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Advancing the Progressive Ideal by Reshaping the Role of State and Market

Paper Session

Friday, Jan. 3, 2020 8:00 AM - 10:00 AM (PDT)

Manchester Grand Hyatt, Cortez Hill A
Hosted By: Association for Evolutionary Economics & American Economic Association
  • Chair: Gary Dymski, University of Leeds

Green Transformation in Times of Austerity

Francisco Louçã
University of Lisbon
Mariana Mortágua
National Assembly of Portugal


The Paris Agreement and the 1.5 °C report of the Intergovernmental Panel on Climate Change demands a cut of 50% of greenhouse gas emissions by 2030 in order to avoid a temperature rise above 1.5 ° C by 2100. Although a general opinion among experts tends to suggest that these aims are insufficient to prevent climate degradation, the available and ongoing adjustment programs seem to be unable even to achieve this moderate level of change. As the US, under the Trump administration, decided to renege on its previous commitment to the treaty, one of the major players in pollution and greenhouse effect is now out of the Paris compromise.
In Europe, despite the situation of climatic emergency, both national governments and European institutions have been incapable to provide a convincing program of energetic and economic transition towards what has been labeled a ‘green economy’. While the European Union continues to support investments in fossil-based projects, namely through the Projects of Common Interest, austerity policies transfer the costs of the transformation to workers and poor people, alienating the necessary social support to such endeavor, as we have seen in France with the Green Tax. The surge of inequality suggests new obstacles to the necessary consensus for an ambitious climate change transition.
Furthermore, the current EU’s and EMU’s institutional framework, especially its competition and fiscal rules, constitute serious constraints to the much-needed transition program. This paper discusses the full scope of such obstacles, and explores possible institutional solutions to address what is now one of the greatest challenges of our generation. In particular, the paper discusses how the combination of restrictive fiscal policies and the absence of a credible, involving and well-financed program is preventing the European Union to solve the climate change challenge.

The Development of Capital Accumulation in a Former Key Currency Country: The UK’s International Balance of Payments and Brexit from a Marxian Viewpoint

Masahiro Yoshida
Komazawa University


This paper considers Brexit from the viewpoint of the historicity of the UK’s economic structure. UK industry has already shifted toward the tertiary sector, among which financial services have been the most remarkable fields for profit-making in the UK. This is consistent with the progression of capitalist formations away from value-creating industries and toward more dependence on money capital and on accumulation in the fields of financial and fictitious capital. The high ratio of money capital ratio to real capital in the UK coincides with this nation being in the most mature development phase of capitalism of all countries.

Turning to the structure of the international balance of payments, the UK is one of the two 6th-stage countries with a current account deficit. This reflects this nation’s mature domestic economic structure and its status of being a former key currency country. Although both the UK and US have a large financial service surplus in comparison with other developed countries, the UK’s ratio of financial service credit to total service credit, as well as its ratio of financial service credit to total service debit, are both much higher than that of other developed countries, including the US. These features show the importance of the financial service surplus in minimizing the UK’s current account deficit.

At the same time, the UK government’s debt to GDP ratio has increased since the financial crisis of 2007-2008. This will not cause financial problems in itself. However, it may increase external debt. Brexit poses double risks here: Brexit may lead to an increase in the current account deficit and in government debt; indeed, an increase in one may feed the that of the other. As the expansion of money capital progresses worldwide, their roles in international finance are cementing the UK and US’s position as the mature capitalist countries. What is important is that the UK is at more of a disadvantage than the US in regards to international debt.

Considerations on Inequality, Corporate Governance, And Financialization: Insights from Capital, Vol. III, Part V, With Chapter 23 ‘Interest and Profit of Enterprise’ as the Clue

