Re: NYTimes.com Article: Devotion to Free-Market Makes for Ineffectual Policy

["Schulte-baeuminghaus" <schulte.baeuminghaus@xxxxxxxxx>]

I agree with what Geoff Edwards says below.
There is a lot of dissent with policies around the world - economic, social,
political, environmental...
This dissent is frequently expressed, sometimes violently, mostly
vehemently.
A great many people and a wide variety of "associations" take part.
In the media and on the internet, the dissent is no less clear and no less
widespread.
However, all of this dissent lacks focus.
Perhaps it would be more accurate to say that there appear to be no
"leaders" and no process which is capable of bringing the dissent into focus
and then, of course, embarking on pragmatic ways of making the dissent
effective.

At the same time, we seem to be pretty clear that governments and
international agencies are holding closely together.
They have been focussed and they have stayed focussed, despite the dissent
and, in the last year, the impact of 9/11.
In many ways, that is astonishing and it is no less astonishing that
distinguished people - in academic life, in business and finance, in CEO
positions in the international agencies - have done nothing effective to
have the issues of the dissenters effectively discussed.

I heard a BBC program a couple of weeks ago, constituting a roundtable of
"celebrities" to discuss issues of poverty, development and the like.
They are people we can all respect. One of the participants was Mary Kaldor
who impressed with her sincerity, her intellect, her articulateness and, may
I say it, her "activism" at least at the intellectual level.
George Soros was another participant to whom it is impossible to feel other
than warmly for his efforts to use his resources for the benefit of so many.
Not as articulate as Kaldor, his sincerity was as marked and his "activism"
has clearly gone far beyond the intellectual.
The retiring Director-General of the WTO was more satisfied with his
organisation - what it had done and what it would prospectively do than he
might have been. His unhappiness was constrained and, in that, he seemed to
reflect the attitudes of those in charge in the United Nations, the IMF, the
World Bank and others. There was no focus on major reform, let alone
"revolution," but rather an implication that a bit of fine tuning would make
everything right.
I might add that an African and a Latin American were both eminently
likeable and impressive for their insights.
However, nothing seemed to emerge from this high-profile group.
We had no line or lines to pursue.
We had no new philosophy or pragmatic guidelines.
We had no process which we might get moving.

I think it is not too sceptical or cynical to say that Johannesburg left
many of us in the same disturbed condition but with nothing achieved or in
prospect that might modify our disturbance. Promises of a kind were there
but no real imperative appeared to change anything fundamental in our
economic, social, environmental or other policies.

We were there yesterday.
We are there today.
Disturbed but unfocussed; chaotic in our "activism," disordered in what we
should do.

Geoff Edwards says he is "not convinced that PK has adequately tapped into
the peace, green, justice and development communities." He suggests, "The
question is, is PK ready for a transforming shift?"
I imagine that he does not mean this in a way to be especially critical of
"PK."
If so, his criticism applies to many others.
Indeed, it could apply over the whole spectrum of individuals, associations,
movements and what have you.
Much of what is said in "PK" is admirable in professional and intellectual
terms but, so far at least, it offers no prospect of confronting and
resolving any of the great world issues of our time.

Can we do better?
I now come to the difficult part.
It's just too easy for each of us to imagine that we have found the way
ahead, the solution to our discontents and so on.
Pet theories can be the bane of rational thought and substantive progress.
But we do need a process for coming to grips with the issues that confront
us.
And for that reason I suggest that we must contemplate a movement of the
kind embodied in Victory Over Want.
It will bring us all together.
It will let all of us - a pretty high proportion of us anyway - have our
say.
It will establish an agenda and a pragmatic way of dealing with each item on
that agenda.
It will apply processes and ways of doing things that have been successful
in the past.
It will go beyond even the emergencies of hunger and poverty and lead us, we
can realistically hope, step by step towards a means of practical,
continuing cooperation and perhaps some form of pragmatic world governance.
We should give serious thought to focussing on our varied dissents and
bringing the wide variety of dissenters together in some such way as this.

