Papers – Capital Accumulation, Production and Employment:

General comments

capital2016 — Fri, 13 May 2016 10:39:02 +0000

If you wish to discuss more than one paper, or to comment on a particular session, or even the conference as a whole, please leave your comment here…

The British Labour Party and the ‘New Economics’

capital2016 — Tue, 10 May 2016 20:18:49 +0000

The election in September 2015 of the socialist MP Jeremy Corbyn as leader of the Labour Party came as a profound shock to the British political establishment. Few dreamed it possible just a few months earlier. Corbyn’s campaign platform was overtly left-wing in its economic proposals, including condemnation of austerity, increased public investment, targeted public ownership, and tax justice against avoidance by corporations and rich individuals. Since his election, Corbyn and his Shadow Chancellor John McDonnell have continued to develop the ideas sketched in the campaign towards a coherent programme for the party’s next election manifesto. Central to that will be an alternative approach for managing public finances to the austerity of the Conservative government aiming at fiscal surpluses, but the discussion on the ‘New Economics’ goes well beyond macroeconomic policy into questions such as innovation, inequality and the labour market. Reviews of key institutions such as the Bank of England and Treasury are promised. This paper explains the background to Labour’s electoral defeat and Corbyn’s subsequent victory, then discusses economic policy before briefly considering what we should learn for campaigning and narratives. It investigates the underpinnings of the emerging programme and its potential to ‘bend the arc of global capital towards justice’ on issues such as investment, taxation or wages, discussing the UK in the international context of the aftermath of the financial crash. At issue here is not an exercise in criticising capitalism, but the practical problem of defining a realistic programme offering genuine progress in contemporary Britain, with sufficient credibility to attract both electoral backing and active support against hostility from global elites. There are lessons and questions here that go beyond the British Labour Party. I give an overview of the issues and during the Conference discussion will offer more detail on areas that attract interest.

Elite appropriation of economics – the case for (r)evolutionary political economy

capital2016 — Tue, 10 May 2016 20:15:27 +0000

This paper attempts to understand the ways in which power operates within the economics profession (problem orientation) in order to pinpoint requirements to address the identified problems. The findings suggest that the most powerful (mis)appropriate economics mainly through their political, economic and ethical power, together with allied economists. In employing these power structures and mechanisms, they are able to justify and maintain the status quo in terms of economics and the economic system. Therefore, it is concluded that it is essential to disempower the dominant economic elites in order to have a chance on (r)evolutions in economics and the economic system. However, such a process has to be coupled with processes that are emancipatory and empowering for the non-elite groups given the subjugatory character of power tools. In doing so, we offer a research approach based on a dual intentionality: descriptive and prescriptive (solution-oriented and emancipatory). The factors that obstruct (r)evolutions in economics are also indirectly pointed out as research areas in the pursuit of actually supporting (r)evolutions in economics. The same approach is possible to apply to the dominant economic system. In addition, it is also intended to be practical with a relatively short-term perspective, aiming to trigger a constructive transitional period, rather than pointing out permanent ideal conditions. The approach is labelled ‘(r)evolutionary political economy’. In this manner, this paper ends with three overlapping recommendations. The first one is research-oriented – to conduct more research in about factors that obstruct or construct (r)evolutions in economics. The second one is policy- oriented – to generate policy proposals that tackle those obstructive factors, and that expand those constructive factors. The third one is activist-oriented – to actively seek to change the economic system within which dissenting economists and scholars operate within. By pursuing these three lines of action, we may not only generate knowledge on (r)evolutions, but also contribute to the higher likelihood of (r)evolutions.

Economic power, employment and economic theory

capital2016 — Tue, 10 May 2016 20:13:30 +0000

The debate about economic growth and unemployment in Brazil is hindered by Friedman’s imported theory, based on the “natural rate” of employment that today pervades global economic thought as adopted by new classical and new Keynesian economists. This misguided view is responsible for a brutal recession, with rising unemployment and a drop in aggregate production, failing at that which it purports to do: recover metaphysical credibility for companies. This matter concerns the political power of a specific social group, which today extends beyond political parties. It is the result of an imported theory from abroad that also is damaging the global economy by imposed economic austerity.

