Welcome James K. Galbraith (Univ of Texas/Austin), and Host Max Fraad Wolff (HuffingtonPost)

[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions.  Please take other conversations to a previous thread. - bev]

Inequality and Instability: A Study of the World Economy Just Before the Great Crisis

James Galbraith’s Inequality and Instability updates and motivates two intertwined and core issues facing the world today. Professor Galbraith takes on the macroeconomy, economics profession, and the structural trends in the world economy. The work builds up analytics, reports outcomes, and suggests areas of future inquiry. The metrics and results are clearly presented, cogently argued, and made readily available to lay readers and professionals in the space. It would be difficult to imagine more essential subjects to modernize and re-energize than issues of growing inequity and endemic insecurity.

The early chapters, Chapters 1-4, introduce measures and measurements of inequities for individuals, households, families. There is a refreshing international breadth of scope. The field is defined and explored along structural lines. This is an important mark of differentiation in an area cluttered by narrow inquiries that do not apply well across geographies and demographics. Chapters 5-9 take the basic premise and observation on a whirlwind tour of the Americas, Europe, and China. This allows the structural approach to be applied to different political circumstances, social norms, and levels of economic development. It is courageous and valuable to stress test common assumptions regarding equality and democracy. A close look at the unique case of Cuba and the recent trends in Argentina and Brazil allow an exploration of some counterfactuals to the long term trends discussed.

The concluding chapter attempts to extrapolate the key message and value of Galbraith’s modernization and structuralization of issues of equity and stability. The financialization of inequality and the rise of instability are broadly and deeply explored in Inequality and Instability. This work will arm advocates of greater equality with broader and deeper understanding. This is invaluable given the size of the challenge and the urgency of issues explored.

172 Responses to “FDL Book Salon Welcomes James K. Galbraith, Inequality and Instability: A Study of the World Economy Just Before the Great Crisis”

BevW April 7th, 2012 at 1:50 pm

James, Max, Welcome back to the Lake.

Max, Thank you for Hosting today’s Book Salon.

James K. Galbraith April 7th, 2012 at 1:53 pm

Delighted to be here. Max, thank you for doing this.

Max Fraad Wolff April 7th, 2012 at 1:58 pm

Exciting to be involved. A really good read and a vital set of subjects. The pleasure is all mine

dakine01 April 7th, 2012 at 2:00 pm

Good afternoon James and Max and welcome back to FDL this afternoon.

James I have not read your book so forgive me if you do address this question in there but is there any hope at all for the 25M – 30M of long term un and underemployed going forward?

When I see articles talking about how well the “recovery” is going and how the economy is growing, it makes me wonder just what universe the writers and folks they are interviewing are living in. All it seems is that the proverbial 1% are recovering while the rest of us, not-so-much

Max Fraad Wolff April 7th, 2012 at 2:01 pm

Two questions just to help kick start our process:

1) Given that the causes, consequences and contours of inequality evolve, how do advocates for increased equality articulate long term robust policies?

2) What happened to prevent “standard” inequality measures from evolving with our evolving economic structure and emerging inequality issues?

James K. Galbraith April 7th, 2012 at 2:02 pm

Sadly you are right. Progress in getting good jobs is very slow, and many older workers will hit retirement age before it happens to them.

BevW April 7th, 2012 at 2:03 pm

As a technical note,
there is a “Reply” button in the lower right hand of each comment. Pressing the “Reply” will pre-fill the commenter name and number you are replying to and helps for everyone in following the conversation.

(Note: If you’ve had to refresh your browser, Reply may not work correctly unless you wait for the page to complete loading)

Max Fraad Wolff April 7th, 2012 at 2:03 pm

Inequality and Instability looks closely at the relationship between structural unemployment and issues of inequality. Perhaps this is an area that deals with the last question and the book?

James K. Galbraith April 7th, 2012 at 2:04 pm
In response to Max Fraad Wolff @ 5

On the first point, the book shows that there are powerful, common, global forces behind the rise of inequalities worldwide.

Those forces are largely financial. And since the US is the seat of financial power, we have much responsibility for what happened during the great run-up of inequalities worldwide, especially from 1980 to 2000. Controlling those forces is therefore a first step.

But it’s also possible for countries to build institutions that restrain inequality at the national level: unions, social insurance, and minimum wages are key institutions of this kind. Countries that had those institutions in the first place, and kept them — or that have been building them in recent years, which is happening in South America, have done better.

Max Fraad Wolff April 7th, 2012 at 2:05 pm

2 More Questions

3) Are poverty measures- by most states, most of the time- about measuring poverty or hiding it?

4) Are India and China the key to global future inequality and instability trends/measures?

Max Fraad Wolff April 7th, 2012 at 2:07 pm

Might we be seeing a political economy issue become more political in origin as the standard responses become more technically economic in conception?

James K. Galbraith April 7th, 2012 at 2:07 pm
In response to Max Fraad Wolff @ 5

On your second point, the standard measures – which are based on income surveys and tax records, mostly – do all right in the US case. And for the US my measures coincide with them very closely.

In many other countries, though, there just aren’t enough surveys to build a clean, reliable view of the history of inequality. My contribution – abetted by many hard-working graduate students over the years – has been to dig up data and make calculations to fill this gap.

Once we had the intuition about how to do it, it wasn’t hard — it just required spreadsheets and a lot of coffee.

dakine01 April 7th, 2012 at 2:08 pm

I do resemble that. I blog some about the plight of the long term un and underemployed here that I cross post to MyFDL – complete with some admitted cheap shots at the cheerleader economists who seem to make careers out of always being wrong.

Max Fraad Wolff April 7th, 2012 at 2:08 pm

Spreadsheets and lots of coffee reminds me of graduate school. Attribution to your grad students, rare and Bravo!

James K. Galbraith April 7th, 2012 at 2:10 pm

On China and India, in the sense that they have over 40 percent of the world’s population, sure.

But then again – maybe not. Inequality statistics tend to be driven by the incomes of the very rich. At the global level, places like Manhattan, the City of London, Frankfurt, the oil states of the Persian Gulf, and so forth continue to exercise a big pull on total income, even though they are (in global terms) very small. And if China continues to move toward the middle of the income distribution, then its effect on global inequality measures would actually fall, despite the enormous size of the country.

One more reason to be careful, is that measures of inequality between countries depend on the accuracy of comparisons of average income, adjusted for purchasing power. This is a tricky business, and the adjustment is sometimes manipulated by national governments for political reasons. (China for example does not want to lose its status as a “developing country.”)

For this reason, I tend to work mainly with measures taken within countries. They are all in the same currency unit, which simplifies things.

And also: the data sets I work from were not intended to be used to make inequality measures; nobody recording the numbers thought they’d be used that way. So there’s little reason to suspect they’ve been tampered with, at least for that purpose.

Max Fraad Wolff April 7th, 2012 at 2:12 pm

As we watch austerity slam into young and vulnerable populations in the EU, are we seeing an Anglo-Americanization of the social safety net in large parts of Europe?

bluedot12 April 7th, 2012 at 2:12 pm

I want to second what saline posed in 4 above. And add, what,do you think needs to be done to get to full employment?

