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Economics

هل نتجه إلى نموذج النزعة الإنتاجية الجديد؟

Jul 5, 2022 Dani Rodrik

كمبريدج ــ يصبح أي نموذج اقتصادي جديد راسخا بالفعل حينما يبدأ معارضوه المزعومون في رؤية العالم من خلال عدساته. فقد حظي نموذج دولة الرفاه الكينزية (الذي اقترحه جون ماينارد كينز)، خلال ذروة رواجه، بدعم كبير من الساسة المحافظين لا يقل عن دعم اليساريين. وفي الولايات المتحدة، أبدى الرئيسان الجمهوريان دوايت أيزنهاور وريتشارد نيكسون قناعة تامة بالمبادئ الأساسية التي يقوم عليها النموذج ــ ومنها أسواق خاضعة للتنظيم، وإعادة للتوزيع، وتأمين اجتماعي، وسياسات اقتصاد كلي معاكسة للدورات الاقتصادية ــ فعملا على توسيع برامج الرفاه الاجتماعية وتقوية اللوائح المنظمة لأماكن العمل والقواعد التنظيمية البيئية.

تكرر وضع مشابه مع الليبرالية الجديدة، إذ جاءت الدَفعة التي حصل عليها ذلك النموذج من خبراء اقتصاديين وساسة ــ أمثال ميلتون فريدمان ورونالد ريجان ومارجريت ثاتشر ــ كانوا متحمسين للسوق. لكن هيمنة النموذج في النهاية تعود بشكل كبير إلى قادة يسار الوسط أمثال بِل كلينتون وتوني بلير، اللذين كانا استوعبا كثيرا من أجندة هذا النموذج المؤيدة للسوق. بالتالي ضغط هذان القائدان من أجل إلغاء الضوابط التنظيمية، وتكريس التوسع المالي، والعولمة المفرطة، مع إعطاء تعهدات كاذبة بشأن تخفيف توابع ذلك الاتجاه كزيادة اتساع فجوات التفاوت وانعدام الأمن الاقتصادي.

واليوم نجد أنفسنا في خضم تحول ينأى بنا عن الليبرالية الجديدة، وإن كان البديل غامضا بشدة. لكن لا يعني غياب نموذج صلب جديد شيئا سيئا بالضرورة، إذ لسنا بحاجة مرة أخرى لسلطة وصاية تقدم حلولا نمطية فضفاضة وخططا مُعدَّة سلفا لدول وأقاليم متباينة الظروف والاحتياجات.

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0 Comments on this paragraph, 24 Comments on this article

Peter Quennell Jul 9, 2022

The "new paradigm" has been in front of our eyes for decades. It is the one that Deming took to Japan and that all the other fast-growth Asian countries then borrowed from. It is that better SYSTEMS mostly done bottom-up are the heavy lifting in all development and growth. It was exactly to do this that United Nations Development was restructured in 1970. All UN agencies except the World Bank (yes even including the IMF) should be optimizing systems in their substantive areas worldwide. What brought that to a screeching halt? Incompetent political appointees at the top - by Ronald Reagan above all - and by mission creep by the World Bank. There is also a trick to upgrading mature systems which only become obvious later - Christensen's "Innovator's Dilemma" 20 years ago finally broke the code.
- Peter Quennell Jul 9, 2022
  
  Dani, I'd suggest not to try to go it alone, as your excellent paper a little bit reads. "Competitive networking" works best. Two or more parallel processes with the same end in mind. A non- zero-sum game. This can easily be done at the US states level; a little of that happens now. At the international level, the US should line up some chums. (Turkey maybe? I worked there.) The US was EAGER to do this in UN Development's early days.... then the Reagan people freaked.
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Robert Johnston Jul 7, 2022

Localism (and regionalism) is a key part of Rodrik's new economic policy agenda. Climate change must be part of the new agenda and local impact and reaction are starting to be felt. That must now be harnessed to coordinated national policy to be effective on the scale needed and reconnect national policy to local and regional needs and action. Could work; at least it's a start.
- Peter Quennell Jul 9, 2022
  
