TripleCrisis

Arjun Jayadev

The Triple Crisis blog is pleased to welcome Arjun Jayadev as a regular contributor. Jayadev is Assistant Professor of Economics at the University of Massachusetts, Boston. His research focuses on international and macro economics, development, political economy and economics of distribution.

In The European Economy Between the Wars, a passage describes the experience of an unemployed English mechanic during the last depression. After seventeen weeks of being unemployed, the worker describes his desperation:

“It isn’t the hard work of tramping about so much, although that is bad enough. It’s the hopelessness of every step you take when you go in search of a job you know isn’t there”.

And in this recession, the despair of joblessness is equally palpable in the voices of those searching hopelessly for work. A long-term unemployed woman from Maryland reports:

“I have only had 2 interviews in the last 2 years out of hundreds of applications and postings of resumes. I have now gone 3 months without any income at all. I don’t know what to do now….It just seems to me that our Government and society is not recognizing us and really doesn’t care. What kind of people have we become?”

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Gerald Epstein

Right wing politicians in the U.S. have gotten very good at channeling George Orwell: As the world economy teeters on the brink of another economic catastrophe whose precipitating cause was a twenty year project to de-regulate finance in the U.S. and abroad, they insist that the cause of our woes is “job killing” regulations. Never mind that, according to the World Bank, the U.S. ranks 5^th in the world in terms of ease of doing business in relation to regulations, and that over the past 5 years, doing business in the U.S. overall has become easier, not harder. The same report shows that in the OECD the ease of doing business has stayed the same or improved since 2006. Yet in the OECD countries 50% more people were unemployed in 2010 than in 2007.

But repeat the “job killing regulation” mantra often enough – and have the echo chamber of the media spread it around relentlessly – and it begins to sink in. All of this serves to soften up the citizenry to accept the corporate goals of killing as many undesirable regulations and to prevent as many new ones. (Of course, they will continue to push for the regulations they like with gusto).

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Matías Vernengo

Krugman decided to try his hand at history of macroeconomic thought in one of his last posts. That’s great, since history of thought is essential to understand how we got here. It’s also bad, since Krugman is still very much a mainstream author, and misses the point of Keynes’ contributions, and the limitations of neoclassical (or more properly, marginalist) approach. He suggests correctly that the New Classical (NC)/Real Business Cycle (RBC) project was a failure, but both the reasons for that and his interpretation of the Keynesian project are misguided.

The first proposition in Krugman’s reassessment of the recent history of macroeconomics, is that Keynesian models were ad hoc, and assumed wage and price rigidity. The whole of chapter 19 of the General Theory (GT) is about the effects of price and wage flexibility, and how it does not produce full employment. It was with Franco Modigliani’s PhD dissertation, done at the New School for Social Research under Jacob Marschak, that the sticky wage version of Keynesian theory that would dominate the neoclassical synthesis was concocted.
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