Commentary

by Felipe Rezende This is the first in a series of blog posts on financing infrastructure assets Insufficient or inadequate infrastructure in both developing and developed economies has sparked a debate about whether financing is sufficient to sustain infrastructure investment to at least keep pace with projected global GDP growth. The task of keeping the minimum investment required to maintain current levels and fostering incremental spending to close the infrastructure gap has revived the debate over the role played by each actor in closing the gap and how to finance this process (see for instance G-20 2013; OECD 2013; World Bank 2015). One of the major post-crisis challenges is that in spite of an ultra-low interest rate environment or even negative nominal and real rates, investment has been anemic in developed and developing economies (IMF 2015). This is particularly important because, since the crisis, investment has collapsed across all sectors (public, business, and household sectors) in Europe (McKinsey 2016, 2). And in the United States, “the trajectory of net fixed capital formation, which decreased from 12 percent of GDP in 1950 to 8 percent in 2007, then fell to only 4 percent in 2014. Average depreciation rates accelerated by about 20 percent during the 1980s as companies invested in shorter-lived assets such as ICT equipment but did not compensate in…more

The 27th Minsky Conference — “Financial Stability in a World of Rising Rates and the Repeal of Dodd-Frank” — just wrapped up yesterday. Anyone interested in the slide presentations can find them below: Welcome and Introduction Jan Kregel, Director of Research, Levy Institute Remarks in PDF Session 1. US AND GLOBAL ECONOMIC OUTLOOK MODERATOR: L. Randall Wray, Senior Scholar, Levy Institute; Professor of Economics, Bard College SPEAKERS: Lakshman Achuthan, Cofounder and Chief Operations Officer, Economic Cycle Research Institute PowerPoint presentation in PDF Philip Suttle, Founder and Principal, Suttle Economics LLC PowerPoint presentation in PDF Michalis Nikiforos, Research Scholar, Levy Institute PowerPoint presentation in PDF Session 2. EMPLOYER OF LAST RESORT STUDY MODERATOR: Peter Coy, Economics Editor, Bloomberg Businessweek SPEAKERS: Pavlina Tcherneva, Research Associate, Levy Institute; Professor of Economics, Bard College PowerPoint presentation in PDF L. Randall Wray, Senior Scholar, Levy Institute; Professor of Economics, Bard College PowerPoint presentation in PDF John F. Henry, Senior Scholar, Levy Institute; Professor Emeritus, California State University, Sacramento; Adjunct Professor, University of Missouri—Kansas City Session 3. REFORM AND INNOVATION IN FINANCIAL REGULATION AND MONETARY POLICY MODERATOR: Matt Phillips, Markets Reporter, The New York Times SPEAKERS: Thomas Ferguson, Director of Research, Institute for New Economic Thinking; Professor Emeritus, University of Massachusetts, Boston; Senior Fellow, Better Markets PowerPoint presentation in PDF Thorvald Grung Moe, Research Associate, Levy Institute; Special Adviser, Norges Bank PowerPoint presentation in PDF Walker F. Todd, Trustee, American Institute for Economic Research (AIER); Lecturer in…more

Director of Research Jan Kregel is one of the editors and contributors for a new collection of essays devoted to the work of Alessandro Roncaglia: Classical Economics Today: Essays in Honor of Alessandro Roncaglia is a collection of essays that pays tribute to Alessandro Roncaglia whose research is based on Schumpeter’s dictum that good economics must encompass history, economic theory and statistics, and therefore does not generally take the form of elegant formal models that are applicable to all and everything. In this direction, Roncaglia is inspired by the Classical economists of the past and becomes a model for present-day Classical economists. A perceptible family air imbues the essays: all the contributors are friends of Roncaglia and see his personality and his interests as a common point of reference. View the table of contents below the fold:

