budget surplus private saving
Charles Brown said: Would it be possible to give bit more of the logic of why a budget surplus saps savings from the private sector ? Alex' comment: In a broadly aggregated economy (say, public vs private sector, omitting, for simplicity the external sector), one institution running a surplus requires the other institution running a deficit. In other words, public sector surpluses mean 'net acquisitions of financial assets' vis-à-vis the private sector. That means that the private sector is releasing financial wealth. Lets include all three sectors, and draw the basic accounting identity as: NET ACQUISITION OF FINANCIAL ASSETS OF THE PRIVATE SECTOR = CURRENT ACCOUNT SURPLUS +PUBLIC SECTOR BORROWING REQUIREMENTS Wynne Godley would say ( Seven Unsustainable Processes...; 1999, pp.8): The intuition that underlies this rearrangement of the numbers is that public deficits and balance of payments surpluses create income and financial assets for the private sector, whereas budget surpluses and balance of payments deficits withdraw income and destroy financial assets. If I may, I would then like to link this appreciation with what Jim Devine said last week, suggesting that there is little chance of a policy implementation in order to revert the ongoing recession. On the one hand there is little hope for a reversion of the fiscal stance, and on the other hand, the 'global slowdown' would not be helpful in reverting the US balance of payments deficit. I think Jim is basically right. The policy options which might now help, are either not part of the 'political culture', or are not feasible. I guess that something in these directions would be in place, only if marginally (the Bush tax plan is an example). But will not be sufficient. So, we should perhaps regret that these policy options were not implemented sooner, when the 'fiscal effort' needed to be more manageable/ acceptable, and when the BoP needed correction from a not-so-low level... Alex -Original Message- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]]On Behalf Of Charles Brown Sent: Sunday, August 26, 2001 12:13 PM To: [EMAIL PROTECTED] Subject: [PEN-L:16358] Jane D'Arista on Doug Henwood's Show [EMAIL PROTECTED] 08/24/01 08:39PM So, the National Review is officially Keynesian/Kaleckian. As the budget surpluses began to expand dramatically in late 1999 and into 2000, the stock market appeared to be reversing the record up-trend of the 1980s and '90s. One possible reason for the reversal: the growing budget surplus was sapping the savings of the private sector. Consumers were able to maintain their spending only through expanding debt to record levels. ((( CB: Would it be possible to give bit more of the logic of why a budget surplus saps savings from the private sector ?
budget surplus private saving
Charles puts the finger on the critical issue of wealth distribution amongst private agents / factors of production. So far the dialogue was about the private sector as a whole vis-à-vis the public sector. In this case, profits, rents and wages are both but one single aggregate. Further disagreggation is highly desiderable, but more difficultly done. To start with, it would require the construction of Social Accounting Matrices and, within this, a disagreggated Flow-of-Funds system (the so-called Matrices from whom to whom). I have done such a work over some developing economies, but would not be able to say more than 'guesses' about the US (at least not 'today') Further, to be able to answer the question of who benefits from alternative fiscal budget programmes would require specifying the relevant items of both the expenditure and the income side. I think many people in the list have indicated that the Bush tax plan is being 'regressive' (against the working class) because it favours relatively more high-income layers, and it does not re-focus spending towards social welfare. I 'guess' they are right, but I have not done the numbers myself. A note at the margin: the framework deployed in my previous mail is using the notion of 'saving' as 'income minus total expenditure (including fix investment)'; that is the flow of income that is further allocated into financial assets (money holdings included). Hope this serves, but I am sure others in the list would be able to add much more than this. Alex -Original Message- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]]On Behalf Of Charles Brown Sent: Monday, August 27, 2001 11:17 AM To: [EMAIL PROTECTED] Subject: [PEN-L:16393] Re: budget surplus private saving [EMAIL PROTECTED] 08/27/01 11:02AM Charles Brown said: Would it be possible to give bit more of the logic of why a budget surplus saps savings from the private sector ? Alex' comment: In a broadly aggregated economy (say, public vs private sector, omitting, for simplicity the external sector), one institution running a surplus requires the other institution running a deficit. In other words, public sector surpluses mean 'net acquisitions of financial assets' vis-à-vis the private sector. That means that the private sector is releasing financial wealth. ( CB: So, these savings are investments ? What comprises the private sector ? The working class is combined with corporations as the private sector ? ((( Lets include all three sectors, and draw the basic accounting identity as: NET ACQUISITION OF FINANCIAL ASSETS OF THE PRIVATE SECTOR = CURRENT ACCOUNT SURPLUS +PUBLIC SECTOR BORROWING REQUIREMENTS Wynne Godley would say ( Seven Unsustainable Processes...; 1999, pp.8): The intuition that underlies this rearrangement of the numbers is that public deficits and balance of payments surpluses create income and financial assets for the private sector, whereas budget surpluses and balance of payments deficits withdraw income and destroy financial assets. If I may, I would then like to link this appreciation with what Jim Devine said last week, suggesting that there is little chance of a policy implementation in order to revert the ongoing recession. On the one hand there is little hope for a reversion of the fiscal stance, and on the other hand, the 'global slowdown' would not be helpful in reverting the US balance of payments deficit. I think Jim is basically right. The policy options which might now help, are either not part of the 'political culture', or are not feasible. I guess that something in these directions would be in place, only if marginally (the Bush tax plan is an example). But will not be sufficient. So, we should perhaps regret that these policy options were not implemented sooner, when the 'fiscal effort' needed to be more manageable/ acceptable, and when the BoP needed correction from a not-so-low level... CB: Is the working class impacted negatively by the surpluses , or is it the corporate sector ? Whose wealth it transferred to the federal government by the effect you describe above ? Workers' wealth or corporate wealth ? Alex
Monetary Policy
Jim wrote: is the G-S article on-line? where is your web-site? === Alex reaction: The Un-Godley private Sector Deficit was the central article of the US Economics Analyst , 27 July, which is produced by the 'GS Financial Workbench' and is distributed to *subscribers*. I guess that one could ask it directly to the chief editor: [EMAIL PROTECTED] (If I circulated the PDF to the list I am afraid Michael would have again problems ...) At Levy, they have opened a separate section for the 'Strategic Analyses , where the reaction to GS paper is included: http://www.levy.org/publications/stratan.html BTW, from the recent quote that Michael has made referring to W Dudley, it seems to me that indeed the 'official version' of GS is starting to lean towards admitting that monetary relaxation (in this context, they emphasize) is of little effect. In Newsday, July 18, pp. A49: The Fed has done all the right things, said William Dudley, U.S. domestic research chief for Goldman Sachs. We're just not getting the bang for the buck that we've seen in the past. Alex
Monetary Policy
Quoting from Michael: I am seeing more and more stories doubting that a recovery is on the near horizon. Notice the quote below We think the economy has got real problems that won't be rectified quickly, said William Dudley, an economist with Goldman Sachs Co. in New York. We think monetary policy in this environment is not very effective. I think that the smashing of Greenspan's myth, along with the possible failure of monetarism and tax cuts, may open up the possibility that people might be receptive to a substantive dialogue about the economy. Certainly it will make teaching easier next week. My comment: Of course I agree with your remarks, Michael (well; monetarism is ineffective per se; tax cuts / fiscal spending not, but are in this case insufficient and badly distributed...). And I hope as well that there would be more serious discussion about the economy. However, I guess that there is lot of pressure on the media (and all types of 'consulting' bureaus) so as to give the public the impression that a recovery is imminent. That is why it surprises me the quote you made above. (Could you please, on a personal note, send me the exact reference? We may need to 'use' it). Actually, there was recently a whole article produced by Goldman Sachs (The Un-Godley Private Sector Deficit, US Economics Analyst, 27 July) where they were trying to argue precisely the opposite: that of course things are not rosy, but that a recovery would follow suit, and that monetary policy is effective... We actually included a rejoinder in our web site on this occasion, and subsequently we were contacted directly by GS... In conclusion, it all points, day by day, into a direction that confirms the analysis deployed in the Implosion ... paper and elsewhere (e.g. Dean Baker had an insightful presentation during the URPE Summer school). On the other hand, it looks to me that there is a lot of people out there who would (perhaps) agree but *will not* acknowledge the seriousness of the situation to avoid making matters worse precisely at the moment in which policymakers are trying to sell the image that their recipes are being effective...
Monetary Policy
I am not sure I understand Doug's remarks (appended below), but probably it is because I was not clear in the first place. Lets see: 1) There seems to be (for me and other observers) convincing evidence that we are leading to a recession. 2) How deep and how long I do not know, but (WITHOUT EFFECTIVE POLICY CHANGES) we could think of something between the UK case and the CBO projections for the US (which are indeed being 'dramatically revised' in the last days). There were cases which were even worse than the UK, such as Sweeden (unemployment rose from 1.5% to 8.2% between 1989 and 1993), or Finland (unemployment rose from 3.1% to 16.4% in the same period!). 3) Other observers (perhaps Doug himself?) may have assessments of different 'degree' (and I could walk some way along different perceptions of this kind, simply because I do not know). Anyway, I was NOT referring in my previous email to Doug or this kind of assessments in which what is debated is the 'degree' of the implosion. 4) If you do not extract my remarks 'out of context', it may become clear (I hope; anyway this is why I am writing this again) that in my previous email I was referring to the position revealed to us by Goldman Sachs. By extension, from the feed-backs we have perceived so far, there seems to be an interest, from the political elite, in keeping up positive expectations. In other words, there are obvious reasons to believe that policy makers and their advisors want to show that money easing and the tax plan (as it stands, no more, no less) would work us well out of a recession. 5) And those reasons (implicit in point 4) are being an obstacle for serious economic analysis. This is my guess, of course. Which could be contradicted, of course. And actually, I was surprised of W. Dudley (G S)'s remarks, as quoted by Michael. You see? Perhaps I am mistaken and now 'everybody' is acknowledging that we are heading for a long period of recession, and this is opening up a serious debate about policies to prevent it. BTW, I do not think the above is contradiction with what I said at URPE or what is written in the paper. Alex Original Message- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]]On Behalf Of Doug Henwood Sent: Wednesday, August 22, 2001 2:41 PM To: [EMAIL PROTECTED] Subject: [PEN-L:16180] Re: Monetary Policy Alex Izurieta wrote: In conclusion, it all points, day by day, into a direction that confirms the analysis deployed in the Implosion ... paper and elsewhere (e.g. Dean Baker had an insightful presentation during the URPE Summer school). On the other hand, it looks to me that there is a lot of people out there who would (perhaps) agree but *will not* acknowledge the seriousness of the situation to avoid making matters worse precisely at the moment in which policymakers are trying to sell the image that their recipes are being effective... So where are you going with this? At URPE, you seemed to hold up Britain in the early 90s as a kind of worst case scenario. In 1991, British GDP was off 1.5%, the only fully negative year. Politically, the Tories were disgraced, and the left purged from the Labour Party. Is this an implosion? Or are you expecting something worse? Doug
crisis watch and labor
Michael wrote: Wouldn't it be fair to say that the United States is on relatively thin ice with respect to maintaining both financial stability and aggregate demand. Alex comment: Another way of looking at it is to think that financial systems are inherently unstable (Minsky). And that (perhaps) a way to attenuate cyclical crushes of the size and periodicity we are witnessing at present times would be to allow for a (relative) degree of financial repression (or at least international co-ordination) and regulation. (Aggregate demand is necessary anyway, all the time, for an economy, global or local, to grow). Now, one could think that there might be a contradiction in the mainstream view, since we often hear, in these times, about the need of better regulatory frameworks (e.g. even from Bretton Woods institutions). And, at the same time, there is an increasing pressure towards financial liberalization. What Bretton Woods institutions and the like aim at is 'correcting' mismanagement, corruption, etc.; not necessarily 'keeping a tight rein' on (the possibilities for accumulation of) the financial system (nowadays called 'global financial architecture). As a result of these tendencies, governments are left with less instruments to manage, control, monitor, whatever, policies. And consequently, the closure of the model seems to be 'to smash labor' (as Michael put it). Both in times of 'prosperity', in order to prevent a crisis, and in times of 'instability', in order to come out of a crisis.
