INEQUALITY IS KILLING CAPITALISM

Robert Skidelsky in Project Syndicate:

Impaired banks that do not want to lend must somehow be “made whole.” This has been the purpose of the vast bank bailouts in the US and Europe, followed by several rounds of “quantitative easing,” by which central banks print money and pump it into the banking system through a variety of unorthodox channels. (Hayekians object to this, arguing that, because the crisis was caused by excessive credit, it cannot be overcome with more.)
At the same time, regulatory regimes have been toughened everywhere to prevent banks from jeopardizing the financial system again. For example, in addition to its price-stability mandate, the Bank of England has been given the new task of maintaining “the stability of the financial system.”
This analysis, while seemingly plausible, depends on the belief that it is the supply of credit that is essential to economic health: too much money ruins it, while too little destroys it.
But one can take another view, which is that demand for credit, rather than supply, is the crucial economic driver. After all, banks are bound to lend on adequate collateral; and, in the run-up to the crisis, rising house prices provided it. The supply of credit, in other words, resulted from the demand for credit.
This puts the question of the origins of the crisis in a somewhat different light. It was not so much predatory lenders as it was imprudent, or deluded, borrowers, who bear the blame. So the question arises: Why did people want to borrow so much? Why did the ratio of household debt to income soar to unprecedented heights in the pre-recession days?
Let us agree that people are greedy, and that they always want more than they can afford. Why, then, did this “greed” manifest itself so manically?
To answer that, we must look at what was happening to the distribution of income.

AT HOME: STEVEN PINKER

Annie Maccoby Berglof in the Financial Times:

Armed with a mug of tea, Pinker seats himself on a contemporary, Danish-designed sofa in the middle of his open-plan loft to discuss his most recent book, The Better Angels of Our Nature , which makes surprising claims about our species: that we’ve become gentler and less aggressive than our ancestors. The proof, argues Pinker, is in comparative statistics on violence so convincing that not even two world wars can dent the evidence. “Conventional wisdom is that we’re living in violent times. The data sets say otherwise. Contrary to stereotyping – and I’ve confirmed the stereotype in a survey – the Middle Ages were much bloodier.”

The apartment, a converted leather warehouse where Pinker lives with his third wife, the novelist and philosopher Rebecca Goldstein, is located a few blocks from Boston’s financial district. “This was once an industrial space. There were tanneries in the area,” says Pinker. Divided into three rooms, it has 14ft-high ceilings and exposed brick walls. The supporting beams in the main room are from the original 19th-century construction. “They are nine inches across. You would be unlikely to see construction like this today,” he adds.

The building has an intriguing past. Pinker’s former sister-in-law once lived here. “She was here illegally,” Pinker says. “She was a painter and her partner was a sculptor. They put in their own plumbing. At some point the developers came in, young urban professionals started pricing them out and by sheer coincidence, decades later, we bought an apartment here, by which point all the artists had been driven out. This is a common urban sequence.”

More here.

IT’S OFFICIAL: AUSTERITY ECONOMICS DOESN’T WORK

John Cassidy in The New Yorker:

In making his annual Autumn Statement to the House of Commons on Wednesday, George Osborne, the Chancellor of the Exchequer, was forced to admit that his government has failed to meet a series of targets it set for itself back in June of 2010, when it slashed the budgets of various government departments by up to thirty per cent. Back then, Osborne said that his austerity policies would cut his country’s budget deficit to zero within four years, enable Britain to begin relieving itself of its public debt, and generate healthy economic growth. None of these things have happened. Britain’s deficit remains stubbornly high, its people have been suffering through a double-dip recession, and many observers now expect the country to lose its “AAA” credit rating.

One of the frustrations of economics is that it is hard to carry out scientific experiments and prove things beyond reasonable doubt. But not in this case. Thanks to Osborne’s stubborn refusal to change course—“Turning back would be a disaster,” he told Parliament—what has been happening in Britain amounts to a “natural experiment” to test the efficacy of austerity economics. For the sixty-odd million inhabitants of the U.K., living through it hasn’t been a pleasant experience—no university institutional-review board would have allowed this kind of brutal human experimentation. But from a historical and scientific perspective, it is an invaluable case study.

At every stage of the experiment, critics (myself included) have warned that Osborne’s austerity policies would prove self-defeating. Any decent economics textbook will tell you that, other things being equal, cutting government spending causes the economy’s overall output to fall, tax revenues to decrease, and spending on benefits to increase. Almost invariably, the end result is slower growth (or a recession) and high budget deficits. Osborne, relying on arguments about restoring the confidence of investors and businessmen that his forebears at the U.K. Treasury used during the early nineteen-thirties against Keynes, insisted (and continues to insist) otherwise, but he has been proven wrong.

More here.

“新结构经济学”新在哪里？

中国经济学者赵洪春：林毅夫的“新结构经济学”为廓清新自由主义与“华盛顿共识”政策药方的迷雾提供了可能，有潜力在更一般意义上讲清国家干预和市场机制的边界。
“新结构经济学”新在哪里？

中国精英政治的转变

波士顿大学中国政治研究学者傅士卓认为，中共最核心的问题是，如何从一个惯于发动群众和政治运动的政党，变成一个真正提供公共服务和行政性的政党。
傅士卓：中国精英政治的转变

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