Addressing the Pandemic in the Philippines Necessitates a New Economic Paradigm

Rodrigo_Duterte_delivers_his_message_to_the_Filipino_community_in_Vietnam_during_a_meeting_on_September_28In his late-night Talk to the Nation on COVID-19 on 6 April, Rodrigo Duterte, the populist President of the Philippines, echoed the affirmation of leaders from rich countries in North America, Europe, and Asia: to do “whatever it takes” for the economy to survive the pandemic. The problem, however, is that, on his own admission, Duterte is incompetent in economics. His stubbornly militaristic mindset and police-centric approach to governance is even more problematic when dealing with complex developmental causes and impacts of the coronavirus outbreak.

Yet the Philippine state’s inadequate institutional capacity to respond to the epidemic goes deeper. Given the national economy’s position in the hierarchical global economic system, its structural weaknesses impacts on how effective the government’s response can be. The current mainstream approaches to resolve the pandemic and the multiple crises of capitalism would fail to address the convoluted historical process of maldevelopment of the Philippines. Thus, a radical political strategy with a new economic paradigm for post-pandemic reconstruction is needed.    Read More »

The currency hierarchy and the role of the dollar as world money

dollar-1445476_1920There has recently been much talk that the hegemony of the United States is crumbling, from the decline in its share of world GDP to its possible submission to a new economic power such as China. However, little has been said about the fundamental pillar that sustains the power of the United States, the US dollar.

Globally, the dollar is the most utilized currency, both in trade in products and services and in cross-border financial operations. Given the continued dominance of the US dollar as the key currency of the international monetary system, it is difficult to speak of a declining US hegemony. But how to explain the power of the dollar and the apparent immunity of the United States hegemony in times of financialization?Read More »

Lost in Technicalities: The Great Indian Slowdown

India’s Finance Minister Nirmala Sitharaman has said, while replying to a discussion on the economic slowdown in the Rajya Sabha, ‘growth may have come down, but it is not a recession yet and it won’t be a recession ever’. Drawing on data up until December 2019, I evaluate to what extent India’s economy is indeed slowing down.

Figure 1: Quarterly Rate of Growth of GDP in IndiaScreenshot 2020-01-21 at 09.42.32

No, it’s not a recession, defined strictly in technical terms, i.e. on the whole, the level of activity hasn’t fallen, even though certain crucial sectors, like automobiles, are seeing a fall. What we have instead is a slow down, a severe one at that, with falling rate of growth of GDP for five straight quarters (figure 1). The Indian government is hiding behind economic jargon to obfuscate the reality that is biting the economy. The writing is on the wall. The Indian economy is facing a severe crisis and the sooner we come to terms with it, the better. Based on a recent paper in Economic and Political Weekly, this blog discusses the changing growth levels in the Indian economy, the reasons for the recent slowdown, and some possible short and long term solutions.Read More »

Brexit’s Keynesian Lesson: Fundamental Uncertainty Revisited

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“About these matters there is no scientific basis on which to form any calculable probability whatever. We simply do not know.”

An economist’s words but not meant to be a description of where things stand today in the aftermath of the Brexit referendum, though they might as well be. These are Keynes’s words from a 1937 article following the publication of his magnum opus, The General Theory of Employment, Interest and Money in 1936.Read More »

Secular Stagnation: Short-term Fixes for Long-term Problems

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The concept of secular stagnation, first propounded by Alvin Hansen in the 1930s, has enjoyed an academic – and mainstream – resurrection thanks to Lawrence Summers (2014, 2016), who first advanced the theory as an explanation for the subdued recovery and anaemic growth prospects of advanced economies. A surprising criticism recently came from Joseph Stiglitz (August, 2018), who believes that the theory offers a convenient escape away from assuming responsibility for failed policy during the crisis.  An acrimonious debate between Summers and Stiglitz followed.  

On the face of it, Summers – and Gauti Eggertson – are right: the modern theory of secular stagnation does see a central and substantial role for fiscal policy. The problem, however, lies in the fact that a short-term fix for aggregate demand shortfalls – fiscal policy – is being advanced as a long-term solution of the problem of reduced growth prospects. The central question of what drives investment in a capitalist economy is not addressed.Read More »

Keynes or New-Keynesian: Why Not Teach Both?

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For economists, the Great Recession, the worst crisis the world economy has seen since the Great Depression of the 1930s, has highlighted the need for plurality in macroeconomics education. Ironically, however, there is a move towards greater insularity from alternative or contrasting points of view. Where as, what is required for vibrant policy making is an open-minded academic engagement between contesting viewpoints. In fact, there does not even exist a textbook which contrasts these contesting ideas in a tractable manner. This blog post is as an attempt to provide certain pointers towards developing macroeconomics in a unified framework.

Macroeconomics as a subject proper came into existence with the writings of John Maynard Keynes[i]. There were debates during his time about how to characterise a capitalist economy, most of which are still a part of the discussion among economists. Keynes argued that capitalism is a fundamentally unstable system so the state needs to intervene to control this instability.Read More »

The Financialization Response to Economic Disequilibria: European and Latin American Experiences

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Book review of N. Levy-Orlik & E Ortiz (2016), The Financialization Response to Economic Disequilibria: European and Latin American Experiences, Edward Elgar Publishing: Cheltenham UK

Levy and Ortiz’s The Financialization Response to Economic Disequilibria is a timely book. It critiques mainstream economic theory and its limitations in explaining how economic conditions change or the transition from one state of equilibrium to another. Its analyses rely on Keynes, Kalecki, Kaldor, Minsky, Prebish, Furtado, and Marxists such as Luxemburg, Marini and Lapavitsas. Macroeconomic teachers interested in a heterodox approach may benefit from Levy and Ortiz’s book as complementary material with experiences showing the dysfunctionality of the global economy from the specific prism of financial disequilibria.

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