Crisis watch
As to the slowing down of the US economy it is clear to me that a period of *negative growth* is forthcoming, unless drastic policy changes are implemented. In this respect, I am on Doug's side: a fiscal and monetary relaxation would help to revert the implosion. How effective? It would greatly depend on the size and nature of the policy change. What can already be said is that since the crisis is the result of a private sector moving back to 'financial surplus', the 'hole' in aggregate demand caused by reducing private expenditure (relative to income) needs to be compensated by a similar public sector deficit (i.e. increasing public expenditure or reducing the tax burden, or both). The other part of the problem is the net *negative* external demand. This point brings us back to the discussion we had about whether devaluation or 'control of imports' (some form of) would help better to restore the external position of the US. The impact of devaluation would be mitigated by the reaction of trade partners. The notion of 'control of imports' I was referring to (based on Godley Cripps paper, Cambridge Journal of Economics 1978, 2, 327-334) is a very interesting one, but I am not sure that it could apply to the US the same way it could work for 'relatively smaller' industrialized nations and LDCs. What remains valid, in my opinion, of Godley Cripps proposition, is that a solution (or softening) of the current crisis requires some form of international coordination, allowing for fiscal and monetary reflation in a synchronized way. BTW, though I do not know very much about Turkey (except from the fact that their problems, politics aside, may have a lot to do with the consequences of 'windfall gains' in previous periods, what some economists tend to call Dutch Disease), I would not be happy putting Argentina, Brazil and Turkey in the same basket... OK, they have things in common (such as being 'potentially more powerful economies' within the group of developing nations, and being periphery anyway). But those things in common are not sufficient to make us believe that the nature of their economic crises are the same. Brazil is a country of 'unsustainable contradictions', between 'sectors' (agriculture, manufacturing and the financial sector) and between 'classes' (the 'sim-terra', the favelas, the proletariat, the -narrowing- middle class, and the extra-rich). A totally unregulated financial sector has been developed in this context, which makes the situation 'explosive'. Argentina, in my opinion, is centrally paying the price of having adopted the Convertibility plan ten (?) years ago, which -as with all 'common currency' arrangements- leaves the country with no instrument to overcome external crises (no instrument other than poverty - reducing wages- or unemployment). Alex -Original Message- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]]On Behalf Of Doug Henwood Sent: Monday, August 13, 2001 9:54 AM To: [EMAIL PROTECTED] Subject: [PEN-L:15854] Re: Re: Re: Re: Crisis watch [EMAIL PROTECTED] wrote: I sincerely hope that I am wrong and Doug is right so that tax cuts in the US and central bank easings around the world would help us get out of the current downturn. I don't know that they will; Michael seemed convinced that it was a straight line to doom, and I was offering some countervailing tendencies. Maybe they'll work, maybe they won't. But we also have to be clear on what we're talking about. Are we talking about the situations in Turkey, Argentina, and Brazil? Those aren't cyclical problems, even if such countries have good years and bad - they're structural. Lower interest rates aren't going to change much, though of course they'll help some. Dire situations on the periphery aren't crises - they're capitalism's normal operating procedures, and have been for a long long time. Doug
saving (was: tax-cut expansion wealth effect)
Christian said, in reaction to a paragraph of mine (also quoted): Our point, in the Implosion... paper was not that debt/ income ratio is guiding consumers, but that such indicator ought to inform economists and policy-makers of the risk of letting things going this pace. So, in your view, an increase in saving, at this point (or a recalibration of our measures of savings) is beside the point. The financial balance is going to have to revert in short order--and that means a loosening of fiscal policy and/or a really more devastating market crash in which wealth is liquidated to overcome income shortfalls. Yes, in part yes. Of course, recalibration of the measure of saving would do much harm if the new measure were misleading. And I think that it is misleading to include capital gains in our measure of saving, for example. The crucial issue (IMO) is raised by Christian above; the financial balance of the private sector is going to revert, because it is relying on excessive valuation of wealth (misleading indicator of spending capacity) and on excessive debt burdens. With this I do not imply giving 'advice' as to whether save or spend the tax rebate. I am just stating that financial balances have gone so far out of historical trends that will revert, soon. The problem is that, at the same time, it is the spending of the private sector that was driven the economic expansion, from the demand side. Now, as the private sector balance *is going to revert*, likely outcomes are, either a recession, or an expansion driven by another factor. That is, public sector deficit, or net export expansion. The former requires a -quite contercultural- Keynesian management of the budget, hopefully not only expansionary but also welfare-protective and re-distributive. The latter requires either devaluation or some form of protectionism. Alex
tax-cut expansion wealth effect
Hello, I am trying to contribute to two separate issues in one email; forgive me if this is not allowed. TAX CUTS and expansion / recession Thanks to Tom Walker remarks (and epilogue below). I broadly agree. We know one thing: business as usual ain't going to cut it. The probable is no longer possible. Whatever happens next is bound to be improbable. IMHO, the probable thing, and at the same time unprecedented in its depth (would this merit the qualification of improbable?), would be a recession scenario, of drastic and painful consequences (and not equally distributed, neither domestically nor across the borders). Such an outcome does not imply to say that a fiscal relaxation would not have *any* Keynesian effect at all. In a demand-driven setting an increase of disposable income would have a multiplier effect. Such does not contradict the fact that it could be very little, or too little, and thus not sufficient to overcome a recession. Further, a tax relaxation may have a different impact depending on how this is distributed across household income levels. I agree with this (thanks, Max for your remarks), but unfortunately, in the model we used for the Implosion... we did not go as far as to specifying different types of households with different propensities. WEALTH EFFECTS. The WSJ article is consistent with our analysis. Moreover, our 'private expenditure function' is influenced, among others, by the evolution of prices in the stock market *and* in the housing/ real state market. However, any form of credit, refinancing, or whatever *based on a debt/wealth* indicator is misleading; or, as Jim put it, it continues the development of a bubble economy. Looking solely at the house market, what is going on now in the US seems a reminiscence of the Japanese bubble a decade ago (from the very little I know of it). Yet, I am not sure whether I understand Michael remarks: the wealth makes debt seem somewhat rational since it is tied to an underlying value. What I think is (and I am sorry to insist again and again on the same) that the meaningful indicator, for the private sector as a whole, is the ratio *Debt/income*, because debts cannot be paid, on the aggregate, with wealth. Wealth needs to be either cashed; or more credit (which would lead to more debt to be serviced) needs to be granted. And there is a limit to both. The above does not mean that the debt/income ratio needs to be guiding the behaviour of consumers (or private expenditure in the aggregate). I personally think that it is not the case, that the 'fear of bankruptcy is somehow less significant than the 'frenzied rush of the tide'. In a (classic, IMO) article of C. Diaz-Alejandro (1985) Good-bye financial repression, hello financial crisis he expresses quite well the sentiment of consumers: when everybody is bankrupt, nobody is!. Our point, in the Implosion... paper was not that debt/ income ratio is guiding consumers, but that such indicator ought to inform economists and policy-makers of the risk of letting things going this pace. Alex
Jamie Galbraith
G'day also, Thanks to Rob for the summary of J. Galbraith' propositions. There are some parts that I sincerely do not understand very well (e.g. what Rob or James mean with Keynesian managed globalization -did such a thing ever existed?). Anyway, I do not feel obliged to 'interpret' or 'explain J. Galbraith, even if he is a fellow of the Levy Institute. Since Rob asks, I guess I could say something about the tax cut. When we (Wynne I) argue that a tax rebate could help postponing a technical recession, we say it in the framework of a 'three-sectors' macroeconomic analysis of the US economy, by which there must be a driven force from the demand side to allow for economic growth. If such a force has been primarily (particularly since 1992) the private sector, AND the private sector expenditure pattern is reverting (at last, and too late, according to our analysis), THEN a reversion of the public sector balance in the opposite direction would help. If, in some months or years to come the public sector cuts expenditures at a faster rate than it relaxes taxation, the overall effect would be recessionary. In our paper we indeed argue that either exports must grow faster than imports, or the public sector would need to move to a deficit level of 6% of GDP! The latter (alone) seemed to us 'implausible'. Less unlikely, but not highly probable either, would be a sort of worldwide coordinated reflation. In any event, J. Galbraith is, IMO, right in stating that if behind a tax cut there comes a sharper cut in expenditure, it would make the tax cut futile. What we have used in our model is the CBO published documents up until beginning June, and we accounted for tax and expenditure changes that were incorporated then. We did not want to speculate on different budget proposals, simply because we did not know. regards, Alex -Original Message- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]]On Behalf Of Rob Schaap Sent: Thursday, July 26, 2001 7:09 PM To: [EMAIL PROTECTED] Subject: [PEN-L:15556] Jamie Galbraith G'day all, Yesterday, Australian Treasurer and Prime Minister-in-Waiting Peter Costello gave a long and (inevitably) simplistic speech on the virtues and inevitabilities of globalisation (I won't repeat it - you can pretty well imagine it verbatim). Tonight Jamie Galbraith graced SBS TV's Insight programme, (he's here on a lecture visit) quietly and clinically put every 'point' Costello had made to the sword. He actually claimed (and it's the first time an economist-on-the-telly has said it in my hearing) that not only inequality but also poverty has been growing world-wide since the era of Keynesian 'managed globalisation'. He called for reregulation, pointing to the trend to private monopoly that follows privatisation, and made much of the lesson afforded us by the Californian electricity episode. And he came down heavily against indirect taxation (the salient policy triumph of Howard's government) on equity grounds. Interestingly, he came down more heavily still on Bush's tax cuts, predicting significant social service/infrastructure shortfalls in light of suddenly diminishing public revenue projections. What say you, Alex? Anyway, Jamie apparently sometimes looks in on PEN-L, and I'll take this opportunity to thank him for sounding like absolutely noone else in Ozzie's TV-Pundit Land. Good on you, mate! Cheers, Rob
Godley and Savings
