Tuesday, August 25, 2009

James K. Galbraith On The Current Situation

James K. Galbraith has issued a white paper based on a meeting that occurred in Paris at the Mayer Foundation this past June. It is entitled "Financial and Monetary Issues as the Crisis Unfolds," and is available at either http://www.epsusa.org/projects/crisisworkinggroups/financeandbanking.htm or http://www.levy.org/vtype.aspx?doctype=9. It is about 9,000 words in total, and the report concludes as follows:
In brief conclusion, the group of experts convened in Paris in June warns that the crisis is not over, that policies so far set in motion are not sufficient, and that the goals set by the authorities so far, which amount to a restoration of previous conditions, are neither desirable nor possible. It is time now to begin to take account of the irreversible characteristics of recent events, to chart a course of new construction instead of reconstruction, and to build the domestic and financial monetary institutions and safeguards necessary to make it possible to pursue that course.


Sandwichman said...

JKG wrote: "The United States can (and will) continue to supply the main global reserve asset, running a trade deficit to match. But it would be highly desirable to supply additional reserves, and hence to fund additional activity
demand, through an alternative asset, channeled mainly through regional institutions and deployed mainly in the not-for-profit and non-traded-goods sectors."

Anti-matter? It would be mucho helpful if the experts could give us ordinary folks an example of such an alternative, not-for-profit, non-traded-goods sector reserve asset.

Myrtle Blackwood said...

Jamie Galbraith wrote:
"“A still larger issue concerns the backdrop of the Kondratieff cycle: the long waves of technical change that generally underlie major economic depressions. In the slump, governments come under pressure to save fading or dying industries, such as automobiles -- an industry based on a nineteenth century combustion engine and the eternal promise of cheap oil. Meanwhile they fail to put resources behind the sectors whose growth is most promising – notably sustainable energy, greenhouse gas reductions and public health. In these matters, organized politics and rational foresight stand at cross purposes, and the cause of economic recovery is not served.”

I tend to think that this crisis is the end-game of capitalism itself. Well, forms of capitalism will probably always be around but I can't see it being maintained on any real scale for a long time. These so-called 'non-recourse loans' (bailouts now spread over decades and steadily increasing in size )could be interpreted as major signs of capitalism's demise.

"over 500 years the three basic costs of capitalist production - personnel, inputs, and taxation - have steadily risen as a percentage of possible sales price, such that today they make it impossible to obtain the large profits from quasi-monopolized production that have always been the basis of significant capital accumulation. It is not because capitalism is failing at what it does best. It is precisely because it has been doing it so well that it has finally undermined the basis of future accumulation...."

"The Depression: A Long-Term View"
Fernand Braudel Center, Binghamton University
Commentary No. 243, Oct. 15, 2008

Myrtle Blackwood said...

Galbraith's paper is much longer and much more in-depth than I anticipated.

Calame's ideas are interesting. Do they herald the end of capitalism if implemented?

"Calame placed before the group principles for an accounting framework that could lead toward a sustainable system. These involved distinguishing between four basic classes of goods:

– those “that are destroyed when shared” – the historical tragedy of the commons, and in our time most pressingly the planet itself. This domain requires the imposition of common regulation, with the goal of preserving the balance between human activity and nature.

– those “that are divided, when shared, in fixed quantities” – the case of non-renewable resources, for which the use by some precludes the use by others. These require an accounting framework based in part on principles of justice. Purchasing power at a given moment is not an adequate justification for the using up of
resources that, when used, are gone for all time.

– those “that are divided, when shared, but reproducible.” These are, like common services and artistic endeavor, mainly the product of human energy and skill. They are the proper domain of the market and of
conventional national income accounting, whose purpose is to assure the full utilization of human resources.

– those “that are multiplied when shared.” These are primarily the fruits of new knowledge, whose production society should encourage (by maximum emphasis on education and research), and whose wide distribution per se serves public purpose and social welfare.

Reminds me of the ancient Roman classification for goods - public, private and common. And then Schumaker's observations about agriculture being a 'living' thing. Not amenable to modern industrial processes.

Myrtle Blackwood said...

One last comment before bed. The following statement by Jamie Galbraith strikes me as politically naive:

"A central dilemma of globalization is that finance escapes from national systems of regulation far more easily than any other activity. It is in the nature of financial transactions that they can be relocated instantly, and often clandestinely, in order to avoid the scrutiny of regulators. "

Finance has been a key tool for states such as the US and Britain to engage in modern day forms of imperialism. Debt colonialisation has been the means to grab resources and monopolise them. The large corporations have done the bidding of Western governments and vice-versa.

John Perkins spells it out in 'Confessions of an Economic Hit Man'. (2004).

Richard Barnet and Ronald Muller observed the same process in their 1974 book: 'Global Reach'.

Perpetual economic war.

An armed conflict between nations horrifies us. But the economic war is no better than an armed conflict. This is like a surgical operation. An economic war is prolonged torture. And its ravages are no less terrible than those depicted in the literature on war properly so called. We think nothing of the other because we are used to its deadly effects . . . . The movement against war is sound. I pray for its success. But I cannot help the gnawing fear that the movement will fail if it does not touch the root of all evil - human greed”. M.K.Gandhi, 1926