Paul Sweeney: As the IMF is here in Ireland, with the ECB and EU Commission, on a mission of assisting Irish citizens to bail out our banks and thus the banks of Europe, and, as a consequence, our public finances, we need to watch carefully to see what is their overall attitude and the nuances.
Yesterday, the head of the IMF, Dominique Strauss-Kahn, delivered a major speech at George Washington University where he said that the "Washington Consensus" certainties have come crashing down, with the Crash of 2008, and he spoke of the challenges that have been posed for macroeconomic policy, social inclusion and multilateralism.
He said that: “This 'Washington consensus' had a number of basic mantras. Simple rules for monetary and fiscal policy would guarantee stability. Deregulation and privatization would unleash growth and prosperity. Financial markets would channel resources to the most productive areas and police themselves effectively. And the rising tide of globalization would lift all boats.”
Mr Strauss-Kahn said that this “'Washington consensus'” not alone “caused incalculable hardship and suffering” but it did more than this. He issued a major challenge to all economists. For he said that “'Washington consensus' also devastated the intellectual foundations of the global economic order of the last quarter century.” That is some criticism.
It is hoped that this speech is heard wide and far in this land, especially by economists who are still wedded to deregulation, privatisation (and socialisation of private debt), and deflationary cuts as a panacea. I’m afraid that the 'Washington consensus' is not behind us (as he claims) here in Ireland.
In what is a possible reference to Ireland’s deep troubles DSK, as he is known, said “Europe needs a comprehensive solution—based on pan-European solidarity.” That is not exactly what is on offer. Ireland’s elite screwed up but as far as Europe cares, we are on our own, thanks to the bankers, developers, anti-regulation ethos and the government that bailed out the bondholders in our name.
He coined a new expression - “globalisation had a dark side”! This dark side was and is the growing chasm between rich and poor.
Afterwards, in replying to students' questions, he spoke of the IMF's support for countries that adopt temporary capital controls (a real surprise), of the challenges faced by European integration (challenges!! An understatement surely!) and by Greece in particular, and about the IMF's work to design carbon taxes and the issuance of new SDRs for climate-change finance.
Of course, DSK may soon resign and stand for the Socialists in France. Thus he may leave the IMF in the hands of the neo-liberals again. In the meantime, we hope his emissary in Ireland hears his words. But will his comrades in the Troika from the EU and ECB hear it too? I fear not until Ireland sinks a bit lower.
You can read his speech here.
In the meantime, the ECB is actually raising interest rates, in this climate!
And in the business pages, the ex-Anglo Irish and other bank directors are still photographed as if they are still great!. They still stride the land that they impoverished in just a few short years. No bank board member has yet to be held to account for the biggest value-destruction in the history of Ireland. Nothing seems to change when it comes to power.
18 comments:
Agree that it's difficult to discern whether this is just one of series of valedictory speeches to embellish his credibility before he grasps the Socialist standard against Sarkozy and le Pen (while it continues to be business as usual back at the ranch in Washington) or signals a genuine desire to roll-back the Neoconnery of the last three decades.
The problem is that the forces which wrought the havoc in the '30s were very much weakened; those that caused the current havoc are deeply embedded in the political power structures and have largely escaped unscathed. In addition, the progressive centre and the left generally formed a plurality in the post-war world which supported the development of prosperous mixed economies. That coaition for progress no longer exists as the centre has being both pulled rightwards and repelled by the left.
@ Paul Hunt,
Regarding:
"The problem is that the forces which wrought the havoc in the '30s were very much weakened; those that caused the current havoc are deeply embedded in the political power structures and have largely escaped unscathed. In addition, the progressive centre and the left generally formed a plurality in the post-war world which supported the development of prosperous mixed economies. That coaition for progress no longer exists as the centre has being both pulled rightwards and repelled by the left."
I'll repeat the question I asked in a previous post?
"I’ll presume you’re aware that the taxation rates reached over 90% for the upper decile of the US labour market, in that very period? Would you consider that to be a prerequisite to a correctly functioning market?"
@disgruntled,
I don't wish to appear obtuse, but I'm not sure what you're tryimg to get me to agree to.