The Levy Economics Institute of Bard College is pleased to announce the ninth Minsky Summer Seminar will be held from June 17–23, 2018. The Seminar will provide a rigorous discussion of both the theoretical and applied aspects of Minsky’s economics, with an examination of meaningful prescriptive policies relevant to the current economic and financial outlook. It will also provide an introduction to Wynne Godley’s stock-flow consistent modeling methods via hands-on workshops. The Summer Seminar will be of particular interest to graduate students, recent graduates, and those at the beginning of their academic or professional careers. The teaching staff will include well-known economists working in the theory and policy tradition of Hyman Minsky and Wynne Godley. Applications may be made to Kathleen Mullaly at the Levy Institute ([email protected]), and should include a letter of application and current curriculum vitae. Admission to the Summer Seminar will include provision of room and board on the Bard College Campus. The registration fee for the Seminar will be $325. Due to limited space availability, the Seminar will be limited to 30 participants; applications will be reviewed on a rolling basis starting in January 2018. Last year’s seminar featured the following faculty (the roster changes somewhat from year to year, but will be broadly similar for ’18): Robert J. Barbera Codirector, Center for Financial Economics, The…more

Today at the New School, L. Randall Wray and Stephanie Kelton take part in a public workshop organized by the National Jobs for All Coalition that is focused on developing a “A New ‘New Deal’ for NYC and the USA.” Wray and Kelton will be sharing initial findings from an upcoming Levy Institute project that proposes a universal job guarantee for the United States. The program would create nearly 20 million jobs that pay $15 per hour plus benefits, raising national output by over $500 billion annually, stimulating the private sector to create more than 3 million additional jobs. Using standard simulation models, the study finds that impacts on inflation would be negligible, while state and local government budgets would improve by $60 billion annually and as many as 14 million children would be pulled out of poverty. The entire event begins at 5pm today. You can follow it live here: [youtube https://www.youtube.com/watch?v=8jqG3wtqm5A&w=427&h=240] The schedule for the two-day event can be found here.

The Levy Institute is accepting applications to the M.S. and M.A. in Economic Theory and Policy for Fall 2018. The new, one-year M.A.* joins the two-year M.S. in offering students an alternative to mainstream programs in economics and finance. Our graduate curriculum is rooted in the Institute’s distinctive research program, including macroeconomic theory and policy analysis, the development and exploration of alternative measures of economic well-being and poverty, and continuing efforts to extend the work of Distinguished Scholars Hyman Minsky and Wynne Godley. Students can specialize in one of the Institute’s five research areas: Macroeconomic Theory, Policy, and Modeling Employment and Labor Markets Monetary Policy and Financial Structure Distribution of Income, Wealth, and Well-Being Gender Equality and the Economy You can find out more about these programs at the new graduate website: The application deadline for early decision is November 15th; regular decision is January 15th. Interested students can join upcoming online information sessions run by program faculty: October 19th, 7:00pm (EST) with Jan Kregel, Director of the Institute’s Master’s Program (sign up here) November 3rd, 9:00am (EST) with Ajit Zacharias, Director of the Institute’s Distribution of Income and Wealth Program (sign up here) A previous session with Director of Applied Micromodeling Thomas Masterson can be viewed here at the Levy Institute Graduate Programs Facebook page. And don’t miss the work…more

The Council on Foreign Relations’ Brad W. Setser has produced a couple of interesting blogposts on Germany’s fiscal policies of late. The first one, titled “Germany Cannot Quit Fiscal Consolidation,” was published at the end of August. On September 18th, the second one appeared, titled “The Global Cost of the Eurozone’s 2012 Fiscal Coordination Failure.” The latter is more limited in scope and draws heavily on a recent report by the Banque de France. Setser elaborates on the rather obvious point that the eurozone’s attempt at fiscal austerity in the years 2011–13, when the currency union experienced the second leg of its double-dip recession, was counterproductively harsh: The consolidation observed between 2011 and 2013, based on the overall change in the primary structural balance of general government, is now estimated by the European Commission at almost 2.9% of potential GDP…the fiscal effort was 1.5 percentage points of GDP in 2012. (Banque de France 2017) Corroborating the Banque de France’s analysis, Setser points out correctly that there was no sound economic case for Germany to embark on austerity just at the time when it also demanded this form of self-sacrifice, in the name of the “credibility” of the euro regime, from its euro partners. If anything, Germany should have continued with at least mildly expansionary fiscal policy to keep the eurozone’s recovery…more

If you’re in the vicinity of New York City at the end of October, Levy scholars Randall Wray and Stephanie Kelton are taking part in a public meeting organized by the National Jobs for All Coalition. The meeting is part of a series of public events focused on the legacy of New Deal. Wray and Kelton will be participating in a panel on the job guarantee — “Political and Economic Prospects for Achieving a Federal and a New York City Job Guarantee” — alongside Philip Harvey and Darrick Hamilton (who was recently recognized by Politico for his work on the job guarantee). The event is hosted at the New School (Oct. 27) and Columbia Law School (Oct. 28). You can download the flyer and program here. For registration and other details, see here.

