Trumponomics: causes and consequences – Part I – RWER issue no. 78

Auerback, Galbraith, Hudson, Kelton, Wray, Tcherneva provide an MMT-based critique of Trumponomics. 

Real-World Economics Review Blog
Trumponomics: causes and consequences – Part I – RWER issue no. 78

download whole issue

Preface          download pdf

Trumponomics: everything to fear including fear itself?          3
Jamie Morgan          download pdf                                                                           

Can Trump overcome secular stagnation?          20
James K. Galbraith            download pdf                              

Trump through a Polanyi lens: considering community well-being          28
Anne Mayhew            download pdf                                                                                    

Trump is Obama’s legacy. Will this break up the Democratic Party?          36
Michael Hudson          download pdf

Causes and consequences of President Donald Trump          44
Ann Pettifor               download pdf                                 

Explaining the rise of Donald Trump          54
Marshall Auerback          download pdf 

Class and Trumponomics          62
David F. Ruccio          download pdf 

Trump’s Growthism: its roots in neoclassical economic theory          86
Herman Daly          download pdf 

Trumponomics: causes and prospects          98
L. Randall Wray          download pdf 

The fall of the US middle class and the hair-raising ascent of Donald Trump
Steven Pressman          download pdf          112

Mourning in America: the corporate/government/media complex          125
Neva Goodwin          download pdf 

How the Donald can save America from capital despotism          132
Stephen T. Ziliak          download pdf 

Prolegomenon to a defense of the City of Gold          141
David A. Westbrook          download pdf 

Trump’s bait and switch: job creation in the midst of welfare state sabotage
Pavlina R. Tcherneva           download pdf          148

Can ‘Trumponomics’ extend the recovery?          159
Stephanie Kelton           download pdf 

Board of Editors, past contributors, submissions and etc.          173

Michael Hudson — Review of James Galbraith, Welcome to the Poisoned Chalice (2016)

Galbraith expressed his “epiphany” already in 2010 that a “market-based” solution was a euphemism for anti-labor austerity and a reversal of political democracy. “In a successful financial system, there must be a state larger than any market. That state must have monetary control – as the Federal Reserve does, without question, in the Untied States.” 

That was what many Europeans a generation ago expected – for the EU to sponsor a mixed public/private economy in the progressive 20th-century tradition. But instead of an emerging “European superstate” run by elected representatives empowered to promote economic recovery and growth by writing down debts in order to revive employment, the Eurozone is being run by the troika on behalf of bondholders and banks. ECB and EU technocrats are serving these creditor interests, not those of the increasingly indebted population, business and governments. The only real integration has been financial, empowering the ECB to override national sovereignty to dictate public spending and tax policy. And what they dictate is austerity and economic shrinkage.…

“Europe has devoted enormous effort to create a ‘single market’ without enlarging any state, and while pretending that the Central Bank cannot provide new money to the system.” Without monetizing deficits, budgets must be cut and the public domain sold off, with banks and bondholders in charge of resource allocation.

As long as “the market” means keeping the high debt overhead in place, the economy will be sacrificed to creditors. Their debt claims will dominate the market and, under EU and ECB rules, will also dominate the state instead of the state controlling the financial system or even tax policy.

Galbraith calls this financial warfare totalitarian, and writes that while its philosophical father is Frederick Hayek, the political forbear of this market Bolshevism is Stalin. The result is a crisis that “will continue, until Europe changes its mind. It will continue until the forces that built the welfare state in the first place rise up to defend it.”