The boundaries between what goods and services should be provided by markets and what should be provided by the state, collectively or on a not-for-profit basis constantly change. I will illustate my position by considering the UK NHS which is the subject of much debate at the moment - and which, I believe, should not be operated internally on a market basis.
The demand for healthcare is almost infinite; but resources are finite. Since the Thatcher era UK citizens demand Scandinavian style healthcare, but are totally opposed to paying Scandinavian levels of taxation to fund it.
In addition there has been a compact that healthcare workers are paid less than private sector workers with similar skills and carrying similar responsibility (I know comparisons are difficult- but I do know that healthcare workers in Ireland are paid far more than their UK peers - but that is another matter). The quid pro quo was job security and a defined pension.
This is now, quite unjustifiably, under threat. But there is no question of increasing taxation to fund the services to match demand; or to manage demand to match the available resources.
I'm not sure how 'progressive' tax levels should be, but more tax is required. In addition there is a requirement to rebalance taxes away from income and general consumption towards 'bads' such as pollution and assets that generate rents. And tax havens should be outlawed and tax evasion reduced as much as possible.
But I am left with a problem of the taxation of income where there is a genuine risk of banruptcy, of loss of earnings and employment with the taxation of income where there is no such risk.
The balance has swung in favour of the former over the last three decades in developed economies, but the latter were catching up - and moving ahead in terms of income - in Ireland during the bubble period. But, of course, rapidly inreasing costs and prices were eating into disposable incomes.
@Paul Hunt,
I bring up that question purely as a response to your repeated reference to the left-progressive centre alliance of the fifties and sixties. It is, (and correct me if I'm wrong), your stated desire to return to that mixed economy that was so successful.
My contention is that high, even extremely high, upper tax rates where central to this economy, for a number of reasons.
First and foremost was the consequent levelling of income distributions, which ensured that the US became almost entirely middle class.
It allowed for effective non-income taxation. Where do you set water charges, fines, etc, when for some those charges/fines are excessively punitive and for others a pittance. You end up with either regressive taxation/ineffective taxation.
It prevented the build-up of asset bubbles. Concentrated wealth seeks the greatest return. This is my point about correctly functioning markets.
It reduced the need for debt. If incomes are levelled, then why borrow excessively to compete for everyday goods or a roof over your head?
It has a stabilizing effect on inflation. Monetary policy can be directed at the real economy without blowing asset bubbles.
Also, I'm aware, that the top tax rate was effectively a tax on one or two people, and that there were people of considerable and even immense fortune in the US during this period. So be it. However, it was no mere soft alliance. The US, post depression was very much one of political economy, and it settled very much to the left of where most people imagine. Actually it's striking how much the argument has been won by the right, that most people I tell this too are utterly shocked to know the US had such tax rates.
@digruntled,
You may be surprised to find we are at idem on the post-war cycle of political economy in the developed economies in the post-war era. (The benefits of open-minded exchange and debate!)
But we can't go back to that progressive consensus. The challenge, recalling Paul Sweeney's initial post on DSK's speech, is to reconstitute the key driving forces of this consensus in the modern era.
The challenge is even more daunting in this globalised era (which really means increased movements of labour, capital and goods and services). And even more daunting still when our tools of political economy were forged in nation states whose economies could be viewed as being largely closed - and, insofar as they were open, were subject to fixed exchange rates and capital controls.
And to top it all, vast numbers of voters (who would previously have adhered to a centrist, liberal, progressive stance and would aligned themselves cheerfully with a left-progreeesive stance) have been seduced by the lies of the Neocons (propogated by 'useful idiot' economists and their media camp-folowers).
This graphic from The Economist (even if I lament the leading question);
http://www.economist.com/blogs/dailychart/2011/04/public_opinion_capitalism
gives an indication of the mountain that has to be climbed.
It is unfair and unjust (but life so often is) that it falls to the progressive-left to attempt to refashion this consensus and to convince voters in the liberal, progressive centre that they have been duped by the Neocons. It cannot be the 'triangulation' (this ill-conceived 'Third Way') pursued by Clinton in the US and Blair in the UK as this simply blundered into the traps laid by the Neocons. If the left doesn't speak to and for these voters in the so-called 'squeezed middle' they will become prey to the lures of the populist, xenophobic, nationalistic parties or the woolly-brained Greens. There is increasing evidence of this throughout the EU. And to do this the left may need to jettison some very comfortable ideological baggage that has repelled these voters and to think again about where the boundaries between the state and the market should lie.