Hello, I am sorry to insist, but I think this is a very important issue. Jim wrote (after a paragraph of mine): 3) The limit to borrow, in our opinion the binding constraint in the last resort, is set by the ratio of debts to *income*, because debts must be serviced by cash. The household sector *as a whole* cannot realize more than a fraction of its assets without causing the market to crash. The limit to borrow is not set by the ratio of debt to income plus capital gains; such a limit would be extremely vulnerable to a fall in prices. Moreover, we actually estimated the ratio of saving, inclusive of capital gains (i.e. change in net worth), relative to income inclusive of capital gains. Such a ratio plunged from 44.4% in 1999 to *MINUS* 17.4% in 2000, and it remained strongly negative in the first quarter of 2001. can't assets be used as collateral, so that the debt/asset ratio is relevant? The point is that the debt/asset ratio ( 'assets as collateral') is a misleading indicator of the capacity to borrow *of the private sector as a whole*. From other micro-perspectives ( whatever the unit of analysis: a household alone, a firm, even a subindustry) the debt / asset ratio may be valid (to an extent)^(footnote): the household cannot service its mortgage? Too bad, the bank appropriates the asset (say the house), puts it for sell in the market and re-establishes its financial position. But some one else *had to buy the house*, be it with cash, or another credit provided that in this case the new owner can indeed service the debt in cash... But for the private sector as a whole the story is entirely different. The debt of the private sector *as a whole* has to be serviced with cash, whatever the collateral. Unless that 'someone else' is ready to purchase the collateral (private sector assets) and pay with cash... In our (macroeconomic) story, the only 'someone(s) else(s)' available could be either the public sector or the external sector. ( And I do not think that we will see in the near future a case of massive 'nationalizations' --appropriation of private sector assets by the state--, nor a case of massive 'transnationalizations' --appropriation of US private sector assets by foreigners). I am glad that Jim acknowledges (remembers) that Wynne is saying this in previous works. Of course he did. And yet, debt as a proportion of income has kept increasing. In walking this path, it is making the recovery of the financial imbalances of the US economy even more painful, for the US and the rest of the world. best regards, Alex ^(footnote) As to the debt/asset ratio there would be much more to say, but perhaps the best could be to recommend Doug Henwood's book Wall Street, chapter (4 or 5, I think; I do not have the book at hand), where he discusses the theoretical aspects of financial markets, and questions the famous Modigliani-Miller theorem. I leave Doug himself to summarize it, if he is around. My reading is that, also at a firm level it does matter the financial structure, and that there is a limit as to how much a firm can borrow (increase debt).
Godley and Savings (was current events)
Hello, there is one thing that I think is important enough to emphasise, in relation with our analysis and what is believed elsewhere. It is about the saving rate, and whether the private sector balance is sustainable or not. Quoting Jim Devine: It's not US _savings_ (i.e., assets) that are non-existent. Rather, it's US _saving_ (net addition to savings) that is negative. Overall US consumer net worth is _positive_, not negative (even though this net worth did fall during the last year). There seems to be a problem in the way the above was expressed (or perhaps I do not understand the definitions used: saving and savingS). Anyway, saving is a flow, assets are stocks. And, not only in the US, but generally, the NET WORTH of the household sector (which includes physical and financial net assets) is positive, and it can be 2, 3, 4, 5 times the level of income. The latest figure for the net worth of the Personal Sector in the US (39.999 Bn.) is almost four times the GDP (circa 10.000Bn.) and more than five times the disposable income of the private sector (circa 7.000 Bn). No one would dispute that net worth of consumers is positive. So, I guess that what is implied by Jim is that household (or consumer)'s saving, INCLUDING CAPITAL GAINS , is POSITIVE, and therefore there is not 'really a problem' with the private sector. Perhaps this is not what Jim implied, but we know that this is a major argument that is going around for some time now. We disagree. We elaborated on this in the paper, which I would very much like you to download or read from the web site (www.levy.org). You could get it directly by using http://www.levy.org/docs/sreport/implos.html Let me try to make the points as concise as I can (but please, try to get hold of the original document anyway): 1) in the framework of our analysis our major concern is with the *financial imbalance* (expenditure, including investment, minus income gross of capital consumption) of the *private-sector* (the aggregate of the private sector, including households, unincorporated firms and corporations) . The gap, which is large as it was never before (above 6% of GDP) cannot be sustained at the present rate, *because* it can only be financed by credit or by foreign purchase of equities. It is not possible to 'spend' the wealth (or capital gains, for that matter). There must be either additional credit (net borrowing) or net realization of assets by the sector as a whole. 2) By disaggregating the private sector between household (or the personal sector) and corporations we find the additional problem that households' realization of equities (to allow spending beyond income but without relying solely on debt) has largely depended on the fact that corporations have been net purchasers of equities. As corporations have been in financial deficit, they could not have purchased equities at the same rate without recurring to more credit; therefore setting another limit to the ability of households to realize its wealth. 3) The limit to borrow, in our opinion the binding constraint in the last resort, is set by the ratio of debts to *income*, because debts must be serviced by cash. The household sector *as a whole* cannot realize more than a fraction of its assets without causing the market to crash. The limit to borrow is not set by the ratio of debt to income plus capital gains; such a limit would be extremely vulnerable to a fall in prices. Moreover, we actually estimated the ratio of saving, inclusive of capital gains (i.e. change in net worth), relative to income inclusive of capital gains. Such a ratio plunged from 44.4% in 1999 to *MINUS* 17.4% in 2000, and it remained strongly negative in the first quarter of 2001. re re re re re regards, alex
protectionism
It seems very interesting what is going on in this discussion, and I am afraid that I can hardly follow. Anyway, let me clarifiy small points. A colleague wrote: Except the paper says _In the very last resort_, the United States should not forget that nondiscriminatory measures to control imports . . . are permitted under Article 12 of the successor to GATT. (Whether you believe such measures can be non-discriminatory is another matter.) the meaning of nondiscriminatory here is simply that the aim is to protect the general level of employment 'in house', not to protect one or a couple of industries and unprotect the others. In this sense, tariffs seem to be the appropriate instrument, rather than quotas. Implicitly, it cannot be done without 'coordination' between trading partners, otherwise it lead to retaliation... Now, again, Wynne's proposal is a much more elaborated one than what we suggested in the paper. It requires a set of coordinated measures in which import restrictions go hand in hand with fiscal relaxation From there onwards, yes, I could agree that 'coordination between countries' is not an even game: anybody can imagine what the 'coordination between Haiti and the US' could be, for example. The authors argue that the best case scenario is that the U.S.' private financial balance wouldn't revert, and growth would continue at about 3%, in which case, Indonesian textile workers are about where they are now. As others have pointed out, the authors' emphasis here and elsewhere is on fiscal and tax policy needed to sustain growth. They also suggest that other countries could engage in some coordinated reflation. Yes, this is actually our main point in terms of possible strategic solutions. You are perfectly right. The problem seems to be that these are not very 'popular' solutions nowadays. A side remark, the 3% growth rate is, in our view, totally unrealistic. Out of the question. In the paper is presented as a baseline because that is the Congressional Budget Office (CBO) forecast. regards, Alex
godley and implosion in the US
folks, be polite! Thanks Jim (or was that meant for Wynne only?) It is nice to be back. As Michael said, I am working in association with Wynne since January. That means that I would not possibly have more answers at hand than many of you who know the work of Wynne from an earlier stage. AS TO PROTECTIONISM Certainly Wynne would be prepared to answer this better than myself. The issue of protectionism was raised, at a relatively early stage in the UK (in Latin America it was there since the times of the ECLAC and Prebisch), by the so-called Cambridge Economic Policy Group (CEPG). Main figures of that group were N.Kaldor, J. Robinson, L. Pasinetti and... Wynne Godley (and many others). The proposition in place was to exercise some degree of protectionism in order to cushion industries that needed some sort of support to avoid being displaced by external competition. The underlying justification was Kaldor's paper Foundations of Free Trade Theory and their Implications for the Current World Recession (in a book edited by Fitoussi and Malinvaud, NY: St.Martin Press. 1980). Kaldor's main hypothesis is that the Ricardian idea that free trade is beneficial for all parties involved (via comparative advantages) is true only if the assumptions of perfect competition and constant returns to scale of the aggregate production function stand. If not, if in reality what there reigns is 'dynamically increasing returns' then free trade leads to polarization. There is more to this, obviously, but perhaps it would be better to leave this for another discussion, where I could also rely on folks more familiar with these issues. Yet, from the perspective of 'history of economic thought' the 'protectionism' issue granted the CEPG the label of 'dissidents', which, IMHO encouraged them to be 'even more dissident' and allow them to produce very interesting things for decades, until Thatcher closed down the group by cutting the funds (the typical story). PROTECTIONISM, THE PAPER AND THE MODEL The issue of protectionism was raised in our paper as a way by which the current balance of payment problem in the US could be, to an extent, corrected. I believe the GATT allows for protective measures in 'proven cases' where BoP problems lead to serious problems of unemployment. It is not a re-drafting of the GATT, but a mere application of one of its clauses. Whether this is or not a good idea could be discussed at length. However, what we truly believe is that the current account deficit (nearly 4% of GDP) cannot be sustained for much longer, in the same way that the private sector imbalance cannot be sustained at the present (unprecedented) level. BTW, someone in the list mentioned that the private sector deficit has not reverted despite it was predicted to revert from time ago. Well, it is starting to revert, and quite sharply. That is what the figures of the Q1-2001 tell. Now, we explored in our model some alternatives that would allow a recovery of the BoP. One of them was a devaluation, since *in our model* the exchange rate was an exogenous variable. But not in reality (though everybody knows that if tomorrow Greenspan wakes up saying something like 'it is not in the interest of our nation to have such a strong dollar' there *will be a devaluation*. This may be the opportunity to tell that we indeed work out our solutions by means of a macroeconomic model where *there are more than accounting identities*. There are a number of critical behavioural relations, for expenditure, imports, exports, prices of international trade, labour, employment, and a couple of more instrumental variables. I would be willing to prepare a text version of the whole model if it serves for something. In plain English (well, nearly, because, as you may have already noticed, it is not *my* mother tongue): a) the model is anchored in a fully consistent system of accounting relations, including both flows and stocks. b) the main propositions of the model turn around private sector behaviour. Basically, private expenditure (and thus imports) will keep raising as long as there is some source of financing (income, or credit, or both). c) The private sector, as an aggregate, can tolerate extravagance because it feels 'wealthy'. But net worth is not the same as cash, that is why credit is necessary in order to keep spending going. d) But there is a limit as to how much the private debt can raise, simply because debts have to paid back, in cash. e) In reaching such a limit, aggregate expenditure will be dramatically reduced, since the public sector (and the public opinion about the public sector) seems not in the lines of deficit expansion. f) If there are not sufficient forces in the external sector to revert the Exports - Imports equation, THEN, there is no room for expansion at all. g) In sum, the implosion begins. That is where our analysis leads to. But I am sure there is much more that we are probably overlooking... Alex
godley
As far as the ideas we put forward in the paper, the critical issue is that
the current account deficit, as it stands, cannot be sustained.
