An Outline of a Progressive Resolution to the Euro-area Sovereign Debt Overhang: How a Five year Suspension of the Debt Burden Could Overthrow Austerity

The present study puts forward a plan for solving the sovereign debt crisis in the euro area (EA) in line with the interests of the working classes and the social majority. Our main strategy is for the European Central Bank (ECB) to acquire a significant part of the outstanding sovereign debt (at market prices) of the countries in the EA and convert it to zero-coupon bonds. No transfers will take place between individual states; taxpayers in any EA country will not be involved in the debt restructuring of any foreign eurozone country. Debt will not be forgiven: individual states will agree to buy it back from the ECB in the future when the ratio of sovereign debt to GDP has fallen to 20 percent. The sterilization costs for the ECB are manageable. This model of an unconventional monetary intervention would give progressive governments in the EA the necessary basis for developing social and welfare policies to the benefit of the working classes. It would reverse present-day policy priorities and replace the neoliberal agenda with a program of social and economic reconstruction, with the elites paying for the crisis. The perspective taken here favors social justice and coherence, having as its priority the social needs and the interests of the working majority

Financialization and Marx: some reflections on Bryan's, Martin's and Rafferty's argumentation

The recent theoretical works of the authors provide thorough insights into the workings of contemporary capitalism. Derivatives are the key issue involved here. They comprehend financialization as a development within, rather than a distortion of, capitalist production. They nevertheless underestimate the ability of Marx's analytical categories to capture the essence of contemporary organization of capitalism. A return to Marx is not only helpful but is also indispensable for clarification of some unformed aspects in their analysis. What is actually involved in financialization is not just the emergence of a structure enabling more effective valuation of financial assets; it is also the development of a technology of power that is superimposed on existing power relations for the purpose of organizing their functioning

A Political Economy of Contemporary Capitalism and Its Crisis: Demystifying Finance

The recent financial meltdown and the resulting global recession have rekindled debates regarding the nature of contemporary capitalism. This book analyses the ongoing financialization of the economy as a development within capitalism, and explores the ways in which it has changed the organization of capitalist power. The authors offer an interpretation of the role of the financial sphere which displays a striking contrast to the majority of contemporary heterodox approaches. Their interpretation stresses the crucial role of financial derivatives in the contemporary organization of capitalist power relations, arguing that the process of financialization is in fact entirely unthinkable in the absence of derivatives. The book also uses Marx’s concepts and some of the arguments developed in the framework of the historic Marxist controversies on economic crises in order to gain an insight into the modern neoliberal form of capitalism and the recent financial crisis. Employing a series of international case studies, this book will be essential reading for all those with an interest in the financial crisis, and all those seeking to comprehend the workings of capitalism

Addressing the rationality of 'irrational' European responses to the crisis: a political economy of the Euro Area and the need for a progressive alternative

Half a decade has passed since the subprime market financial meltdown, which was the onset for the Euro Area (EA) crisis. The European project has entered its second, less optimistic phase. The stylized facts of the first phase have been widely discussed during the last years, not always in an illuminating or coherent way. cross-country differentials in growth and inflation, persistent current account (or financial account) imbalances, real effective rate appreciation (mostly for countries with current account deficits), and the setting up of a leveraged and highly integrated banking system were the most striking developments. Having in mind the crisis of the exchange rate mechanism (ERM) of the European Monetary System (EMS), all these events may give a feeling of déjà vu. Nevertheless, both the protagonists and the stage (the institutional framework) are different this time; we have not seen the final act yet. Given the character and the long history of the euro project and given its nature as a mechanism for organizing the interests of capitalist elites, anticipating its demise is not a safe bet. The European Monetary Union (EMU) is a sui generis monetary union: one without a central authority possessing the typical characteristics of a capitalist state. Two other points about the EMU are also worth mentioning. first, the EMU sets up a context of symbiosis that elevates default risk to secure austerity. Second, it must rely on the elimination of "moral hazard" as the only way to let different capitalist formations be governed according to the neo-liberal agenda, thus aggressively promoting the interests of capital. Official responses must not block the workings of financial markets, even during the crisis; they must exist only in a status of complementarity to markets (see the analysis in Sotiropoulos et al. 2013). This chapter revisits and challenges the theoretical roots of the main-stream political responses to the crisis. It also sets the background for the discussion of an alternative anti-austerity context. this debate is crucial since Europe is in the midst of an institution building process