Paul,
I hear what you're saying, but you probably won't be surprised if I argue nonetheless. You see, and I'm sure you're aware, not very much is really new. The world has gone through globalisation before. In fact, if my memory serves me well, the last great period of globalisation was pre 1930's and made up a very similar portion of the world economy. Granted the complexity is of a different order now, but the basic parameters are the same.
You see the key driving force of this consensus is not ideology, but consequence. The lack of a welfare system (and I'm speaking of the US here) in the 1930's and the consequent upheaval was a defining experience for the American public. The new deal that resulted ensured the democrats were unassailable in the southern states right up to the civil rights movement of the 1960's. Nothing to do with belief systems.
I looked at that graph in the economist. And you know it means nothing. I typed socialism, poll, US, into the search engine of Naked Capitalism and came up with a whole host of articles. Some titles:
1. Free Market Capitalism Gets Thumbs Down in 27 Countries, Including US (Nov 2009) BBC survey of 29,000
2. Socialism gaining ground in America (April 2009). Apparently only 53% believe Capitalism is better, and not surprisingly results break along income lines.
And the third which leads the conversation on:
3. Why is there no political outlet for Anger on the Left These Days?
There really is nothing new about all this. They've been arguing over banking since the 1700's. The tea party movement would feel more than a shared bond with the book burners of the Grapes of Wrath. What is new, is that the left had seriously lost the courage of it's convictions. It needs to speak up, stop apologising for what it believes and articulate it's positions. And you know I have hopes that is actually what is occuring. This comfortable ideological baggage is precisely what needs to be heard. The loony left needs to be loony left, to provide the space for the reasoned left to exist, to hold and keep that progressive centre honest. And the centre left needs to be honest. Not say they're centre left and then perform some damn compromise because "otherwise no-one would vote for us" garbage. You don't sway people by not standing over your own values.
And you know, the right understands this, and has always understood this.
But ultimately, it is consequence that drives things. A person seduced can fall out of love if a relationship turns sour. People have voted for the right because they were sold a lie (you're right about that). But that lie is bare for everyone now.
BTW. A lovely piece of satire in Naked Capitalism.
http://www.nakedcapitalism.com/2011/04/blacklisted-economics-professor-found-dead-nc-publishes-his-last-letter.html
@disgruntled,
The lie, indeed, is bare to everyone now, but 'government failures' are as real as 'market failures' or 'market blowouts'. But those who have been duped by this lie for so long - and continuously fed the line that government always and everywhere is the problem - will need a lot of convincing. The current narrative from the progressive-left isn't convincing. That needs to change. I want it to change. You want it to change. This board should be the ideal location to begin crafting this narrative, but we generally get invective about the folly of markets.
@ Paul,
It isn't convincing because few are making it's case, and those that do are drowned by the weight of ingrained "expertise".
As for beliefs. Well, there will always be people you won't convince. And that's fair enough, and maybe even rightly so. A plurality of ideas is a truly healthy thing and keeps everyone honest. But this is partly the problem, the plurality of ideas has been heavily skewed, its distribution one big fat tail. The right has not been kept honest. It's quite honestly been a victim of it's own success.
I heard an anecdote once. It involved the last Soviet ambassador to the US. He said to his hosts, "we're about to do a horrible thing to you. We're going to deprive you of an enemy." Ideas need their counterparts for balance.
I'll tell you, though I've often been proven wrong with my observations about Irish people and society, I don't see any real ideology here at all. Don't rock the boat conservatism, sure, but economic ideology, very little. I think for most here there's a pendulum at work. It takes a great big swing and those with an interest hold it in place and prevent it from returning. This is the stability we're witnessing. It becomes truly interesting when the weight becomes too great to bear.
BTW. About markets. I think credit exchanges are a very interesting prospect, and something I'd like to see explored more. Japan has spent the past twenty years developing several thousand exchanges, many of which operate on a national level. They offer a real prospect for local employment and social service where such a simple thing as money is not available.