We mentioned that a sort of coordinated reflation would be a possible
solution, at a global scale. A devaluation (if it was a policy instrument)
may serve, to an extent, but it has also implications for the rest of the
world. In previous papers of Wynne Godley (1999: Open Economy Macroeconomics
Using Models of Free Trade) it was put forward that the impact of a
devaluation is not full since (price and volume) feedbacks from trade
partners would be expected (i.e. exporters shade their prices to maintain
market share).
As to protectionism, there is a VERY IMPORTANT QUALIFICATION, which does not
come out in the paper of Kaldor (the one I had at hand when I wrote my
previous Email). Namely, the original idea, put forward by Godley and Cripps
in a 1978 article in the Cambridge Journal of Economics ('Control of imports
as a means to full employment and the expansion of world trade), is that of
NON SELECTIVE PROTECTIONISM, combined with fiscal relaxation ( I am waiting
to get a copy of such paper to be able to be more specific; from what I
understand it is, in a general way, a combination of import tariffs/ quotas
with tax relaxation / expenditure expansion that would lead to increased
output). I.e. it is not an issue of protecting some industries that may be
non competitive because of particular inefficiencies, but to protect an
entire economy against its failure to ensure employment and against the
exhaustion of reserves.
In Godley and Cripps paper, such is a fully thought-out idea, which rather
than leading to debacle or global recession, actually leads to increased
output and employment worldwide.
Furthermore, in Godley (1995)' Critical Imbalance in US Trade (Levy
Institute Policy Brief, No. 23) it is emphasized that in both the GATT and
the WTO it is contemplated that contracting parties may restrict the
quantity or value of merchandise permitted to be imported (pp. 25). And, as
noted there, the principles of nonselectivity and nondiscrimination are as
fundamental as that of trade itself.
Anyway, I hoped I made a bit clearer Wynne's position on this. As I said,
international trade is not really my area. What I can stand for is that the
present trends of main financial (im)balances of the US economy (private
sector negative net savings and negative balance of trade) cannot be
sustained. And, the longer the remedies are postponed, the more dramatic the
implications for the US and the rest of the world. And, this seems to be
something that, again, free trade is not capable to resolve...
A
-Original Message-
From: [EMAIL PROTECTED]
[mailto:[EMAIL PROTECTED]]On Behalf Of Max Sawicky
Sent: Tuesday, July 17, 2001 2:42 PM
To: [EMAIL PROTECTED]
Subject: [PEN-L:15234] RE: RE: Re: Re: Re: RE: wynne godley
. . .
The effects of any form of undisguised wall-to-wall US protectionism on
world trade today would be presumably, completely catastrophic, the debacle
even worse than 1929-31. Is the Godley view that this debacle is inevitable
anyway, so it's a case of sauve qui peut? Mark Jones
I presume a plausible U.S. protectionism would not be
an all-or-nothing thing, but a modulated policy negotiated
in some kind of concert with other countries (naturally with
a U.S. edge in bargaining power). Whether/how it would
work I have no idea.
mbs
godley and implosion in the US
Yes, I agree with Rob Schaap's illustrative description of the tragedy of our non-competitive free market at both international and domestic levels. I would not be able to express it better. And I find it very appropriate to look at the IT sector, because it is usually shown as a factor of equalization rather than polarization. Indicators of the implosion? In the context of our model in particular we look at the trends of the main (current) balances: private sector, public sector and the external sector. Within the private sector we look at the households (or sometimes the personal sector, which includes unincorporated enterprises) and companies. We also look at the stock positions (accumulation of financial wealth, for example, and, what M. Forstater said: credit). Through the structure of the model we trace the impact of these balances and their components on aggregate demand and economic growth. If (one of ) the components of the main balances that generate an expansion reverts or slows down, AND there is no other force that would alternatively generate an expansion, then an implosion unleashes. In particular, according to the NIPA accounts, the balance of the private sector started to revert in the first quarter. And, in the first quarter there was no compensation from a fiscal or external side. Thus, the previous pattern of growth is altered, and could turn into an opposite sign. There is going to be a sort of termporay compensation with the tax rebate (third quarter) but this would be, in our estimation, only sufficient to avoid a 'technical recession' (technical recession is four successive quarters of negative growth). But it will not be sufficient to reinstate economic growth. A side remark, we do not intend to make a short term forecast of the economy. It would not be possible, in our opinion. But what can be said is that the necessary reversion of the (unsustainable) current trends will lead, sooner or later, to a painful recession. And, the implications for the rest of the world will be perhaps even more dramatic. Recently European leaders complained that US is loosing its role of locomotive, affecting Europe. And, in Latin America the effect of the slow down in the US is starting to impinge on Brazil, Argentina, Chile, and from there others will follow suit... (I think you were discussing this in the list, I will give it a look). well, good night, Alex
trivia quiz - 2 (a bit harder!)
Trivia question number two: there was a correlation between the lengths of women's skirts and the business cycle. (There is also supposedly a study linking the number of dairy cattle in Kentucky and the business cycle. Any help here?) Often, you will find similar examples in Econometric textbooks to explain "spurious" correlations (or sometimes "non-sense correlations", as denominated by G.Undy Yule). In particular, business cycles are very prone to misleading results in econometrics due to statistical properties of cycles (random shocks will, in average, generate cyclical patterns; it is only a question of finding the "right" random examples to associate with the cyclical data under investigation...). The best account of this is in Morgan, M.(1990) "The History of Econometric Ideas", Cambridge University Press. Chapter 3 of the book relates the pioneering works of Hooker (1901 !), Yule (1921 and 1926 !), Slutsky (1927 ! ) and others, who presented evidence of "spurious" correlations such as marriage rate and international trade, experiments with harmonic curves, lottery results and the business cycle, etc. Not only did they present the evidence or experimental results, but also managed to demonstrate their statistical flaws. To me, it is still amazing to see that for almost (already) a century, the economic literature is plagued by studies which "prove", based on "sound" or sophisticated econometric techniques, a priori hypotheses which might just be "nonsense"... Probably is to keep busy the academia... Salud, Alex PS. I recently built a "sound" econometric model, for a workshop at the ISS, in which I "explain" the Kenyan GDP as being correlated with a set of variables denoting a Keynesian expansion. The econometrics fit rather well, the only problem is that the exogenous variables were not Kenyan, but Ecuadorian... If anybody wishes it, I have no problem to send an attachment with the data and results to "reproduce" the experiment in a classroom (such things should be public property, I guess...) Alex Izurieta Institute of Social Studies The Hague - The Netherlands Email: [EMAIL PROTECTED] Tel.31-70-4260480 Fax.31-70-4260799
[PEN-L:9636] Peru
does anyone on pen-l have any special information about the government raid on the Japanese ambassador's mansion (ending the hostage sitation)? it seems very suspicious that ALL of the hostage-takers were killed. It sure sounds like some of the hostage-takers were killed after they were taken prisoner ... I do not have special information about it, but a deep sorrow and a great concern. The sorrow is the obvious one, and has to do with what Jim wonders: how and why those young people were killed? My concern has to do with the surprise that no-one has yet raised the issue about "killing" from the other angle, that is: "how is it possible that none of the hostages were killed by the host-takers?" Hostages were un-armed, and under vigilance by the TupacAmarus (some of them were apparently playing soccer downstairs, but not ALL them). A typical "terrorist" action would have led to the killing of the hostages by the host-takers, not only because it is 'easiest' to kill those who cannot defend themselves, but also -and non irrelevantly- because if at least some of the hostages are killed one prevents the "triumphalism" and arrogance of Fujimori's, and puts forward a cautionary tale for possilbe military "solutions" of a similar type in future. But that did not happen!! Why As I said, I do not have "special information", but truly believe that if this did not happen is because TupacAmaru rebels DID NOT WANTED TO KILL !!! And, it is here, in this very omitted factor by the international media and all politicians around the world, that lies the greatest evidence that these TupacAmaru militants wanted a different world, guided by the deepest value that should shape any societal organisation: the respect to life. They, Cerpa Cartolini and the rest (we do not know how many, let alone their names and personal histories), have taught a lesson to humankind, and hope this does not pass unadverted. Alex Date: Wed, 23 Apr 1997 11:17:08 -0700 (PDT) Reply-to: [EMAIL PROTECTED] From: James Devine [EMAIL PROTECTED] Subject: [PEN-L:9626] Peru does anyone on pen-l have any special information about the government raid on the Japanese ambassador's mansion (ending the hostage sitation)? it seems very suspicious that ALL of the hostage-takers were killed. It sure sounds like some of the hostage-takers were killed after they were taken prisoner ... in pen-l solidarity, Jim Devine [EMAIL PROTECTED] [EMAIL PROTECTED] Econ. Dept., Loyola Marymount Univ. 7900 Loyola Blvd., Los Angeles, CA 90045-8410 USA 310/338-2948 (daytime, during workweek); FAX: 310/338-1950 "It takes a busload of faith to get by." -- Lou Reed. Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260.755 4260.799
[PEN-L:9638] Peru
Just received this through the A-infos list. I extracted the piece that touches upon the issues raised by Jim and myself. Alex ** Interview With Norma Velazco, European Spokeswoman For The Tupac Amaru Revolutionary Movement (MRTA) Q: How do you explain the fact that during the storming of the residency, all 14 guerrillas were killed - including two teenage girls - whereas on the other side, only 2 soldiers and 1 hostage died? The goal of the MRTA commando was not to murder the embassy prisoners. They were determined to have their demands fulfilled while providing the maximum protection for the lives of their prisoners. There was a struggle between the members of the commando and the soldiers. But most of the members of the MRTA commando were only killed after the residency had been taken, they were most likely tortured as well. Their dead bodies have not yet been shown to the public. *
[PEN-L:9588] LatAm Marxism