To prevent such a progressive policy revival, the troika promotes regime change in recalcitrant economies, such as it deemed Syriza to be for trying to resist creditor commitments to austerity. Crushing Greece’s Syriza coalition was openly discussed throughout Europe as a dress rehearsal for blocking the Left from supporting its arguments. “Governments from the Left, no matter how free from corruption, no matter how pro-European,” Galbraith concludes, “are not acceptable to the community of creditors and institutions that make up the European system.” …

Galbraith’s month-by-month narrative describes how the IMF and ECB overrode Greek democracy on behalf of creditors and privatizers. They sought to undermine the Syriza government from the outset, making Greece an object lesson to deter thoughts by Podemos in Spain and similar parties in Portugal and Italy that they could resist the creditor grab to extract payment by a privatization grab and at the cost of pension funds and social spending. By contrast, conciliatory favoritism has been shown to right-wing European parties in order to keep them in power against the left.…

The arena of conflict and rivalry has shifted from the military to the financial battlefield. Along with the IMF and ECB, central banks across the world are notorious for opposing democratic authority to tax and regulate economies. The financial sector’s policy of leaving money and credit allocation to banks and bondholders calls for blocking public money creation. This leaves the financial sector as the economy’s central planner. 

The euro’s creation can best be viewed as a legalistic coup d’état to replace national parliaments with a coterie of financial managers acting on behalf of creditors, drawn largely from the ranks of investment bankers. Tax policy, regulatory and pension policies are assigned to these unelected central planners. Empowered to override sovereign self-determination and national referendums on economic and social policy, their policy prescription is to impose austerity and force privatization selloffs that are basically foreclosures on indebted economies. Galbraith rightly calls this financial colonialism.…

At first glance the repeated “failure” of austerity prescriptions to “help economies recover” seems to be insanity – defined as doing the same thing again and again, hoping that the result may be different. But what if the financial planners are not insane? What if they simply seek professional success by rationalizing politics favored by the vested interests that employ them, headed by the IMF, central bankers and the policy think tanks and business schools they sponsor? The effects of pro-creditor policies have become so constant over so many decades that it now must be seen as deliberate, not a mistake that can be fixed by pointing out a more realistic body of economics (which already was available in the 1920s).…

The EU cannot be “fixed” by marginal reforms. Greece’s treatment shows that it must be recast – or else, countries will start leaving in order to restore parliamentary democracy and retain what remains of their sovereignty. The financial sector’s ideal is for economies centrally planned by bankers, leaving no public infrastructure unappropriated. Privatized economies are to be financialized into opportunities to extract monopoly rent.

The gauntlet has been thrown down, posing a question today much like that of the 1930s: Will the alternative to austerity, debt deflation and the resulting economic breakdown be resolved by a pro-labor socialist alternative, or will it lead to a victory by anti-European right-wing parties?….

Not difficult to see where this is headed. The Left and it's chance and blew. Now it the Right's turn.

Michael Hudson
Review of James Galbraith, Welcome to the Poisoned Chalice (2016)

Yanis Varoufakis — Galbraith’s letter to Kathimerini: Let’s talk about academic-journalistic ethics, shall we?

Spat in progress. 

Yanis Varoufakis
Galbraith’s letter to Kathimerini: Let’s talk about academic-journalistic ethics, shall we?

Sandwichman — The Iatrogenic and Incoherent "Theory" of Flexibility

Sandwichman hits it out of the park. Contains some choice references.

EconoSpeak
The Iatrogenic and Incoherent "Theory" of Flexibility
Sandwichman

Dylan Matthews — Donald Trump on the debt: "You never have to default because you print the money” – Updated

Trump's latest comments suggest that he grasps this notion. In doing so, he's echoing a heterodox left-wing economics movement that's gotten some buy-in from Bernie Sanders as well: modern monetary theory….

Vox
Donald Trump on the debt: "You never have to default because you print the money”

Dylan Matthews

UPDATE: MMT economist Scott Fullwiler is on this at Twitter.

Scott Fullwiler @stf18

Barkley Rosser — The Revenge Of Joan Robinson: Capital Theory Controversies Revive

It was just two years ago that Thomas Piketty's book, Capital, made the best seller lists. Right now considerable attention is being paid to Anwar Shaikh's voluminous magnum opus, Capitalism. Both of these books take as their central issue that of the underlying forces driving secular trends in income distribution, particularly the division between wage incomes and profit or interest-based incomes.