@disguntled,
It is basic to human nature that, once people advance beyond a purely subsistence level of existence, they will speculate to accumulate and accumulate to speculate. Markets will always exist to facilitate the trade and exchange required in this process and will exist because they are the most efficient means of processing huge amounts of data and information and framing and executing economic choices.
In addition, the holding, enjoyment and trading of well-defined property rights is fundamental to liberty and freedom in a democratic society governed by the rule of law. Capitalism will never be suppressed or superceded, but it may be governed and restrained to generate socially and economically useful outcomes.
The view that markets are evil, malign, should be squeezed to the margins, barely tolerated and the corresponding belief that there is an army of altruistic, with a bone of self-interest in their bodies, totally public-spirited functionaries employed by the state who would make the decisions more equitably and efficiently that would otherwise be generated by markets are totally for the birds.
The right and centre-right are dominant because they have been able to expose these views and beliefa as the nonsense they are - and been able to convince a plurality of voters in most developed economies.
Until those on the left come to terms with the abiding existence of capitalism, the valid role of markets and relationship with freedom and liberty and seek to strike a better balance individual liberty, on one side, and public and collective imperatives, on the other, it is at nothing.
And what is even worse, in its blind rage at markets it fails to see that, at root, the current international problems are not caused by markets per se, but by the excessive financialisation of all markets, where the underlying physical trade in goods, services and commodities has been totally subverted by a much larger layer of financial or paper trading of the underlying assets.
Targetting this effectively would rouse significant public support and help to split those in the liberal, progressive centre from the Neocons who have duped them and whose hegemony has facilitated this suppression of functioning markets.
But continuing to demonise the underlying markets or, at best, barely tolerating them and impoisng all sorts of external sanctions, or suggesting that the state can perform the functions of many of these markets better deserves the ridicule it will receive.
I had hoped for better from the progressive-left at this time of potentially great opportunity, but I probably should have known better.
What a waste.
Paul,
Cop on will you.
You seem to have some idea in your head that the average left wants to supress trade, the exchange of goods. Who and where is that being advocated?
But equally, it really is about time you stopped pretending that the efficient market hypothesis has any validity left. It very efficiently destroyed itself. There is not a single advanced country that would have a financial market left if it wasn't for the presence of overwhelming government support in the past couple of years.
Furthermore, where has their been a challenge to liberty or the rule of law? You're being just a bit OTT don't you think?
Plus the conflation of capitalism with democracy is facile and disingenuous. By implication, anything else is dictatorship and totalitarian.
But I will come to your point: The problem I have with markets, is the ideology that underpins them. That all forms of exchange are good, because if they weren't the market would somehow prevent them. That self-interest without any countervailing philosophical ethic is by itself ethical, for it leads to efficient outcomes, or that it's just basic human nature. It is not. Greed without regard for the other is how a pyschopath operates. It's social darwinism.
But then this is all just a straw man argument. You know I'm not advocating the abolition of markets.
But since you seem to think there's some sort of ground between us, and for you at least it concerns markets and nothing else, please note the question I've repeatedly asked: "I’ll presume you’re aware that the taxation rates reached over 90% for the upper decile of the US labour market, in that very period? Would you consider that to be a prerequisite to a correctly functioning market?"
@ Paul Hunt,
BTW, it's not just people like me that hold this view of markets. Larry Fink, CEO of Blackrock (the same one's who did our stress tests and which manages the biggest asset management fund in the world with trillions of assets), when asked to sum up all the problems going on in the world at the moment, said "Confusion, uncertainty, actually, markets like totalitarian governments. What we have going on is democratisation, and democracies are messy as we see here in the US."
http://www.zerohedge.com/article/shadow-king-wall-street-markets-love-totalitarian-markets
@disgruntled,
Perhaps you don't see the irony of presenting yourself in agreement with on of the 'masters of the universe'! As JK Galbraith pointed out many moons ago - and to which I have referred previously - this focus on markets provides this king-pins of capitalism with a very convenient functional anonymity. "It's not me, guv. It's the markets wot's doin' it".