As Geoff Edwards says, "What is needed is a campaign to develop a publicly
digestible, coherent,
multi-lateral package explaining alternative economics, then to promulgate
it."


James Cumes
http://VictoryOverWant.org



----- Original Message -----
From: "Geoff Edwards" <g.edwards@xxxxxxxxxxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Sent: Monday, September 09, 2002 3:12 PM
Subject: Re: NYTimes.com Article: Devotion to Free-Market Makes for
Ineffectual Policy


>
> In the long run, superior ideas prevail, even over power. Or more
precisely,
> power aligns itself to the most powerful ideas. However, the process may
> take decades and horrendous damage can be done in the meantime by
> dysfunctional ideas.
>
> It is well known in public policy circles that significant conditions
> necessary for the new ideas to prevail include:
>
> *  the internal contradictions of the old ideas must be commencing to
assert
> themselves; these ideas are no longer serving the interests of the key
> people affected;
>
> *  there must be a new, coherent paradigm ready to be pressed into
service;
>
> *  the advocates of reform can tap into several different social problems
at
> the one time.
>
> The internal contradictions of neo-classical economics are now pressing
> themselves upon the consciousness of many commentators. The question is,
is
> PK ready for a transforming shift?
>
> I think not quite. Although there may well be a coherent alternative
ready,
> I am not so sure that it is packaged in a form that makes it easy for
policy
> analysts and decision-makers to pick up and adopt. Also, I am not
convinced
> that PK has adequately tapped into the peace, green, justice and
development
> communities. So I suggest that neither the second nor the third conditions
> are yet satisfied.
>
> What is needed is a campaign to develop a publicly digestible, coherent,
> multi-lateral package explaining alternative economics, then to promulgate
> it.
>
> Geoff Edwards
> PhD Student
> Griffith University
> Brisbane, Australia
>
>
> -----Original Message-----
> From: pkt-owner@xxxxxxxxxxxxxxxx [mailto:pkt-owner@xxxxxxxxxxxxxxxx]On
> Behalf Of pdavidson@xxxxxxx
> Sent: Saturday, September 07, 2002 12:51 AM
> To: pkt@xxxxxxxxxxxxxxxx
> Subject: NYTimes.com Article: Devotion to Free-Market Makes for
> Ineffectual Policy
>
>
> This article from NYTimes.com
> has been sent to you by pdavidson@xxxxxxxx
>
>
> What do you think of this?
>
> pdavidson@xxxxxxx
>
>
> Devotion to Free-Market Makes for Ineffectual Policy
>
> September 5, 2002
> By JEFF MADRICK
>
>
>
>
>
>
> N a widely cited speech in Jackson Hole, Wyo., last week,
> Alan Greenspan tried to defend his failure to tame the
> 1990's stock market bubble. The Federal Reserve chairman
> said raising interest rates would have caused too much
> damage to the economy. He said raising margin requirements
> would not have mattered, although senior Wall Street hands
> like the economist and consultant Henry Kaufman had long
> urged him to do so.
>
> But most telling, Mr. Greenspan said Fed officials could
> not know when stocks were too high. Maybe the market, even
> when violating all sorts of historical precedents, was just
> right.
>
> Such thinking is all too representative of the undue faith
> in the magic of markets that characterizes today's policy
> making.
>
> Mr. Greenspan was quick to help the market when it was too
> low. During the Asian financial crisis in 1997, the fear
> that the financial system might collapse weighed heavily in
> his decision to cut rates sharply.
>
> But when stocks were in a bubble and the political pressure
> was to keep the good times rolling, he consistently
> retreated to his deepest belief that the markets were
> basically efficient and should not be interfered with. A
> few economists have even asserted that stock bubbles are
> entirely rational.
>
> A highly respected mainstream economist has issued one of
> the strongest criticisms yet of such thinking. George
> Akerlof, a professor at the University of California at
> Berkeley, won the 2001 Nobel in economic science, with
> Joseph Stiglitz and Michael Spence.
>
> In his Nobel acceptance speech, reprinted in the June issue
> of The American Economic Review, Mr. Akerlof uses
> behavioral economics to criticize oversimplified
> laissez-faire theories.
>
> Such theories depend greatly on one assumption: that buyers
> and sellers are rational and seek to maximize their own