Akira Matumoto
Ritsumeikan University


Disjunctures between corporate governance, increasingly dominated by financial considerations, and social inequality have been among the motor forces of current world-wide ‘populist’ voter revolts. This paper looks for clues for the relation between economic inequality, corporate governance, and financialization by re-examining the work of Marx and of Berle and Means. Marx is widely considered, in Japan, to have pointed out that profit is divided into the wages of management and the profit of enterprise. As he writes in Capital Vol. III (Marx, 1992) “the work of supervision, entirely divorced from the ownership of capital, is always readily obtainable. It has, therefore, come to be useless for the capitalist to perform it himself. An orchestra conductor need not own the instruments of his orchestra, nor is it within the scope of his duties as conductor to have anything to do with the “wages” of the other musicians. Co-operative factories furnish proof that the capitalist has become no less redundant as a functionary in production as he himself, looking down from his high perch, finds the big landowner redundant."(Capital Vol. III, Part V, Chapter 23, 'Interest and Profit of Enterprise'. However, this general interpretation in Japan may not be sufficient for capturing capitalism’s contemporary reality. This presentation develops an alternative interpretation of this chapter by combining Marx's explanation with the theory of the separation of ownership and management proposed by Adolf Berle and Gardiner Means (1932). We then explore causal relations among income inequality, corporate governance, and financialization.

Brecht and Modern Money Theory

Jan Toporowski
SOAS University of London


Proponents of Modern Money Theory (Wray 2015) have been active in promoting active intervention in the labour market through a policy of having the government acting as an ‘employer of last resort’ for the involuntarily unemployed. But this is not an essential part of the Theory and there is nothing particularly monetary about such a policy. The most essential revelation is its policy doctrine that fiscal deficits (the excess of government expenditure over revenues) that have been monetised are in effect ‘free money’ that does not have to be repaid. Most recently, Modern Money Theory has been called upon to support fiscal initiatives that are not necessarily intended to provide last resort employment, such as the Green New Deal advanced in more radical sections of the US Democratic Party, or the protests of their comrades in Europe, railing against the fiscal rules preventing government expenditure to overcome Europe’s economic depression.

So what is wrong with Modern Monetary Theory? If it is all so simple, and ‘free’ government money can pay for everything, what is wrong with it? After all, the loan from the central bank to the government may easily be made effectively non-repayable by being ‘rolled over’ or renewed on maturity, and any interest on the loan from the Bank (minus the Bank’s costs) is added to the Bank’s profits which of course belong to the owner of the Bank, the government. In this way, monetisation costs the government and the tax-payer virtually nothing. This economical, apparently free, method of financing government expenditure is of course attractive when public services, welfare and infrastructure are deteriorating in the face of austerity. But this low cost is only the case at the time of the expenditure. To understand the true efficiency of this kind of financing, it is necessary also to consider the consequences of such financing. In particular, it is necessary to understand how that money would be absorbed by the economy.

Minsky’s Socialization of Investment: A Schumpeterian Synthesis of Keynes and the New Deal

Riccardo Bellofiore
University of Bergamo


Post-Keynesianism has mainly understood the Great Recession as an effective demand crisis, provoked by the prior fall is the wage share: so the exit reduces to a matter of wage-led recovery, or traditional Keynesian active fiscal policy. This paper argues, to the contrary, that understanding the crisis requires a primary focus on novelties in finance and production, with distribution and demand being secondary considerations. Fictitious capital, capital assets inflation, and disequilibria, were stabilising for a while, even endogenously sustaining effective. The current crisis is the outcome of money manager capitalism stage of capitalism - the real subsumption of labour to finance, in Marxian terms. The most promising starting points are the structural dimensions of Minsky's analysis and the monetary circuit approach.
The paper builds on Minsky’s explicit criticism, in his John Maynard Keynes (1975), of the inconsistencies of Keynes’ General Theory (1936) on the socialization of investment. In a more radical approach, Minsky reconnected his own reading of Keynes with the New Deal, in an innovative combination. He well knew that the historical New Deal was in partial discontinuity with Keynes. The New Deal reformed finance, increased resource utilization, erected a social safety net for personal income, acted as direct employer, and installed barriers against price deflation. But Roosevelt was not Keynesian, nor was Keynes a Rooseveltian. Work relief was preferred to transfer payments, the latter being of secondary importance during the New Deal. And Minsky agreed. Minsky’s socialization of investment, thanks to his reference to the New Deal, is not far from a socialization in the use of productive capacity: it is a “command” over the utilization of resources; its output very much looks like Marx’s “immediately social” use values. It is complementary to a socialization of banking and finance, and to a socialization of employment. In this respect, consider the gap between the “Keynesian” welfare state and Minsky’s preferred economic policy: a full employment policy led by the government as direct employer, through extra-market, extra-private enterprise and employment schemes.
Gary Dymski
University of Leeds
John Hall
Portland State University
JEL Classifications
  • B0 - General
  • I3 - Welfare, Well-Being, and Poverty