This allows these king-pins to rig and subvert markets and to suborn politicians and policy-makers without anybody getting to grips with what they are actually doing or how they are doing it. It's time to put the focus on the organ-grinder and not the organ or the monkey.
@disguntled,
The spam-checker seems to be preventing chronological posting so effective engagement is almost impossible. I have previously tried to answer your final question. I have tried to seek common ground; but you have retreated to the comfort of dogma. So be it. In conclusion all I will assert is that until the progressive-left unambiguously declares that well-defined private property rights and well-governed markets are in the interests of all citizens it will never secure the popular plurality that is required to enact and implement genuinely progressive policies in the interests of the many.
It is basic to human nature that, once people advance beyond a purely subsistence level of existence, they will speculate to accumulate and accumulate to speculate....
the corresponding belief that ...functionaries employed by the state would make the decisions more equitably and efficiently that would otherwise be generated by markets are totally for the birds....
...come to terms with the abiding existence of capitalism...
...expose these views and beliefs as the nonsense they are...
...suggesting that the state can perform the functions of many of these markets better deserves the ridicule it will receive.
I have tried to seek common ground; but you have retreated to the comfort of dogma. So be it.
Hi, Anonymous,
Not sure if you're 'disgruntled' or someone else having a go! (I can understand why many commenters use psuedonyms or hide behind anonymity, but it does suggest a climate of fear that prevents people revealing their true identities which, perhaps, should be confronted - or a desire to wound, but not to engage.)
However, the issue here is that the assertions you seem to consider as dogma are well supported by historical and empirical evidence. But the general thinking of the so-called progressive left is to reject this evidence because it is deemed to be ideologically biased. I'm also assuming that you do not wish to promote the brutal and inhuman application of Marx's ingenious manipulation of the Hegelian dialectic that cost the lives of countless millions - and stunted the lives of so many more - during the 20th century. But I sometimes wonder.
At the very least, in a deomocratic context, there seems to be a desire to secure and establish an indefinite majoritarian application of 'progressive-left' governance. But, however well-intentioned, the tyranny of faction - any faction - should be avoided at all costs.
Regrettably there is considerable evidence that this board - and much of the intellectual basis of the progressive-left - is informed by this ahistorical and anti-democratic bias. As an economist and democrat I am repelled, but I am still driven by a need to engage with such a broad strnd of popular opinion to see if it is poosible to view the world as it is and could be - not how it should be.
@Paul Hunt,
Hi Paul,
No, I'm not anonymous, (I'm aware of the irony in that using a pseudonym I am essentially anonymous). However, I am not the above poster.
Regarding his/her post, and your subsequent post, I will say this:
1. anon is essentially correct in pointing out the irony of you labelling the left as dogmatic, whilst trotting out such cliche'd positions above.
2. what you say is invariably so cliche'd as to be almost meaningless.
3. you invariably try to paint a picture of yourself as this reasonable champion of the common mans cherished beliefs, and by extension whoever debates with you as against such beliefs. But you've never to my knowledge stated what those beliefs are.
4. you mention evidence being rejected, but don't say what evidence. You mention it twice in your post above, including to suggest once again, that there is an anti-democratic bias on the left. Where? Seriously???
I post anonymously, because a. I'm not an economist and b. really am just a disgruntled observer. I read a lot, and query much. Fundamentally I'm conservative by nature, but believe that my well being and my families well being is intimately tied up with my neighbours (neighbours meant in the broadest sense). What dragged me to comment in the first place was your commentary, which I found utterly annoying. Not because I'm an ideologue, which you've repeatedly asserted, (I have an above average interest in what's going on, and have a left-ward bent), but because you often appear to be engaged in a bait and switch type of debate. You're always trying to get people to say what they're not. And, you never answer a question.
I'll quote Thatcher, who whilst she repelled me with her vision of society, often spoke sense:
"To me, consensus seems to be the process of abandoning all beliefs, principles, values and policies. So it is something in which no one believes and to which no one objects. If you just set out to be liked, you would be prepared to compromise on anything at any time, and you would achieve nothing."
Ultimately, the impression I always get from your posts is that you wish such a consensus on the left.