> incomes and profits. These economists, perhaps best
> represented by the work of the so-called new classical
> economists, whose home base is the University of Chicago,
> conclude that stocks are almost always sensibly priced.
> They also conclude that unemployment cannot be reduced
> without creating inflation, people save enough on their
> own, regulations that limit the international flow of
> capital are anathema, and even monetary policy has little
> or no consequence.
>
> Mr. Akerlof argues, however, that market bubbles can exist
> and should be kept under control; that unemployment can
> often be pushed lower by government without generating
> inflation; that people will not save enough on their own;
> and that liberalized global capital flows have been
> damaging. He argues that monetary and fiscal policies do
> matter in creating jobs and raising incomes.
>
> The starting point for Mr. Akerlof and his colleagues is to
> make the central assumption of economics realistic. People
> are often not rational, maybe even most of the time.
> Consider investors in stocks. Keynes implied long ago in
> his "General Theory of Employment, Interest and Money," Mr.
> Akerlof notes, that investors are subject to fads and
> fashions.
>
> Behavioral economists have developed a lot of evidence to
> support this idea. For example, Robert Shiller of Yale has
> carefully shown that stock prices are much more volatile
> than corporate profits and dividends.
>
> An important conclusion is that when stock prices are
> historically far out of line with profits, there is a good
> chance that it is a bubble, not a "new economy" of
> ever-higher profits, as Mr. Greenspan often suggested in
> the 1990's.
>
> Similarly, new classical economists argue that markets are
> so efficient that unemployment is largely voluntary. For
> the most part, they say, people who are out of work can
> find jobs if they are willing to work for less. Government
> cannot really help them.
>
> Mr. Akerlof argues that in real life, businesses often pay
> more than the market wage to retain good workers, bolster
> morale or create incentives to work harder. Thus, jobs are
> actually rationed, and many job seekers are shut out.
>
> Mr. Akerlof argues that behavioral economics also casts
> doubt on the related assertion that there is a unique
> natural rate of unemployment. If policy makers push the
> jobless rate lower, the argument is that inflation will
> inevitably accelerate. Mr. Akerlof believes that when one
> considers the way people really act, this is just plain
> wrong. As Keynes asserted, monetary and fiscal stimulus can
> produce more jobs and higher incomes that will not be
> undermined by higher inflation.
>
> As for savings, much economic theory argues that people
> save rationally over their lifetimes for retirement. But
> behavioral economists show that people systematically
> procrastinate - they spend today and plan to save tomorrow.
>
>
> This may seem obvious. But consider how far Social Security
> privatization has gotten, based largely on the new
> classical view of rational human behavior. Proponents argue
> that if people are deprived of Social Security as a safety
> net, almost all of them will save adequately for
> retirement, no matter their level of income. There is no
> basis in human observation or economic history for this
> conclusion. For many people, especially with lower incomes,
> saving is very difficult.
>
> The strength of behavioral economics is that it is based
> largely on actual observation of human behavior, not pure
> theory. "In the spirit of Keynes," Mr. Akerlof writes,
> "behavioral macroeconomists are rebuilding the
> microfoundations that were sacked by the new classical
> economists."
>
> To be fair, economists from other schools of thought,
> including post-Keynesians, structural economists and gender
> economists, have tried to explain the same observations
> with other interesting theories, and they deserve more of a
> hearing.
>
> But Mr. Akerlof and his colleagues have attacked today's
> conventional wisdom, which dominates the halls of power, on
> the basis of its own assumptions and values. Mr. Akerlof's
> side, I believe, is winning this battle of ideas. The
> battle for power may be another matter.
>
>
http://www.nytimes.com/2002/09/05/business/05SCEN.html?ex=1032323863&ei=1&en
> =6e582ba00fcbaf96
>
>
>
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