Real World Non-Equilibrating Supply and Demand Theory

capital2016 — Tue, 10 May 2016 20:11:03 +0000

It seems that mainstream economics adopted a kind of a Frankenstein version of the supply and demand notion, created by their authors of economic theory fiction. Actually, mainstream supply and demand fake theory scares almost all real world economists to the point of rejecting the notion of supply and demand itself and not only its mainstream fiction version. This paper demonstrates that what produced this Frankenstein are the hypotheses and assumptions adopted by their creators; with such hypotheses and assumptions it is impossible to create a theory. A distorted version of the reality came thus about, and the distorted economic policy then created to make the rich richer also steered the world to financial, economic and social crises. After demonstrating that mainstream supply and demand is not a theory, this paper develops a real world supply and demand theory. The theoretical background comes basically from the Marshall ́s idea of supply, from Keynes ́ ideas about disequilibrium, and from Maslow ́s idea of human needs on the demand side. The real world test, described in details, is the estimate of the aggregate supply and demand model of the United States. This experiment also presents the practical application of the aggregate supply and demand theory to the analysis of the effects of each economic policy instrument on the aggregate supply and demand curves and thereof on GDP, price index, employment, income concentration and so on. For example, the conclusion about monetary policy is that it caused prices to rise and GDP to fall, that is, inflation and unemployment. Results obtained indicate that this theory adhere to the reality and that Marshall and Keynes were working on a promising way to create a real world economic theory based on the supply and demand interactions. Finally, the paper suggests that this Marshall and Keynes work may be retaken, ideally by a research group aiming to elaborate a realistic and democratic economic theory and policy, and to create a new paradigm. In so doing, it must always be taken into consideration that it was planning to avoid this real world economic theory that the few reach commanding the economy hired those authors of economic theory fiction and ordered that Frankenstein.

Evolving Wealth Inequality in Kerala: Mapping the Winners and Losers

capital2016 — Tue, 10 May 2016 20:09:05 +0000

This article tries to analyze the trends in wealth inequality in Kerala in the post reform period. Historical evolution of inequality has followed a ‘U’ pattern in the state with high inequality in the pre-land reform period, decreased inequality in the period of public action and rising inequality in the liberalization period. Land is found to be the most important asset that determines the household’s wealth status. Wealth inequality in Kerala stands very high and it recorded a significant rise in the post the 90’s. The contemporary nature of accumulation is such that it aids the rich to become richer while the economically weaker sections are pauperized. It also revels in the traditional caste divides helping the privileged caste groups accumulate more at the same time leaving no gain for the historically deprived groups.

The Role of Human Capital Resource in the East African Economic Growth

capital2016 — Tue, 10 May 2016 20:05:25 +0000

This study presents the role of Human Capital Resource in Economic Growth using dynamic panel Transmission Mechanism Channels in Vector Error Correction model and Time Scale Decomposition of the Wavelet analyses. The empirical results indicate the estimated Human Capital Resource has long-run effects on Gross National Income per- capita for a panel of ten East African countries for the period 1980 to 2014. The Short-term Transmission Mechanism Channels using the Wald test indicates that there is significantly important contribution of growth in Human Capital Resource to the development of Physical Capital Stock through Gross National Income per capita. The estimated growth in Gross National Income per capita has also a positive role towards the accumulation of Physical Capital Stock via Human Capital Resource. The Granger Causality test Wavelet Analyses of country by country for a heterogeneous panel data clearly show that the estimated growth of Human Capital Resource is a cause for change in the Gross National Income per capita growth in the short-run, medium and long-run.