On the character of the current economic crisis

In the third chapter of Capital, Marx observed: “As long as the social character of labour appears as the money existence of the commodity and hence as a thing outside actual production, monetary crises, independent of real crises or as an intensification of them, are unavoidable. It is evident on the other hand that, as long as a bank’s credit is not undermined, it can alleviate the panic in such cases by increasing its credit money, whereas it increases this panic by contracting credit” (Marx 1991: 649). As we know, financial crises are sometimes the prelude to, and sometimes the result of, a crisis of over-accumulation of capital. Sometimes, again, the financial crisis manifests itself independently of the broader economic conjuncture, that is to say does not have any significant effect on the level of profitability and the level of employment of the “factors of production” in the other sectors of the economy above and beyond the financial sphere or some specific parts of it. This, for example, is what happened in the case of the international financial crisis of 1987, when there was a collapse of share prices in the international stock exchanges, providing the international press with the opportunity to speak of a “return to 1929 and the Great Depression”. But it is also what happened in most of the more than 124 crises in the banking system that were recorded between 1970 and 2007. It is thus evident that each specific financial crisis must be examined both in relation to its particular characteristics and in relation to its interaction with other spheres of economic activity and the wider economic conjuncture, before it becomes possible to draw conclusions as to its causes, its extent and its consequences. We shall argue that the current crisis is the outcome of permanent characteristics of capitalist relations of production and reproduction, but also of characteristics that are peculiar to the core of the neoliberal organization of this relation, that is to say to the core of the present form of appearance of capitalist relations of production

Le capital humain et physique dans l'économie

L'objet de ce papier concerne l'estimation du capital humain et physique dans l'économie grecque au cours de la période 1988-1998. Pour y parvenir nous avons appliqué le modèle de Solow (1957) et le modèle de Mankiw, Romer et Weil (1992), qui constitue une extension du modèle de Solow en comprenant le capital humain. A partir du modèle de Solow on a estimé le capital physique et sur la base de Mankiw, Romer et Weil, le capital humain. Les données statistiques pour la recherche proviennent du Service Statistique National de Grèce. Au vu des résultats économétriques, les deux modèles ap¬pliqués sont très satisfaisants. En effet, les modèles peuvent décrire, de manière satisfaisante, la technologie de production en Grèce, pendant la période examinée. Néanmoins avec la procédure appropriée nous avons constaté l'existence d'une multicollinearité. Cela signifie que les relations entre le capital physique et humain, au cours de la période 1988-98, sont linéaires. Il semble allors que l'économie grecque trouve devant un carrefour, où elle doit abandonner les relations linéaires entre le capital et le travail et entrer dans le processus de l'accroissement diachronique de la proportion du capital par rapport au travail. Cette condition est essentielle pour 1' acroissement du produit en long terme. Autrement, les relations entre le capital et le travail, à moyen et à long terme ne seraient pas favorables au développement du pays

Heterodox influences on Schumpeter

Purpose – Joseph Alois Schumpeter's ideas are in the discussion agenda of various economists working in different theoretical traditions. However, several aspects of his work remain unexplored. In particular, the origin of his ideas in the context of the then prevalent economic theories of the German-speaking camp, have not been widely discussed. The purpose of this paper is claim that the elaborations of certain German-speaking heterodox economists and/or schools of economic thought may be traced in Schumpeter's oeuvre. Design/methodology/approach – The influence of the German Historical School and specifically of Gustav von Schmoller, Max Weber and Werner Sombart on typical Schumpeterian themes is examined. In a similar vein, it is argued that Schumpeter's analysis presents striking similarities with the works of the Austro-Marxist Economist Rudolf-Hilferding and the Austrian Social Democrat Emil Lederer. Findings – In this context, certain Schumpeterian insights appear less original. Originality/value – Conclusively, it may be inferred that a deeper understanding of Schumpeterian economic analysis presupposes an acquaintance with certain heterodox theoretical traditions of the German-speaking world.Consumer behaviour, Economic doctrines, Economic theory, Economics

Emil Lederer and Joseph Schumpeter on Economic Growth, Technology and Business Cycles

Lederer, Schumpeter, Economic growth, Technology, Business cycles,