Curiously, Piketty's theory remains firmly in the neoclassical camp regarding the questions raised by the old Cambridge, England school. He notes those controversies, but more or less dismisses them, perhaps reflecting the influence of being at MIT for a long period of time, even as he mocks excessive mathematical abstraction of much of modern growth theory. Jamie Galbraith and others, including Shaikh, have taken Piketty to task for his dismissal of the issues raised by those old controversies,…

Shaikh is an old fan of Sraffa's and a participant in the original debates. While he also does not present most of his theory as drawing on these old arguments, his approach is much closer to it in flavor and atmosphere, even if he eventually draws more heavily on modern econophysics methods. These fit nicely into his more Marxist approach, even as he downplays Marx. But, of course, it was Marx who more sharply posed these questions regarding the nature of capital and how it affects income distribution, as well as power distribution, within societies.…

Econospeak
The Revenge Of Joan Robinson: Capital Theory Controversies Revive
J. Barkley Rosser | Professor of Economics and Business Administration James Madison University

James Sherman — Uncovering the Bad Math and Logic (and the Bias) at the New York Times

Excellent summary and analysis of the debate over Gerald Friedman's projections about the Bernie Sanders economic plan. It's a Post Keynesian takedown of Justin Wolfers and Christina and David Romer for failure to understand and address Friedman's actual position.

The Body Politick
Uncovering the Bad Math and Logic (and the Bias) at the New York Times
James Sherman, lecturer in the Program in Ethics, Society, and Law at Trinity College, University of Toronto, a research fellow of the University of Toronto’s Centre for Ethics, and the recipient of a Social Sciences and Humanities Research Council of Canada fellowship
ht David Fields

Yanis Varoufakis — A New Approach to Eurozone Sovereign Debt – op-ed in Project Syndicate

The eurozone is unique among currency areas: Its central bank lacks a state to support its decisions, while its member states lack a central bank to support them in difficult times. Europe’s leaders have tried to fill this institutional lacuna with complex, non-credible rules that often fail to bind, and that, despite this failure, end up suffocating member states in need. One such rule is the Maastricht Treaty’s cap on member states’ public debt at 60% of GDP. Another is the treaty’s “no bailout” clause. Most member states, including Germany, have violated the first rule, surreptitiously or not, while for several the second rule has been overwhelmed by expensive financing packages.

The problem with debt restructuring in the eurozone is that it is essential and, at the same time, inconsistent with the implicit constitution underpinning the monetary union. When economics clashes with an institution’s rules, policymakers must either find creative ways to amend the rules or watch their creation collapse.…

Yanis Varoufakis
A New Approach to Eurozone Sovereign Debt – op-ed in Project Syndicate

Also

My question to Christine Lagarde, Eurogroup 25th June 2015 – as narrated by Landon Thomas in the NYT

Greece’s Third MoU (Memorandum of Understading) annotated by Yanis Varoufakis

Letsgetitdone — A Book about Bernie Sanders, Greece, Austerity, and Much More [Free Aug 16 only]

Here's the link to the Kindle e-book at Amazon. There will be a free promo on August 16, and I have no plans to do another. So, if you're at all interested in the book please download it when you see this post.

This book provides a detailed narrative about the proceedings of a panel of well-known economists convened by Senator Sanders at the Hart Senate Office Building on July 30, 2015, on the Greek debt crisis, and its implications for austerity, the Eurozone, the looming crisis in Puerto Rico, and democracy. The panel session included introductory speeches by Senator Sanders, Greece’s Ambassador to the United States, Cristos Panagopoulos, and panel presentations by economists, Joseph E. Stieglitz, Jacob Funk Kirkegaard, and James K. Galbraith. The panel was moderated by Stephanie A. Kelton.…

Also, I'm reminded that not everyone who sees this post will know that even if they don't have a Kindle brand tablet, then can still read Kindle e-books by downloading Kindle software for the Mac, PC, and Android, just below the book cover image at no charge, and then proceeding to download the book and read it. So, please just download the software, and proceed from there. And enjoy! Also, please review the book, that will help!