What's good to read on Marxism in Latin America? Hope it helps to hint to some important names (authors). I am afraid most of their works are not published in English. Mariategui, Jose Carlos (Peru): it is a "pioneer" both chronologically and content wise. He introduced, right from the early 1900s, notions of indianity and colonialism into marxist thought. It would surprise me if his "7 thesis on L.A" are not translated into English. Cueva, Agustin (Ecuador). He died quite recently, and I therefore suspect (hope) that something has been published in English as a sort of compilation of writings or "memorial...". He comes from a sociological tradition, though he also wrote a "economic history of LA". Whatever you find from him is worth reading. Arismendy, Rodney (Uruguay). The same as with Cueva, he died recently. He is a sociologist, founder of the Communist party in Uruguay. Comes from a leninist tradition, "latinamericanised" little by little, especially after the Sandinista experience, which he joined in the early set up. Zea, Leopoldo (Mexico). His first writings were more..., say cautios marxist "approximations". But it was the Cuban revolution that radicalized his thoughts and became a marxist proponent. Gonzalez Casanova, Pablo (Mexico). He is an historian, and wrote a lot about economics and labour. He has also edited an impressive history collection, putting together many writers, of a marxian strand practically all them. He could be more known in the US as he explicitly intended to appeal to the northamerican (progressist) publicl by (trying to) integrating latam marxism with US "empiricism" (whatever it may mean). Sanchez Vasquez,Adolfo (Spaniard, later nationalised in Mexico). He writes from a philosophical point of view. Interesting in the sense that it links also with a Spanish tradition of "classical" non-marxists philosophers (as Ortega y Gasset). IMO he treats marxism sometimes in a reductionist / materialist narrow way... Dussel, Enrique (Argentina). He writes from philosophical and theological backgrounds. His main contribution, which I think is, next to 'indianity', a most revelant "originality" of Latam marxism, is the appraisal of marxist thoughts as they were incorporated by grass roots groops and social movements whose "militancy' (?) or political engagements is derived from christian groups. Vilas, Carlos (mexico). Casually, I 've recently told of a book published in English: Magnus,B., Cullenberg,S (eds)(1995)(Routledge) "Whiter Marxism? Global Issues in International Perspective", where there is a chapter wiritten by Carlos Vilas about Latam marxism. I believe it must be good. (BTW, there is also in that book a critical appraisal of Foucalt...). And, obvioulsy, if you want to make the "synthesis" yourself, one should give a look to Sandino, Farabundo Marti, Jose Marti (Cuba), Ernesto (che) Guevara, and... Fidel. Pls. tell me if you find something in English over there. I am curious. Salud, Alex Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260.755 4260.799
[PEN-L:7059] anti-intellectualism against and ...
From: Gerald Levy [EMAIL PROTECTED] A prerequisite for giving any theory hell by critiquing it is first *understanding* that theory. well... 'Understanding' denotes there is a certain 'logic' underneath. What if there is any ? What if the so-called theory is a non-theory, as pomos themselves pretend by aiming at being the quintessence of 'deconstructionism' (of every theory, and consequently -'logically'- theirs as well ). In brief, what if 'that theory' is a non-sense?? I haven't heard Doug give a critique of *any* of the writers that he refers to. I have only heard him *dismiss* those writers and their theories. Perhaps he does have a critique of post-modernism but so far it reads more like sounding off between beers. I think Doug can defend himself well. As far as myself is concerned, I am going to hang his piece on my door at the ISS; just to 'provocate' those newly appering 'fast track pomos' around. From your reaction, it seems it works well. Salud, Alex .. Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260.755 4260.799
[PEN-L:6988] Exploitation in progressive organisations
From: [EMAIL PROTECTED] Subject: [PEN-L:6987] Fwd: Re: exploitation in progressive organizations? (was re:aiusa) 2. (...) to have the same goals as the organization, something profit making businesses do not expect. As a plain old worker in a company, you are expected to give a certain amount of labor per dollar, but not necessarily have the same goals as the CEO. Sure? I certainly agree with Maggie's recent postings on this issue, which only helps to emphasize the need that folks in the 'left' keep *always* in mind, that i) we need power to get through to a better world and that ii) power is not 'mine', but belongs to (not only relies on) the unprotected and exploited. Me, as Maggie, have seen it very often (though not always, of course, I am not a pessimistic...) that 'politically correct' folks, as soon as they get a bit of power, they forget (or close an eye to) both i) what is this power for and ii) to whom this power belongs.. BUT, I wouldn't dare to say that private corporations and the capitalis society as a whole does not ask their workers to adhere to the goals and values of the corporation/society... Of course they do!! Maybe, there are other kind of experiences..., but is that the 'common pattern'??? I mean, also for plain workers, as subtle the interioration of values as it may be, it does exist. And, moreover, plain and not plain workers who do not share the values and goals, who do not repeat 'we' when they are referring to the organisation they work for, who do not conceed a great deal of idolatrisation to their bosses, who do not manifest that they are 'glad' to get their income thanks to the jobs offered by the organisation, who do not dress as expected, who do not 'socialize' following the norms of behaviour, etc., etc., they are little by little marginalised, and eventually either they are fired or at the end they resign out of exhaustation... (the latter, if I may say, is the recurrent experience of my wife over the last five years or so...) What makes a difference, and I understand that is Maggie what was implicitly referring to in #2 of her last posting, is that in a private (or at least non-non-profit) organisation it is more straightforward -and immediate?- to unionise. And *if* the union succeeds in represeenting the workers, and *if* the union does not end up patronising and adopting the same values of the organisation, *then* the plain worker can be more independently minded. But that independence of mind is -for the very little I know- becoming more and more scarse... One more thing that adds to the challenge we have ahead. Salud, Alex. Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260.755 4260.799
[PEN-L:6954] Redistributing jobs
o a todos, acumulable con el ingreso del trabajo y suficiente para vivir. Para el financiamiento, se han analizado decenas de formulas. En la medida en que estas se basan en la redistribucion fiscal, todas tienen una validez limitada en el tiempo. Porque la produccion social distribuye cada vez menos medios de pago a cada vez menos gente. Nos encontramos en una pendiente donde las sumas a redistribuir terminaran por sobrepasar las sumas distribuidas. Mientras se inicia un cambio de trayectoria, es importante ganar este tiempo obteniendo para la politica un mayor margen de autonomia. Solo puede lograrlo para sus paises miembros una Union Europea que se haya vuelto invulnerable a los mercados financieros a traves de su moneda unica, liberada del fetichismo monetarista y primera potencia comercial del mundo, consciente de que, al imponer reglas y limites a la "competitividad", tiene el poder de hacer que los intercambios sirvan para el desarrollo social y ecologico de un planeta solidario. Interlink Headline News TORRES Consulting ([EMAIL PROTECTED]) Home Page: http://www.torres-c.com/ Public FTP: ftp://ftp.torres-c.com/ ITALY Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260.755 4260.799
[PEN-L:6908] Off Limits: USA
Thanks Michael, I take this one! ...and write you immediately, before you go picnic! Now that you say it, I am ashamed that I never introduced myself!!! The truth is that I entered into the list as a 'passive observer', whith the single intention of learning and getting a relief feeling that there are *still* some leftists cromagnon species somewhere in the world... Soon after, I got 'enthusiastic' with some ongoing discussions and ... intruded without being introduced!!! Very briefly, I am from Uruguay and for 'obvious reasons' I rushed out in the 1970s. From Ecuador, I moved then to Spain, then Italy, now The Netherldands. I say this because if you are going to have 'days off' per continent (which I do *not* agree, of course), better 'classified' me in the third world rather than in Europe (moreover, in the Netherlands they use a sort of barbaric language that I can hardly understand; so do not ask me questions about...) With some years of direct involvement in 'left oriented popular movements' in my background, mixed with (uncompleted) studies of pure mathematics and philosopy, I ended up, at present, trying to finish a PhD in Economics while doing some teaching/research assistanship. As to my 'interests' are concerned, I just feel at easy with the way things go in Pen-l. Sometimes, when subjects are too much into specific US affaires, I still over-read and, after confirming my ignorance, I delete. But in most of the times, I learn from the way discussions are tackled and new aspects come to the fore. Sharing bibliographical references, sylabus, methodological approaches, debating on theoretical grounds, having arguments on current issues, etc. is very useful to me. Obviously, I have a preference for issues that concern directly the third world; but, overall speaking, in the 'global context' we are submerged, there is little that would not influence in one way or another, at the end, the lifes of people in the third world (and viceversa). I have to admit that 'I have had it' with the international financial institutions (WB, IMF, IADBs, etc.), because of their overwhelming pressure on the third world, but *also* because I believe they are terribly effective and dangerous at proliferating the most orthodox mainstream economics, all over the world (at the level of politics, but also research and teaching). And this worries me, be it for its present *and also* its long term impact... Now, looking forward for the rest of the day (including the 'rest overs' from those folks who went picnic!) Salud, Alex Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260.755 4260.799
[PEN-L:6911] the IFIs and the like
I've written: I have to admit that 'I have had it' with the international financial institutions (WB, IMF, IADBs, etc.) Bill said: so when were you ever enamoured with SAPs? Never! nooi! nunca! mai! jamais! What I meant was that I screened almost every relevant piece written by or about them (well, just a bit, which I used to count by kilos and not by pages, in any case...), to try 'understanding' what the reasons are of their success in the academia, while continous failure in the real world. But... I failed. The only thing I could 'understand' is that -more at the level of the political economy, at a 'global scale'- the interests IFIs are serving are so huge that it will not be easy to beat them down in the near future. My only 'hopes' are in two tracks: a) empowerment at the grass root level; b) strenghtening of alternative theoretical propositions. And it is in this respect that I am still amazed: I cannot (yet) cope with the fact that mainstream thinking has been so easily adopted everywhere (or almost) just 'for free'... Anyway, I think discussion lists as this one would help. I am, however, getting a bit more worried from yesterday's Wolfensohn's speech at the ISS: they are putting lots of energies (and resources!) into building an 'universal classroom + database'. This looks like anticipanting the apocalyptic view of Paul Davidson on the future of economic theory... I hope folks in Pen-L and elsewhere are becoming fully aware of this *very possible* scenario. Beste Alex Bill: hoe gaat het u? ik hoop dat je zijn wel. am sure you have a Ducht novel somewhere there, this is not possible! (btw, it should say: hoe gaat Met u (jou) ) Bill again: how could they ever do the world any good when the US President gets to appoint the WB President and the US dominates both institutions? Hold on!, one thing you may not know is that Wolfensohn, just appointed a year and a half ago as president of the WB, has been, and still is, a member of the board of the Bilderber Group, which is , as you may know, the main designer of the actual world 'order'. The board includes the most influential political and economic elites of the Northen countries. This is a very serious concern... You can check this out in "Nexus Magazine", Vol.3, #1, Dec.95-Jan.96 (which is reproduced in a subdirectory of http://www.peg.apc.org ). I wonder why Australia does not have any 'representative' in the board... Now, have a nice evening, and a nice weekend. We will have to 'resist' a long time still... BTW, do not get enthusiastic about my spelling! It is just a 'colonized mixed'... Salud, A. Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260.755 4260.799
[PEN-L:6886] WB at the ISS: a non-objective report
