Posts Tagged ‘politics’

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I suspect gender is one reason some have chosen to support Hillary Clinton (but there are many, many reasons why not to, having to do with the political positions she holds and the interests she represents).

Still, it is extraordinary that, according to data collected by Justin Wolfers, over the past decade, women have been elected to only 17.5 percent of House seats, which places the United States below nearly every other rich country—with a percentage equal to that of Bangladesh and Venezuela.

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Mark Tansey, Recourse (2011)

One of the great advantages of economics graduate programs outside the mainstream (like the University of Massachusetts Amherst, where I did my Ph.D.) is we were encouraged to read, listen to, and explore ideas outside the mainstream—especially the liberal mainstream.

The liberal mainstream at the time, not unlike today, consisted of neoclassical microeconomics (with market imperfections) and a version of Keynesian macroeconomics (which was, in the usual IS-LM models, best characterized as hydraulic or bastard Keynesianism). Essentially, what liberal economists offered was a theory of a “mixed economy” that could be made to work—both premised on and promising “just deserts” and stable growth—with an appropriate mix of private property, markets, and government intervention.

For many of us, liberal mainstream economics was a dead end—uninspired and uninspiring both theoretically and politically. Theoretically, it marginalized history (both economic history and the history of economic thought) and ignored the exciting methodological debates taking place in other disciplines (from discussions of paradigms and scientific revolutions through criticisms of essentialism and determinism to fallibilist mathematics and posthumanism). And politically, it ignored many of the features of real capitalism (such as poverty, inequality, and class exploitation) and rejected any and all alternatives to capitalism (in a liberal version of Margaret Thatcher’s “there is no alternative”).

Then as now, what liberal economists offer was, as Gerald Friedman has recently pointed out, a “political economy of despair.”

The reaction to my paper — the casual and precipitous conclusion that it must be wrong because it projects a sharply higher rate of GDP growth — comes from the assumption that the economy is already at full employment and capacity output. It is assumed that were output significantly below full employment, then prices would fall to equilibrate the two. This is the political counsel of despair. It is based on classical economic theory and the underlying acceptance of Say’s Law of Markets (named for the great Classical economist Jean-Baptiste Say), which says that total supply of goods and services and the total demand for goods and services will always be equal. The shoe market creates the right amount of demand for shoes — it works out so neatly that the true measure of the supply of shoes, of potential output, can be taken by measuring actual output. This concept is used as a justification for laissez-faire economics, and the view that the market mechanism finds a harmonious equilibrium. . .

There is, of course, a politics as well as a psychology to this economic theory. If nothing much can be done, if things are as good as they can be, it is irresponsible even to suggest to the general public that we try to do something about our economic ills. The role of economists and other policy elites (Paul Krugman is fond of the term “wonks”) is to explain to the general public why they should be reconciled with stagnant incomes, and to rebuke those, like myself, who say otherwise before we raise false hopes that can only be disappointed.

Fortunately, back in graduate school and continuing after we received our degrees, we were encouraged to look beyond liberal economics—both outside the discipline of economics (in philosophy, history, anthropology, and so on) and within the discipline (to strains or traditions of thought that developed criticisms of and alternatives to liberal mainstream economics).

Marx was, of course, central to our theoretical explorations. But so were other thinkers, such as Axel Leijonhufvud (whose work I’ve discussed before). He—along with others, such as Robert Clower and Hyman Minsky—challenged the orthodox interpretation of Keynes, especially the commitment to equilibrium. Leijonhufvud was particularly interested in what happens within a commodity-producing economy when exchanges take place outside of equilibrium.

The orthodox Keynesianism of the time did have a theoretical explanation for recessions and depressions. Proponents saw the economy as a self-regulating machine in which individual decisions typically lead to a situation of full employment and healthy growth. The primary reason for periods of recession and depression was because wages did not fall quickly enough. If wages could fall rapidly and extensively enough, then the economy would absorb the unemployed. Orthodox Keynesians also took Keynes’ approach to monetary economics to be similar to the classical economists.

Leijonhufvud got something entirely different from reading the General Theory. The more he looked at his footnotes, originally written in puzzlement at the disparity between what he took to be the Keynesian message and the orthodox Keynesianism of his time, the confident he felt. The implications were amazing. Had the whole discipline catastrophically misunderstood Keynes’ deeply revolutionary ideas? Was the dominant economics paradigm deeply flawed and a fatally wrong turn in macroeconomic thinking? And if this was the case, what was Keynes actually proposing?

Leijonhufvud’s “Keynesian Economics and the Economics of Keynes” exploded onto the academic stage the following year; no mean feat for an economics book that did not contain a single equation. The book took no prisoners and aimed squarely at the prevailing metaphor about the self-regulating economy and the economics of the orthodoxy. He forcefully argued that the free movement of wages and prices can sometimes be destabilizing and could move the economy away from full employment.

