PUBLICATIONS
A group of academics disputes the notion that President Roosevelt’s fiscal and job creation programs helped end the Great Depression. On the contrary, Research Scholar Greg Hannsgen and President Dimitri B. Papadimitriou believe that the New Deal era strengthens the case for the effectiveness of fiscal policies and job programs. They recommend a permanent employer-of-last-resort program, as proposed by Hyman P. Minsky, to mitigate the effects of the current Great Recession.
The persistence of mass unemployment throughout the 1930s should be blamed on the enormity of the task at hand and Roosevelt’s reluctance to run deficits, say the authors. And the number of jobs created by the Works Progress Administration and other federal agencies was perhaps more important than the size of the fiscal stimulus.
Through the credit-default-swap (CDS) “insurance” market, it is possible to take on the risk of a mortgage-backed security without purchasing or holding the security itself. Since the market for these products is moribund, Wall Street is looking for the next asset bubble by securitizing life insurance policies—that is, by making bets on the death of human beings.
Marshall Auerback and Senior Scholar L. Randall Wray argue that CDSs give the participants a vested interest in financial instability by creating perverse incentives. They believe that most of the problems created in the securitized mortgage business will be re-created in the market for securitized life insurance policies (e.g., indiscriminate sales without normal underwriting, and defrauding of policyholders). The authors call for the banning of CDSs and life settlement securities, which operate against the public interest. In essence, they say, this is financial engineering run amok.
According to L. Randall Wray, the economic crisis cannot be explained within the context of a “Minsky moment” because it represents a slow transformation of the financial system and economy toward fragility. Basing his arguments on Hyman P. Minsky’s financial instability hypothesis, Wray blames “money manager capitalism,” which is an economic system characterized by highly leveraged funds seeking maximum returns in an environment that systematically underprices risk. He suggests that the money manager phase of capitalism may be ending.
Wray notes that the trend has been toward more severe and frequent crises. He proposes policy responses such as regulatory constraints and new standards to prevent boom/bust cycles; massive fiscal stimulus to allow growth without relying on private sector debt; mortgage relief; higher wages; greater employment; and revised monetary policy. We must return to a model with enhanced oversight of financial institutions and a financial structure that promotes stability rather than speculation, Wray says.
Gender equality was lauded as one of the greatest achievements of the Soviet Union and the former socialist-bloc countries. Using the Georgian household budget survey for the period 2000–04, the author assesses the economic dimension of gender inequality in Georgia. The study aims at establishing a baseline for the analysis of the impact of recent gender-targeted policies by the Georgian government.
The paper focuses on the gender wage gap, which was found to be substantial as a result of factors such as occupational differences. Female employment is concentrated in industries with the lowest mean wages—education, health care, and culture—but there are indications that women are increasingly engaged in high-skilled sectors such as finance, manufacturing, and energy. The irony is that the difficult economic environment, together with caretaking responsibilities, has shielded women from experiencing more significant discrimination in the labor market.
Authors Paolo Casadio and Antonio Paradiso develop a small-scale econometric model of the U.S. economy based on a financial balances model by Goldman Sachs (2003) that was inspired by the works of Distinguished Scholar Wynne Godley. Their analysis includes the private and external sectors of the economy, and introduces the idea of financial fragility in capitalist economies that was originally developed by Hyman P. Minsky.
Casadio and Paradiso find that the financing gap—the difference between internal funds and business investments of nonfinancial firms—is a leading indicator of business cycles, while business investment is a lagging indicator. They also find that all sector balances depend on asset market variables, and that discrepancies from equilibrium affect the growth in output (e.g., a negative financial balance has a negative effect on GDP, while a negative household balance has a positive effect).
