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The latest news, debates, proposals and developments on new economic thinking at a glance.
To really understand the dollar system and international finance, one important question to ask is how the world became so dependent on the US dollar. A new book of the INET book series and Cambridge University Press does precisely this.
Money and Empire: Charles P. Kindleberger and the Dollar System, by Boston University economics professor Perry Mehrling, outlines the evolution of Kindleberger’s economic thought in the context of a ‘key-currency’ approach to the rise of the dollar system, which served as the indispensable framework for global economic development since World War II.
The book is a biography of both the dollar and a man, telling the story of the development of ideas about how money works and the rise of the dollar system, which contrasts with the more common myth of multilateralism at Bretton Woods.
As Adam Tooze observes in his review of the book, Kindleberger understood money and banking as inherently transnational, with ownership, accounting and control dispersed in space. This understanding of global credit creation is somewhat at odds with the intermediation view on banks underlying the work of this year’s “Nobel” prize winners. When Ben Bernanke asked Kindleberger for a comment on his paper Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression (1983), he received the following reply, which underlines the degree of intellectual disagreement: “I think you have provided a most ingenious solution to a non-problem.” Read the whole reply here.
A reform of the European Stability and Growth Pact has been on the agenda for some time. Now the European Commission has presented its proposal. The rules are to give member states more flexibility in reducing debt, but at the same time become more binding.
An overview of various reform proposals by Jan Priewe can be found here. In addition, here is a study by the ZOE Institute on the effects of various fiscal rules on a just green transformation.
Biden threatens oil companies with excess profits tax – Article (German)
Der Spiegel, 01.11.2022
Shortly before the mid-term elections in the USA, President Biden takes a sharp swipe at the oil industry. “Either it lowers prices at the pump or it pays a higher tax.”
Who Broke American Democracy? – Article
Angus Deaton, Project Syndicate, 27.10.2022
Democracy is premised on equality, and all citizens are supposed to have an equal chance to influence political decisions. But for too long in the United States, the political and electoral systems have catered to the interests of elites and the well-off at the expense of those without a college degree.
How the U.K. Became One of the Poorest Countries in Western Europe – Article
Derek Thompson, The Atlantic, 25.10.2022
Britain chose finance over industry, austerity over investment, and a closed economy over openness to the world.
EU leaders hail breakthrough in gas cap plan to tackle energy crisis – Article
Financial Times, 21.10.2022
Prices fall 7% after member states agree to finalise details on proposals to lower costs for households and businesses.
Michael Sandel – Das Leistungsdenken zersetzt unsere Gesellschaft – Video (German)
SRF, 02.10.2022
“You can make it if you try!” This formula is widely accepted, as is the belief that those who achieve success and prosperity deserve it. Michael Sandel, one of the most successful philosophers, says that this is not true and is even dangerous for the community.
In a new opinion piece for the Financial Times, Martin Sandbu makes the point for opening the discussion about the mandate for central bank, between the poles of independence and democratic accountability:
“Credibility of central banks itself is only as good as the credibility of the macroeconomic regime as a whole. That is not to say central bank independence should be jettisoned, but to ask openly whether it actually works for the economy… Even if monetary considerations should take priority, such monetary dominance is undoubtedly something to be democratically debated, not technocratically imposed.”
Federal government wants to skim off windfall profits in the electricity sector as well – Article (German)
Zeit Online, 19.10.2022
A price brake is to be introduced not only for gas, but also for electricity. The Ministry of Economics wants to skim off profits from the electricity sector.
The gas price brake is better than its reputation – Article (German)
Tom Krebs, Zeit Online, 18.10.2022
The Gas Price Commission’s proposal strikes the right balance between savings incentives and price brakes. But the government absolutely has to improve on one point.
Wars Aren’t Won with Peacetime Economies – Article
Joseph Stiglitz, Project Syndicate, 17.10.2022
Since launching his war of aggression in Ukraine, Russian President Vladimir Putin has described his barbaric project as a confrontation with the entire West. But while Western governments have responded politically and diplomatically, they have yet to do what is needed economically.
A New Chance for the World Bank – Article
Larry Summers, Project Syndicate, 10.10.2022
The World Bank should be a major vehicle for crisis response, post-conflict reconstruction, and, most importantly, for supporting the huge investments necessary for sustainable and healthy global development. To realize this potential, those attending the Bank’s meeting this week need to step up and do the right thing.
Why market power undermines climate protection – blog post (German)
Max Bank & Nelly Grotefendt, Makronom, 17.10.2022
Time and again in recent years, the consequences of one-sided lobby and market power have become clear – and how difficult it is to limit them.
OUR MAIN TOPICS
New Paradigm
NEW PARADIGM
After decades of overly naive market belief, we urgently need new answers to the great challenges of our time. More so, we need a whole new paradigm to guide us. We collect everything about the people and the community who are dealing with the question of a new paradigm and who analyze the historical and present impact of paradigms and narratives – whether in new contributions, performances, books and events.
Redefining
the role of
the state
REDEFINING
THE ROLE OF
THE STATE
For decades, there was a consensus that reducing the role of the state and cutting public debt would generate wealth. This contributed to a chronic underinvestment in education and public infrastructure. New research focuses on establishing when and how governments need to intervene to better contribute to long-term prosperity and to stabilize rather than aggravate economic fluctuations.
Remaking
finance
REMAKING
FINANCE
More than a decade after the financial crisis there still seems to be something seriously wrong with the financial system. Financial markets still tend to periodically misprice risk and contribute to boom and bust cycles. A better financial system needs to discourage short-termism and speculative activity, curtail systemic risk and distribute wealth more broadly.
Greening
prosperity
GREENING
PROSPERITY
During the high point of market orthodoxy, economists argued that the most 'efficient' way to combat climate change was to simply let markets determine the price of carbon emissions. Today, there is a growing consensus that prices need to be regulated and that a carbon price on its own might not be enough.
Reducing
inequality
REDUCING
INEQUALITY
The rising gap between rich and poor has become a threat to social cohesion in most rich countries. To reverse this trend it will be crucial to better understand the importance of different drivers of income and wealth inequality.
Innovation Lab
INNOVATION LAB
Do we need a whole new understanding of economic growth? What would be a real alternative? How viable are alternatives to GDP when it comes to measuring prosperity? These and other more fundamental challenges are what this section is about.
Globalization
for all
GLOBALIZATION
FOR ALL
After three decades of poorly managed integration, globalization is threatened by social discontent and the rise of populist forces. A new paradigm will need better ways not only to compensate the groups that have lost, but to distribute the gains more broadly from the start.
Europe
beyond markets
EUROPE
BEYOND MARKETS
The euro was planned during a period in which economic policy making was driven by a deep belief in market liberalism and the near impossibility of systemic financial crises. This belief has been brought into question since the euro crisis, which showed that panics do happen. New thinking needs to focus on developing mechanisms to protect eurozone countries from such panics and to foster economic convergence between members.
Corona Crisis
CORONA CRISIS
The current Corona crisis is probably the worst economic crisis of the post-World War 2 era. Economists are working hard on mitigating the economic effects caused by COVID-19 to prevent a second Great Depression, the break-up of the Eurozone and the end of globalisation. We collect the most important contributions.