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To that extent tax competition is on point. In the main, urban fiscal problems are due to the city-suburb (city-state legislature) relationship, IMO. mbs Max, I don't understand your point. Toledo gave away tax breaks to lure companies, such as Chrysler, which gutted its tax base.
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This also creates a bind regarding the dollar. If the dollar threatens to depreciate, the damn foreigners will refuse to continue financing our binge, dump their securities, drop the market and spoil our fun. Rob Schaap wrote: Ah, we're talking economics again, are we? Well, Prudent Bear Marshall Auerback http://www.prudentbear.com/Comm%20Archive/markcomm/i082900.htm talked about Wynn Godley's thoughts on private sector debt last August (when, to my mind, things looked bad, but not as bad as now - Kenichi Ohmae's warnings about Japan's new boy's idea of effectively sucking back Wall St Yen to wash away red ink, and mebbe destroy some excess capital, come to mind): -- Michael Perelman Economics Department California State University [EMAIL PROTECTED] Chico, CA 95929 530-898-5321 fax 530-898-5901
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At 04:08 PM 7/17/01 +, you wrote: Ah, we're talking economics again, are we? is that allowed? Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~JDevine Is it peace or is it Prozac? -- Cheryl Wheeler.
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Although Godley is not signing on for a while, his co-author and ex-penner, Alex Izurieta, is coming on board. You can direct some of these questions for him, although you might wait a couple of hours. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
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At 09:37 AM 7/17/01 -0700, you wrote: Although Godley is not signing on for a while, his co-author and ex-penner, Alex Izurieta, is coming on board. You can direct some of these questions for him, although you might wait a couple of hours. folks, be polite! Jim Devine [EMAIL PROTECTED] http:/bellarmine.lmu.edu/~JDevine It takes a busload of faith to get by. -- Lou Reed.
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. . . The effects of any form of undisguised wall-to-wall US protectionism on world trade today would be presumably, completely catastrophic, the debacle even worse than 1929-31. Is the Godley view that this debacle is inevitable anyway, so it's a case of sauve qui peut? Mark Jones I presume a plausible U.S. protectionism would not be an all-or-nothing thing, but a modulated policy negotiated in some kind of concert with other countries (naturally with a U.S. edge in bargaining power). Whether/how it would work I have no idea. mbs
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Mark Jones wrote: Incidentally, the Godley paper lays policy emphasis on import controls. This looks like impish humour, since it is hard to imagine how such a policy could be implemented without doing even more damage. As Jim Devine says, the cure is worse than the disease: To summarize, U.S. prosperity was fragile even before late 1929, due to the process of over-investment relative to demand and the international environment. Then the Crash, restrictive fiscal and monetary policy, and protectionism interacted to break the unstable prosperity and to accelerate the downward movement. This movement involved the famous multiplier/accelerator interaction, reinforced by wage-cut induced underconsumption, debt deflation, and international interactions. [(The Causes of the 1929-33 Great Collapse: A Marxian Interpretation, by James Devine) ] The effects of any form of undisguised wall-to-wall US protectionism on world trade today would be presumably, completely catastrophic, the debacle even worse than 1929-31. Is the Godley view that this debacle is inevitable anyway, so it's a case of sauve qui peut? As my old friend Steve Zeluck used to say, the devil can quote scripture. Anyway, I think it's a big mistake to generalize from the 1930 Hawley-Smoot tariff to current-day issues. (It's quite common for the free trade vulgaris crowd -- e.g., Krugman -- to fall for this trap.) The GATT (now called the WTO) is aimed specifically at preventing trade wars of the type that H-S spurred. In any event, the world political economy has changed, undermining the political basis for protectionism (as I argue later on in the paper that Mark quotes). When the components of a car are imported for assembly in the U.S., that makes even the direct benefits of protection more ambiguous. Further, the power of the main political forces for protection has faded, at least in the U.S.: these are nationally-oriented manufacturing, narrow-minded labor unions, and domestic agriculture. As I further argue in the paper, these days it's not protection that encourages depression as much as a world-wide process of competitive austerity and export promotion encouraged by the US and its IMF and World Bank and by the competition to attract capital investment by offering low wages, pliable work-forces, etc. It's important to realize that in my full story of the origins of the Great Depression (http://bellarmine.lmu.edu/Faculty/JDevine/depr/Depr.html.), the H-S tariff plays only a small role. (It's sort of like Jar Jar's role in Star Wars Episode I: bad but ultimately unimportant. When I see the Jar Jar-free version of SW Ep I, I'm sure it will be just as bad as the original.) Further, it was a _product_ of an international political economy centering on aggressive nation-state-to-nation-state competition of a sort we don't see in the rich capitalist world these days. It also hit a world economy that was ready to fall. It should also remembered that the early-1920s US tariff _promoted_ US prosperity, unlike H-S. Back then, BTW, it was Republicans, not Democrats, who liked tariffs. Protection was the main Republican activist economic policy. I'm not big into protectionism: it can create jobs in one country by taking jobs away from workers in another. Or -- in the VERY exceptional case of a H-S tariff -- it can destroy jobs for both. Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevine
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In any event, the world political economy has changed, undermining the political basis for protectionism Jim, I check the archives often, and have learned a great deal from your posts. Not sure I agree here. Wouldn't the US state like to run a trade deficit to its own mnc's and thus accept imports from where its mncs are deeply integrated at the expense of other countries? There seems to be some basis for such a neo mercantalist trade policy. In the case of China--seemingly a platform first and foremost for Japanese mncs-- the US accepts imports probably not only because their own mncs are involved directly or as subcontractors but as a quid pro quo for access to the massive internal Chinese market. But it seems to me that neo mercantalist state may be alive and well. Don't know how far the state has retreated. Best, Rakesh
