- 3 Coppice Way
Leeds - 01132407925
- Emeritus Professor of Economics, University of Leeds, UKedit
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Immediately following the global financial crisis of 2007–2008, budget deficits rose from the operation of the automatic stabilisers and some mild discretionary actions to bolster demand in the face of the economic downturn. This was soon... more
Immediately following the global financial crisis of 2007–2008, budget deficits rose from the operation of the automatic stabilisers and some mild discretionary actions to bolster demand in the face of the economic downturn. This was soon replaced by drives to reduce budget deficits and debt ratios even though unemployment continued to be high and output well below previous levels. The ‘debt scare’ behind fiscal consolidation is examined and found wanting on empirical and theoretical grounds. The nature and estimates of ‘the multiplier’ are examined and the consequences of the wide range of estimates considered. There has been a shift to the formulation of fiscal policy in terms of a balanced structural budget. This shift relies on discredited ideas, such as a well-defined and stable non-accelerating inflation rate of unemployment, and brings back the notion that savings and investment necessarily balance at a full employment equilibrium.
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In this chapter, we begin with a consideration of the views of Kalecki on the nature of money, specifically that in conditions of developed capitalism money is predominantly credit money created by the banking system. This leads into... more
In this chapter, we begin with a consideration of the views of Kalecki on the nature of money, specifically that in conditions of developed capitalism money is predominantly credit money created by the banking system. This leads into consideration of the way in which the banking system and the expansion of the money supply is an important ingredient in any expansion of the economy. Specifically, there is a need to consider the financing requirements of an expansion of investment demand. The interaction of the demand for money by the public and the banks’ willingness to supply money are seen as determining short-term interest rates, with long-term interest rates based on the expectations on future short-term interest rates. The final section of the chapter deals with the restrictions placed on the expansion of any single firm by the finance capital market.
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The paper opens with a consideration of the historical developments on the nature and features of money and endogenous money, and the post-Keynesian revival of ideas of endogenous money. Particular attention is drawn to the work of Basil... more
The paper opens with a consideration of the historical developments on the nature and features of money and endogenous money, and the post-Keynesian revival of ideas of endogenous money. Particular attention is drawn to the work of Basil Moore in relation to endogenous money, including the location of that analysis with commercial banks (some of whose liabilities are transferable and widely accepted as a means of payment) and the post-Keynesian-inspired revival of endogenous money. There is a brief outline of the aspects of financialization since the late 1970s which have relevance for the analysis of banks and money. Some thoughts are offered on the impact which those changes of the financial system have for the analysis of banks and of money.
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There has been a major shift within macroeconomic policy over the past three decades or so, in terms of the relative importance given to monetary policy and to fiscal policy. The former is gaining considerably in importance, while the... more
There has been a major shift within macroeconomic policy over the past three decades or so, in terms of the relative importance given to monetary policy and to fiscal policy. The former is gaining considerably in importance, while the latter is being so much downgraded that it is rarely discussed at least in academic circles these days. There are, of course, exceptions to this general statement. The onset of the ‘great recession’ prompted governments to initiate fiscal measures that avoided another ‘great depression’. However, that was rather short-lived. It is now the case that a number of governments have resumed their hostility to fiscal policy as a stabilization instrument. In Arestis and Sawyer (1998, 2003a, 2004), we critically examined the significance of this shift in terms of monetary policy, which led us to question the effectiveness of interest rates now being used as the main instrument of monetary policy. In the same paper, but also in Arestis and Sawyer (2003b, 2006, 2010), we explored the role of fiscal policy, and argued that in the ‘new consensus in macroeconomics’ within which macroeconomics in general and monetary policy in particular is generally discussed, there is barely any mention of fiscal policy.1
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Our main focus of attention in this and the next chapter is on the EMU macroeconomic policy frameworks. We discuss monetary policy as implemented by the ECB in this chapter, and this is followed in chapter 5 by a discussion of the fiscal... more
Our main focus of attention in this and the next chapter is on the EMU macroeconomic policy frameworks. We discuss monetary policy as implemented by the ECB in this chapter, and this is followed in chapter 5 by a discussion of the fiscal policy aspects of the Economic and Monetary Union (EMU). In this chapter we set out the specific elements of the monetary policy of the EMU, and consider the strengths and weaknesses of this policy as applied within the EMU.
