Institute for New Economic Thinking

Written By: - Date published: 10:30 am, December 23rd, 2010 - 3 comments
Categories: Economy, Keynes - Tags: ,

All those who think Keynes is dead (and those who merely wondered what happened to him) should check out the website of George Soros’s Institute for New Economic Thinking (INET). A remarkable range of economic luminaries are presented on video and powerpoint, most or all of them arguing for a radical Keynesian solution to the financial crisis, in the form of an expansion of public spending, mainly focused on remedying the accumulated social deficit of the last few decades, for instance affordable housing and transport infrastructure.

The current austerity policies being pursued by European politicians and advocated by US Teabaggers will fail, and once they do fail, it will be an end to ‘business as usual’.

It may also be an end to politics as usual, depending on how corrupt the current political party systems are seen to be by that time.

Some of the presentations are a little academic, but most of the ones that I have seen could be grasped by the intelligent ordinary viewer. I would recommend people to start with the video presentation and powerpoint of Richard Woo, which can be found on the link at the first INET conference, held at King’s College Cambridge in April 2010.

One thing that comes across as remarkable is how radical even mainstream public servants, such as the British chief financial regulator Lord Turner, now sound compared to local equivalents such as Bollard and Brash. Turner calls for a serious wing-clipping of the real estate sector, which he describes as being behind “every” banking crisis in recent memory, in the sense that that bank lending drives up the values of real estate assets and at the sime time drives the banks to over-extend themselves in a largely unproductive sector. According to Lord Turner, the real challenge is to break the bank / real estate nexus. And that’s the cautious civil service view!

In effect, it seems that a Gorbachev moment has now come to the heartlands of neoliberalism, while New Zealand remains a kind of East Germany by comparison.

3 comments on “Institute for New Economic Thinking ”

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  1. Bored 1
    23 December 2010 at 4:52 pm

    In effect, it seems that a Gorbachev moment has now come to the heartlands of neoliberalism, while New Zealand remains a kind of East Germany by comparison. No advances upon a Polish shipyard it would seem…..26 years of neo liberalism, yippeee!!!!!!!!!!

  2. Jenny 2
    23 December 2010 at 5:30 pm

    From Bill Rosenberg today

    Inequality, bargaining power, debt and financial crises

    With no Economic Bulletin this month, here is some remarkable thinking to ponder on during the break.

    The International Monetary Fund (IMF) – the citadel and enforcer of neoliberalism – is doing some rethinking. This example is worth pondering. The attached magazine article outlines the thinking, and it goes like this.

    Income inequalities have built up enormously over the last few years in the US. Wage earners have compensated for stagnating or falling incomes by borrowing. The 5 percent of the population who have become fantastically rich can’t spend all the money pouring in so they lend much of it to the other 95 percent. So the other 95 percent have become increasingly indebted – and many of them cannot repay it because of their low incomes. Hence the debt crisis. Debt crises will continue as long as this level of inequality continues. Even large scale defaults on loans (such as mortgage defaults) will only give temporary relief. The only way to fix the problem sustainably is to restore the bargaining power of wage earners, for example by strengthening collective bargaining rights.

    While this is currently only a model and needs to be extended to an open economy, there is good evidence for it. It adds to the credibility of the analyses and views of prominent economists such as Paul Krugman, Raghuram Rajan, Robert Reich and Robert Wade linking increasing debt, inequality and crises.

    We don’t have the data to do a similar analysis of New Zealand, but it should be considered. Our household debt situation is probably fuelled as much by plentiful supplies of international funds as lending by the wealthy local beneficiaries of our growing inequality. It may have been moderated by more generous transfers through the social welfare system than in the US. We addressed these issues in the CTU submission to the Savings Working Group – see http://union.org.nz/savings.

    If you are interested in the full technical paper from the IMF, which has more factual detail and the full theoretical model, see http://www.imf.org/external/pubs/ft/wp/2010/wp10268.pdf

    Regards

    Bill

    Dr Bill Rosenberg,
    Policy Director/Economist,
    New Zealand Council of Trade Unions, Te Kauae Kaimahi,
    178 Willis St,
    Education House, Level 7,
    PO Box 6645,
    Wellington 6141,
    New Zealand.
    Web site: union.org.nz
    [redacted]

    [lpent: don’t put phone numbers email addressees on the site. And put spaces in front of web addresses. Fixed both.]

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