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his work is very important i think. he sets up scenarios with simple models, like Y = C + I + G + X -M or S + T + M = I + G + X and then can show, e.g., what would have to happen for expansion to continue or to avoid a significant downturn, given things like trade deficit and/or tight fiscal stance. or if credit would dry up in the consumer sector. it is also interesting to look at his stuff in relation to David Levy's forecasting, based on the Levy/Kalecki/Minsky profits equation. It would be intersting to see him on pen-l. -Original Message- From: Michael Perelman [mailto:[EMAIL PROTECTED]] Sent: Monday, July 16, 2001 2:59 PM To: [EMAIL PROTECTED] Subject: [PEN-L:15206] Re: RE: wynne godley I was hoping for more fruit and less nuts. On Mon, Jul 16, 2001 at 03:48:15PM -0400, Max Sawicky wrote: If the discussion is not fruitful, I'm sure it will be nutful. mbs Jim Devine has brought up Wynne Godley's work several times. He has a new paper writter with a former penner, who had promised to return. I think that Godley may sign up to pen-l after he returns from England. I hope that we can discuss his paper fruitfully. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED] -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
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Worse than that, it makes sense -- a violation of basic academic principles. On Mon, Jul 16, 2001 at 04:29:07PM -0500, Forstater, Mathew wrote: his work is very important i think. he sets up scenarios with simple models, like Y = C + I + G + X -M or -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
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Ah, we're talking economics again, are we? Well, Prudent Bear Marshall Auerback http://www.prudentbear.com/Comm%20Archive/markcomm/i082900.htm talked about Wynn Godley's thoughts on private sector debt last August (when, to my mind, things looked bad, but not as bad as now - Kenichi Ohmae's warnings about Japan's new boy's idea of effectively sucking back Wall St Yen to wash away red ink, and mebbe destroy some excess capital, come to mind): ... A further complicating factor when examining this credit binge and its consequences is the degree of dependence on foreigners to sustain the boom and thereby facilitate the service of this growing private sector debt burden. For the moment such foreign munificence seems to have a very positive effect for all concerned. Foreigners are deriving great returns investing in a booming US economy, which in turn reinforces the tendency to invest more. But consider the effects of this virtuous cycle: foreign ownership of US assets now measure over $6.4 trillion (equivalent to 66 per cent of US GDP), according to Bridgewater Associates, compared to US holdings of foreign assets which measure a mere $4.7 trillion (or 48 per cent of GDP). On a net basis, the US now is a net debtor to the tune of almost 20% of GDP, and this continues to mount with every monthly increase on the nations current account deficit. The foregoing study by Bridgewater Associates breaks down the extent of this foreign ownership in the following manner: - Foreigners own a record 38% of the US treasury market, and if you take out the treasuries held by the Fed, foreigners own 44% of the liquid treasury market. - Foreigners own a record 20% of the US corporate bond market. - Foreigners own 8% of the US equity market. Including direct investment foreigners own l4% of US corporations Foreign ownership of US assets per se is not the problem. The threat comes from the fact that this foreign ownership overlays an economy rife with debt and, hence, highly vulnerable to financial dislocation should this foreign capital withdraw precipitously. We have already seen the effects of the sudden withdrawal of short-term capital in economies prone to financial fragility during 1997/98: Thailand and Korea immediately spring to mind. But in one respect the US is far more vulnerable than these Asian economies, which at least had the virtue of high levels of private household savings to fall back on. In the US, by contrast, household savings are virtually non-existent (indeed, they are negative, as of the most recent figures for July). Indeed, the ratio of debt relative to income for both the household and corporate sectors is at an all-time high. By way of comparison, these ratios are well above the levels that led to the widespread banking and savings and loan crises a mere decade ago. The net debt issuance of US private households and corporations taken in aggregate is now nearly 6 per cent of national income, according to a recent study by Andrew Smithers---a historically unprecedented level. Wynn Godley of the Jerome Levy Institute has pointed out that when a private sector deficit of this magnitude has been attained elsewhere in the G-10, it has invariably led to financial crisis, recession, or both. The parallels with the Asian nations circa 1997 are both ominous and instructive. As Bridgewater notes, If foreign sentiment does ever turn they have a boatload of US assets that could be sold. These holdings are so big, and so much larger than US assets abroad that they are a long-term risk to US financial markets. A precipitous withdrawal of foreign capital risks setting in motion a deflationary dynamic in which debt defaults intensify, thereby accelerating an even greater contraction in economic activity. And I remember Jim and Matt telling us Godley and Wray argued in a March 2001 *Business Week* that Bush's incremental tax cut won't have the clout in the medium term to finance the private sector's debt load. Now, if I may risk sounding my usual ignorant self in matters economical, ain't it the truth that America's problem ain't quite the same as Japan's? Well, not at the same stage, anyway. Sure, America has excess capacity - lots of it - and sure, Japan has a bad debt problem - lots of it - but ain't private debt the big cloud on the American horizon? It occurs to me that if you give rich Yanks a big tax cut, or a 'prosperity dividend', they're gonna do more of what they have been doing: buy foreign made luxury consumer goods and encourage Veblenian emulation by people emboldened to leverage their tax cuts. More money in the hand is more creditworthiness as far as American consumers have been concerned of late. What America actually needs is to start working on private debt, and mebbe get somebody somewhere to buy more of the stuff its own cappos make. What I'm trying to say is that tax cuts, in the