Scarecrow April 7th, 2012 at 2:13 pm

I understand your research found marked variations in the degrees to which different countries allowed their economies to become dependent on/tied to its financial sector, and the degree to which they relied on the public sector and investment to promote growth, employment and equality. Can you talk a bit about those differences and what they mean for correcting our own inequality and slow growth?

James K. Galbraith April 7th, 2012 at 2:13 pm

Thanks and I’ll pass that along. This whole project has been the work of rolling cohorts of Ph.D. students at the LBJ School, going back about 15 years. They’re the best.

Max Fraad Wolff April 7th, 2012 at 2:16 pm
In response to bluedot12 @ 17

Employment can increase inequality in certain circumstances as well as reduce it in others. We might benefit from a discussion of tax structures and safety nets too?

James K. Galbraith April 7th, 2012 at 2:16 pm

Yes, unfortunately, that’s a good way of putting it, but I’d say it’s worse than that. In Greece, specifically, public institutions like health care, education and retirement were never very strong. Now they are being destroyed. A great many Greeks will be leaving, particularly those who have family or professional connections in the US, Australia or elsewhere.

Max Fraad Wolff April 7th, 2012 at 2:18 pm

Valuable technique tips

James K. Galbraith April 7th, 2012 at 2:18 pm
In response to bluedot12 @ 17

Getting back to where we were just five years ago is going to be very tough no matter what we do — you already know that.

My view is, we should take some steps that make life easier both for older and for younger workers, immediately. These include making it easier to retire early, lowering the age of eligibility for Medicare, and raising the minimum wage.

Then it would become easier to create jobs for those who were still stuck in unemployment.

Max Fraad Wolff April 7th, 2012 at 2:19 pm

I spent many months in Greece and the transformations are coming fast and strong.
Is there as lesson for the US with 500,000 public sector job losses at the state and local level 2009-2010?

Max Fraad Wolff April 7th, 2012 at 2:20 pm

It is interesting that higher speculative asset returns aid in the pension funding area while increasing inequalities more generally

William Black April 7th, 2012 at 2:22 pm

Jamie, have you seen James Stewart’s endorsement of Paul Ryan’s budget plan as a serious basis for resolving the budget “crisis”? Ryan’s budget takes the already grossly extreme inequality and supercharges it. Ryan is an Ayn Rand devotee whose actions are easy to understand, but what is up with the Stewarts of the world that they treat inequality as a best a tertiary concern?

Bill Black

Scarecrow April 7th, 2012 at 2:23 pm

Is it correct to interpret your findinds as posing a serious warning to any efforts to privatize — or financialize? — significant portions of the public sector, such as health care, retirements, etc — because that contributes to instability and inequality — and if so what must we do to stop what appears to be an inexorable trend to do that in the name of debt reduction? E.g., isn’t Ryan’s budget, and the Dems toying with its rhetorical basis, just making things worse, on top of what it does to beneficiaries?

Max Fraad Wolff April 7th, 2012 at 2:23 pm
In response to Scarecrow @ 18

The differences between redistributive and growth oriented policies have profound cumulative effects

James K. Galbraith April 7th, 2012 at 2:23 pm
In response to Scarecrow @ 18

Yes, there are differences. In rich countries strong institutions — unions and social security systems — can buffer the population against financial crisis. In certain large developing countries — India and China most notably — the debt crisis of the 1980s and the Asian crisis of the 1990s were basically non-events, because they protected themselves with capital controls.

It’s the smaller developing countries that tended to have the hardest time. And Russia in the 1990s, of course.

econobuzz April 7th, 2012 at 2:24 pm

Welcome JKG and MFW,

How do you feel about the MMT policy of government as employer of last resort — a job guarantee (JG) — when the private sector is not hiring?

James K. Galbraith April 7th, 2012 at 2:24 pm

Yes. From the beginning of the crisis, we should have had open-ended revenue sharing to support state and local public services — schools, health, parks, libraries, roads and transit. Not doing that made everything much worse than it should and could have been.

Max Fraad Wolff April 7th, 2012 at 2:24 pm
In response to William Black @ 26

Hi Bill,
Always a pleasure to have a chance to exchange thoughts and ideas. Thank you

James K. Galbraith April 7th, 2012 at 2:26 pm
In response to William Black @ 26

I confess I did not find time to read Stewart on Ryan! It’s hard to take something like the Ryan plan seriously, though as a threat it’s a serious matter.

DWBartoo April 7th, 2012 at 2:26 pm

Thank you, James and Max, for joining us this evening.

DW

dakine01 April 7th, 2012 at 2:26 pm
In response to William Black @ 26

I read that Stewart column this morning and almost got sick. Amazing BS (in my not so very humble opinion)

Max Fraad Wolff April 7th, 2012 at 2:26 pm
In response to econobuzz @ 30

Government monies were/are used to subsidize many jobs. Its a question more of which jobs, doing what and under what policy and wage structure. Government monies are not fixed but vary with growth, tax rates and tax collection levels

bluedot12 April 7th, 2012 at 2:26 pm

I think I saw that youth unemployment in Greece and Spain were north of 25%. That is getting to Arab spring time. What are they to do? Endure more austerity in the hope things get better? Here we have somewhere between 13 million and 25 million or more underemployed depending on the numbers you like. To me, this is a cancer. It destroys lives and families and can wreek havoc on society. What is to be done?

June Carbone April 7th, 2012 at 2:27 pm

I’ve been looking at the way that greater inequality affects men v. women. The big surprise for me is that since 1990, the gendered wage gap, measured by the median weekly income for full time workers, has increased for college grads (i.e., women make a smaller percentage of male income than they made in 1990), while the wage gap has shrunk for those who do not graduate from college. My hypothesis is that the financial sector explains a good deal of this since the six job categories with the biggest gender gaps have been in the financial sector. Medicine is next and the wage gap has grown there even at the entry level. In addition, I suspect that these developments have a lot to do with family stability patterns — strong at the top, stability increasing at the bottom. Have you looked at the gender effect at all?

Max Fraad Wolff April 7th, 2012 at 2:28 pm

Ryan’s budget is actually part of a larger struggle over if we need to switch course or offer more aggressive versions of the policy trajectory we have been on since the mid 1970s.

Scarecrow April 7th, 2012 at 2:28 pm

Yes. That distinction is something both of you might elaborate on; why it’s important and how to recognize it.

James K. Galbraith April 7th, 2012 at 2:30 pm
In response to Scarecrow @ 27

OK, I’ll say another word on budget plans. We need an economic plan. A budget plan is not an economic plan.

All of these budget plans are based on economic assumptions, and the ones used by the CBO to underpin Ryan or anyone else are confused and contradictory. There needs to be an independent, skeptical examination of this.

If the short-term interest rate went up four or five points over the next few years, as these projections typically assume, we’d have a lot more problems than just a scary debt/GDP ratio.

We have serious economic problems but the budget plans are focused on the wrong issues and if they were implemented, they would make things worse.

bluedot12 April 7th, 2012 at 2:31 pm

I think Econ is referring to a specific program where the government would undertake to hire anyone and everyone who wants a job, not merely a subsidy. In fact, as I understand it, the program does NOT want subsidies to private business. Are you familiar with it and if so, what do you think of it?

econobuzz April 7th, 2012 at 2:31 pm
In response to dakine01 @ 41

Digby had a good post destroying the piece.

