“The economic problems in the U.S. and Eurozone are mostly structural, not monetary. Unfortunately ideologues and politicians on both sides of the spectrum are interested in quick fixes rather than the real groundwork of economic progress.” (Source: Huffington Post)
Very good analysis by Jeffrey Sachs of the global economic crisis and why austerity policies and a return to classical Keynesianism will not work.
‘And all countries rich and poor will need to plug two more structural holes. The first is the explosion of tax havens, the kind where Mr. Romney reportedly keeps his savings. Without adequate taxation of corporate and high-end income, there is no way to close budget gaps in the U.S. and Europe. The second is ecological. No economic trick, no amount of education and training, will suffice, if we do ourselves in by human-induced droughts, heat waves, famines, and floods. It’s time, in short, to put away the gimmicks and to start thinking about the sustainable economic prosperity, built on education, skills, social inclusion, and environmental responsibility.’
"… in any given year, maybe one per cent of the financial economy has anything to do with the production of real, nonfinancial goods and services.
The rest? It consists of ways to make money from money. That seems innocuous enough, until you remember what money actually is. Money is not wealth; it’s a system of abstract, culturally contrived tokens that we use to manage the distribution of real goods and services. A money system can simplify the process of putting energy, raw materials, labor, and other goods and services to work in productive ways; that’s the reason we have money, or rather the reason most of us are prepared to discuss in public. That’s not what the other 99% of the world’s financial assets are doing, though. They are there to ensure that the people who own them have disproportionate, unearned access to real, nonfinancial goods and services." (Source: Energy Bulletin)
John Michael Greer’s brilliant and must-read analysis of the current financial crisis with some very valid lessons and predictions for the Eurozone. Here are a few more interesting extracts from this fascinating article:
“Since the crisis dawned in 2008, EU policy has demanded that every other sector of the economy be thrown under the bus in order to prop up the tottering mass of unpayable debt that Europe’s financial economy has become. As banks fail, governments have been strongarmed into guaranteeing the value of the banks’ worthless financial paper; as governments fail in their turn, other governments that are still solvent are being pressured to fill the gap with bailouts that, again, amount to little more than a guarantee that even the most harebrained investment will not be allowed to lose money. “
“the financial industry has done a superb job of convincing people that what they do is important to the rest of us. It’s true, to be sure, that having currency in circulation makes economic exchanges easier, and the kind of banking services that people and ordinary businesses use are also very helpful, but governments used to produce and circulate currency without benefit of banks until fairly recently, and banking services of the kind I’ve just mentioned can be provided quickly and easily by a government that means business…”
“So the downside of any financial crisis, however grandiose, can be stopped promptly by proven methods. Then there’s the upside. Yes, there’s an upside. That’s the ultimate secret of the financial crisis, the thing that nobody anywhere wants to talk about: if a country gets into a credit crisis, defaulting on its debts is the one option that consistently leads to recovery. “ (see Argentina and Iceland).
"The current crisis of global capitalism provides a unique opportunity to chart an alternative to the complicit collusion of central states and free markets that characterise liberal political economy. From this perspective, the proposed shift of focus from a self-interested pursuit of power or wealth (or both at once) to the quest for the common good opens the way for transforming modern economics. The alternative that this essay has outlined is a ‘civil economy’ whereby markets and states are embedded in the social relations and civic bonds that constitute society." (Source: OpenDemocracy)
At OpenDemocracy, Adrian Pabst sketches the contours of an alternative economy beyond free market and state, beyond austerity and neo-Keynesianism.
“The notion of ‘civil economy’ raises fundamental questions about the complex links between markets, states and civil society. Worldwide protests since 2011 reflect an implicit, inchoate awareness that ‘big government’ and ‘big business’ have colluded at the expense of the people. Both central bureaucratic states and unbridled free markets are largely disembodied from the mediating institutions of civil society, which in turn are subordinated to the global ‘market-state’.”
“Most of our credit system does not support economic growth in the sense of supporting transactions in goods and services,” he explains. “Most of our finance system, most bank loans, support increased asset prices, which have a number of detrimental effects on the economy.”
"The threat to growth today is not a shrinking of the financial sector, but it enormous size.”
Must-read article on the web site of the Institute for New Economic Thinking underlining the need for a radical reform of the financial sector.
