job creation for the poor in the region, but there the long term impact on poverty has varied and depended crucially on their sustainability, their contribution to improving local infrastructure and economies. These mixed results in no way invalidate the importance of economic growth for unemployment and poverty reduction, but brings into focus the importance of going beyond short term policies for job creation and poverty reduction as well as complementing such policies with social policies both for poverty alleviation and improving skill levels of the work force.
    Keywords: economic growth, employment, unemployment, poverty, poverty alleviation, Middle East, North Africa
    Date: 2008
  3. By: Ranjana Das
    Abstract: The study investigates whether Fair Trade Organizations (FTOs) are able to adhere to their principles of social justice and development goals as they enter mainstream markets which are dominated by neo-liberalism, unequal terms of trade and propagation of the ‘free market’ principle. Through a case study of Kala-a craft marketing Fair Trade Organization in West Bengal, India, the paper shows shifts in the development of the FTO, the introduction of a certification regime and the emerging contradiction between the intentions of the FTO and its actual practice in the contemporary period. The implications of shifts in orientation from solidarity based notions of social justice to market oriented social justice, in particular on the weakest link and most vulnerable section who are women craft workers at the bottom of the production chain are investigated. A production chain analysis of handicraft production gives evidence of violation of FT principles and ILO’s decent work norms and also reveals characteristics of the informal economy with producers having no entitlements to minimum wages, or social security benefits. There remains gender bias in the employment of women in the fair-trade production chain. The data shows that there is no challenge to gender segmentation and in fact a reinforcement of the feminine stereotype. Declining partnership with cooperatives, rising partnership with large scale NGOs and setting up of a Business Development Unit within the organization are some of the strategic shifts in the FTO. These shifts and the lack of implementation of FT principles indicate that the FTO is succumbing to the logic of the neo liberal mainstream market resulting in a drift away from the social justice principles within the Fairtrade Network. While onstage FTO’s use the principle of ‘fairness’ particularly in relation to Northern Corporations, this notion of fairness is not extended to the lower end producers through which they are expanding in the global market.
    Keywords: fair trade, social justice, neoliberal market, gender, production chain
    Date: 2009
  4. By: Horst Hanusch (University of Augsburg, Department of Economics); Florian Wackermann (University of Augsburg, Department of Economics)
    Abstract: This paper analyses the current financial crisis from a Neo-Schumpeterian perspective. We postulate four linkages that led to the crisis, and that will help us find our way out of the crisis. Therefore, we show that the current evolution is very similar to the Japanese crisis in the beginning of the 1990s. Furthermore, we address the issue why the world was faced with this crisis in such an unprepared way and look at the deficiencies in current economic theories that are responsible for the fact that we did not foresee this development. Besides, we elaborate that the crisis is not a systemic default of the capitalistic system but that it is rather a consequence of its enormous success. Finally, we propose the Neo-Schumpeterian Corridor as a theoretical framework that can help avoid such dramatic evolutions as the current crisis and look at possibilities to overcome this situation.
    Keywords: financial crisis, Neo-Schumpeterian Corridor, crisis evolution, governmental role
    JEL: B52 H11 N20 O20
    Date: 2009–02
  5. By: Reinhart, Carmen; Rogoff, Kenneth
    Abstract: The historical frequency of banking crises is quite similar in high- and middle-to-low-income countries, with quantitative and qualitative parallels in both the run-ups and the aftermath. We establish these regularities using a unique dataset spanning from Denmark’s financial panic during the Napoleonic War to the ongoing global financial crisis sparked by subprime mortgage defaults in the United States. Banking crises dramatically weaken fiscal positions in both groups, with government revenues invariably contracting, and fiscal expenditures often expanding sharply. Three years after a financial crisis central government debt increases, on average, by about 86 percent. Thus the fiscal burden of banking crisis extends far beyond the commonly cited cost of the bailouts. Our new dataset includes housing price data for emerging markets; these allow us to show that the real estate price cycles around banking crises are similar in duration and amplitude to those in advanced economies, with the busts averaging four to six years. Corroborating earlier work, we find that systemic banking crises are typically preceded by asset price bubbles, large capital inflows and credit booms, in rich and poor countries alike.
    Keywords: bail out; banking; crisis; debt; equity prices; house prices
    JEL: E6 F3 N10
    Date: 2009–01

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