Max Fraad Wolff April 7th, 2012 at 2:32 pm

We have gone very far, by international and historical standards, to deregulate and lower redistributive tax/regulation. The question is a partial return to the New Deal/ Great Society type policy or a return to a more 19th and early 20th Century economy with huge returns to wealth and endemic instability for the 90% non-wealthy

James K. Galbraith April 7th, 2012 at 2:33 pm
In response to June Carbone @ 38

The data I tend to rely on, which measure incomes by sectors and regions, tend not to allow for a really careful look at gender wage gaps. But it seems to me that your sense is right. The financial sector is likely male-dominated, especially at the top. And in the blue-collar industries, what happened was a sharp decline in employment and wages in unionized industries, which were also male-dominated.

Very different types of workers, though!

bluedot12 April 7th, 2012 at 2:34 pm

excuse me but a debt/gdp ratio is straight up bullshit. We have far too much unemployment to worry about that bit of nonsense. Same for 10 year projections that the CBO likes to do. Hell, they can’t predict one year and they want to do ten?

June Carbone April 7th, 2012 at 2:34 pm

Hi Jamie,

What do you think of the proposals in France to raise taxes on the wealthy to 75%?

dakine01 April 7th, 2012 at 2:35 pm

I like Charles Pierce’s response (tho a tad profane):

Fck the deficit. People got no jobs. People got no money

Max Fraad Wolff April 7th, 2012 at 2:35 pm
In response to bluedot12 @ 43

I’m not sure I know what ” the program” is. Sorry. Its worth keeping in mind that less than 60% of the population is employed so employing everyone would not be necessary or likely? Simple nationalization involves altered ownership/Part of the value of Jamie’s book is a look at economic structures.

DWBartoo April 7th, 2012 at 2:36 pm

What likelihood exists, that the Masters will, ever, on their own, do what is necessary, wise, or just, James? Considering that the mantra “Greed is Good” has been coupled to “Privatize” all governmental functions, and America has long championed the notion that “freedom” equates with “free enterprise” and that Capitalism is synonymous with “democracy”?

How may “the people” not merely in America, but around the world, bring about meaningful change … how may authority be successfully challenged? What “act” or set of actions, beyond what Occupy is doing already, may reach sufficient hearts and minds to affect a change in thinking AND in courage for the people? What “tea” may we symbolically toss into Boston Harbor? Any thoughts?

DW

James K. Galbraith April 7th, 2012 at 2:36 pm
In response to bluedot12 @ 37

Greece alternates between despair and rebellion. But I think most Greeks realize that they have little leverage in Europe — they can only damage their own nest. And there are only eleven million people in Greece.

Spain is a different situation – a larger country, with more leverage. And Italy is larger still. Italy is huge – 20 percent of European GDP.

I’d keep an eye on Italy, over the medium term. The crisis has not hit Italy very hard yet but, when it does, things could get quite interesting.

bobschacht April 7th, 2012 at 2:37 pm

I enthusiastically agree with your three steps plan. How can we push, and who can we push, to support these steps?

Bob in AZ

June Carbone April 7th, 2012 at 2:37 pm

Yes, different types of workers, but if the net effect is that those high earning men marry the high earning women, and the blue collar women ditch the men who cycle in and out of bad jobs, it increases inequality through the family. There a lot of evidence that laid off men do less housework than employed men.

bluedot12 April 7th, 2012 at 2:37 pm

I think Bill black could point you to the program. It is not for the entire population, just those able and willing to work, as I understand it.

James K. Galbraith April 7th, 2012 at 2:38 pm
In response to bluedot12 @ 47

Panicking over the debt/GDP ratio would be very unwise. It will rise while the economy stagnates. Then it will fall again, if the economy recovers. It’s a consequence, not a cause of anything.

James K. Galbraith April 7th, 2012 at 2:38 pm
In response to bobschacht @ 53

Thanks. Write letters, blogs, YouTube videos, tweets. Facebook walls?

Scarecrow April 7th, 2012 at 2:38 pm

The President just signed the misnamed “JOBS” Act, described by some as deregulating part of the financial sector; we’ve just witnessed arguments about preserving or overturning portions of the Affordable Care Act that would channel billions through private insures (and other billions through Medicaid). It seems both of these represent examples of exactly the wrong thing to do, given your research/findings. Is there anyone left advising the White House or Dem side of Congress that is even capable of/open to understanding the points this book is making? If not, we’re in for a thoroughly dreadfull economic debate between that team and the I know how to fix the economic Mitt guy. Any hope there?

bluedot12 April 7th, 2012 at 2:39 pm

yes.

Scarecrow April 7th, 2012 at 2:41 pm
In response to June Carbone @ 48

One of the candidates proposed a 100% marginal rate for incomes above a certain level. Made the 75% rate look modest.

James K. Galbraith April 7th, 2012 at 2:41 pm
In response to June Carbone @ 48

I have not taken in the details on that, will wait to see if Hollande wins before devoting time to it.

But in general, there is a big problem with the Socialist parties in Europe. They don’t have an independent analysis. They see the problem in the same terms as the right does: deficits, debt, and so forth. What they offer is a kind of feel-good approach for lefty sensibilities.

Europe needs a new deal — make that a New Deal. Not just a few new taxes.

bluedot12 April 7th, 2012 at 2:43 pm

It certainly appears the socialists have utterly lost their way. They now spout almost the same nonsense as the neo liberal PTB all over the eurozone.

James K. Galbraith April 7th, 2012 at 2:43 pm
In response to Scarecrow @ 58

Hope? I always quote Bill Black, quoting William of Orange. Bill, can you give us the exact language?

Max Fraad Wolff April 7th, 2012 at 2:44 pm

http://www.bls.gov/news.release/empsit.t02.htm

trends in general and youth labor force participation are very alarming in the US of late. Friday’s job report highlights the following teen unemployment rates for March 2012: 20.5% White, 30.5% Latino, 40.5% African American.

How are our inequalities contributing to this structural labor market instability for the young?

June Carbone April 7th, 2012 at 2:45 pm

Do you see any better organization on the part of the left this time around? It is striking how the Administration only listened to the pro-Wall St. types on the JOBS bill. Are Democrats who voted for it taking any heat?

And on the deficit, I was listening to some talk show on TV where they just all agreed it’s a big problem. No sense any reasonable person might disagree.

William Black April 7th, 2012 at 2:46 pm

We (a group associated largely with UMKC economics and Modern Monetary Theory (MMT)) were amazed by our recent trip to Rimini, Italy. Over 2100 regular Italians paid to bring us over and sat for 2 1/2 days on folding chairs in a basketball stadium to participate in economics discussions. Two takeaways relevant to your new book: they were distressed by surging inequality and they were most grateful that we took on “There is no alternative” (TINA) and said there were other, better ways to respond to the Great Recession than austerity.

Marshall Auerback and I have been emphasizing for years that Spain should give us all the willies. It is by far the most opaque European nation with regard to its financial sector. The reported numbers (e.g., for bank losses and bank capital) suggest that there is no serious problem, but the numbers on unemployment are the worst in Europe. They have made hiding losses on real estate loans an art form.

bluedot12 April 7th, 2012 at 2:46 pm
In response to Scarecrow @ 58

Well that Mitt guy just wants to deregulate a little more. What could possibly be wrong with that?/

James K. Galbraith April 7th, 2012 at 2:47 pm
In response to Scarecrow @ 58

What we’re seeing, in our politics, is an election-season debate between two lines of poll-tested rhetoric.

