Multilateral Clearing E. F. Schumacher Economica New Series, Vol. 10, No. 38 (May, 1943), pp. 150-165
On Wed, Feb 4, 2015 at 10:33 AM, Tom Walker <[email protected]> wrote: > I believe this was E.F. Schumacher's idea that Keynes adopted. > > On Wed, Feb 4, 2015 at 9:02 AM, Hinrich Kuhls <[email protected]> wrote: > >> Syriza’s finance minister has a big idea – but will Germany accept it? >> Yanis Varoufakis wants to revive a Keynesian mechanism that may prove >> unpalatable yet from which Germany directly benefited in the postwar >> period >> Linsey McGoey >> The Guardian, 30 January 2015 >> >> http://www.theguardian.com/commentisfree/2015/jan/30/syriza-finance-minister-big-idea-will-germany-accept-it >> >> Since Syriza’s victory in the Greek elections on Sunday, it is the new >> Essex-educated finance minister Yanis Varoufakis who has been grabbing >> most of >> the headlines. Much of his appeal lies in his iconoclasm: in his 1998 book >> Foundations of Economics, a kind of bible for the growing alternative >> economics >> movement, he cites the British Keynesian Joan Robinson: “The purpose of >> studying >> economics is to learn how not to be deceived by economists.” >> >> But what can we expect from this reluctant economist and reluctant >> politician >> intellectually? Announcing his decision to run for a parliamentary seat on >> Syriza’s ticket on his personal blog, Varoufakis stressed that he never >> wanted >> to run for office, preferring to channel his policy ideas across the >> political >> spectrum. But he grew tired of seeing his policies ignored. >> >> Above all he wants to draw attention to an idea that was first conceived >> by one >> of his major intellectual influences: John Maynard Keynes. It’s an idea >> that >> even ardent Keynsians often neglect; an idea that Keynes dramatically >> announced >> to a group of sceptical listeners at the 1944 Bretton Woods conference; >> an idea >> that runs diametrically counter to the current policies of Germany’s >> government. >> That idea is a global surplus recycling mechanism. >> >> In his recent book The Global Minotaur, Varoufakis claims that the notion >> of a >> surplus recycling mechanism is simple in theory and revolutionary in its >> implications. It was first devised by Keynes while working as an unpaid >> policy >> adviser to the British Treasury during the early 1940s. The proposal was >> an >> outgrowth of Keynes’s frustration with the limits of the gold standard >> during >> the 1920s. At that time there was an outflow of gold from Britain to the >> US to >> pay for Britain’s trade deficit. Logically the inflow of gold should have >> expanded the money supply in the US, increasing the competitiveness of UK >> exports. But the US adopted policies to offset inflationary pressures. As >> the >> economist Marie Christine Duggan has suggested, the harsh lesson for >> Keynes was >> that the gold standard was ineffective at forcing creditor nations to >> increase >> domestic prices or reinvest their surpluses. Creditor nations were free >> to hoard >> as they liked, placing the burden of action on debtor nations who had very >> little choice but to act in ways that tended to depress their domestic >> economies. >> >> Keynes’s proposal for curbing the problem was to create global rules that >> would >> place equal pressure on both creditor and debtor nations to adjust their >> respective trade imbalances, helping to ease the burden shouldered by >> debtor >> nations. He suggested that any nation that failed to ensure its trade >> surplus >> did not exceed a particular percentage of its trade volume would be >> charged >> interest, compelling its currency to appreciate. These interest payments >> would >> help to finance the second arm of Keynes’s proposal: the creation of an >> International Clearing Union. The ICU would act as a sort of automatic >> “global >> surplus recycling mechanism,” to use Varoufakis’s term. >> >> As Varoufakis has emphasised, individual nations do this internally. They >> disperse their own wealth, either through direct transfers (paying >> unemployment >> benefits in Glasgow or Idaho through taxes raised in London or New York), >> or >> through direct investment – purposefully building more factories and >> infrastructure in depressed regions. >> >> Keynes believed we needed something like this on a global scale. In recent >> years, the idea has received more and more support: economists such as >> Paul >> Davidson and Joseph Stiglitz are supporters. But surplus nations are >> rarely >> enthusiastic about the idea. Even though the proposal serves their own >> interests >> over the long term (by systematically investing surpluses in depreciated >> areas, >> they’re helping to ensure markets for their own exports), few are willing >> to >> sacrifice short-term economic supremacy for long-term sustainability. >> >> When Keynes first introduced his proposal, the US delegation at Bretton >> Woods >> showed little interest in a plan that would restrict their ability to run >> whatever surpluses they want. After intense negotiations, Bretton Woods >> delegates reached an agreement that largely reflected the interests of >> the US >> contingent, led by Harry Dexter White. The most significant difference >> between >> White’s plan and Keynes’s is that White did not have any forced penalty >> mechanisms in place to charge interest whenever nations exceed surplus >> limits. >> At the time, Geoffrey Crowther – then the editor of the Economist – >> cautioned >> that “Lord Keynes was right … the world will bitterly regret the fact >> that his >> arguments were rejected.” >> >> Years later it may be time to resurrect a once lost idea. But perhaps too >> short >> memories in surplus nations may be the obstacle. Heiner Flassbeck, a >> professor >> of economics at Hamburg University, is one of the few German economists to >> highlight this point. Flassbeck points out that: “We’re asking debtor >> countries >> to repay their debt, but at the same time we are preventing them from >> doing it >> […] In Germany, unfortunately, the historical lessons are not even >> discussed. >> Nobody knows what happened, really, to Germany, what happened to the >> Germany >> reparations payments, that they were cancelled.” It’s good that >> Varoufakis now >> has a platform to remind them. >> _______________________________________________ >> pen-l mailing list >> [email protected] >> https://lists.csuchico.edu/mailman/listinfo/pen-l >> > > > > -- > Cheers, > > Tom Walker (Sandwichman) > -- Cheers, Tom Walker (Sandwichman)
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