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1. The Formulation of Debt and Deficit Policies: Democracy, Technocracy and Public Policymaking Y.Kitromilides 2. Prospects of Future Fiscal and Debt Policies in the UK P.Arestis and M.Sawyer 3. Future Fiscal and Debt Policies: Germany in... more
1. The Formulation of Debt and Deficit Policies: Democracy, Technocracy and Public Policymaking Y.Kitromilides 2. Prospects of Future Fiscal and Debt Policies in the UK P.Arestis and M.Sawyer 3. Future Fiscal and Debt Policies: Germany in the Context of the European Monetary Union E.Hein and A.Truger 4. Sustainable Future Fiscal and Debt Policies for Spain J.Ferreiro, C.Gomez and F.Serrano 5. Prospects of Debt and Deficits in the New French Political Era J.Creel, P.Hubert and F.Saraceno 6. Fiscal Federalism and Debt-Financing in China Y.He, Kun-Chin Lin and R.Tao 7. Fiscal and Debt Policies for Sustainable US Growth G.Zezza
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The Economic and Monetary Union (EMU) has a clear set of monetary and fiscal policies associated with the Stability and Growth Pact (SGP). We argue here that those policies have to be understood by reference to a particular macroeconomic... more
The Economic and Monetary Union (EMU) has a clear set of monetary and fiscal policies associated with the Stability and Growth Pact (SGP). We argue here that those policies have to be understood by reference to a particular macroeconomic analysis. Specifically, it is argued that the macroeconomic policy framework for fiscal and monetary policy with EMU is embedded in what is now known as the ‘New Consensus Macroeconomics’.1 Any specific macroeconomic analysis puts forward a view of how the economy operates, what are the issues which policy can and should address, and the effectiveness (or otherwise) of particular policies (for development of this argument at a general level see Arestis and Sawyer, 2010a), and the New Consensus Macroeconomics is no exception.
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The Labour government elected in May 1997 came into office stressing that it was ‘New Labour’ and pursuing a ‘third way’. In macroeconomic terms, the emphasis was on the avoidance of ‘tax and spend’ policies and restraints on public... more
The Labour government elected in May 1997 came into office stressing that it was ‘New Labour’ and pursuing a ‘third way’. In macroeconomic terms, the emphasis was on the avoidance of ‘tax and spend’ policies and restraints on public expenditure along with the adoption of the so-called ‘golden rule’ of public finances (as discussed below). There was something akin to a disavowal of a Keynesian approach to macroeconomic policies and specifically the use of fiscal policy to help steer the economy. There was an emphasis on labour market reforms and flexibility, which would, in effect, lower the ‘non-accelerating rate of unemployment’ and thereby lower unemployment. Whereas previous Labour governments had pursued a range of industrial and regional development policies to stimulate economic growth and lower unemployment, there was a major shift from those policies to those of labour (and to some degree product) market ‘flexibility’.
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What should the macroeconomic policies of the Economic and Monetary Union (EMU) look like? In trying to give an answer to this question we proceed in three stages. The first, which picks up from our discussion in chapters 4 and 5, is to... more
What should the macroeconomic policies of the Economic and Monetary Union (EMU) look like? In trying to give an answer to this question we proceed in three stages. The first, which picks up from our discussion in chapters 4 and 5, is to consider what the objectives of economic policy should be, specifically in relation to macroeconomic policy. The second is to consider the instruments of economic policy and how they can be used to achieve the stated objectives. In this we look at the instruments of monetary policy and argue that monetary policy should be geared towards ensuring financial stability (rather than being narrowly focused on inflation) and that additional tools of monetary policy should be developed to move away from sole reliance on the central bank interest rate policy. In the case of fiscal policy we argue for such a policy that is geared towards achieving a high level of economy activity and low unemployment. For national governments this would entail setting the budget position in an appropriate manner without constraint from the Stability and Growth Pact and similar measures. At the federal level there is a need to develop a budget of some significance and one which can play a stabilising role. This can raise questions such as whether this would be a budget covering just the EMU countries or whether it should be extended to all EU countries.
