Re: Why economists do not care about high rates of unemployment w

[Paul Davidson <PB108928%UTKVM1.BITNET@xxxxxxxxxxxxxxxxx>]

FROM:  Paul Davidson
"      Economics Department
"      523 Stokely Management Center  (615) 974-4221
Dear Doug: First let me apologize for changing your last name in my earlier pos
tings. Sorry for the error.

The question you ask as to why the Bretton Woods system broke down is a good
one as is your prior complaint that the IMF and World Bank become tools of
 "political power of the rentier".
(Mitchell uses a more emotionally charged lexicon.)
         You are willing to suggest that Bretton Woods broke down because of
the "weakening preeminence of US in the global economy". This does suggest that
 you recognize that, at least in the US, the capitalist system could push for
global reductions in the major faults of unemployment and inequality. (Mitchell
apparently would not agree that the entrepreneurial system can be designed to
permanently (if only the Us hadn't weakened) or even better if only the
strengthening entrepreneurial economies of Europe, etc) had followed the
designs for solving inbalances in intenrationl payments as the US did
after WWII. And as I demonstrate in my "Reforming the World's Money" article
in the 1990-91 JPKE  (as part of a symposium with John Williamson, a purveyor
of the more orthodox approach to international payments  and hence an excell=
ent chance to contrast what a Keynes' vision vs. orthodox vision) and in
my PKMT, Keynes's original proposal contained the necessary condition for
continued global economic growth. Keynes specifically states that the basic
fault with all convertible international payments systems -- whether fixed
or flexible -- is that the entire burder of adjustment is put on the
deficit nation. Success requires, according to Keynes,shifting a majority of
the onus of adjustment to the creditor position. Thats what Keynes's original
bancor plan did, thats what the Marshall plan and foreign aid (tmporarily) did,
 and that is embedded as a permenant attribute of the new international
payments system that I m advocating in PKMT and the JPKE.
       There are many disagreements between Hy Minsky and myself --- as well
as many areas of agreement. I do not think that his claim that I have not made
a "paradigm shift" as a negative. Like Keynes, I believe that the classical
system is merely a specical case of a gneral theory -- a case that happens
not to be applicable to the real world. I am presenting an elaboration of Keyne
s's monetry analysis for opened as well as closed economies. that does not
require a paradigm shift, I believe.
     Finally Doug raises the question of why is there no political momentum
to restore it. First, I think the attempt to move to a unified monetary system
in the European Community is a piecemeal attempt. But it does show some
political momentum. the main problem is that in politics "You don't beat
somebody with nobody". No one has come up with an alternative system that
the establishment in economics and the media can endorse  as an improvement.
The two major alternatives are {a} McKinnon's fixed rate purchasing power
parity scheeme and [b] Williamson's FEER (fundamental equilibrium
exchange rate] scheme. As the symposium in the JPKE shows, and even Williamson
admits in this symposium, these alternatives do not change the onus of adjustme
nt to the creditor position -- a necessary condition for improvement of the sys
tem.

Have a good day!____Paul Davidson
))))_ fax # (615) 974-1686