“The Eurobond scheme only works effectively if taxation and spending powers are transferred to a central authority – “fiscal union”. But bar a series of truly extraordinary backflips by Europe’s divided rulers, spontaneously agreeing to settle their deep differences, this will not happen. Should anything resembling a “Eurobond” eventually be summoned up, it is liable only to be a feeble stop-gap measure. The underlying causes of Europe’s financial crisis will not have been addressed.”
Very good analysis by senior economist James Meadway on the New Economics Foundation blog.
Here is Meadway’s solution:
“The first steps to ending the crisis are to end austerity, halting and reversing the suicidal programmes of expenditures that have been launched; to write off debts that are now unpayable, whether owed by states (like Greece) or individuals and firms (as in Spain); and to allow the failure of private banks, nationalising and recapitalising them as needed. Tight restrictions on the movement of capital will be necessary to prevent financial panic spreading, and serious, radical efforts must be made to reverse the growing concentrations of wealth in Europe. For countries in the south, most especially Greece, this will not be achievable without abandoning the euro.”
“Many of the growth strategies tried around the world have turned out to have built-in limitations or decelerators – what one might call elements of unsustainability.”
Absolute must-read article in Project Syndicate by 2001 Economics Nobel laureate Michael Spence. He seems to be one of the few economists able to think beyond the unfruitful austerity versus growth debate and link the crisis of the economy and economics with the sustainability crisis.
Two interesting quotes from this brilliant analysis:
“Perhaps the largest long-run sustainability issue concerns the adequacy of the global economy’s natural-resource base: output will more than triple over the coming two or three decades, as high-growth developing economies’ four billion people converge toward advanced-country income levels and consumption patterns. Existing economic-development strategies will require significant adaption to accommodate this kind of growth.”
“Contrary to the prevailing wisdom nowadays, some degree of Keynesian demand management in the transition to a more sustainable growth pattern is not in conflict with restoring fiscal balance over a sensible time period. On the contrary, applied both individually and together, fiscal stimulus and consolidation are necessary parts of the adjustment process.
But they are not sufficient. The crucial missing pieces are a shift in the structure of accessible aggregate demand and restoration of those parts of the economy’s asset base that have been run down, implying the need for structural change and investment.”
“A big pile of green-growth reports demonstrates the plausibility of this path to recovery from an historic economic crisis. It is now up to us to realize its potential. Green growth offers a realistic alternative to the faltering austerity approach to overcoming the current economic crisis. Policymakers should incorporate this thinking into the “beyond austerity” narrative that is taking shape in a growing number of key EU member states.”
Good Project Syndicate article by Dutch sustainability expert Roland Kupers on the value of several recent green growth reports and their link to the austerity versus growth debate in Europe.
Global plutocracy and the financial Fourth Reich are preparing their battle plans against a François Hollande win in the second tour of the French presidential elections. See this Interesting video on the French blog rue89.com.
Read also this week’s Economist (“The rather dangerous Monsieur Hollande”) to understand how the 1% is preparing for new class war.
I guess it is not really “Mr. Nice” Hollande they are worried about (social-democratic parties will remain part of the establishment) but the increasing backlash in Europe against neoliberal capitalism.
"The European Union’s fresh push for growth must not compromise its drive for austerity, Italian Prime Minister Mario Monti said Thursday, as he joined leading EU politicians in defending the bloc’s sometimes unpopular belt-tightening measures." (Source The Independent Online)
For all the new lip service to growth we now hear from Draghi, Monti, Van Rompuy and other EU leaders, one thing is sure: the austerity leopard will not change its spots. What is meant by "putting growth centre-stage" will be nothing more or less than further labour deregulation (sold under the Newspeak “Flexicurity”).
What we really need is a debate on prosperity and how to protect it, social redistribution and radical reform of the financial sector.
“Overdeveloped countries, including the United States, need to adopt a strategy of economic "degrowth" to limit ecological collapse and severe climate shifts. This does not mean stagnating economic development; it means cutting down on waste and overcoming the social pressure to accumulate material wealth at the expense of others’ well-being.” (Source: ipsnews)
Short summary of the Worldwatch Institute’s “State of the World 2012: Moving towards Sustainable Prosperity". The publication will officially be launched on 11 April.