On the President’s side, it’s about subsidizing manufacturing, and about pressuring China, and a few other things of that nature. Most Americans will never see the slightest effect from this, for the simple reason that only 11 million of us work in manufacturing to begin with.

On the Republican side, it seems to be a dog’s breakfast of “do what we’ve always wanted, for whatever reason, and the economy will get better.”

And then in the background there are the budget hysterics, who have mystical connection to the number zero.

So there isn’t really a debate over economics, in any meaningful sense, going on. The task for an economist is to try to get one started.

econobuzz April 7th, 2012 at 2:48 pm

FWIW, many of us have trouble with using the term “structural” unemployment as an explanation for what is going on. There is very little empirical evidence of that today. Both Krugman and Baker have made this point over and over.

bluedot12 April 7th, 2012 at 2:50 pm
In response to William Black @ 66

Is it any wonder? someone came along and said we can make things better. Now will they do anything about it?

William Black April 7th, 2012 at 2:50 pm

“It is not necessary to hope in order to persevere.” (Some historians, being scholars, doubt the attribution of this exact motto to the House of Orange, but even they concede that what they see as a more precise transalation of the motto had the same meaning as the quotation above.)

June Carbone April 7th, 2012 at 2:51 pm

Hi Max,

One of the things no one can talk about is how we are making this all worse by our reproductive policies. The unintended pregnancy rate between the mid-nineties and 2006 dropped by over 30% for college grads and the well off. It increased by about the same amount for poor women and the least educated. These trends are likely to get worse with states like Texas dismantling the clinics that provide contraception.

And the right is proud of the fact that the US birthrate is above replacement. The political active black women I hear are figuring it’s a grand conspiracy. I went to hear one woman who kept saying it had to be a right wing plot but she just couldn’t figure out why they wanted more African-American kids.

bluedot12 April 7th, 2012 at 2:51 pm

You nailed that one.

Max Fraad Wolff April 7th, 2012 at 2:52 pm
In response to econobuzz @ 69

I think the lack of structural analysis is a big part of the problem. Its hard to call unemployment cyclical when it slowly grows across 5 business cycles? If you take the standard terms that would leave you with season and frictional. I doubt you like that better?

June Carbone April 7th, 2012 at 2:53 pm

You should try the Tea Party groups. When Bill talks to them about how Wall St. runs the country, he gets a great response.

Scarecrow April 7th, 2012 at 2:53 pm
In response to William Black @ 72

Yeah, good maxim. Of course, William is dead. The Orange one, not the Black one.

Max Fraad Wolff April 7th, 2012 at 2:54 pm
In response to June Carbone @ 73

Our recent debates on abortion/contraception are a moral, historical, economic and gender equality affront to modernity and progress on every level

James K. Galbraith April 7th, 2012 at 2:55 pm

On employment, we’ve relied heavily in the US on credit booms to create jobs.

The fact I’d emphasize, is that this isn’t going to happen again, any time soon. So we’re going to need a new set of policies to do this.

To come back to the job-guarantee approach, I think asking the government to create jobs directly is not a robust solution. The problem is that the program goes right into the budget firing line, where it will get chopped up. That was the experience with CETA, the Comprehensive Employment and Training Act, back in the 1970s.

So I prefer to think in terms of how to get decentralized institutions doing useful things, with their own funding streams, so that you can create jobs that endure. Education, health care, social services, home care, neighborhood conservation…

James K. Galbraith April 7th, 2012 at 2:56 pm

agreed.

perris April 7th, 2012 at 2:57 pm

HI JAMES!, looks like a GREAT book, my comment;

Inequality and Instability: A Study of the World Economy Just Before the Great Crisis

there reappy was no “just before the great crisis”, it’s been festering since reagan destroyed the middle class and it’s been a slow torture

beginning with reagan’s redistribution of wealth, marketed as ” tax cuts” which were actually tax increases, and on top of that were actually a redistribution of tax burden to weigh even more heavily on the labor class and less on those who contribute hardly anything to our growth, the wealth class.

it was brewing and large and damaging long before it was recognized as some kind of crisis

when real wages were lower per hour (or depressed), when families were forced to have two incomes instead of one to pay the very same bills they once payed on one, when there was fewer american investment and later retirments and when people couldn’t afford health care for their kids, the entire economy was in a state of depressing wealth, a depression not a “recession” was at hand for quite some time

tuezday April 7th, 2012 at 2:57 pm

James, in your book, you make it quite clear that an under regulated financial sector is the root of inequity. The very last paragraph of your book, to paraphrase, states that the US set itself up for the collapse of 2008 knowing full the financial sector would be destroyed. Yet the vampire squid lives on. By my questimation we are up to QE23 with the recent mortgage settlement probably making it 24. Do you see this ending? What’s it going to take to get the financial sector under control and what will it look like?

Max Fraad Wolff April 7th, 2012 at 2:58 pm

I agree. I think there is an unfortunate impulse by many to just try what worked last time despite the mountain of evidence that the context and economy is radically different. We need new progressive plans that factor significantly different circumstances and changed players.

dakine01 April 7th, 2012 at 2:59 pm

I worked as a janitor in an elementary school in NH in ’76 under the CETA program before I joined the USAF

jest April 7th, 2012 at 2:59 pm

So I prefer to think in terms of how to get decentralized institutions doing useful things, with their own funding streams, so that you can create jobs that endure. Education, health care, social services, home care, neighborhood conservation

But where do we get the capital to do those things? Typically that comes from gov’t, but that is a lost cause.

Do you know of any other forms harvesting capital for local investment? Catherine Austin Fitts has some interesting ideas, but no one else seems interested in the concept.

econobuzz April 7th, 2012 at 2:59 pm

The level of cyclical unemployment can rise over time without any structural unemployment. How low it falls and how fast it rises is a function of government policy. In fact, if the Fed continues to “fight” inflation when there is no sign of it, and fiscal policy is politically paralyzed, that is exactly what one would expect to see — deeper troughs in the employment to population ratio and much longer recovery periods. To persuade me of structural unemployment, you need to show me increases in relative wages for so-called skilled workers.

James K. Galbraith April 7th, 2012 at 3:00 pm

I think that when you get a big slump it does produce a “structural” problem — especially when you’ve got a lot of older workers out there. Many of them will go to the back of the queue when jobs start to become available, and they haven’t got all that much work-time left.

That’s why I think some “structural” solutions are useful, especially in the present situation.

That said, I don’t like the term “cyclical” because it implies that what goes down will necessarily come back up. Larry Summers and company fell into that trap in 2009, accepting forecasts that made that assumption mechanically.

perris April 7th, 2012 at 3:01 pm

I believe the real solution is to bring back the tariffs, however not country or economy based tariffs but corporate based tariffs, this would be kind of cute;

“if a corporation pays lower then we pay our laborers for a living wage, we will tariff the commensurable difference, if we pay lower wage, or don’t provide health care or the same amount of time for vacation, those countries should tariff our corporations the commensurate difference”

it’s really obsurd laborers have been producing more and taking a smaller piece of the pie and we have to find a method for getting labor sharing more of the wealth THE LABORER produces.

without labor all wealth would perish, without wealth there would still be plenty of jobs and labor

TomThumb April 7th, 2012 at 3:02 pm

I worked under CETA as a Social Worker Assistant and then went right to Social Work graduate school when that ended in 1977. CETA works!