That helped understand the Great Depression. At that period, wages [were] highly flexible and all that seemed to occur as they fell was further devastating unemployment. Being true to Keynes’ own insights, he argued, would require an overhaul of macroeconomic theory to place the problems of coordination and information front and center. Rather than simply assuming that price and wage adjustments would cause the economy to restore an appropriate level of output and employment, he suggested a careful analysis of the actual adjustment process in different economies and how the economy might evolve given these processes. As such, he was proposing a biological or cybernetic approach to economics that saw the economy more as an organism groping forward through time, without a clear destination, rather than a machine that only occasionally needed greasing.

That “path not taken” might also have helped us understand the Second Great Depression and the uneven—and spectacularly unequalizing—recovery that liberal mainstream economists have supervised and celebrated in recent years.

Meanwhile, the rest of us continue to look elsewhere, beyond the liberal political economy of despair, for economic and political ideas that create the possibility of a better future.

 

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Yesterday, I argued that the U.S. tax system is broken. That’s because many corporations pay no federal taxes and, even when they do, the effective rate is much lower than the statutory rate.

And that’s just on the tax-revenue side. On top of that, as Oxfam (pdf) shows, U.S. corporations received a wide variety of subsidies. For example, from 2008 to 2014, the top 50 U.S. corporations collectively earned $4 trillion in profits, paid $412 billion in federal taxes, and received $11.2 trillion in support in the form of loans, loan guarantees, and bailout assistance from the federal government.

There is no doubt that data from this time frame is shaped heavily by the federal programs, like the auto-bailout and TARP, that were created to deal with the largest economic crisis since the Great Depression. Additionally most loans and bailouts are paid back in full with interest. There are also relevant distinctions to be made between companies and sectors on their tax practices and their receipt of federal support.

Companies benefit in different ways from federal investments and from tax laws, only some of which are revealed in the data Oxfam analyzed. The data also does not show the value of other forms of federal support that companies receive beyond loans, loan guarantees and bailouts.

Nonetheless, the data is useful to observe in aggregate because it puts in stark relief the taxpayer financed benefits large companies in general enjoy in relation to the taxes they pay.

In addition, those same corporations hold $1.4 trillion in offshore cash reserves, which are not subject to taxation. And they spent roughly $2.7 billion on lobbying from 2008 to 2014.

That means for every $1 they invested in shaping federal policy through lobbying, they received $130 in tax breaks and more than $4,000 in federal loans, loan guarantees and bailouts.

Those breaks indicate that not only is the U.S. tax system broken; so, too, is the political system.

Except, of course, for U.S. corporations.

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It’s an issue that often comes up with my students. They believe the key problem in the country is the growing polarization between the two major political parties. Nothing gets done because politicians from opposing parties don’t seem to agree on anything.

But, as Robert Weissman [ht: ja] explains, “That story is not true.”

In fact, Americans overwhelmingly agree on a wide range of issues. They want policies to make the economy more fair and hold corporate executives accountable. They want stronger environmental and consumer protections. And they want to fix our political system so that it serves the interest of all, not just Big Money donors. These aren’t close issues for Americans; actually, what’s surprising is the degree of national consensus.

The problem isn’t that Americans don’t agree. The problem is that the corporate class doesn’t agree with this agenda, and that class dominates our politics.

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The question in the table from a recent Democracy Corps/Roosevelt National questionnaire (pdf) is a good example. Fully 73 percent of those polled were (very or somewhat) convinced by the following story:

The rules that govern our economy no longer work for Americans. For 40 years, economic policies have rewarded large corporations and the wealthiest with the promise that their gains would “trickle down” to everyone else. It hasn’t worked. Instead we have faced sluggish growth and economic insecurity for more and more Americans with all the gains going to the top. It is time to rewrite the rules of our economy so small businesses and average American families have a chance too, not just the wealthy and well-connected. That starts with preventing corporations and CEOs from flooding the political process with money so they can manipulate the rules to their advantage. Then we can focus on policies that will grow our economy and level the playing field—rebalancing the tax code so those at the top pay their fair share like the rest of us, changing corporate governance so CEOs prioritize long term investments in workers and their companies over short-term gains and speculation, and ensuring banks do what they’re supposed to do and serve America’s families and provide loans to productive businesses. We can also raise wages for working people by guaranteeing equal pay for women and create more family-supporting jobs by investing in infrastructure and making college more affordable. We have the power to rewrite the rules of our economy.

The same is true on a wide variety of issues, from increases in the minimum wage to expanding Social Security.

American opinion is not divided. What is true is that the views of the average voter are trumped by a corporate elite that finances and writes the rules for political debate in the United States.

That’s the real gridlock that needs to be broken up.

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