Monday, December 9, 2019

Bill Mitchell— Free flows of capital do not increase output but do increase inequality

There was an IMF paper released in April 2018 – The Aggregate and Distributional Effects of Financial Globalization: Evidence from Macro and Sectoral Data – that had a long title but a fairly succinct message. It indicates that the IMF is still in a sort of schizoid process where the evidential base has built up so against the political voice and practice that the IMF has indulged itself as a front-line neoliberal attack dog that elements in its research division are breaking ranks and revealing interesting information. In part, the Brexit debate in Britain has been characterised by economists supporting the Remain argument claiming that free capital flows within Europe (and Britain) are the vehicle for strong output growth and better living standards. They claim that when Britain leaves the EU global capital flows will be more restricted in and out of Britain and that will be damaging. It is really just a rehearsal of the standard mainstream economic claims found in monetary, trade and macroeconomics textbooks. What the IMF paper does is provide what they call a “fresh look at the at the aggregate and distributional effects of policies to liberalize international capital flows” and the researchers find that, “financial globalization … have led on average to limited output gains while contributing to significant increases in inequality”. That is, the pie hasn’t really grown much as a result of all these free trade moves but a growing share is being taken by an increasingly wealthier few. And workers are the losers....
Bill Mitchell – billy blog
Free flows of capital do not increase output but do increase inequality
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia


Andrew Anderson said...

but do increase inequality"

So do government privileges for depository institutions and MMT solutions I've seen so far would INCREASE government privileges.*

*e.g. unlimited deposit guarantees FOR FREE.
e.g. unlimited, unsecured loans from the Central Bank at ZERO percent interest.

Matt Franko said...

Yo The loans are only for Reserve Assets to comply with govt Reserve regulatory requirement (min % of deposit liability) and they’re at 1.5%