Daily Kos — Money & Public Purpose
A Book about Bernie Sanders, Greece, Austerity, and Much More
Letsgetitdone (Joe Firestone)
(Cross-posted from New Economic Perspectives.)

Conference on the Greek Debt Crisis led by Sen Bernie Sanders

Conference on the Greek Debt Crisis

Rm 902 Hart Senate Office Building

Sen. Bernie Sanders will convene a panel of three nationally-known economists to discuss the debt crisis in Greece and throughout the world. The panel will be moderated by Stephanie Kelton, the chief economist of the Senate Budget Committee minority staff.


Participants:

U.S. Sen. Bernie Sanders

Joseph Stiglitz, Senior fellow and chief economist at Roosevelt Institute

James Galbraith, University of Texas

Jacob Funk Kirkegaard, Peterson Institute for International Economics

Stephanie Kelton, University of Missouri – Kansas City


When:

2:30 PM, Thursday July 30th

Where:

Hart Senate Office Building, Room 902

RSVP: gmatthews@rooseveltinstitute.org

Yanis Varoufakis — Two from James K. Galbraith

Yanis Varoufakis

Only the No Can Save the Euro – by James K. Galbraith

Nine Myths About the Greek Crisis – by James K. Galbraith

Michael Stephens — On Demands for Greek “Reform”

Senior Scholar James Galbraith on the “reforms” being demanded by creditors (vis. pensions, labor markets, privatization, and the VAT) in the negotiations over Greece’s fate...

The Levy Institute’s latest strategic analysis for Greece lays out the ways in which the austerity and “reform” program has undermined the Greek economy, and thereby the country’s ability to manage its public debt...

Multiplier Effect

On Demands for Greek “Reform”
Michael Stephens

Bill Mitchell — The Troika is the enemy and its either exit or capitulation

Its the Friday lay day blog. Lay day means rest, sometimes. The Greek government paid €450 million back to the IMF bloodsuckers yesterday which apparently calmed markets (Source). How can a so-called bankrupt country afford to pay that sort of cash? Well it can by causing more unemployment and poverty. The Government is trying to appease the Troika (IMF, ECB and the European Union) so that they will given them more cash in the coming weeks. Appeasement is an appropriate word here. Just as in the historical context, it means going along with something evil that will ultimately backfire and cause more grief. But then according to the US economist James Galbraith, in his latest apology (April 7, 2015), Syriza is – The Real Thing: An Anti-austerity European Government. Funny about that. Unless it is flying below all perception, Syriza seems trapped by an anti-democratic force that is intent on squeezing any notion of abandoning austerity from its agenda. And, try to square Galbraith’s claims against the insights provided by Alain Badiou and Stathis Kouvelakis in this interchange (April 3, 2015) – Dangerous Days Ahead.

Bill Mitchell – billy blog
The Troika is the enemy and its either exit or capitulation
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

The Real Movement — The strange case of the missing growth plan in the SYRIZA-EU debt deal

A Marxist who regards Varoufakis and Galbraith as fascists look at the deal.

The Real Movement

The strange case of the missing growth plan in the SYRIZA-EU debt deal

also

Is the working class now neoliberal too?

New Greek Finance Minister said, "Greece will neither want to leave the euro nor threaten to do so."

Oh well, this thing's going nowhere. It's got the liberal disease of big talk, no action, written all over it.

The new Finance Minister is this guy, Yanis Varoufakis. He once said, "Greece will neither want to leave the euro nor threaten to do so."

Done. Finished. Toast.

