Simon Wren-Lewis is an economics prof at Oxford. He says:
“We seem to be in a strange prisoners dilemma where it is absolutely clear that the world wants more safe assets (the rate of interest on indexed debt is zero if not negative), but every individual government thinks that if it provides them lenders will suddenly panic, and think they are no longer safe. I think this fear is irrational, but unfortunately events in the Eurozone feed this fear on a daily basis. (It should not, because governments without their own central banks are in a different position from those that have . . . )”
Can’t quarrel with that (much as I like quarrelling). In particular, what he calls “safe assets” are much the same as what MMTers call “private sector net financial assets”.
He then goes astray by ACCEPTING the demand by economic conservatives for a balanced budget, and looks for ways to boost demand WITHIN that balanced budget. The ploy he advocates is to raise taxes and public spending by the same amount.
The reasons why that raises demand are a bit technical, and I won’t go into those technicalities. But the more important point is that the whole balanced budget idea is complete and total B.S.
That means that any proposal based on the balanced budget assumption has to have flaws somewhere. And the flaws in the “raise taxes and public spending” idea are thus.
First, the idea WOULD raise aggregate employment. But the problem is that the idea only works by raising PUBLIC SECTOR employment. Now that is a severe weakness because any half decent system or idea for raising employment ought to work given RISING OR FALLING public sector employment. Plus it ought to work assuming the aim is keep public sector employment CONSTANT as a proportion of total numbers employed.
Second, going for the “raise taxes and public spending” idea involves government in a self-contradiction as follows. Where government decides that the optimum split of GDP as between private and public sectors is some given ratio, that ratio will be disturbed if government goes for the “raise taxes and public spending”. Or to put it in less general terms, the current Tory led regime in the U.K. is aiming to REDUCE public spending relative to GDP, so it is unlikely to accept the “raise taxes and public spending” idea.
The Social Market Foundation.
On the subject of balanced budget ways of raising employment, Wren-Lewis then supports the ideas recently put by the Social Market Foundation. See W-L’s last paragraph here. These ideas are complete hogwash, as I explained here.
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you're not the Durham BNP Ralph Musgrave are you?
ReplyDeleteYes, I’m a member of the disgracefully racist BNP, which opposed the Iraq war from day one. That’s in contrast to the “racism-free” Labour and Tory parties which killed about a million Muslims in Iraq (assisted by G.W. Bush) – on the basis of doctored intelligence reports and pack of lies, if I remember rightly.
ReplyDeleteFirst, the idea WOULD raise aggregate employment. But the problem is that the idea only works by raising PUBLIC SECTOR employment.
ReplyDeleteNot true Ralph. A large proportion of public spending consists of public purchases from the private sector. That employs people in the private sector.
'Yes, I’m a member of the disgracefully racist BNP, which opposed the Iraq war from day one. That’s in contrast to the “racism-free” Labour and Tory parties which killed about a million Muslims in Iraq'
ReplyDeleteTwo wrongs don't make a right.
If the BNP ever got into power, their economics policy would render Britain a complete basket case.
Dan,
ReplyDeletePurchases by government from private contractors ARE COUNTED as public spending. So to that extent, my classification is correct. However your way of classifying “public” and “private” is not totally illogical. If we go with your method, then that DILUTES my argument a bit, but does not destroy it. E.g. if govt collects more tax and expands public spending in my sense, the result will almost certainly be a rise in the number of people employed DIRECTLY by govt, PLUS a rise in numbers employed by private contractors working for govt.
AKA Damo,
The phrase “two wrongs don’t make a right” is certainly applicable where the two wrongs are of roughly equal magnitude. But where supporters of political parties that have recently taken part in the killing of a million Muslims use the phrase against an organisation that has not killed so much as one Muslim, then words fail me. The word hypocrisy is not adequate.
Re BNP economic policies I agree these are pretty much of a nonsense. Though it’s moot as to whether they are any worse than the Eurozone’s management of Greece. As for the bunch of economic illiterates that make up Congress, BNP economic policies compare quite favourably.
Why are you a member of the BNP?
ReplyDeleteFor a variety of reasons. E.g. I’m not too keen on fascism of any type – Islmofascism included. I.e. I don’t like movements which believe in killing the cartoonists, authors and publishers they don’t like. Nor do I like a movement which has made strenuous efforts at the U.N. to have criticism of said movement outlawed worldwide. Nor do I care for homophobia or treating women like dirt. Nor do I like movements, a significant proportion of whose members think that anyone who leaves the movement ought to be killed. In fact there is not much difference between that and Nazism, is there?
DeleteAlso I think most of the arguments for multiculturalism are pure hogwash. For details on the latter point see: http://www.ethnic.ndo.co.uk/mulindex.htm