Seems like you are giving up without a fight.

bluedot12 April 7th, 2012 at 3:03 pm

You are likely right about the government creating jobs directly. The political flak would chew it up, but it frames the issue quite well. People need jobs, don’t like this one, ok, which one then? We need to find leaders, some people who also understand economics. We have a dearth of that now.

On a credit boom, we are still delveraging from the last one so it is not going to happen, at least not until we get past the liquidity trap Krugman keeps bringing up. Maybe we can then start another housing boom and let the crooks off a second time. /s

PeasantParty April 7th, 2012 at 3:04 pm

Hello,

So glad you both are here. I have just a couple of questions and an observation. First, the observation that most of the hiring that I see is being done through Temp Agencies. That does not appear to be a solid job increase, of course the Govt. numbers tout these hires.

Next, I’ve been studying a little Marxian Theory. It appears to me that most of the theory he wrote could be a good way to turn this economy around since the Government/Obama/Geithner have both said absolutely no to a broad Public Infrastructure plan to put people back to work. Have you looked into some of the things that the Marxian Theory offers?

Last, how do we as a country turn back the Preditory lending and shark style ownership of this society?

emptywheel April 7th, 2012 at 3:04 pm

Jamie, Max, welcome

I’m about halfway through this book (skipping the math bits), and at the same time I’m listening to “How Nations Fail.” I find the latter to be really really historically sloppy, with a fetish on the nation-state that is both (at times) anachronistic and misleading.

I guess you can imagine that it’s an interesting comparison.

With that in mind, can you address, first, the data you got showing that non-socialist democracies actually are slightly more unequal than, say, Arab Republics and social democracies?

And while I realize you’re measuring inequality and they’re measuring growth, can you talk about how to resolve these books (I also realize you cite their earlier, more academic work).

James K. Galbraith April 7th, 2012 at 3:04 pm
In response to perris @ 81

That’s an interesting observation. I call the period from 1980-2000 the “Soros superbubble” — his term — but make the point that it was a “supercrisis” for poorer people and countries around the world. This shows up very clearly in my inequality data; it’s one of the key findings in the whole body of work.

And I would date the key turning point at 2000, when the NASDAQ collapsed.

But I’d still defend the term “Great Crisis” for the period when it all unraveled, beginning in 2007. Likewise we call 1929 the Great Crash.

Max Fraad Wolff April 7th, 2012 at 3:04 pm

Fair enough. There is an economic structure problem that Krugman, Summers at el are not usually focused on:

We have vast coming gaps where folks developed skills and clustered to work in around speculative finance, housing and retail. That stuff is not coming back and with no re-training, green jobs, public tech, transit, industrial policy, these folks will be classed structurally unemployed by BLS models for years.

James K. Galbraith April 7th, 2012 at 3:06 pm
In response to TomThumb @ 89

Good for you. I was on the congressional staff at that time so I still have some scars from the previous fight.

But I think there are ways to get jobs funded — you just have to put a few degrees of separation between the program and the budget-cutters.

James K. Galbraith April 7th, 2012 at 3:06 pm

Right.

TomThumb April 7th, 2012 at 3:09 pm

No. I disagree. I enjoyed it when you used to call for a direct frontal attack on their weasel words about creating jobs. Anything else is caving. In my opinion. Call them out for being do nothings. That is better than watching people get hurt every day and not making any changes.

perris April 7th, 2012 at 3:10 pm

But I’d still defend the term “Great Crisis” for the period when it all unraveled, beginning in 2007. Likewise we call 1929 the Great Crash.

it’s a good term and it was definitely when everyone recognized the crisis.

I pointed out to paul krugman and he later wrote a piece on it, that “the great depression was the big one, there are depressions smaller then that one, they have been called recessions but really, when the majority of people have less wealth and are working harder for it, that’s a depression rather then a recession, I would say “recession” is when growth slows, however when assets shrink I would call that depression.

anyway, love your work and this book looks like a keeper, will pick one up

PeasantParty April 7th, 2012 at 3:11 pm

I have one more question. How much of today’s ills do you think hinges on Bush’s Service Economy and Ownership Society?

bluedot12 April 7th, 2012 at 3:12 pm
In response to TomThumb @ 97

We need more people like Grayson who told us how a republican health care plan really worked and a little less Mr Bi Partisanhip Obama.

econobuzz April 7th, 2012 at 3:13 pm

We have vast coming gaps where folks developed skills and clustered to work in around speculative finance, housing and retail.

With adequate aggregate demand, the vast majority of those folks — most of whom are educated — would find other jobs. Having to take a job in a different industry is not evidence of structural unemployment.

My definition of a rise in structural unemployment is a rise in the minimum unemployment rate you can get to before you start having inflation problems. There’s no empirical evidence of that.

All “structural problems” are not evidence of “structural unemployment.”

IMHO. YMMV

Max Fraad Wolff April 7th, 2012 at 3:13 pm
In response to PeasantParty @ 99

Most of these policies and trajectories are more than a single bill in the making. That said I prefer the following terminology the owership society and the servant economy

James K. Galbraith April 7th, 2012 at 3:14 pm
In response to emptywheel @ 92

There’s not too much math in it…

One of the things we did was to classify just about every observation we had (by country and year, going back to the 1960s) according to the type of government that existed at that time. And then we asked whether there were significant differences between levels of inequality according political type.

And the answer, not surprisingly, was that there were. The group that we called social democracies had fairly low inequality, especially if they’d been pursuing social democracy for a long time. So did the countries that call themselves Islamic republics. Dictatorships tend to be much more unequal. Recently-created democracies don’t do so well — because they inherit the character of the regimes they replace.

None of this is really surprising, but it does help build confidence in the quality of the data. Common sense results are a good thing, in this line of work.

Max Fraad Wolff April 7th, 2012 at 3:15 pm
In response to econobuzz @ 101

Your definition is interesting. That is not generally the same definition used at The Fed, Treasury, CBO, BLS

PeasantParty April 7th, 2012 at 3:15 pm

Yes, they still remove liberty and brotherhood from Americans.

James K. Galbraith April 7th, 2012 at 3:15 pm
In response to TomThumb @ 97

Point taken. It’s a tactical issue and there are mornings when I agree with you.

emptywheel April 7th, 2012 at 3:18 pm

Yeah, I guess the slightly surprising part (and one that I think presents the most trouble for Acemoglu and Robinson’s book–if their selective reading of history already didn’t do so) is in the democracies being slightly more unequal than some other forms of government. Americans like to think our democracy ensures capitalism works for all, but it doesn’t work out that way.

James K. Galbraith April 7th, 2012 at 3:19 pm
In response to tuezday @ 82

We have definitely been feeding the financial maw and hoping for trickle-down. And very little does.

At some point, it will be time to send in the investigators instead.