are they applied, the timinng etc... In facing questions about poverty, JW was `recurrently emphatic' at arguing that poverty alleviation is for him and for the WB in its totality *the* objective. In the same level are also `social justice' and `human rights' (undefined during the speech, probalby because of time constraints...). On the conditionality issue, WB's gut level feeling is that there can be no universal `conditionality' nor a unilateral determination, but that the conditions for each and every loan and programme are the result of agreement between the parties concerned. And of course, the WB is open to criticism in order to improve its image of an open-minded organisation; it is in this sense that the WB is keen to receive inputs not only from governments during negotiations, but also from the civil society (read NGOs; well ... he also mentioned the ISS, I think not because of its relevance, but because he has a strong survival instinct...) Further JW's responses -appeared to take the `middle' road - and yet sounded very unambiguous to me: `it is better to have policies than chaos'. The harshness was softened by emphasising that the WB was interested in improving by seeking agreement with partners (even though, according to him, the agreement was always there, the point is that it was often presented by some governments as if it were imposed to them so that they are not responsible for the consequences before the electorate...). So, there was no scope for doubt on this issue, you put on the one side the WB 'policies, and on the other side the `chaos', and you choose. Of course, JW `cured himself in health' (as we say in Spanish) by stating -once he was questioned about their rigid neoclassical framework, and that in, e.g. WB's poverty assessments on African countries, no matter what the cause of poverty is the remedies proposed were always following the same recipe- that the WB does not have `*any* pre-built theoretical framework; you may believe it or not -he say- we are not a right wing institution trying to rule the world'. * Summarizing, it was a master's lecture, `sincere and humble', in which the WB was shown to be deeply concerned with poverty, wanting to achieve results and inviting the agreement of civil society (NGOs) in order to avoid World chaos and increasing poverty. ~~~``` Salud, Alex Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260.755 4260.799
[PEN-L:6822] HELP! The WB is attacking us!!!
Hi Pen-L folks, The WB president, Wolfesohn, is paying a visit to our institute this Thursday 24th October. WHY US First, some background info, and below a query (if you do not have time after so many postings these days, please go directly to the 'query' at the end of the message) Undoubtly, this visit is in the framework of 'publicity campaign', consistent with the effort to convince the populace of WB/IMF 'serious concerns' about poverty, health, corruption, faith and tra la la... ISS management seems to be quite enthusiastic about this visit, and staffmembers may be ... divided, though -I am afraid- many of them will have a collective orgasm that day (sorry, this was a lapsus)... What concerns me is the students. This is an international institutions specialized in development (postgraduate) studies, and the great majority of students (say 400) come from developing countries and have some 'political influence' in their countries of origen. If this were some years ago, I am sure that the students themselves would have prepared a demostration against this visit. Now, things have changed (do not ask me why): for the most radical of them, this may be a 'non-event', but for others, an 'occassion to openess'... There will be a 'speech' and a 'reception', and most students will participate... En fin, with a group of people here we are preparing a kind of 'panflet' on what the WB really means by visiting the ISS, and, especially, trying to emphasise that the new 'facade' is just one among many others that occured in the past, when Bretton Woods institutions had to recognize that their recipies were failing again and again. It could be of a great help to have inputs from some of you that also know of recent 'moves' of the WB/IMF in this direction. Great examples I have used already are: * Camdesssus visit to Argentina and Uruguay, in which he shows concern with' governments going too much to the right', but at the same time encouraging the application of drastic measures to liberalize the labour market; * Camdessus visit to SouthAfrica, which in this case received a 'nasty' demostration from the people of the street, but also a 'warm' reception from the ANC authorities... * Recent presure exercised by IMF/WB to Ecuadorian authorities, by postponing the approval of debt renegotiations and moneys for a housing project, until 'economic measures' take place (reduction of subsidies, fiscal austerity, etc.) * Recent inteview of WB staff with church leaders... **QUERY: Does any body in the list has *recent* info on visits or declarations of WB and IMF authorities, especially on/in developing countries, that we can add to our 'panflet'? (Hey, Shawgi, is there something over there?, I am serious.) Other suggestions are also welcomed. ** That is it! Thanks, and keep going. Salud, Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260.755 4260.799
[PEN-L:6602] Competitiveness
Tom Batsis wrote: Doug, do you think thatincreased "competitiveness" is responsible for declining standards of living? From: Michael Perelman [EMAIL PROTECTED] Yes. Of course, when profits start to fall, business takes it out on the workers. That is the underlying mechanism. I have discussed this matter in The Pathology of the U.S. Economy and in The End of Economics. ... I am really curious about the arguments in your books, Michael! (hope we have them in our library...) The main idea is quite convincing and also 'intuitive' (most of my 'intuition' was educated with Marx' readings... :-) ) Indeed, it looks like in the Manifest: increasing capitalist competition = declining rates of profits = squeezing workers' income .. = leading to revolution. That all looked quite 'exciting', and we seem to be still sympathetic with the idea... However, I am still puzzled: Increasing competition among capitalists has taken 'a different track': the internasionalisation of capital, the creation of multinational monopolies, the rising of financial markets and speculation, leading also to 'concentration over concentration', in the form of the huge financial-entrepreneurial conglomerates and cartels that we know now, etc... That is, in one phrase: increasing competition has led to increasing concentration ... On the other hand, the same process has apparently being accompanied by a deterioration of real income of (at least) the lower quintiles of population at a world scale (including the North). That is, increasing competition has *indeed* led to a deterioration of standards of living, but *through a still sharper concentration*. I would rahter prefer to find some hole in my argument above, than to give up to the idea of a 'revolution'. Could you give us a 'hint', Michael, at least until we get hold of your books?? Thanks, Alex Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260755
[PEN-L:6613] Competitiveness
From: [EMAIL PROTECTED] (Doug Henwood) How do we know there's been a sharper concentration? How can we *really* know?? Especially if behind almost every big firm there seems to be an intrincate conglomerate of well diversified networks of investors, financial enterprises, conglomerates, and even governments... Yet, I do make my inferences, anyway, based on, say, things I've used here and there:: * 'The Times 1000' (1989/90): "The 500 leading European Companies" (pp.88 ff.) * '1990 Britannica Book of the Year', Encyclopaedia Britannica, Chicago, pp.816 ff. * ECLAC had (and possibly still has) a Data Bank on Direct Foreign Investment in Latin America, will allowed for calculating Gini's. I remember to have used it to make the point that not only MNCs showed a tendency -over the 1980s- to concentrate *at the origin* by building financial-entrepreneurial conglomerates, but also *in destination* by narrowing down into selected countries and industries. There are of course elaborated studies on the same, which I used over the late 1980s and early 1990s. These may focus on financial, industry, or country perspectives; they develop their own argument, but add sufficient statistics: * Devlin(1989): Debt and Crises in Latin America; *Kirpatrick, Lee and Nixson (1985) Industrial Structure and Policy in LDCs.; * also Forbes has quite some stuff on this as well; * Magdoff (1992): 'Globalization - To What End', in Miliband and Panitch (eds): Socialist Register 1992. As you may see, I haven't followed closely the issue over the last four or five years, but still, I happen to find, practically everyday, news about merge and agreements between big firms (banks, telecomunication cias, airlines, computer cias, mining, food industries, etc etc...) all over the world. I "looks like" sharper concentration, to me... Put that together with things as the UN Development reports, Human indicator indexes, or other stuff which tells about concentration of *personal* wealth... If capitalists are getting more and more 'concentrated', it can be related with that *at the origin* the capital is concentrating... But still, I will be happy to change my mind if there is some evidence of the contrary, really. My guess is that, given the current complexity of financial interrelations in the world of today, any *proof*of one point or the other should be taken with care... Salud, Alex Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260755
[PEN-L:6563] Why raise the minimum wage
wrote: Did anyone yet mention the degree of concentration in markets where firms typically pay workers the minimum wage? As has been remarked previously, most minimum wage workers are in their service sector but many of these markets are highly concentrated and dominated by oligopolies. Consider the fast food industry and the likes of McDonalds, Burger King, Wendys, etc.. Now, certainly if wages were to go up, this would increase each firm's costs of production, ceteris paribus. Yet, these are hardly competitive markets in the normal sense of the term and the oligopolies have a high mark-up over costs. So my guess is that if the minimum wage was increased, ** Doug wrote: But Jerry's quoted posting is pretty standard left-wing economic thought, and the Wall Street Journal story pretty standard business journalism. My impression is that the business journalists are closer to the truth - that competition today is more intense than it was 20 or 30 years ago, the days of price leadership and polite cartels. But monopolistic/oligopolistic theories still prevail on what's left of the left these days. Who's right? Maggie: So, the answer to your student is that there are several results which could be construed from minimum wage, depending on which set of assumptions you prefer. *** Also to Doug (thanks Maggie, sometimes it is difficult to answer that guy :-) ). IMHO, all depends what the capitalists look at: if they perceive that the US economy (and their plants) are near full capacity, and that (maybe) other costs than labour are getting out of hands, they may make a net profit by moving abroad. Other assumption is that they start considering buying British beef (it is getting *really* cheap here around, you can imagine why...). Salud, Alex Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260755
[PEN-L:6531] Confusion at the IMF
From: D Shniad [EMAIL PROTECTED] Subject: Confusion at the IMF Here's some more on the contradictory messages coming from the IMF. The October 4, 1996 issue of Latin America Data Base (Volume 6, Number 37) Sid Shniad Thanks Sid for the information. It is really helpful to know where are the new bits and pieces in recent journal articles and reports that add to this 'contemporary (tragi)comedy'. I find it interesting to see the evolution of the discourse of 'big-brother governments' and 'big-sister institutions', while confimrming possible contradictions with current practices... But frankly, I do not see *any* contradiction with the apparent swing of rethoric in Bretton Woods institutions. Let me put it briefly (and excuse me for the over simplification): - During the 1960s the major effort was to allow for the consolidation of political hegemony of capitalism, as oppossed to various sorts of 'comunisms' that were growing everywhere (Africa, LA, Eastern Europe, and even Western Europe's May 68..) The most acceptable facade then was a' la "Alliance for Progress" capitalism. -During the 1970s, it was appropiate to consolidate the financial hegemony, by spreading dollars and marks (debt) over the globe, pushing for financial intermediation at the time that MNCs were getting a handle over financial-commercial holdings. It was the time in which it was easy to 'borrow the umbrella because the wheather was nice' (Nurske) -During the 1980s, 'it began to rain and those who borrow the umbrella had to return it". SAPs and stabilisation packages were at the root of every economic programme in practically every country. That allowed for testing without any scrupules the most radical versions of NC economics, using the third world as laboratories. So, it was the time to consolidate the 'theory', the 'mainstream'. - Lets keep this in mind for a moment: political, economic, financial, and ideological control has, then, been conquered. Reagan-Tacherism was in the wake of this process, and not in the other way around. It was the silent victory of capital, and not of these two figures, who happen to be at the crest of the wave... One thing is true, international institutions and powerful governments serving the big capital wanted