There is  no way that Tsipras and Syriza can deliver what they say they will deliver while in the euro. NO. WAY.

The sad thing is, this guy Varoufakis taught at University of Texas. That's where MMTer and economic liberal, James K. Galbraith teaches. Too bad he didn't learn a thing or two while he was there.

The Baffler — Q&A: James K. Galbraith on the Myth of Perpetual Growth, How Language Shapes Economic Thought, and More

In Issue 19 of The Baffler, James K. Galbraith debunked the notion that the world’s economists were caught unawares by the financial crisis of 2007 and 2008, in a piece that was appropriately titled “We Told You So.” Now, in his new book, The End of Normal: The Great Crisis and the Future of Growth (Simon & Schuster, 291 pages, $26), he widens his scope, laying out an economic theory that begins in the years following World War II and extends to the future. 

One central argument of his book explains why we would be mistaken to expect perpetual growth in the American economy. The post-war decades have raised our expectations, Galbraith says, but for the economy to continue to grow at the same pace would be unsustainable. So we need to adjust our idea of “normal” growth—and even change how we measure overall economic success. 

Baffler editor-in-chief John Summers and I talked to Galbraith on the phone last week about the premise of his book, and about whether economists really matter, among other things.

The Baffler
Q&A: James K. Galbraith on the Myth of Perpetual Growth, How Language Shapes Economic Thought, and More
Lauren Kirchner

James K. Galbraith — The new way forward

For these reasons, it may be that we can not return fully to “normal” even if there were a lot more “stimulus” as fellow Keynesians often demand. So let’s challenge our basic assumptions, and adjust. High ambition is sometimes a good thing — but stubborn over-reach leads to perpetual failure.

There are better ways. Let’s first recognize that our great social insurance programs are more necessary than ever before; these programs should be extended, not attacked and cut back. Second, let’s demand that the financial sector be restructured and shrunk, with public alternatives that can achieve social objectives at low cost. Third, let’s focus our minds on specific objectives — for jobs, education, caring, living conditions, energy, climate mitigation and decarbonization — that may be achieved within the limits and despite the difficulties that we face. Fourth, let’s (finally) face the limits of military action and the foundations of global security.

Growth alone cannot solve our problems. But we can still improve our lives, work to stabilize our world, and work to the save the planet, if we put minds and resources to the task....

The Boston Globe | Opinion

The new way forward
James K. Galbraith
(h/t Mark Thoma at Economist's View)

Econolosophy — Sociologizing Krugman and His Evolving Worldview

The bottom line is that we are slowly starting to see an evolution in Krugman’s worldview. He is inching toward heterodox economists like James Galbraith and Richard Wolff, but not explicitly. It will be interesting to see if Krugman elaborates on how his mind is evolving at the upcoming Rethinking Economics conference in NYC in September.

Economics without sociology is nonsense when power is at the heart of a society's social, political and economic structure and functioning.

Sociologizing Krugman and His Evolving Worldview
Econolosophy

Favorite line:

Krugman never once – or perhaps never once explicitly – has entertained the view that the system may be being politically managed by the rentier class so as to maintain a high rate of return for the capitalists.

Unlearning Economics — CAPITAL IN PIKETTY'S 'CAPITAL'

I posted a link to this through another link at Unlearning Economics blog when it appeared. I am posting a direct link now as weekend reading for those who may have missed it. It is the best short critique of criticisms of Piketty's notion of capital that I have run across. This is good opportunity to catch up with some the most salient points in summary form, especially if you haven't been following the new "Capital controversy" closely.

Pieria
CAPITAL IN PIKETTY'S 'CAPITAL'
Unlearning Economics, June 18th 2014

James K. Galbraith — Unpacking the First Fundamental Law

JKG discussion on Piketty

Economist's View
Unpacking the First Fundamental Law, by James K. Galbraith
Mark Thoma | Professor of Economics, University of Oregon