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Beyond Monetary Policies
Submitted by saldeck on Wed, 03/02/2016 - 05:22.
Finance ministers and central bankers met in China to discuss many of the problems for which they alone are responsable.
Neoliberal ideology has dominated world discourse. The mantra has been that the only viable policy for goverments and social movements was to give priority to something called the market.
Of course, allowing the market to prevail necessitated political action. The so-called market was never a force independent of politics.
Is that day over? Is there what a recente article in Le Monde called a timid return by Establishment institution to concern about sustaining demand?
The IMF had long been the strongest pillar of neoliberal ideology, imposing its requerements on all governments that sought loans from it. However, the IMF worried openly about how anemic world demand had become. It urged the finance ministers of the G20 move beyond monetary policies to encourage investments in order to sustain demand by creating jobs. This was quite a turn-around for the IMF.
The dollar still seems the relatively safest place for governments and the wealthy to park their money. But deflation seems to have become the dominant reality of most Europe.
Will the timid moves recommended by the IMF stanch the reality of declining world demand? Will the dollar be able to resist a further loss of confidence in its ability to be a stable depository of value? Or are we moving toward a further, much more severe, wild swing in the so called market, with all political consequences this will entail?
Effective demand is the sine qua non of capitalism as an historical system. Without effective demand, there can be no capital accumulation. That is the reality that seems to be creeping in.
It is not likely however that the timid attempts to deal with this new reality can in fact make a difference. The structural crisis of our system is in full bloom.
The big question is not how to repair the system but with what to replace it.
Which stimulated the following O&G thought.
The Failure of Macro-economics
Quite a bit yet remains for us to write about, saldeck; and knowing the way ”aggregate minds” of the trade work provides us with a stretch of time to write several tomes before they change direction to really begin the fight to survive.
Faced with the battle to reconcile poor theory with adamant reality, the Economics trade may be at a low point in its development currently. Its attempts to apply policy measures in most economic phases – fiscal, monetary, markets – in search of balance and recovery are confounding. Of the two ends of the remedial scale, that is, the “practical austerity” or rebuilding by incurring more fiscal debt, neither appears capable of salvaging our disabled systems. To the Economists, the result indicated in either case is whether we spend or don’t does not influence the marketplace, output, investments or consumer demand. We seem at a loss, with no idea how to elicit positive response in any case.
Henry Hazlitt, the maverick economics writer of a half century ago, in a 1959 critique of Andrew Dickson White’s Fiat Inflation In France wrote -
It’s a thought that has passed through these pages several times over, an admonition which applies today, and will probably prove a suitable response to any of the next hundred or thousands of central bank inflationary faux pas for the next two thousand years. . . should the race last that long on this earth. Something might impel us to conclude there would be such an ending at our current pace toward impoverishment. Humans will be living in earthen and sod huts in a hundred years and wearing animal skins soon after, unable to afford much beyond that, driven to that state by educated men of science. Education may yet be our downfall. Remember Alexander Pope's admonition,
Drink deep or taste not the Pyerian spring.
But for the current day, we do have some impatient factions casting blame for the stagnation on theoretical inadequacies, or mistaken policy choices, while the majority of the scientists may be committed more toward the belief that expectations are limited due to constantly changing, inefficient personal interests which do not serve the propagation of the species.
This is not a confidence builder if we are to consider that this band of scientists has been chasing after answers for three hundred years and have consistently chosen the wrong direction when confronted with a fork in the road. Our army of economists exhibit no understanding of the social/industrial/commercial/financial complex they’ve helped build; and though they speak of the optimum, none of their policy choices interferes with our taking the circular route back to the same starting point repeatedly.
We’ve had enough of this science steeped in half-supposition, half-cryptology and half superstition – and, in total, does not fit!
What they have committed to is that the markets cannot be controlled, our longer term output and employment statistics are moving in the wrong direction and our theories promote decreasing effectiveness, shun stability like the plague, and promote the imbalance of inequity.
We’ve published our thoughts about deficiencies before, quoting such stalwarts as Adair Turner, Charles Goodhart, William R. White, Minsky and Kindleberger and other occasional dissenters who cannot be easily dismissed with a rogue label. Attention has been directed toward the smaller faction of dissenters, quoting them for seven long years now. The complaints appear to be more acceptable now, but of insufficient strength to reject the faulty policies that send us off in the wrong direction again and again.
Something is missing. When a scholar sits down to churn out a self-propelling mechanism with only distant references – if at all – to the engine driving the mechanism, it shows only that he/she believes in the fairy tale of perpetual motion and mysterious forces. Or, when he/she turns out a depiction of a complete system but never closes off a single one of the hundreds of elements of the system, it should not be considered complete, no matter how attractive the coat of paint used to detract attention from flaws.
There is only one way out from reproducing this unfortunate and destructive circular path ad infinitum: include the last essential element and begin anew.
That is O&G’s latest preoccupation. But, again, due to normal expectations – those well-known ravages of time – the start he can provide may be dismissed too easily for not meeting today’s stringent criteria for acceptable theory. . .
Be like us! Work as we do.
To which we’re prompted to reply, “Would you depend on a man my age, who spends all his sleeping hours, lying awake, staring at dark ceilings, and all his daylight hours drifting off into naps at the drop of a hat? Hoping, through it all, that he can save those thoughts that spring on him unexpectedly from the slightest related mental hiccup and fade off just as quickly as they appeared?”