30 September 2011

Union preferences in the UK

US healthcare

Great graph on the inefficiency of the US healthcare system by Lane Kenworthy at Consider the Evidence:

Crisis' latest developments

- German Parliament approves the EFSF; two days ago the main German Business associations had urged them to do so.
- Protests in Greece continue.
- First six month in Ireland show some pick up in the economy

Meanwhile in the US the debate around fiscal policy continues:
- Brad Delong on why more stimulus in the US would pay for itself.
- Krugman on the fallacy of the 'high regulation - high spending as a cause of the crisis' thesis held by Republican.
- Robert Reich points out that one in three family with young children lives in poverty in the US

As no significant long term solution is found, Japanese style protracted low growth becomes more likely
Soros has a proposal to end the crisis

29 September 2011

The state of the union address of the president of the European Commission

“Once the euro area is fully equipped with the instruments necessary to ensure both integration and discipline, the issuance of joint debt will be seen as a natural and advantageous step for all. On condition that such euro bonds will be "Stability Bonds": bonds that are designed in a way that rewards those who play by the rules, and deters those who don't. As I already announced to this house, the Commission will present options for such "Stability Bonds" in the coming weeks. 

Some of these options can be implemented within the current Treaty, whereas fully fledged 'euro bonds' would require Treaty change.  We can do a lot within the existing Treaty of Lisbon. And there is no excuse for not doing it, and for not doing it now.  But it may be necessary to consider further changes to the Treaty.”  

Interview with Acemoglu

Here is an excerpt of the interview by The Region of Acemoglu on the Transitions in Political Economy. The full interview can be found here

Region: There’s so much more to ask about, and we haven’t even touched on your massive body of research on institutions and on transitions in political economy. Perhaps we could end with that, with your work with James Robinson on transitions in political economy. I wonder if you could share any thoughts you’ve had about how that research applies to the Arab Spring.

Acemoglu: Yes, for the last 15 years, most of my research is exactly what you could call, broadly, political economy. Why don’t I talk about that a bit, and then we can kind of transition into transitions.

Region: Perfect.

Acemoglu: My professional research didn’t start with political economy, although when I originally began to study economics in high school and college, I was interested in what today you would call political economy—the interaction of politics and economics.

26 September 2011

On the problem of trading short term pains for long term gains

In a speech to the house of Common several decades ago, Aneurin Bevan (British Labour Politician) described "the central problem falling upon representative government in the Western world as how to persuade the people to forgo immediate satisfactions in order to build up the economic resources of the country..." [quoted from Hall 1986: 281, originally quoted in Wilson, 1971: 19)

25 September 2011

Capital inflows and the debt crisis

Compelling alternative hypothesis for the current debt crisis at the streetlightblog. The post argues that southern Europe's integration to European Monetary Union led to massive capital inflows to those economies. 

This resulted in persistent current account deficits and the eventual sudden stop of capital to those countries, thereby precipitating the crisis.

24 September 2011

When Marx Met Engels, the Renegade Industrialist - in Bloomberg

Interesting commentary by Mary Gabriel on the relationship between Marx and Engels - the fact that it is published on Bloomberg is also unusual. Are 'radical' political economy theories being given more space in mainstream media as a result of the crisis?

21 September 2011

'Grow or wither away'

The IMF warns of 'slowing growth' which calls for.... delaying excessive austerity in the short term. Well, better late than never, but one wonders why we had to wait for the risk materialising itself instead of anticipating this, as many economists had done.

12 September 2011

Is this the end for the Eurozone?

Greece's economy is contracting, which was of course predictable given the austerity package. If the greek authorities have not been able to reign the budget by more than 5% (the estimated contraction of the Greek economy), higher deficits can be expected... 

Meanwhile, there is still no clear roadmap on the part of European Leaders and the ECB leadership is itself split as apparent with the recent resignation of Jürgen Stark. The ruling of the Constitutional court may effectively ruled out the required steps to address the crisis: Eurobonds and a fiscal union.

The Euro exchange rates with the Yen is now at a 10 year low, and this morning the 10 year spread for Greece was 18.97, 10.330 for Portugal and at 3.736 for Italy (From Eurointelligence)

05 September 2011

Andrew Watt sums up the summer

Good summary of the Summer by Andrew Watt:
"La Rentrée is upon us. The summer, such as it was, is over. Time to reflect. It’s Friday, late and I am tired. Fortunately I can be very, very brief. Four things are important to grasp.
  1. The European economy and, more  latterly, its labour market had begun a recovery that was, overall, sluggish, and uneven between countries. But it was a start. Unemployment was falling slowly.

02 September 2011

IMF confirms what we already knew: Austerity is bad for the economy!

"Using this new dataset, our estimates suggest fiscal consolidation has contractionary effects on private domestic demand and GDP. By contrast, estimates based on conventional measures of the fiscal policy stance used in the literature support the expansionary fiscal contractions hypothesis but appear to be biased toward overstating expansionary effects." Source

01 September 2011

The Robin hood syndrome among the rich is spreading

After the US and France, the German happy few also call for more taxation... Let's hope that governments hear them!

The role of actors in welfare state development

The role of political parties, unions and business in driving welfare state change is a contested issue in political economy. 

Recent work by Emmeneger and Marx (2011) challenges the notion that employers favoured higher protection of employment in Germany. This is important because Germany represents the ideal type of a coordinated market economy. The Varieties of Capitalism (Hall and Soskice, 2001) literature would therefore make us expect that employers had an important role in promoting higher jobs protection. This followed the functional needs of the firms to solve the coordination problem that surrounds investing in non-transferable/specific skills. This interest of the firm in developing welfare state policies is for instance historically apparent in a cross class alliance between certain firms and labour (see for instance Swenson 1991).

This follows in the footsteps of Korpi (2006) that argued that employers were at best passive in accepting new welfare state policies. In the traditional Power Resource Approach, labour strength is a key driver of welfare state development.

As important is Jensen's (2011) contention that unions and left parties may have different social policy preferences. The former primarily favours labour market policies while the latter prefers familly and old age policies. Within the labour movement more generally, labour has been increasingly divided between insider s and outsiders (Rueda, 2007) and there has been a breakdown between high and low skill workers (Iversen and Soskice, 2009). While class politics is itself a contested issue (Weakliem, 2011), these divisions have led to a dualisation of welfare state policies (see Bruno Palier's work).

Thus, there are multiple potential dividing lines in the actors that are purported to push for more welfare state policies. It will be interesting to analyse how the current economic and financial crisis is affecting the role actors can play in welfare state development.