It took a very long time. Too long. But just in time for the recent G20 meeting in Hamburg on July 7-8, The Economist’s cover page story featured Germany’s persistent current account surpluses as the world community’ new “German problem”; supposedly an issue of foremost interest to the G20. In fact, Germany has run up current account surpluses exceeding 4 percent of GDP in each and every year since 2004. For the last couple of years Germany’s surpluses even exceeded 8 percent of GDP. Running at over 250 billion euros annually, Germany is the world champion in what is often portrayed as a global competition by the German media and body politic, and not without pride. At close to 300 billion US dollars last year, China’s surplus of 200 billion dollars only came in as a distant second. Just as with Germany’s, China’s external surpluses had started to skyrocket at the time of the global boom of the 2000s. It reached a peak at over 400 billion in 2008, amounting to close to 10 percent of China’s GDP at the time. Since then China’s current account surplus has roughly halved and amounts to less than 2 percent of China’s GDP today. At least in that regard, China is a good global citizen. Reducing and containing “global (current account) imbalances” has…more

The Economist‘s analysis of Germany’s job market miracle of the past ten years offered in “What the German economic model can teach Emmanuel Macron” is more balanced than the usual accounts one hears in Germany itself. Germans are in love with the idea that structural reform of their labor market and persistent budgetary austerity were solely responsible for the German economy’s superior performance in recent years. The Economist highlights that Germany was fortunate enough to embark on its route for national salvation – the decisive lowering of its labor costs relative to its European partners – at a time when the world economy and global trade were booming, when China was craving German capital goods, and German companies were restoring their special relationship with a region reemerging from behind the iron curtain. No doubt France and its struggling euro partners are facing a far less benign regional and global environment today. The Economist would have done well to remind us that despite enjoying a more favorable economic context, Germany became known at the time as “the sick man of Europe/the euro.” Between 1996 and 2006, Germany managed to almost persistently suffocate domestic demand to such an extent that the economy was growing, if barely, on exports alone: the background to Germany’s 8.5 percent-of-GDP current account surplus today. As for France,…more

Jan Kregel opened this year’s Minsky Conference (which just wrapped up yesterday) with a reminder that the broader public challenges we face today are still in many ways an echo of those that faced the nation in 1930s. What follows is an abridged version of those remarks: This year’s conference takes place in an increasingly charged and divisive economic and political atmosphere. Sharp differences in approach are present within the new administration, within the majority party, and even within the opposition. It is a rather different environment than the one envisaged when planning for the Conference started last September. I had originally proposed as a title “The New Administration meets the New Normal: Economic Policy for Secular Stagnation.” It was an obvious attempt to hedge our bets on the outcome of the election. After the election the first adjustment to the title was “Can the New Mercantilism Displace the New Normal: Economic Policy under the New Administration.” As you can see the final title eventually adopted the elocution proposed at the presidential Inauguration. My intention was not to elicit recollection of the “America First” committee’s support of isolation from the emerging European conflict in the 1930s. It was rather to recall that the phrase was first used, to my knowledge, by Franklin Roosevelt during his first election campaign. Herbert Hoover had resolutely refrained…more

The Justice Verma Committee submitted its report on January 23, 2013. In addition to recommendations for reforming laws related to sexual violence, harassment, and trafficking, it provided a comprehensive framework for gender justice through a proposed “Bill of Rights.” The Verma Committee’s recommendations are still waiting to be transformed into public policy. We must not forget that this document represents an intense 30 days of work in response to a brutal gang rape of a young student in the heart of the nation’s capital in a public transport vehicle in the late evening of December 16, 2012. She was returning home with her friend after watching “Life of Pi.” The power of this report is the acknowledgment (in the very first line of the report) that this brutal event represents a “failure of governance to provide a safe and dignified environment for the women of India, who are constantly exposed to sexual violence.” The acknowledgement is a clarion call for government policies to ensure dignity, safe mobility, and security for women. “Bill of Rights” The Bill of Rights is a proposed charter that would set out the rights guaranteed to women under the Constitution of India, against the backdrop of India’s commitment to international conventions. These rights are articulated as the right to life, security, and bodily integrity; democratic and civil…more