Or so I hope. Bill Black has been beating this drum for years now, with my cheering from the front row.

bluedot12 April 7th, 2012 at 3:19 pm

Then again those guys don’t want to talk about NAIRU.

James K. Galbraith April 7th, 2012 at 3:20 pm
In response to emptywheel @ 107

I have a review of Acemoglu and Robinson, at

http://www.democracyjournal.org/2/6482.php?page=all

emptywheel April 7th, 2012 at 3:24 pm

Ah, sorry, I should have checked for that first.

William Black April 7th, 2012 at 3:24 pm
In response to TomThumb @ 97

We should be so lucky that they are “do nothings.” They have actively made things worse with the JOBS Act. We (the leading white collar criminologists), the SEC, the CFTC, and NASAA (the state securities supervisors) all warned that it was the most fraud-friendly bill since the Commodities Futures Modernization Act of 2000. I did a recent piece explaining that every disastrous financial deregulation measure since the Garn-St Germain Act of 1982 passed with enormous bipartisan support. The “kumbaya” moments when the parties join to do the bidding of finance (their leading contributors) are always cynical exercises that produce crises. Jamie is absolutely spot on to identify finance as the heart of the problem of inequality and recurrent, intensifying financial crises.

beowulf April 7th, 2012 at 3:25 pm
In response to William Black @ 72

For some reason that always reminds me of something Edgar said in King Lear (though I concede I may be missing the point). :o)

And worse I may be yet: the worst is not
So long as we can say ‘This is the worst.’

PeasantParty April 7th, 2012 at 3:27 pm

Mine as well. I have recently gotten a job after almost 3 years. I was laid off from Maersk Shipping lines. If I had a million or two, I’d give it to William Black to go after them.

TomThumb April 7th, 2012 at 3:28 pm
In response to William Black @ 112

Thanks to you both for coming here today and sharing your knowledge with us. I heard your Italy speech on Guns and Butter. More power to you. You were awesome. And thanks to Mr. Galbraith who is also fighting the good fight.

TarheelDem April 7th, 2012 at 3:28 pm

IMO “structural” is too broad a term now. Does it mean transitions in the organizational structure of industries, the age-sex structure of the workforce, the structure of production relationships between countries, or something else? “All of the above” is not explanatory.

And one part of the industrial structure picture globally is the multiple trillions of dollars that are going into militaries, which are slowly sapping the ability of almost all countries to deliver improvements in infrastructure.

econobuzz April 7th, 2012 at 3:29 pm

Thanks. I understand that. Many things can cause “structural unemployment.” But the way you measure it empirically is through changes in relative wage rates. This is an important issue because many use the term to refer to a kind of unemployment that the government can’t do anything about.

BTW, Krugman:

Here’s what economists mean by “a rise in structural unemployment”: a rise in the minimum unemployment rate you can get to before you start having inflation problems.

He’s not always right, of course. Nor am I. LOLOL

Scarecrow April 7th, 2012 at 3:29 pm

James — you published an excellent piece called “No Return to Normal” back at the beginning of 2009 or so, which FDL noted back then, and it seems to have held up very well. Now that you’ve completed the book, did your research turn up any insights that would lead you to change any of what you said back in 2009?

James K. Galbraith April 7th, 2012 at 3:29 pm
In response to emptywheel @ 107

Let me take a second here to make a key distinction. In the book I talk about two very distinct concepts.

One is income inequality. Income is what the tax authorities say it is, and in the US, income inequality is driven very largely by finance and the stock market. That’s the way a capitalist economy works: capital is held by a relatively few people, and their incomes are driven by pricing on capital markets.

The other concept is pay inequality — the inequality in what people earn for work. That depends on two things: economic structure and economic performance. When the economy is doing well, pay inequality tends to go down. So it’s quite possible for income and pay inequality to go in opposite directions.

When you compare pay inequality in the US with pay inequality in Europe, you find something very interesting. While US pay inequality is on the high end (comparable to Spain or Italy) for Europe, it isn’t wildly out of line. And US pay inequalities are less than they are in Europe taken as a whole — when you compare Europe as a continent to the US as a continent.

Why? Because we had the New Deal and the Great Society, which work to almost erase what used to be huge differences between the North and South in the US. Europe hasn’t had the equivalent.

I think this also bears on why Europe has had such high unemployment in recent years (before the crisis made things worse). They were actually much more unequal than they thought they were, and policies that attack the existing welfare states in Europe have been making that worse.

William Black April 7th, 2012 at 3:29 pm

It ‘s worse than that. These elite frauds are the leading destroyers of wealth and employment in the modern era. There is no “trickle down” — there is a “lahar” that devastates the folks that live below the summit when the volcano erupts. The lahar sweeps away their jobs, their pensions, and their homes. June can tell you about what it does to families.

James K. Galbraith April 7th, 2012 at 3:31 pm
In response to TarheelDem @ 116

True. “Demographic” is more on target for the specific issue I was raising here.

dakine01 April 7th, 2012 at 3:31 pm

Given how the entire regulatory process from all points of the economy seem to be captured (at least at the Federal level), how do we get investigations that are other than a whitewash?

William Black April 7th, 2012 at 3:33 pm

Yes, the programs that drive the right crazy are the government efforts that succeed. Failed programs are no challenge to their paradigm, indeed, they are useful evidence to be cited. But programs that work, that reduce inequality and serve as automatic stabilizers that speed the recovery from recession — these are programs they detest and target for destruction.

emptywheel April 7th, 2012 at 3:34 pm

OK, now that I see I’m in good company in my opinion of their work, one thing their book at least DID get me thinking about is all the international “extraction” they conveniently ignore (their focus on Argentina, for example, doesn’t talk about Argentina’s ties to England).

You address how international relationships have a role in inequality most interestingly when you talk about what happened in the 1990s and 2000s, after the US had no one else to exploit and then turned inward to homeowners (that’s not a fair summary of your argument–sorry–I don’t have the book in front of me).

But my impression is that, because your data is necessarily national, you don’t go further than that to talk about inequality internationally (again, I’ve just read half the book so far). Is that all right?

James K. Galbraith April 7th, 2012 at 3:36 pm
In response to Scarecrow @ 118

Not so far. There is one thing from 2008 that we need to go back to, however. And that’s energy prices.

You remember that in 2008 there was a huge run up in oil prices, which we were told was all supply-and-demand (China and India, don’t you know). Energy economists knew this was ridiculous. And then the price collapsed at the start of the great crisis.

The FCIC and other investigative bodies (understandably, they were overloaded) never took this on. But now we’re seeing the same Hydra raising another head. I think this issue has to be addressed – you need a strategic approach to energy or you’ll never have either sustained economic growth or a profitable alternative to fossil fuels.

As for Paul Krugman on “structural unemployment,” — one thing we know, is that economists do not know what the unemployment rate is that will bring on wage inflation. That’s because the shocks that are mistaken for inflation have (since the 50s) always come from somewhere else, and are unrelated to the US rate of unemployment at any given time.

PeasantParty April 7th, 2012 at 3:36 pm
In response to William Black @ 120

I think we have to throw a giant wrench into the Capitalist system. We have to create worker owned shops/industries. That would still fall under an ownership society, just shift the ownership from those few to the many.

beowulf April 7th, 2012 at 3:36 pm

But I think there are ways to get jobs funded — you just have to put a few degrees of separation between the program and the budget-cutters.