to keep there 'up' and avoid any collapse. The obvious strategy is then to 'accomodate' the discourse every time there is an apparent leak in the well consolidated system... -In the mid-1980s there was already quite some evidence that the SAPs and stabilisation were not succeding as expected. Then, I remember well, there was a lot of literature arguing that the main policy targets were fine, but probably more attention should be given to the 'sequency' of these policies in order to ensure the success... - There was then a 'quiet' interim that came about due to the 'collapse of comunism', which allowed for a more 'careless' application of structural adjustment... The 'shock therapy' had its party !! It was also easy to argue that in those countries in which SAPs have already started many years before and have not succeeded, it was just a question of time, because 'the adjustement has not yet been completed" (an addtional reason for going for a 'shock therapy') - Soon after, a major concern was that- whatever the sequency of policies- SAPs by definition would necessarily create poverty at the start. So, the 'poverty' issue is not of nowadays, it is there at least some five years... But then, the discourse could easily accomodate again, the 'sequency' story was left behind and a new 'safety net' story was adopted: the creation of some sort of safeguard for the poor during the first phase of the adjustment, under the conviction (?) that economic growth will bring about poverty alleviation... - Now, in these days apparently, the discourse again accomodates to counteract an obvious criticism: neither 'safety nets' have worked out well, nor growth was achieved (or if any, growth has not overcome poverty or improved distribution)... So there is a problem... - Aha!! that is it: CORRUPTION! The report of the last annual meeting, and lots of declarations here and there are just imbued with this new 'magic word' which allows for putting the orthodoxy in a safe place... There is no any contradiction, in my view, or at least, not any different than the contradiction of always between the capital and labour, at an international scale... Sorry, it was longer than expected. Salud, Alex Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260755
[PEN-L:6513] A new WB line re poverty?
impact of adjustment policies. He added that he is "looking forward to this direct assessment made in collaboration with NGOs, in order to know whether what we are doing is good or bad" Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260755
[PEN-L:6467] World Bank repudiates its history?
From: [EMAIL PROTECTED] (Doug Henwood) Subject: [PEN-L:6464] World Bank repudiates its history? Just talked to a journalist friend who's covering the World Bank/IMF meetings in Washington. He reports a remarkable change of rhetoric coming out of at least part of the WB - notably from the Bank President, James Wolfensohn... Don't know about the ins and outs of the WB, but my overall impression on Doug's mail is the following: * I do not think the WB/IMF really realize that the huge increase of poverty and inequality after decades (two at least) of applying SAPs and the like it is their fault. On the contrary, all the stuff I read till now clearly point towards those 'policy questions', the 'delay' in applying structural and stabilisation programmes, and the still too disruptive role of the state. Their general assessment is *still* of the sort: poverty and inequality would be now worse if SAPs were not applied... * I can see that there is an increased awareness that 'poverty still exists', and that this might be disruptive for the strategic 'global economy' which rests in the minds of North Governments and Bretton Woods institutions. But if they have a 'framework' behind their awareness, I doubt it is really different than the NC paradigm, which, we know, it is from some years ago that allows for the introduction of 'safety nets' and the like within their models. * But lets suppose, for the moment, that there might be a slight change of perception (as I said, I do not know the ins and outs of these institutions), there are still various problems. I mention the first ones that come to my mind, and would like very much to hear more from pen-l folks: - I wonder how the WB is going to push for new ideas while holding at the same time their 'free market' paradigm. That is not an easy task, especially with the overwhelming status of rigid NC assumptions in their quarters. - Still, lets not forget that the huge majority of economists and social scientists in the world (say 100% minus pen-l people, my teacher of macro en Madrid, and some of your friends; in sum, 100% minus 500 'friends' : ) ) were educated and *are being educated* within the NC textbook paradigm. It will take a lot (another one or two decades) until the 'melting' paradigm begins to soak textbooks in the academia... - Finally, the application of policy (WB/IMF behind, but not alone) is made by politicians, who firstly have a very clear (and unchangeable) class position and perception of the problems and, secondly, they inherit their tools from technocrats (after these have, in turn, been 'indoctrinated' in their classrooms). That means, in practice, apart from another 'delay' (of say another decade) in absorbing the 'new ideas', that the 'new ideas' will probably affect at the level of the discourse only, and not of the political practice. Any thoughts? Salud, Alex world Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260755
[PEN-L:6386] Giffin
Indeed, Jim has a point: 1. Frankly, I don't see what's wrong with positing a downward-sloping demand curve as long as one remembers the _ceteris paribus_ condition (holding expectations constant): maybe it's not a falsifiable or testable proposition and therefore it's tautological (as Robin suggests). But all of social science (right, left, and center) has some propositions of that sort, as part of their Lakatosian "hard core." To reject this kind of hard core is tantamount to rejecting abstraction. The problem is that this abstraction in particular may be 'valid' only for a very small (infinitesimal) lenght of the 'curve'; sometimes (depending on the 'good' in question) it can even be nearly a 'point' (so what do we do with a curve that turns to be only a point?). As soon as a relatively significant change in price occurs, expectations will immediately change!! And these will pull the demand probably stronger than the actual price change... Then, one could also think that a 'more useful' or 'less tautological' abstraction could be to draw a demand curve against the 'expected price', while (ceteris paribus) holding the actual price constant... But again, as I said before, in certain (speculative) markets in particular, the actual price is affected by the expectations of future prices, and so on... (something to do with ergodicity?) I can agree with that it is not a question of left or right...; it is a methodological issue in its own right (though I must admit that for one reason or another I always felt that the 'left' is furnished with a sounder methodology...). In terms of right or left, if this is the question, I am quite comfortable with Jim's examples, as well as with recognizing that stocks and FEX markets behave 'differently' than NC ecomonics tells, and that not only labour, savings, stocks, but also basic needs (i.e. 'commodities') may very well follow the same 'unpredictable' pattern. Nobody (yet, if I remember) has mentioned the quite recurrent examples of people in third world countries buying more of the basic stuff which prices suddenly begin to raise... En fin, good to think about. Salud Alex Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260755
[PEN-L:6326] Giffen
From: "Rosser Jr, John Barkley" [EMAIL PROTECTED] Doug's example of the stock market (and there are lots of other markets where dynamically we see people buying more of something when the price rises and selling when it falls, e.g. real estate, antiques, stamps, baseball cards, currencies, etc.) is simply a matter of the demand curve shifting outward with a change in the expectation regarding future prices. It could coinide easily with the static demand curve sloping downward, which is defined in ceteris paribus terms with expectations being one of the ceteris being held paribus. Now, do you also hold 'tastes' constant as long as income raises for the cases of Irish potatoes or kerosene, or...? Rosser's point is certainly valid,... heruistically speaking. The clue here is 'until where' we push the 'ceteris paribus' condition in a de facto continuosly moving market environment... Salud, Alex Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260755
[PEN-L:6294] Giffin, stocks and FEX
At 12:39 PM 9/18/96, [EMAIL PROTECTED] wrote: Does anyone know of empirical examples of Giffin goods, either in case of a price increase or of a price decrease? While [EMAIL PROTECTED] (Doug Henwood) repsonds: Stocks? Doug .. Well said, Doug! In particular Stocks and Foreign Exchange are great examples of Giffen goods. In general, all markets in which expectations of future prices play a more determinant role than actual prices, may act as "Giffen markets" if actual and expected prices changes follow different directions... The reason has to do (a.o.) with the fact that actual prices themselves may be strongly influenced by the expectations of future prices (as, e.g. in Harvey,J.(1991) `A Post Keynesian View of Exchange Rate Determination' (JPKE). En fin, that leaves neoclassical microeconomics with little room to explain market behaviour..., unless that it is admitted that the exception becomes the rule and viceversa. Salud Alex Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260755
[PEN-L:6295] Giffin, stocks and FEX: corrigendum
In general, all markets in which expectations of future prices play a more determinant role than actual prices, may act as "Giffen markets" if actual and expected price changes follow different directions... Sorry, both should have the same sign. Alex Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260755
[PEN-L:5748] The New York Times and Northen governments
From: [EMAIL PROTECTED] (...) the NY Times every day (..) dealing with domestic US issues take a line that is in favor of a welfare state, a meaningful regulatory system, critical of growing inequality and corporate greed, sympathy for the plight of the working poor, concern over restrictive monetary policy, etc. But in pieces dealing with foreign countries, capitalism is celebrated, free-market reforms cheered, privatization lauded, and the welfare state and anything even vaguely socialistic sneered at. Has anyone else noticed this pattern of the NYT's "social democracy at home, unfettered capitalism abroad" editorial policy? Peter I find Peter's concern a fair one. Note, though, that his is about *the NYT* (i.e. Peter specifically refers to a particular case, which can be debated in its own right with a considerable accuracy). I would even be inclined to suggest that, to a *very large degree*, the regulatory-capitalism-inside-BUT-free-market-capitalism-outside bias looks like a practice of most Northen governments... It is risky to generalize in this way, I admit. But looking at the evidences, it does not seem very unrealistic. Think for example at the public budgets. I am out of date in these statistics now, but I do remember that -beginning with the USA and some Eurpean governments- some years ago the ratios fiscal deficit to GDP were larger in these countries compared with the average of LDCs. I guess the same pattern still applies. However, an almost always first conditionality clausula for a poor country to receive a loan from "Bretton Woods" institutions or a package of ODA (official development assistance) from a Northern government, was a drastic reduction of the budget. Even if this trend cannot be confirmed on a *very general* basis, just think what would happen if poorer countries in the world would decide to "follow" economic practices in the "North" and decide to ensure a certain level of "unemployment benefit" ??? Now take the example of trade relations, protectionism, effective monopolies, cartels through multinational corporations, etc, etc... En fin, issues to explore, and to know more about. But my overall feeling is that the NYT just reflects a pattern of Northen policy, *to a very large degree*. Salud, Alex Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260755
[PEN-L:5713] 358 Billionaires = 2.7 Billion People
Shawgi, Impressive picture of 'freedom' brought about by capitalism!!! Freedom to climb up, freedom to ...slide down, ehh??? But, could you give us precise references? A United Nations report says that ... It might be useful to get hold of the report. Thanks, Alex Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260755
[PEN-L:4167] Cuba libre
C.N.Gomersall :
Does "Cuba libre", as the name of a drink, mean that ...