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... By 1981 it had outgrown its base but was having difficulty acquiring land for expansion in India. Bhagwan Shree Rajneesh (later known as Osho) and his 'sannyasins' (disciples) ended up on a 64,000 acre ranch in the high... more
... By 1981 it had outgrown its base but was having difficulty acquiring land for expansion in India. Bhagwan Shree Rajneesh (later known as Osho) and his 'sannyasins' (disciples) ended up on a 64,000 acre ranch in the high desert of central Oregon. ...
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The purpose of this chapter is to review Kalecki’s contribution to the understanding of the business cycle and to growth, and to relate his contribution to other works in these areas. The phenomenon of the business cycle was central to... more
The purpose of this chapter is to review Kalecki’s contribution to the understanding of the business cycle and to growth, and to relate his contribution to other works in these areas. The phenomenon of the business cycle was central to Kalecki’s economic analysis of capitalism and his discovery of the importance of aggregate demand for the level of economic activity was undertaken in the context of cyclical fluctuations. His earliest and some of his last writings were concerned with cycles and growth, and involved a continuous search for an improved understanding of these issues.
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This chapter outlines how the pace and structure of financialisation have differed over time and across countries, and also how income distribution (inequality of personal income, distribution between wages and profits) has proceeded with... more
This chapter outlines how the pace and structure of financialisation have differed over time and across countries, and also how income distribution (inequality of personal income, distribution between wages and profits) has proceeded with different time profiles and structures. This chapter outlines the nature and features of financialisation in the present era, and provides a summary of the main trends in income distribution and inequality over the past three decades. The links between the financial sector and inequality of income and earnings are explored, and specifically the extent of inequality within the financial sector and the degree to which inequality in the financial sector contributes to overall inequality. The evidence on the processes of financialisation and the distribution of income is reviewed. The ways in which financial deepening can impact on inequality and poverty are explored. The links between inequality and financial crisis and household debt are reviewed.
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Page 1. CONCENTRATION IN BRITISH MANUFACTURING INDUSTRY By MALCOLM С SAWYER 1. Introduction 'To summarise the findings on the most important trait of market structurethe concentration of output among ...
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This paper reviews the final two volumes of Kalecki's Collected Works. It first dis cusses, based on the papers in Vol. VI, his contributions on cartels, on Nazi Germany, the development of indices of business fluctuations and of... more
This paper reviews the final two volumes of Kalecki's Collected Works. It first dis cusses, based on the papers in Vol. VI, his contributions on cartels, on Nazi Germany, the development of indices of business fluctuations and of national income accounts, and the movement of prices and costs over the business cycle. Drawing on the papers reproduced in Vol. VII, this paper continues by discussing Kalecki's writings on rationing, inflation, imperfect competition and unemployment, money and finance, the national debt and the welfare state, international economic arrangements, the post-war American economy and econometrics and methodology.
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The widely varying evaluations of the work of Michal Kalecki made by economists tells us much about the state of economic thinking about capitalism. For some, Kalecki occupies a place amongst the greatest economists. The Cambridge Journal... more
The widely varying evaluations of the work of Michal Kalecki made by economists tells us much about the state of economic thinking about capitalism. For some, Kalecki occupies a place amongst the greatest economists. The Cambridge Journal of Economics, for example, places Kalecki alongside Keynes and Marx as the three main sources of traditions which have ‘much to contribute to the understanding and treatment of current economic and social issues’. The series of books, of which this book is one, cites Kalecki with Marx and Sraffa as providing a ‘more fruitful point of departure’ than the prevailing orthodoxy. Joan Robinson (Robinson, 1980, p. 122) as well as Eichner and Kregel (1975, fn. 1) acknowledge the contribution of Kalecki’s ideas rather than those of Keynes, to the tradition which labels itself post-Keynesian.1 Galbraith has acknowledged ‘how much those of us the world around have owed to the intellectual capital you (Kalecki) have provided over these past decades’ (quoted in Feiwell, 1975, p. 17 from a letter from Galbraith to Kalecki). Worswick (1977), until recently director of the National Institute of Economic and Social Research, London, has indicated that ‘I thought him [Kalecki] the best [economist in the world] when I knew him in the war, and I still think so’.