Jamie, I’m curious what you mean by that. Also I’m wondering if there are any actions a state govt can take to improve their economies and get people working or are governors and state legislators simply hostages to Congress’s fortune (or misfortune)?

Looking forward to reading the new book, the last one (The Predator State) was outstanding.

James K. Galbraith April 7th, 2012 at 3:38 pm
In response to dakine01 @ 122

I’ll put in a good word for the investigators!

I think Phil Angelides (and Wendy Edelberg) did a terrific job. I think Elizabeth Warren (and Damon Silvers) did a terrific job. Likewise the Levin committee. And SIGTARP.

We have had some excellent official investigations. What we haven’t had, is action from the responsible authorities.

I think I borrowed this line from Bill: “If only Atty Gen. Holder were alive.” …

Scarecrow April 7th, 2012 at 3:39 pm
In response to William Black @ 123

How do you account for this hostility? It seems pathological, deliberately cruel. What’s in it for the right, even in their framework, to warrant their attacks on these programs?

tuezday April 7th, 2012 at 3:40 pm
In response to TomThumb @ 115

Do you have a link to that speech? For some reason the guns part of guns and butter never gets mentioned and is the elephant in the room.

PeasantParty April 7th, 2012 at 3:40 pm

James,

Here at FDL and at Emptywheel we have discovered that Atty Gen Holder is not interested in the crime because he has sticky fingers when it comes to the financial crimes of America for the past decade.

William Black April 7th, 2012 at 3:41 pm
In response to dakine01 @ 122

Call out individual senior regulators. Get on tem to act and create a drumbeat in which you stay on them. We need a clock that counts up the days (now, years) without a prosecution of even of the elite lending frauds that made the liar’s loans that drove this crisis. Follow-up on my letter to U.S. Attorney Wagner (E.D., CA — Sacramento, CA). He responded to a Huff Po journalist that it didn’t make any sense for a CEO to loot a company. CEOs cannot be frauds in his world. We convict scores of CEOs for looting “their” S&Ls, but he thinks this was the first “virgin crisis” (conceived without “sin”). It is no surprise that his distict is one of the epicenters of mortgage fraud.

emptywheel April 7th, 2012 at 3:41 pm

Thanks, that’s tremendously helpful.

WRT a comparison between us and Europe–how did the EU’s big investment in less developed areas compare (my husband is Irish and we always joke about the nice new freeways in Donegal, for example, but those weren’t precisely the freeways that really needed to get built.

In other words, Ireland did benefit from a ton of investment, thanks to the EU. Would it have worked if they hadn’t gotten so financialized? Or was something else necessary?

dakine01 April 7th, 2012 at 3:41 pm

Yeah, I guess things aren’t helped when we still see certain individuals walking around (virtually speaking) rather than having been perp walked to a federal court room.

econobuzz April 7th, 2012 at 3:42 pm

One of the things that we are seeing more and more is that there are billions of hours of relatively unskilled work, needed to be performed by millions of relatively unskilled laborers, to repair our infrastructure: roads, bridges, schools, etc. that the private profit-maximizing sector will not do.

To leave this labor idle and wait until the private sector decides to employ them is immoral.

artgoldhammer April 7th, 2012 at 3:44 pm
In response to William Black @ 72

Not quite right on the William of Orange quote: “Point n’est besoin d’espérer pour entreprendre, ni de réussir pour persévérer.” No need to hope in order to begin [or undertake], nor to succeed in order to persevere.”

Jamie, I’ve only begun reading your book, but I was struck by your statement that inequality is spatial in Europe, local in the US (as well as greater in Europe than in the US, contrary to what we often hear). Given the spatial variation of wages in Europe, are you able to make predictions about industrial outsourcing in the EU? I’ve noticed for example, that France is now in deficit with Spain in trade in manufactured products. The main shift is in automobiles, and it seems to have occurred over the past few years. Which suggests that Spain has been up to a few things with cheap capital besides building too many homes. What do your data tell you about EU development patterns?

bluedot12 April 7th, 2012 at 3:44 pm
In response to econobuzz @ 135

Maybe we need another WPA?

James K. Galbraith April 7th, 2012 at 3:44 pm
In response to beowulf @ 127

Well, I like the non-profit sector in this country a lot. Health care, education — these are useful things. Paul Samuelson once said to me “Health care is 15 percent of GDP, and it’s the best 15 percent of GDP.”

The thing about these sectors is, they have multiple funding streams. Higher ed has state money, federal money, tuition, philanthropy… This buffers the institution from cuts.

If you go to (say) France, and look at what happens when you rely entirely on state funding for universities, you’ll see what I mean.

That said, the federal government handles *insurance* extremely well. Social Security and Medicare are functional, efficient programs. That is why they are so hated by some people – and prized by others.

Max Fraad Wolff April 7th, 2012 at 3:45 pm
In response to econobuzz @ 135

Its a good point. the best , greenest smartest safest from export jobs are fixing and maintaining. We do very little, its wasteful and highly inefficient

William Black April 7th, 2012 at 3:46 pm

Notice that while the anti-fraud community was unanimously up in arms warning against passage of the JOBS Act there was utter silence from AG Holder — our chief law enforcement officer. We will know that Obama is serious about prosecuting the elite financial frauds when he makes Patrick Fitzgerald, the U.S. Atty (ND IL – based in Chicago), the AG. Don’t hold your breath.

econobuzz April 7th, 2012 at 3:46 pm
In response to bluedot12 @ 137

I think the government has to be the employer of last resort in an economy like ours in which the busts are endemic — and only the victims pay the cost.

TomThumb April 7th, 2012 at 3:47 pm
In response to tuezday @ 130

http://www.kpfa.org/archive/show/34

I got that mixed up. Mr. Hudson gave the speech in Italy. Mr. Black gave the most recent interview. Sorry.

The link is to the Guns and Butter Archive page.

William Black April 7th, 2012 at 3:47 pm
In response to Scarecrow @ 129

It threatens all their dogma for a government program to work and be strongly supported by the public.

PeasantParty April 7th, 2012 at 3:47 pm
In response to bluedot12 @ 137

I think so. I also noted that in my question above at #91. It hasn’t been addressed yet. I guess it is not something discussed in the book.

bluedot12 April 7th, 2012 at 3:47 pm
In response to William Black @ 140

not gonna happen, nearly 100% on that.

Scarecrow April 7th, 2012 at 3:48 pm

I believe we have a strategic approach to energy: we’re a fossil-based economy, mostly oil, more gas, phasing out coal gradually, so we’ll do whatever it takes to keep those supplies coming for as long as it takes. It’s not a good policy; climate wise it’s nuts; but it’s a policy.

On the alternative view of price rises, where is there a good (layman’s) explanation of the speculation thesis (if that’s the problem) and its ties with the financial sector? I’ve yet to read one that seems convincing. And arguments about how forward prices are set in this odd “market” don’t explain how an implicit spot price gets defined when financial traders close out their positions under real conditions, not speculative ones. It doesn’t make sense. Any suggestions on what to look at?

bluedot12 April 7th, 2012 at 3:48 pm
In response to econobuzz @ 141

I agree with that but you can’t get any traction on it.

