Mariana Mazzucato, Professor of the Economics of Innovation at the Science Policy Research Unit of the University of Sussex and author of The Entrepreneurial State: debunking public vs. private sector myths, has made a passionate case for the government’s active role in the economy —sending the old laissez faire notion that markets can run themselves into the dustbin where it belongs. In a new book co-edited with Michael Jacobs, Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth, she offers a bold new vision for contemporary capitalism that works for the people and the planet. What chance does this vision have in the age of Trump and Brexit? Mazzucato shares her view in this interview with Lynn Parramore
“If we want growth today to be more innovation-driven, more inclusive and more sustainable, then we need a more active state — not a less active one. Yet we still hear the dogma that we should just fix market failure by focusing on science and infrastructure, and to ‘level the playing field.’”
If our national Government was to spend more than the currently budgeted amount on your health care system next year, it would be good to know how they would finance that spending. It is a question…
Source: Paying for public services, in a monetary sovereign state
Tis wisely said, “you can take a horse to water but you cannot make it drink”. In the absence of growing demand for their products, there is no reason to expect that business will respond to a tax cut by investing in expanded productive capacity. Any additional after-tax profit is just as likely to be used for buying residential real estate – precisely what an already speculation-prone economy and society does not need!…
The government’s so-called ‘economic plan’ does not stand up to critical scrutiny. It looks particularly ill-suited to the economic conditions that the nation faces in the aftermath of the local mining boom and the continuing financial instability on a global scale. There is little ‘on the table’ that provides an affective antidote or alternative. Rather, we are being offered continuity in the form of ‘trickle-down economics’. This is the belief that giving wealthy people even more income will eventually benefit everyone. It is a self-serving elite ideology, rather than sound economics. It was deeply embedded in the policies of US President Ronald Reagan, for example, emphasising tax cuts for the wealthy as a means of creating more incentives for wealth-creating private enterprise. Reaganomics caused both economic inequality and the budget deficit to surge. Are we doomed to re-run this failed policy?
The Coalition’s oft-restated commitment to ‘jobs and growth’ is an Abbott-style three word slogan, hitched to a give-away to the big end of town in the form of business tax cuts and some assorted policies that intensify economic inequalities. When the promised surge in ‘jobs and growth’ fails to materialise, the government will have three options: (1) abandon any claims about its capacity to undertake ‘budget repair’, (2) engage in big cuts to social services, health and education in the attempt to get the government budget back into surplus, and/or (3) raise the rate of taxation on goods and services (GST).
No-one knows for sure what the future will bring, but it is hard to take the government’s ‘economic plan’ seriously without also mentioning the tooth fairy or the prospect that pigs might fly…
READ THE FULL ARTICLE HERE
Mainstream economics is terrible at understanding the reality of human behaviour. Now, even the respected thinker Paul Romer is calling for change says Paul Mason
Romer’s huge mea culpa on behalf of mainstream economics is a sign that, after a decade-long hunt for trolls and gremlins as the cause of crisis, academia now has to begin the search for the cause of instablity inside the system, not outside it. My hunch is that the answer lies in large, agent-based simulations, in which millions of virtual people take random decisions driven by irrational urges – such as sex and altruism – not just the pursuit of wealth
Alan Nasser explains How Modern Money Works.
Modern Monetary Theory has one of it’s best exponents at Australia’s Newcastle University in Bill Mitchell. Alan Nasser here sets out the myths about government taxing and spending we are seemingly trapped with. Left wing economists as much as others, and why this is keeping us in the neo-liberal moment.
As Keynes put it, “Anything we can actually do we can afford. Once done it is there. Nothing can take it away from us.” He also said in the Treatise On Money
“[I]f the banks can create credit, (why) should they refuse any reasonable request for it? And why should they charge a fee for what costs them little or nothing?”
An excellent summary of what is wrong with our approach to economics by Beth Webster
Back in the good old days of the 19th century when market economies oscillated between boom and prolonged recession, economists believed that nations were like households. They had to balance their budgets. If they spent more in one year they would have to save more the next to pay off the debt. Sound advice for a household. But not so for an economy as a whole.
Welcome to the Keynesian revolution
Keynes proved this in 1936, and subsequently governments followed this theory to get their economies out of depression and onto the long economic boom that lasted until the mid-1970s.
What stops this downward spiral? There needs to be an external injection of spending into the system. This is the essential Keynesian message. By external, we mean something that does not originate from employees (householders) or the investment community. It has to come from either the government in the form of perpetual budget deficits or perpetual exports.
Exports are not the answer At the end of the day, the stimulus to incomes has to come from governments who control the money supply and can thus spend without having to borrow. Essentially, they can monetise the debt. They do not have to pay this debt back – it is spending financed by central banks. The point is that if the government adds to spending (and production) without extracting an income for itself, it allows investors to realise the minimum rate of profit necessary for them to invest again.
This is what occurred for the 25 years following WWII. So what stopped it?
Inflation. Inflation instigated by a series of oil price shocks but then prolonged by excessive government spending in the US to finance the Vietnam war. Governments in the late 1970s and 1980s reacted to inflation by drastically cutting spending. But the rate of inflation did not fall until the price of oil fell in the 1990s and China flooded the world with cheap manufactured goods. Certainly, if an expansion of the money supply is excessive we will get inflation. But taken to an extreme in the other direction, we get low growth and unemployment.
Where do you think we are in 2016? With 700,000 official unemployed, close to another 700,000 under-employed, and an inflation rate below 2%, I would say we are swung too far to the parsimonious side. It is all about balance. It should not be about blind and mechanical fear mongering about government budget deficits. The current political debate is on level with a Tony-Abbott-climate-change debate. Misguided, low brow and damaging to the well-being of many people.
The problems in Australia’s manufacturing sector are well-known, and many Australians have concluded that the decline in manufacturing is inevitable and universal: that high-wage countries like Australia must accept the loss of manufacturing as an economic reality. But international statistics disprove this pessimism. Worldwide, manufacturing is growing, not shrinking, including in many advanced high-wage countries.
Australians are purchasing more manufactured products, not less. Manufacturing is not an “old” industry: it is in fact the most innovation-intensive sector of the entire economy, generating better-than-average productivity growth, good jobs, and exports. Most importantly, manufacturing possesses several key structural features that make it vital to the economic success of any economy – including Australia’s. JIM STANFORD documents the damaging decline of Australian manufacturing, a decline that has accelerated in recent years. It explains the unique features of manufacturing (including innovation-intensity, productivity, income-generating capacity, export-orientation, and complex supply chains) that endow it with a national economic importance. It shows that Australia has done much worse than other high-wage countries (even smaller more remote ones) at maintaining manufacturing: in fact, manufacturing employment is now smaller as a share of total employment in Australia than in any other advanced country (even Luxembourg!).