From Peter Meyers from down under. The idea seems to me based on the principle
of distribution of wealth which leads to the transfer of wealth from the
financial sector to the productive sector (i.e. more people have money, rich to
poor) hence more spending globally. Henry had a parallel idea of "restructuring
international trade". Distribution internal to countries is however not
addressed. The transfer is from rich to rich.
Gary Santos
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1) Eamonn Fingleton - Reality Check on Globalism
Date: Fri, 1 Aug 2003 08:58:22 +1000 From: "John Craig"
<cpds@xxxxxxxxxxxxxxxxxxxxx>
A 1940s proposal by Keynes might be a way to overcome problems with
globalisation according to Galbraith. [I think this is James Galbraith, son of
JKG or maybe it is from JKG who is in his 90's and still active. I think JKG is
writing one book now which should also be quite interesting.].
OUTLINE: Development finance, long influenced by Keynes, has been turned
over to investment bankers over the past 20 years. The Bretton Woods
conference put in place the IMF and World Bank - partly on the basis of
Keynes critique of the Versailles Treaty after WW1. Keynes proposed a
multilateral financial system - in which great nations would not place
commercial financial terms ahead of every goal of social progress - by
enabling trade to coexist with a generous and protective system of
financial institutions. A key feature involved creditor adjustment -
involving sanctions on countries that ran trade surpluses. This would
force to latter to choose between discrimination against their trade and
expansion of domestic demand. Debtors meanwhile would have access to
overdraft facilities. The Americans would not accept this due to
preference for laissez faire, the gold standard and manufacturing
superiority. Thus IMF and World Bank were constructed on more
traditional lines. The US was later converted by social programs into
the Keynesian locomotive for the rest of the world. And poor countries
grew faster than the rich. But this system ended in the 1970s.
Development finance was returned to commercial banks - and the system of
development finance broke down - engulfing the developing world in
speculative instability. Brazil currently has high debts and a trade
surplus. The IMF offers loans on conditions that demand be suppressed -
whereas Keynes proposals would have required that demand be expanded on
the basis of international reserves. The successful economies of
developing world are those which have pursued mercantilist policies and
detailed planning strategies. Europe has free trade and capital flow,
but countries are required under the stability and growth pact to
maintain small unified budget deficits - despite high unemployment.
Income convergence in Europe has halted. The US has been able to
overlook these issues because (a) the $US has been world's reserve
currency (b) it has been a safe haven for capital and (c) Keynesianism
has continued as the basis of domestic policy - despite constant
pressure for tax cuts. (Galbraith J 'Don't turn the world over to
bankers', Le Monde Diplomatique,May 2003)