James K. Galbraith April 7th, 2012 at 3:49 pm
In response to emptywheel @ 133

One of things we have, that Europe lacks, is social insurance at the continental level. Greek pensions have been slashed because the Greek state can’t pay them. In the US, this hasn’t happened (yet) and we can still fight it off if we’re well-prepared to do so.

I’ve argued for a “European Pension Union” that would put a floor under pensions all across Europe, and stabilize demand in the periphery.

Running everything through infrastructure funds leads to paving beautiful places, without necessarily doing the right thing for economic development. The freeways in Portugal are another example of this, I fear.

tuezday April 7th, 2012 at 3:50 pm
In response to TomThumb @ 142

Thanks

James K. Galbraith April 7th, 2012 at 3:51 pm
In response to Scarecrow @ 146

Mike Masters and Michael Greenberger provided congressional testimony on this back in the fall of ’08.

I’ve been working through a number of recent books on oil but haven’t got a recommendation at hand.

bluedot12 April 7th, 2012 at 3:52 pm

I’ve seen other proposed “solutions” to the eurozone. Why not just bust it up?

Max Fraad Wolff April 7th, 2012 at 3:53 pm

Despite the terrible suffering, there are many lessons for the US in the austerity madness and debates raging in the EU PIIGS today.

dakine01 April 7th, 2012 at 3:53 pm

Wasn’t there a dictator in Portugal that they used to do news stories that every time things got a little dicey with his regime, he went on another road building binge?

BevW April 7th, 2012 at 3:53 pm

As we come to the end of this great Book Salon discussion,

James, Thank you for stopping by the Lake and spending the afternoon with us discussing your new book.

Max, Thank you very much for Hosting this great Book Salon.

Everyone, if you would like more information:

James’s website (Univ of Texas/Austin) and book (Inequality and Instability)

Max’s website (The New School)

And a thank you to Bill Black and June Carbone for stopping by today.

Thanks all, Have a great weekend.

Tomorrow: William DeBuys /A Great Aridness: Climate Change and the Future of the American Southwest; Hosted by Brad Johnson

If you want to contact the FDL Book Salon: FiredoglakeBookSalon@gmail.com

bluedot12 April 7th, 2012 at 3:54 pm

yes and the biggest is this: don’t ever, ever adopt someone elses’s money.

beowulf April 7th, 2012 at 3:55 pm
In response to June Carbone @ 76

Ha ha, you just reminded me of one of the funniest moments (well there wasn’t much competition) of the 2008 meltdown; the super patriots at Free Republic who vehemently opposed, as all right-thinking Ameicans were, to the bank bailout were shocked to discover a kindred soul.

James K. Galbraith must have studied under Milton Friedman rather than his Dad. How did that happen?

TarheelDem April 7th, 2012 at 3:55 pm

Thanks James and Max for the excellent discussion.

James K. Galbraith April 7th, 2012 at 3:57 pm
In response to artgoldhammer @ 136

Interesting question, Art. The data that we use in two chapters (from Eurostat) probably could be used to show shifting employment patterns by sector, at least within Europe. I haven’t done that, though, and I’m not sure the level of detail is fine enough to do a really good job.

In Europe as in the US, most jobs are in services and they don’t go anywhere. Or in construction, where they come and go.

James K. Galbraith April 7th, 2012 at 3:58 pm
In response to dakine01 @ 153

Yes, I think that was a favorite Salazar trick. Your memory is good.

Max Fraad Wolff April 7th, 2012 at 3:58 pm

Thank you and thanks to Bev for her great work!

A true pleasure. Jamie’s book is really worth the time and will be valuable for my students as well.

Best,

Max

GlenJo April 7th, 2012 at 3:59 pm
In response to BevW @ 154

Wow, thank you all! I arrived late (finished doing my taxes) and am eagerly reading through all the comments.

Thank you!

Scarecrow April 7th, 2012 at 3:59 pm

thanks for that direction —

– and thank you to James and Max for an excellent discussion. Buy the book, peeps!

James K. Galbraith April 7th, 2012 at 4:00 pm
In response to beowulf @ 156

I missed that one.

If you want to see (a much younger version of me) in debate with Milton F., check out the 1990 re-issue of Free To Choose — first program.

DWBartoo April 7th, 2012 at 4:00 pm

Very excellent Book Salon.

Thank you, James and Max.

Thank you, Bev, as always …

And thanks to all commmenters for superb questions and useful speculations.

Bill Black it is always a pleasure to “see” you here.

DW

tuezday April 7th, 2012 at 4:01 pm

Excellent book salon. Thanks to all who attended.

James K. Galbraith April 7th, 2012 at 4:01 pm

And thank you again Max, for a great couple of hours, and to Bev and FDL for having me on. Also to my (many) friends who came by.

beowulf April 7th, 2012 at 4:01 pm

That’s an interesting point, from a political standpoint, multiple sources of funding makes it more difficult to starve the beast (to say nothing of the politically powerful stakeholders in education and healthcare who won’t take losing their funding lightly).

Max Fraad Wolff April 7th, 2012 at 4:02 pm

Many thanks Jamie and congratulations on a first rate book!

bobschacht April 7th, 2012 at 5:27 pm
In response to bluedot12 @ 137

Of course we do. But how do we get it through Congress?

IIRC, Obama is starting a kind of WPA for Veterans, which will be harder for Republicans to vote against.

Bob in AZ

beowulf April 7th, 2012 at 6:25 pm
In response to Scarecrow @ 146

Sorry for the late hit but Paul Davidson (Post-Keynesian economist AND oil industry veteran) wrote a fascinating article in 2008 about oil market speculation and what Uncle Sam should do– jump into the market whenever necessary to crush speculators with massive sales from Strategic Petroleum Reserve. Sort of the same game plan as Thomas Frank’s innovate proposal to crucify goldbugs on a cross of (ironically enough) gold.

However, from out of left field is a theory from Platts Oilgram News writer James Norman that oil prices are, in fact, set by the Military Industrial Complex. In The Oil Card, Norman argues that the US and our Saudi allies use the price of oil as a weapon. We force it down when we want to hammer Russia (as an oil exporter, low oil prices weaken its economy) and we force it up when we want to hammer China (its industry is powered by oil and not by, as in the US, ever cheaper natural gas). Not sure what I think about that theory, but it certainly explains a lot.

Phoenix Woman April 7th, 2012 at 9:25 pm
In response to June Carbone @ 73

My guess: They’re cannon fodder.

letsgetitdone April 8th, 2012 at 12:09 am

Hi Jamie,

Do you know the approach to the JG through the non-profit sector taken by Randy Wray and Pavlina Tcherneva, as here for example? In that approach the Government is the funder, but people who want full time work get jobs defined by the nonprofit sector.

How do you feel to that approach to the JG?

Also, the JG idea proceeds from the theory that a fully employed “buffer stock” of workers is better for the labor market and for people than an unemployed buffer stock. MMT without the JG might provide targets of 4% UE and 4% annual inflation as objectives of fiscal policy. But MMT with the JG has targets of as close to 0% UE as is consistent with job transition activity, and little or no demand-pull inflation? So the cost of not implementing a JG program could prove to be 6 million additional people unemployed in the US than an MMT-like program without a JG? If these hunches are correct, which would you prefer as a policy?

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