Sorry to be suspicious, but... was there a hidden implication with this
question? Let's assume the answer is no.
While being in Madrid some years ago, I heard among a group of
'antifranquist' people, also committed to the Cuban revolution, the
following explanation:
When the Castrists took power, one of the first measures to be
implemented was the nationalisation of multinational corporations.
Some of them, beacuse of their heavy symbolic nature, were practically
'invaded' by people. U.S.' Coca-Cola was among those 'symbolic' ones,
and people, over some weeks, were able to take Coca-Cola for free.
Obviously, almost naturally, people mixed it with their *very Cuban* ron.
As this new 'drink' (Coca-Cola + Ron) was popularized simultaneously
with the spontaneous celebrations -on the street- of the victory
against imperialism, it was common to see people with a glass of
(Coca-Cola + Ron) in hand, singing up "Cuba Libre!!". In this way
the 'new drink' was baptized.
Who knows whether this is the real 'truth', but I must say that I felt
it was a sympathetic story.
Of course, Ron or not Ron, for me the most important thing is that Cuba
is still free ("libre") of many -if not most of- capitalist
disgraces which increasingly generate misery in the rest of Latin
America.
Alex Izurieta
E-mail: [EMAIL PROTECTED]
Institute of Social Studies
P.O. Box 29776
2502 LT The Hague
Tel. 31-70-4260480
Fax. 31-70-4260755
[PEN-L:3855] Re: stock market investment
Hi Blair, May I respond in between the lines? Only two comments. .. Hall Taylor have this idea that in the long run the classical model and Say's Law are correct... I cannot adhere with this logic that a succession of disequilibria in the short run would lead to an equilibrium in the long run. It is in this perspective that I interpreted Keynes' "in the long run we are all dead" (sorry if it is not textual, I took it from a Spanish version..). In my very intuitive opinion, the statement above, which apparently Hall and Taylor elaborated more formally, has very easily passed unadverted to the logic of many economists due to a blind application of the 'ceteris paribus' methodology. I come from a background in pure mathematics and have always difficulty in accepting this as a 'generally valid' method. The most 'aggressive' use of it is when economists think in the long run, ceteris paribus the short run; while in practice, the disequilibria of today just add, in a not-necessarily related manner, to the disequilibria of yesterday... I can imagine that a Keynesian could have something to add to my (probably too heterodox) view. I found that John Weeks (A Critique of Neoclassical Economics, 1989, MacMillan) elaborates quite acceptably in this direction. What are the obvious (to all but me?) criticisms of this model in its own terms, i.e., suitable for a low-level intermediate undergraduate macro class? One thing I will always regret of my experience as undergraduate economist is to have been too often 'forced' to think against the logic and against the reality (even if that was 'suitable' for the lecturer, it was not for me...). Thanks all. Thank you also; your remarks took me away for a moment of my daily affairs, and invited me to reflect. Blair Sandler [EMAIL PROTECTED] Alex Alex Izurieta E-mail: [EMAIL PROTECTED] Institute of Social Studies P.O. Box 29776 2502 LT The Hague Tel. 31-70-4260480 Fax. 31-70-4260755
[PEN-L:3829] Re: stock market investment
From: "Hugo Radice" [EMAIL PROTECTED] Subject: [PEN-L:3828] Re: stock market investment Peter Dorman: Could you give us a full citation for the book by Margaret Blair? Margaret Blair (1995) 'Ownership and Control", Brookings Institution, Washington. Greetings, Alex Hugo Radice [EMAIL PROTECTED]
[PEN-L:3427] Re: Protest Anti-Labor Purge at UC Berkeley
I must said that I fall quite far from your geographical settlement. That does not mean that your approach as a whole does not appeal to me. From the moment I subscribed to the list I only benefited from your insights and information. Keep up! With warm support, Alex Date: Thu, 21 Mar 1996 20:36:14 -0800 Reply-to: [EMAIL PROTECTED] From: [EMAIL PROTECTED] (R. Anders Schneiderman) Subject: [PEN-L:3425] Protest Anti-Labor Purge at UC Berkeley Dear Penlrs, This is a general call for support that Nathan and I are sending out because of the fact that our Center, the Center for Community Economic Research, was driven from UCBerkeley's Institute of Industrial Research for being too pro-labor, pro-affirmative action, and pro- immigrants rights--and for working on these issues in the community. In addition to contacting the folks listed below, you might also drop a note to Michael Reich. Thanks, Anders Schneiderman Center for Community Economic Research P.S. The rally covered in the press release below was very successful. It was just the first step in the fight to create a multi-racial, pro-labor space at Berkeley. - PLEASE FORWARD ACTION: Please read the following release and respond to UC-Berkeley's Chancellor Tien and IIR Director Clair Brown in support of the end of censorship and a Pro-Labor Labor Center at UC-Berkeley. UCB Chancellor Chang-Lin Tien (510) 642-7464 (510) 642-7465 IIR Director Clair Brown 643-7090 643-8140[EMAIL PROTECTED] - PRESS RELEASE MARCH 20TH, 1996 FOR MORE INFO, CALL (510) 486-1275 Anders Schneiderman "A LABOR CENTER AS PRO-LABOR AS THE BUSINESS SCHOOL IS PRO-BUSINESS"" --LABOR LEADERS, STUDENTS PROTEST PURGE AT UC-BERKELEY LABOR INSTITUTE On Wednesday, March 20 at noon, the UC-Berkeley Institute for Industrial Relations (IIR) was picketed by area unionists, students and former staff driven out of the IIR for their pro- labor and anti-racism activities. Participants in the picket included Jim Dupont, head of Hotel Restaurant Workers Union Local 2850, and State Assembly candidate Mark Friedman. Demanding that students and community need a "Labor Center as Pro-Labor as the Business School is Pro-Business," the picketers protested the forced resignations of five IIR staff people in the last eight months. According to affirmative action student leader Harmony Goldberg, "The IIR purge shows that the real political correctness at the University is the repression of people who support labor unions or defend affirmative action, while millions of corporate dollars pour into a new Business School that promotes corporate downsizing." "Corporations can buy all the university research and support they want," argues Jim Dupont, Secretary-Treasurer of HERE 2850. "All we demand for the community and labor movement is one small corner at the University dedicated to the working people of this country." The protesters calling for the end of censorship by the IIR, expanded diversity in the almost all-white IIR, the creation of a multi-racial Labor Studies program at UC- Berkeley, and the reversal of the increasing corporate dominance of the University. Protestors charge that IIR Director Clair Brown is responsible for the following: ** Mary Ruth Gross, long-time head of the IIR Center for Labor Research and Education, was demoted then pushed out despite protests by local and statewide labor leaders. ** The Center for Community Economic Research (CCER), an IIR project founded by Nathan Newman and Anders Schneiderman, was driven out of the IIR after ongoing harassment of its labor, affirmative action, and immigrant rights work. The final straw was when the IIR refused to process paychecks for grad student employees working on a union research project. ** After Clair Brown censored the Labor Center Reporter, staffer Rob Wrenn and the majority of the editorial board resigned. ** John Sladkus, assistant director of the Labor Center, resigned after censure for a pro-labor KQED editorial. Previously, Clair Brown had forced Sladkus to destroy a box of already printed brochures for a "Young Unionists" conference because they mentioned the struggles for immigrant rights and affirmative action and their use in union organizing. "The irony of the situation," notes Anders Schneiderman, co- director of the Center for Community Economic Research, who was recently driven out of the IIR, "is that IIR Director, Professor Clair Brown, styles herself a 'labor-management
