Wednesday, October 26, 2011
Monday, October 24, 2011
Thoma points out that the US economy hasn't, by any serious measure, prospered as a result of the declining fiscal burden faced by the super-rich. But his argument also receives strong support from comparative analysis. A quick look around the advanced world shows that the most unequal societies are also the worst performers in the post-crisis scenario. In Europe, egalitarian Sweden, Holland and Germany are the strongest performers, whilst less progressive economies such as Ireland, Greece and Italy suffer (not to mention the UK). In North America, Canada is in much better shape than the US.
Friday, October 21, 2011
Tuesday, October 11, 2011
Saturday, October 8, 2011
Although it's important to make these arguments, and Chang does a great job of it, the dominant feeling I'm left with is dejection and frustration. Why? Because what Chang is arguing is almost self-evidently true, and should barely need saying. Indeed, 25-30 years ago much of what he argues in the book constituted the conventional wisdom. Yet the idea that markets are social constructs, that regulation is a politically loaded issue, that individual productivity is not really individual, have now become quite radical things to say.
What more interesting is the apparently unselfconscious Orientalism of Greenspan's assessment of the Southern countries. Greenspan's analysis of the North-South divide in Europe goes as follows:
There remains the question of whether most, or all, of the south would ever voluntarily adopt northern prudence. The future of the euro beyond a select group of northern countries with a similar culture will depend on the ability of all eurozone nations to follow suit.
What would this 'similar culture', based on 'northern prudence', involve? Well, for a start it presumably doesn't involve the Anglo-Saxon recklessness exhibited by Northern European countries such as Britain, Ireland and Iceland. So we are talking about particular areas of the North whose prudence is expressed in wage restraint and sound public finances: the countries generally referred to in the comparative political economy literature as 'social democracies'. So Alan comes out as an unexpected fan of large public sectors, high and progressive taxation, and strong trade unions. Who knew?
The counterpart of course is Southern fecklessness. Here we go back to a common refrain of blaming poor economic performance on climate. Greenspan cites approvingly the following words from Kieran Kelly:
if I lived in a country like this [Greece], I would find it hard to stir myself into a Germanic taxpaying life of capital accumulation and arduous labour. The surrounds just aren’t conducive.”
Never mind that the average yearly working hours of a Greek employee are the highest in Europe. It's just so hot, how can they ever do any work? A notion that nobody ever applies to Texas or Florida.
It's barely worth the effort of outlining all the ways in which Greenspan is wrong. But the fact that this kind of sub-racist nonsense can be given space in one of the best newspapers around is a sign of the times. The times are ugly, and what we thought was true wasn't. So why not just blame problems on those suffering them? It's a lot easier than trying to work out what went wrong, and admitting that powerful men like Greenspan didn't have the faintest clue what they were talking about.
Friday, October 7, 2011
Tuesday, October 4, 2011
The clearest statement on political market efficiency I can think of is Donald Wittman's The Myth of Democratic Failure. The interesting bit about Wittman is that he makes two ambitious (to my view implausible) claims: that the rational actor model explains politics well, and that an effective and 'efficient' democracy can be explained in rational actor terms. The resulting text is an entertaining lesson in the usefulness of functionalist reasoning and ad hocery wheeled out in support of a notionally deductive theory resting on individual rational action.
But political science also makes less strong claims about democratic efficiency as a matter of course. The notion that governments could fleece the population systematically is rarely entertained. Yet at the moment this is what seems to be happening across the advanced world, with little in the way of organized reaction (as yet).
Which is the key - 'organized reaction'. Democracy requires organization - leaving political action to isolated individuals doesn't get us very far. And the difficulties of organization - the free rider dilemma, the danger of hierarchy, the asymmetric access to political influence - produce colossal inefficiencies in the political market. Political scientists need to start thinking about how these inefficiencies, coupled with economic disaster, could destabilize what we assume to be well entrenched democratic institutions.
Monday, October 3, 2011
Munchau used to be a measured, cautious and conservative commentator. The fact that he is using such strong language these days totally freaks me out.
Sunday, October 2, 2011
Greece and some other countries have serious budget difficulties. But most of the European periphery also faces a current account crisis – something has to be done to increase exports or reduce imports or both. If the exchange rate can’t depreciate, wages won’t be cut, and “fiscal devaluation” proves unworkable, activity in these economies will need to slow down a great deal in order to reduce imports and bring the current account closer to balance – unless you (or the Germans) are willing to extend them large amounts of unconditional credit for the indefinite future.
And as these economies slow down, their ability to pay their government debts will increasingly be called into question.