PKT message, Tackling the World Recession (Grieve Smith 2002)

Tackling the World Recession (Grieve Smith 2002)

John Grieve Smith advocates a form of international Keynesianism. He is a Fellow of Robinson College, Cambridge, UK and has worked in the British Cabinet Office, the Treasury, as an Under-Secretary in the Department of Economic Affairs and then as Director of Planning in the British Steel Corporation. His latest book, There is a Better Way: A New Economic Agenda was recently published by Anthem Press.

REFERENCE: John Grieve Smith, "Tackling the World Recession", A Catalyst Working Paper. London, UK: Catalyst, January 2002. 25 pages. from the Catalyst website at http://www.catalyst-trust.co.uk/paper4.html

HIGHLIGHTS: The threat of recession "can only be tackled effectively if the leading industrial countries jettison the neo-liberal economic consensus . . .and adopt more expansionary policies. The United States shows encouraging signs of doing so, but policy in the EU is still largely dominated by the prevailing orthodoxy, as it is in the UK." (p. 5) Grieve Smith urges that "Governments should be making contingency plans for more active domestic expansionary measures if the outlook deteriorates" and calls for a "New Bretton Woods" (p.6) (details, see below)

CRITIQUE: Three cheers for the Grieve Smith position - (1) "jettison the neoliberal economic consensus", (2) especially, in the European Union, (3) build a New Global Financial Archtecture, a new Bretton Woods (incl. Tobin tax, terminate the floating exchange rate system and replace it with a two-tier system [regional subsystems + global], and other). It would be useful, though, to move beyond this position forward to a position of world-system Keynesianism. The difference would be theoretical and practical. Theoretical - for example, "demand" in Grieve Smith is national demand, he does not use the term "global [effective] demand". His conceptualization remains tied to a system of nation-states (statist system, in the sense of "international relations"), in which the rich nations are the main actors. In contrast, in a world-system view transnational corporations and Third World countries are also treated as important actors. Practical implication - in Grieve Smith's approach, the fat must get fatter so that the thin ones can have some spill-over effects (expansion of rich-country demand must lead the world). In contrast, from a world-system perspective, expansion of demand *in the South of the world* could be leading the world and could generate spill-over effects for the rich countries (e.g., less unemployment in Euroland). If we pay the poor countries better, they can afford to buy more of our products. Further, it would be useful if Grieve Smith's appealing international Keynesianism could be sharpened by insertion of concepts like "global exploitation", "global wage differential" "global wage discrimination" "unequal exchange". Another addition to the Grieve Smith line could be political "green" - investment on a world scale in renewable energies and sustainable technologies.

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from the Grieve Smith paper ---

A NEW BRETTON WOODS

[quote, p. 6]

? More fundamentally,the current situation provides an opportunity for agreement on a new Global Financial Architecture to tackle the three inter-related sources of

instability:capital movements,asset price bubbles,and exchange rate volatility.

? Some moves have been made towards more effective regulation of financial institutions,but it must be a priority to reduce the degree of leverage in the

system and tightening up the regulation of bank lending for speculative purposes.

? Taxes on financial transactions, such as the Tobin Tax could improve stability by reducing the profitability of short-term speculation,but they can only be levied on

an international basis.The Government should aim to harmonise taxes on share transactions not abolish them.

? The present regime of floating exchange rates should give way to a new era of managed,but flexible rates.This would of necessity involve a two tier approach,

with a number of (varied) regional systems,and global arrangements to manage the rates between them.

[end quote]