@disgruntled,
I expect we'll have to agree to disagree. The problem is that the post-war Keynesian consensus broke down because governments, rather than applying a counter-cyclical fiscal policy (as Keynes hoped and assumed), decided to solve every problem and meet every demand from a pressure group by throwing money at them. (The Johnson administration's authorisation of dollar-printing to finance the Vietnam war, Nixon's decision to drop the dollar's fixed convertibility to gold and the first OPEC oil price rise horribly revealed the long-standing policy flaws.)
This allowed the Neocons to build and establish their dominance over a period of 30 years from the mid 1970s. And, in anumber of respects, they have had the better of the argument and been able to lure voters with progressive, liberal instincts into their camp. Centre or left-of-centre governments (such as Clinton's or Blair's) were forced to kow-tow before the Neocons household gods. The left has retreated holding on to a naive belief in universal, if sometimes suppressed, altruism as the fundamantal driver of human behaviour and an equally dogged determination to maintain public transfers and to protect any improvements in worker pay and conditions irrespective of any embedded inefficiencies or the resulting cost impact on consumers (in terms of higher taxes, higher charges or poorer service).
I'm sure you observe the continuing dominance of right and centre-right governments throughout the EU, the inexorable decline of left and centre-left parties as a viable governing alternative and the more frightening rise of nationalistic, xenophobic, populist parties. Maybe you think one big, concerted heave by the left will change the political landscape - and good luck if you do. But I don't see it happening and that's why I argue for principled engagement with the liberal.progressive centre.
Hi Paul,
I've looked hard to find that progressive centre of which you speak. I note on irisheconomy.ie and eurointelligence, that Kevin O'Rourke uses Dani Rodriks policy trilemma as a useful framework. Yves Smith has also written at length on this. Well, I concur with him. Democracy has been utterly subverted by the process of globalisation, and the debate here reflects that in a way that would utterly bemuse those outside the country. Where else would a low corporate tax be seen by almost all as an existential condition? (Note, corporate taxes in the US, post world war II were half again as large as income tax).
You see, as a self declared 'progressive left of centre' voter, I voted predominantly for Labour in the previous elections. I'm wondering who do I vote for in the next elections?
I never agreed to the transfer of €100,000,000,000 of public money to private institutions. I do not/cannot support the reductions in conditions of labour in the retail/hospitality industry. What of the lack of a property tax? Do we even have an inheritance tax? Are these even or realistically on the agenda? Does the 'progressive centre' even advocate the introduction/strenghtening of such taxes? No, for what it is, it does not.
You argue for a principled engagement with the liberal.progressive centre. But for me the operative term is principled. I noted something once whilst watching Euronews (a few years ago). There was an election on in Denmark at the time. And there was a senior figure in the opposition party advocating the raising of taxes, prior to an election with more or less these words: "we have a choice, to continue providing this level of public services we need to raise taxes." I was struck by the willingness to make such an argument at election time. Here we cannot even hold fast to such ideas as taxing wealth.
You write often about government inefficiencies and inadequacies. About how the left is doomed to failure due to it's naive belief's in government's abilities to solve all problems and altruism as a fundamental driver of human behaviour. I'm not one who believes either of those propositions. However, I think you vastly underestimate the potential role of the state, and also the willingness of the public to hear of the benefits of an alternative course. As I see it, lots of spurious evidence has been presented over the years as to why taxing wealth impacts everyone negatively. The countervailing argument that taxing wealth may impact everyone positively is derided as idiocy, naivity, heresy, (choose your superlative) and generally without evidence.
Considering the chorus, is it really a surprise that people hold the views they hold?
I've written about the top tax rate in the US, post Great Depression. An interesting argument, and one I've never heard here is that such great increases in taxes could actually corelate with higher GDP growth. I'll repeat that: there is a positive relationship between high taxes on high income and wealth and GDP growth. You know, it's an argument I wish someone would make.
See:
http://www.presimetrics.com/blog/?p=253
You know in all this sound and fury, we may well agree on an awful lot, however, I cannot agree that if you believe something is true/right, you should alter your beliefs to suit some nebulous concept as a 'progressive centre'. It does nothing for democracy. And so far it's cost us €100,000,000,000, and impacted on our ability to get out of our hole. And that cost is going to keep rising.
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