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on Post Keynesian Economics |
| By: | Sergio Cesaratto (University of Siena) |
| Abstract: | A number of economists holding Keynesian or pragmatic monetarist views warned that political union was a necessary premise for a viable monetary union. Inspired by Goodhart, we name this the Cartalist view. The European currency union was, however, strongly influenced by New Classical Macroeconomics, which gave new strength to older traditions, like ordoliberalism, that back separation of monetary and fiscal policy, legitimizing a Stateless currency. Again like Goodhart, we call this the Metallist view. This distinction is particularly relevant for assessing two alternative perspectives of the nature of the Euro area crisis. On one hand, there are those who argue that the crisis is akin to a traditional balance of payment crisis of the kind typically occurring in fixed exchange rate regimes. On the other, there are those who attribute the crisis to obstacles to more resolute intervention by the European Central Bank (ECB). Accordingly, belated intervention by the ECB led to worsening of the fiscal crisis of peripheral Euro area states, subsequently exacerbated by austerity policies. In this view, a classical balance of payment crisis can be excluded as a cause of the crisis, because Target 2, a payment mechanism analogous to Keynes’s International Clearing Union, protects the Euro area. In this paper, I argue that although a balance of payments crisis cannot exist in a viable sovereign monetary union, it is still conceivable in a flawed, stateless monetary union like the Euro zone, possibly obscured by Target 2. In this regard, I also show that, while timely and resolute ECB intervention would have been appropriate, in the absence of federal institutions (particularly a federal budget controlled by a European democratic parliament), once this intervention finally took place, austerity measures necessarily accompanied it to check moral hazard possibilities of peripheral member countries. I argue that the German neo-mercantilist orientation and the influence of the predominant mainstream credo that monetary policy should be detached from politics and fiscal policy are obstacles to a viable federal union. I also warn about the risk that the Parliament of such a union would be divided according to national rather than ideological/class interests. Virtue out of necessity, Hayek pointed out long-ago that a currency union among different nation-States could only survive with a minimalist federal State. |
| Keywords: | Europe, Crisis, Target2, ECB, State. |
| JEL: | E11 F33 N14 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:ais:wpaper:1508&r=all |
| By: | Faruk Ülgen (CREG - Centre de recherche en économie de Grenoble - Grenoble 2 UPMF - Université Pierre Mendès France) |
| Abstract: | Approaches that support the process of financial liberalization usually assume that free markets can ensure systemic adjustment in case of disequilibria without structural public interventions, and self-regulation mechanisms are more efficient than any collective regulatory mechanism. This article seeks to assess the irrelevance of these critical assumptions with regard to systemic viability in capitalist economies. These assumptions and related (de)regulatory (de)structural reforms implemented in the last decades reveal to be inconsistent with the characteristics of capitalist economies in light of the 2007-08 crisis. In the footsteps of Hyman Minsky, it maintains that financial instability and crises are endogenous phenomena in a capitalist economy and imply tight state intervention. It then argues that financial stability is a public matter and in order to reach societal efficiency and systemic viability, it is necessary to carry out a public organization of markets according to social/collective objectives beyond macroprudential regulatory mechanisms. |
| Date: | 2014–09–25 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-01111162&r=all |
| By: | Sunanda Sen |
| Abstract: | Developing countries, led by China and other BRICS members (Brazil, Russia, India, and South Africa), have been successfully organizing alternative sources of credit flows, aiming for financial stability, growth, and development. With their goals of avoiding International Monetary Fund loan conditionality and the dominance of the US dollar in global finance, these new BRICS-led institutions represent a much-needed renovation of the global financial architecture. The nascent institutions will provide an alternative to the prevailing Bretton Woods institutions, loans from which are usually laden with prescriptions for austerity--with often disastrous consequences for output and employment. We refer here to the most recent example in Europe, with Greece currently facing the diktat of the troika to accept austerity as a precondition for further financial assistance. It is rather disappointing that Western financial institutions and the EU are in no mood to provide Greece with any options short of complying with these disciplinary measures. Limitations, such as the above, in the prevailing global financial architecture bring to the fore the need for new institutions as alternative sources of funds. The launch of financial institutions by the BRICS--when combined with the BRICS clearing arrangement in local currencies proposed in this policy note--may chart a course for achieving an improved global financial order. Avoiding the use of the dollar as a currency to settle payments would help mitigate the impact of exchange rate fluctuations on transactions within the BRICS. Moreover, using the proposed clearing account arrangement to settle trade imbalances would help in generating additional demand within the BRICS, which would have an overall expansionary impact on the world economy as a whole. |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levypn:15-5&r=all |
| By: | Faruk Ülgen (CREG - Centre de recherche en économie de Grenoble - Grenoble 2 UPMF - Université Pierre Mendès France) |
| Abstract: | This article suggests an institutionalist analysis of monetary capitalism and points to the inconsistency of liberal regulation mechanisms. It leans on the characteristics of money in a capitalist economy, often ignored by the consensual wisdom but explicitly studied by institutionalist approaches as major concerns in economic evolution. The article then shows, in a Minskyian vein, the weaknesses and irrelevance of liberal financial structures with regard to the prerequisites of sustainable macroeconomic stability. The main implication is that macro-prudential regulatory reforms must be designed and implemented to tame speculative finance. Therefore, market-based self-regulation mechanisms must be replaced by public regulation processes that could be framed on two rules: preventive-constrained finance and preventive-binding funding. |
| Date: | 2015–06–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-01166696&r=all |
| By: | Vladimiro Giacché (a/simmetrie) |
| Abstract: | Summers has recently reintroduced the hypothesis of “secular stagnation”, first proposed by Alvin Hansen in 1938 as an explanation for the protracted slump of the US economy. However, the secular stagnation hypothesis looks rather as a description, than as an explanation of the current low-growth environment. In this paper we consider the Marxian hypothesis of the tendency of the rate of profit to fall as an alternative theoretical paradigm. Looking at the post-WWII data, the Marxian hypothesis provides an adequate picture of the long-run growth trends. This conclusion is reinforced once we take into account the counteracting factors mentioned by Marx, all of which, and in particular the use of share capital, were operating in the last decades. The paper concludes by outlining some alternative scenarios of recovery. |
| Keywords: | Marxian economics, Marxian model, Economic growth, Secolar stagnation, Comparative analysis of economic systems |
| JEL: | B51 E11 O40 P51 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:ais:wpaper:1507&r=all |
| By: | Lans, Cheryl |
| Abstract: | For most of the world's developing countries, the 1990s were a decade of frustration and disappointment. The economies of sub-Saharan Africa and Latin America did not rebound economically in response to the structural adjustment prescriptions of the World Bank and IMF (Rodrik 2001; 2002). Frustration with the World Bank and IMF led to the development of many cooperatives in Latin America (Miller, 2006). Involuntary unemployment is capitalism’s most costly market failure and the demand for social services like the social-professional reintegration of disadvantaged groups usually cannot be provided solely by national governments (Monzón Campos, 1997). An alternative economy often arises in response to unemployment. This alternative economy is composed of co-operatives and NGOs working on small projects for community economic development and ethical businesses providing services (camps, financing, daycare, media, housing, women’s centres) (Corcoran and Wilson, 2010). |
| Keywords: | co-operatives, alternatives to capitlism |
| JEL: | B00 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66013&r=all |