LONDON – Bad economics breeds bad politics. The global financial crisis, and the botched recovery thereafter, put wind in the sails of political extremism. Between 2007 and 2016, support for extremist parties in Europe doubled. France’s National Rally (formerly the National Front), Germany’s Alternative für Deutschland (AfD), Italy’s League party, the Freedom Party of Austria (FPÖ), and the Sweden Democrats have all made electoral gains in the past two years. And I haven’t even mentioned Donald Trump or Brexit.
Over the weekend, just ten years ago, the investment firm Lehman Bros collapsed, and the world economy collapsed after it. I feel a little reluctant to add to the torrent of words trying to read the runes of this catastrophe for the better management of affairs in the future.
But, by chance or cunning, a book of mine, called Money and Government: A challenge to mainstream economics, has just been published. This tries to set the collapse of 2008 in a historical context. It has been inspired by John Maynard Keynes, who believed that the collapse of the 1930s needed the response of a new economic theory, and a new, or rather very old, conception of statecraft.
LONDON – Liberal revulsion at US President Donald Trump’s mendacious and uncouth politics has spilled over into a rigid defense of market-led globalization. To the liberal, free trade in goods and services and free movement of capital and labor are integrally linked to liberal politics. Trump’s “America First” protectionism is inseparable from his diseased politics.
LONDON – Since June 23, 2016, when 52% of British voters backed withdrawing from the European Union, the “Brexit” debate has been tearing British politics apart. Although the Brexit referendum was non-binding, then-Prime Minister David Cameron’s government, expecting a vote in favor of “Remain,” had promised to honor the result. Britain, late to join the EU, will be the first member state to leave it, with the exit date set for March 2019.
LONDON – The fixation on the ongoing World Cup, during which an estimated one million foreign football fans, many from Europe and the United States, are expected to converge on Moscow and other Russian cities, risks masking the extent to which Russia and the West have drifted apart. In fact, relations between the two sides nowadays are purely functional; a new Cold War has started.
LONDON – Slumps have always been boom times for monetary experiments, and the economic collapse of 2008-2009 was no different. Underlying this recurrence is the instinctive feeling that economic calamities must have monetary causes, and therefore monetary remedies. There is either too much money, which causes inflation, or too little, which leads to depression. So the aim of monetary reformers –among whom are always a large number of quacks and cranks – has been to “keep money in order” and prevent its gyrations from disturbing the “real” economy of production and trade.
LONDON – Not so long ago, there were two competing explanations of unemployment. The first was the Keynesian theory of deficient demand, which holds that workers become unemployed “involuntarily” when their community lacks the money to buy the goods and services they produce. The second was the view often associated with the Chicago School, according to which unemployment is a voluntary choice of leisure over work at whatever the offered wage.