Can We Bend the Arc of Global Capital toward Justice by Investment in Human Capital?

capital2016 — Tue, 10 May 2016 20:03:04 +0000

Can We Bend the Arc of Global Capital toward Justice? Yes, provided “idle” capital is wisely invested in human resources. The world economy is suffering from a shortage of investment opportunities. The signs are slow economic growth in the face of very low, even negative, interest rates. Prominent economists (Gordon, Krugman, Summers, Stiglitz) forecast that these conditions will persist for many years.

At the same time, a million children are born in poverty each year in the U.S. Careful evaluations show decent (seven to ten percent according to James Heckman) returns for strategic interventions targeted on these children and their families. Pay for Success, funded by Social Impact Bonds, are a means for controlling the risks associated with these interventions. Providers are paid only if results are achieved. Investors experience with PFS during the last five years in Great Britain and elsewhere have encouraged two statewide efforts (South Carolina and Connecticut) in the United States.

Economic Solutions for the Social Problems of Mass Migration, Persistent Alienation and Wanton Terrorism

capital2016 — Tue, 10 May 2016 20:00:25 +0000

A cogent approach to public policy based on economic principles could go a long way toward resolving a welter of social problems ranging from mass migration and persistent alienation to rampant crime and wanton terrorism. To this end, the first step is to separate the nubs of fact from the sea of dross that confounds the public debate on social policy amongst elected officials as well as private citizens. After clearing away the muddle, the problems may be tackled through a coherent strategy based largely on a battery of economic mechanisms. As a backdrop, the haphazard schemes of the policymakers to date have often exacerbated the problems in Western countries rather than mitigated the torments. An example lies in a shower of grants awarded to radical immigrants in the vain hope that the donations might prompt the recipients into scaling down their subversive activities. In actuality, though, the standard response of the dissidents is to accept the money as well as the imprimatur of official recognition by the government in order to bolster their own agenda in moulding impressionable minds and prodding the audience into opposing Western values. The disruptive actions of the dissidents might be virtual, as in insisting that women must submit to men in every aspect of their lives. Or the noxious schemes may be tangible, as in coaxing the acolytes into committing flagrant acts of terrorism. On the upside, though, the government could and should take a coherent approach to migration and integration that pays heed to the profound differences in culture between the newcomers and the incumbents. In this way, the policymakers can field a suite of constructive programs to help the outlanders in a trenchant way in adjusting to their host countries and turning into productive members of the society at large. The ultimate aim is to formulate a win-win strategy for the migrants as well as the natives.

Employment in a Just Economy

capital2016 — Tue, 10 May 2016 19:57:54 +0000

This paper is based on the ideas of political philosopher John Rawls and suggests that in a just economy full employment would have to go beyond the implications of NAIRU. Rawls argues that the just economy is one which would be created behind a veil of ignorance, that is to say, without knowing where we would end up in the society’s distribution of talent and other attributes. If we were to create it from scratch we would not create the kind of labor markets that exist currently, because we would be too concerned about ending up among the excluded, i.e., those without full time jobs which today in the U.S. is still 10% of the labor force or some 15 million adults. This is substantial but it does not even include at least 7 million additional people who have dropped out of the labor force altogether or the 2.3 million in jail!

Hence, the “natural” in the natural rate of unemployment is a misnomer, insofar as unemployment does not occur in nature. The concept is especially misleading, because many economists and media commentators inappropriately but invariably equate it with “full” employment as Martin Feldstein did in the January meeting of the American Economic Association. As a consequence, endemic un- and underemployment is accepted as an inevitable attribute of the labor market. This is insidious inasmuch as the concept assumes that the institutional structure of the labor market is held constant. However, with creative restructuring of that market our aim should be to bring unemployment down to the minimum feasible rate which in the U.S. is most likely around 1.2%,–the rate which prevailed in 1944 and which probably represents the lower bound attainable. Instead of the prevailing system, the right to work needs to be recognized as a natural right, because the right to life depends upon it. Several ways are proposed to create an inclusive labor market that distributes the available work in a more equitable fashion than the current system and envisions a just economy that risk-averse people would be willing to enter at random, i.e., without knowing where they would end up in it.