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The paper points to the push for balanced budgets in many countries. It briefly reviews the rationale for balanced budgets and finds them wanting. It is argued that a balanced budget and economy operating at potential output are in... more
The paper points to the push for balanced budgets in many countries. It briefly reviews the rationale for balanced budgets and finds them wanting. It is argued that a balanced budget and economy operating at potential output are in generally incompatible and hence a balanced structural budget is not possible. It is argued that there are major issues in the estimation of potential output and of the size of structural budget position, which creates severe difficulties in using the structural budget position as an objective of fiscal policy.
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From the "new consensus in macroeconomics" (NCM) framework, this paper derives a different set of policy proposals. The NCM has become associated with the use of interest rate policy to target inflation and to reach a... more
From the "new consensus in macroeconomics" (NCM) framework, this paper derives a different set of policy proposals. The NCM has become associated with the use of interest rate policy to target inflation and to reach a zero output gap, and to ignore fiscal policy. This paper argues that interest rate policy is an ineffectual policy instrument. It proposes that interest
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The paper brings together a range of ideas on the construction and nature of what may be termed a post neo-liberal social economy. The social democratic era of the early post-war decades and the neo-liberal era of the past four decades... more
The paper brings together a range of ideas on the construction and nature of what may be termed a post neo-liberal social economy. The social democratic era of the early post-war decades and the neo-liberal era of the past four decades are briefly considered. Some general thoughts on the mechanisms of economic co-ordination under the heading of markets, networks and planning are provided. The roles of different forms of ownership and control – private, public, mutual and co-operative – in a social economy are then considered. The strategic roles to be played by the State under the heading of social economic strategy are next considered. The final main section relates to the role of the State: welfare and income support, and macroeconomic policies.
The Economic and Monetary Union (EMU) is confronted with a multi-headed set of crises – an unemployment crisis, a balance of payments crisis, a banking and financial crisis, a fiscal sovereign debt crisis and an existential crisis. The... more
The Economic and Monetary Union (EMU) is confronted with a multi-headed set of crises – an unemployment crisis, a balance of payments crisis, a banking and financial crisis, a fiscal sovereign debt crisis and an existential crisis. The underlying argument of this paper is that these sets of crises have arisen from or been exacerbated by the ways in which the Economic
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The first part of this chapter is concerned with the savings behaviour postulated by Kalecki, namely that the savings propensity out of labour income is taken to be much smaller than the savings propensity out of profits. The reasons for... more
The first part of this chapter is concerned with the savings behaviour postulated by Kalecki, namely that the savings propensity out of labour income is taken to be much smaller than the savings propensity out of profits. The reasons for this view and some of the consequences of it are then explored. When this differential savings proposition is combined with the degree of monopoly approach, a theory on the determination of the level of income and the distribution of income is obtained. We also examine the mechanism envisaged by Kalecki whereby savings adjust to the level of investment. In Kalecki’s approach, investment and savings are brought into equality through changes in the level of income and its distribution, with the rate of interest not involved. In the next chapter, it will be seen that Kalecki regarded the rate of interest as a monetary phenomenon, and not related to savings and investment. The final section of this chapter considers Kalecki’s links with the set of ideas which come under the heading of under-consumptionist approaches.
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La private finance initiative nel Regno Unito: una lettura critica (di Malcom Sawyer) - ABSTRACT: The paper begins by outlining some of the issues connected with the «Private Finance Initiative» (PFI) in the UK. It considers the current... more
La private finance initiative nel Regno Unito: una lettura critica (di Malcom Sawyer) - ABSTRACT: The paper begins by outlining some of the issues connected with the «Private Finance Initiative» (PFI) in the UK. It considers the current scale of PFI expenditure in terms of its impact on investment, the implications for the future course of public expenditure and the extent to which PFI expenditure has reduced the measured size of the public debt. The relative cost of finance of PFI as compared with the alternative of direct government borrowing to finance investment is discussed. The way in which the choice of a Public sector comparator (PSC) is decisions on PFI project proposal is assessed with particular reference to the impact of the choice of the discount rate. The claim that the PFI provides additional investment for the public sector is critically examined and largely rejected. The argument that the costs of construction and of operation are lower under PFI than under conventi...