Europe, German Mercantilism and the Current Crisis

Contributions to Brancaccio and Fontana (2011) look at a variety of aspects of the current crisis, some of them focusing on the contingent financial causes, others on the underlying contradictions of capitalist economies. In this context, less attention has been paid to the role of Europe and particularly Germany. Europe has not been distinguished by an assertive and cooperative economic policy stance in the aftermath of the current crisis. German mercantilist policies are said to be behind the European policy stance and a source of regional and global imbalances. After a brief examination of the main pillars of European economic policy and German behaviour during the present crisis, these notes suggest an embryonic interpretation of the origins of mercantilist behaviour, dwelling on the nature of mercantilism in economic theory and commercial practice, and of the allegedly German mercantilist model. The suggested interpretation is that in the German case, the national mystique of a trade surplus may have had a role in disciplining the labour market and at the same time assuring profits. Recent developments in Spring 2010 have shown the gravity of the European imbalances in the global crisis (see Cesaratto 2010) and the relevance of the background issues discussed in the present paper.

The controversy over the US Social Security Surplus. A non conventional view

This paper examines the US controversy over the Social Security ‘Trust Fund’ (SS-TF). It is shown that, according to neoclassical theory, the SS-TF has a substantial meaning as a safety belt in view of the alleged pending problems of, but, according to more Keynesian principles, it does not play this function. On the opposite, the establishment of a SS-TF will have deflationary effects on the economy

Pensions in a shrinking economy: a comment on Kuné

In a contribution to Pensions: An International Journal, Prof. Jan Kuné discusses whether a fully funded (FF) pension scheme can cope with a demographic shock better than a payas- you-go (PAYG) system. He makes ample use of my own contributions on this issue but ignores my criticism of the neoclassical interpretation of FF pension schemes and especially of the claim that an FF scheme is superior to PAYG in this and other respects. The purpose of this note is to stimulate some response, from Prof. Kuné or others, to my critique of the neoclassical interpretation. The policy implications of this discussion for pension reforms are evident.

Germany and the European and Global Crises

Moving from the current global and European imbalances and crises, and from the consideration of the German reaction to them, the paper explores the political economy origins of the conservative German policy stance. It emerges that an export-oriented economy was a deliberate decision of the German elite after WW II and that the external constraint may be regarded as appropriately designed for internal discipline and efficiency (and vice-versa) in a self-reinforcing process. The conclusions illustrate some possible future scenarios for Europe.European Monetary Union, financial crisis, Germany, neo-mercantilism

The implications of TARGET2 in the European balance of payment crisis and beyond

The paper provides an account of the meaning and implications of TARGET 2 in the Eurozone (EZ) balance of payments crisis. In this context, it discusses Hans-Werner Sinn’s thesis about a stealth bail-out of the EZ periphery by the ECB from a heterodox perspective. Financial liberalisation, a relatively loose monetary policy and the provisional fading of devaluation risks generated ephemeral growth in some peripheral EZ countries sustained by capital flows from core-countries. This has been followed by real exchange rate revaluation and deterioration of foreign accounts. As a result, external financing flows dried up and the previous stock of loans began to be repatriated. TARGET 2 has played a fundamental role in avoiding a precipitous crisis. This distinguishes the European crisis from more traditional balance of payments crises. However, the presence of TARGET 2 does not offset the absence of the financial crisis prevention and resolution mechanisms that are characteristic of fully-fledged political and currency unions

Italy: A Question of Interest Rates and Trust

Contrary to the image generally portrayed to Northern European countries, Italy is not a fiscally profligate country. Indeed, Italy has a record of primary fiscal surpluses (balances that exclude interest rate payments) since 1992; only Germany can make a similar claim. Regrettably, this uninterrupted series of budget surpluses was accompanied by a loss of external competitiveness due to the approaching and later adoption of the euro since 1995. These two factors combined to form the deep root of the long-term sluggishness of the Italian economy, particularly of its labour productivity stagnation. The supply side factors do matter, of course, given the increased global competitive environment, but the demand side factors are the main drivers of this development

La financiación inicial y final en el circuito monetario y la teoría de la demanda efectiva

Un aspecto notable de la teoría heterodoxa moderna es la separación entre los modelos de crecimiento basados en la demanda y las teorías del dinero endógeno. Este artículo sugiere una posible integración entre la teoría keynesiana del multiplicador (y el supermultiplicador) y las teorías del dinero endógeno y la financiación de Keynes. Centrándose en la versión de la teoría del circuito monetario (TCM) de Graziani, es una contribución para reconciliar la preocupación de la tcm por la financiación inicial de la producción y la preocupación de las teorías del crecimiento heterodoxas orientadas a la demanda por el financiamiento final de la demanda autónoma

As leis de rendimento nas teorias neoclássicas do crescimento: uma crítica sraffiana

The paper examines critically the exogenous and endogenous neoclassical growth theories, with particular attention given to the question of assumptions on marginal returns to factors and returns to scale. It shows that a number of deficiencies In the treatment of topics such as the connection between accumulation and growth and increasing returns to scale, together with many of their most implausible results and artificial assumptions, are In fact the high price imposed by the insistence on basing the theory of growth In the traditional and flawed marginalist explanation of distribution.Este artigo examina criticamente as teorias neoclássicas de crescimento, exógenas e endógenas, com atenção particular para a questão das suposições de retornos marginais para os fatores e os retornos de escala. Mostramos que muitas das deficiências no tratamento de tópicos tais como a conexão entre acumulação e crescimento e os retornos crescentes de escala, junto com muitos de seus resultados implausíveis e hipóteses artificiais, são, na realidade, o alto preço imposto pela insistência em baseara teoria do crescimento na tradicional e problemática abordagem marginalista da distribuição. Palavras-chave Crescimento endógeno; Sraffa; retornos crescentes de escala

Social surplus approach and heterodox economics

Given the emphasis on social provisioning in heterodox economics, two of its central theoretical organizing principles are the concepts of the total social product and the social surplus. This appears to link heterodox economics to the social surplus approach associated with the classical economists and currently with Sraffian economists. However, heterodox economics connects agency with the social surplus and the social product, which the Sraffians reject as they take the level and composition of the social product as given. Therefore the different theoretical approach regarding the social surplus taken in heterodox economics may generate a different but similar way of theorizing about a capitalist economy. To explore this difference is the aim of the paper. Thus the paper is divided into four parts and a conclusion. In the first section social provisioning and the social surplus is introduced. In the second section, the Sraffian social surplus approach is delineated while in the third section the heterodox social surplus approach is delineated. In the fourth section of the paper, some of the implications emerging from the differences between the two approaches are discussed. The paper is concluded in the final section