  "That must now be harnessed to coordinated national policy..." Yes. When the US departmental rolling planning was brought in 2 decades ago the US had less experience than almost any country, and the task was also complicated by the federal system. There SHOULD have been local development nodes emerging everywhere, linked up and helping to drive policy. But the actual planning you see today is top down, without nodes, and really without consultation with anyone.
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Per Kurowski Jul 7, 2022

The risk weighted bank capital requirements reward banks more when financing “safe” government debt & residential mortgages (carbs-demand-the present) than when financing “risky” businesses (proteins-supply-the future)
That inflates the inflation and weakens the economy
That has of course nothing to do with neoliberalism
That has of course nothing to do with “productivism”
With decreed risk weights of 0% government and 100% citizens, that has loads to do with empowering the Bureaucracy Autocracy
- Peter Quennell Jul 9, 2022
  
  Yes. We repeatedly found in the UN that 20% of any economy produces 80% of the value gains. Most of the rest does not even cover its cost of capital. The S curve is highly relevant here. The lower end is where most of that 80% happens. Banks are more pointed toward the fading, now-low-value-adding, more-corrupting enterprises at the top end of the curve. So is Congress of course - its the vast politically elected & appointed layers not the "bureaucratic autocracy" that screws things up.
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Madurai Padmanabhan Jul 6, 2022

The Asian model with American characteristics?!

Hope the role of the reserve currency is also reassessed; that could allow global south to practise similar policies to benefit their people.
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Henry Rech Jul 5, 2022

Rodrik imagines a truly revolutionary future.

In the West, the impetus for this future is being driven by the emerging global strategic imperatives and domestic political and social exigencies.

Globalization accelerated the rise of China and has ultimately supported its militarization and its ability to project power.

The same forces compelling the West to "internalize" ("friend shore") its economy will force China to do the same. It is likely China's access to markets in the West will increasingly be denied it.

Globalization has also undermined the the fortunes of millions of workers in the West. This has been the cause of the shift to ultra right wing politics.

Reindustrialization of the West will see the mitigation of both strategic and domestic challenges.

The emerging partition between East and West will dominate the foreseeable future.
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vic lai Jul 5, 2022

The new macroeconomic paradigm is probably the reemergence of the active uses of fiscal policies by the US Federal Government, supplemented by carefully accommodative monetary policies from the Fed, under the implicit guidance of Modern Money Theory.
---
The US Federal Government's recent proactive fiscal policies to cope with the latest pandemic, in the form of stimulus checks and loan-repay-exemptions given to the private households and corporations of the country, have shown its expected ability to quickly lift the domestic economy out of the persistent trap of secular-stagnating, low-interest-rate, and relative-lack-of-aggregate-demand laggard state.
To cope with the potential stagflationary macroeconomic state the US may run into in the near future, the Biden Administration can quickly do the following to help win friends and influence people.
(The following is adapted from a book by Mariana Mazzucato.)
---
A new American Fund for Investment (AFI) can be created, which is a special purpose vehicle (SPV) sitting under the umbrella of the US Fed.
Such a Fund would focus on equity investment in really useful large-scale, long-term real-economy and infrastructure projects, particularly in renewable energy, transportation, education and vocational training, new housing, hospitals and elderly care, care of young children, urban infrastructure redevelopment, information and communication technology (ICT), and armaments, all at a national scale.
Such projects typically carry too much risk for the private sector to finance on their own, but with co-investment by a triple-A rated, government-backed Fund, considerable private domestic investment currently seeking long-term returns could be leveraged.
Some of the assets created through these investments could eventually be privatized, generating ongoing revenues for the Fund.
These projects will help prop up the aggregate demand of the country, preventing the domestic macroeconomy from experiencing a prolonged recession in the coming years.
---
The AFI would be financed by paid-in capital from the state governments, which comes from the Special Bonds issued by the SPV, to be bought by
(i) the country's commercial banks using their ample reserves at the Fed,
(ii) the country's MMFs using their ample savings at the Fed's ONRRP facility.
Their interest revenues can be tax-free.
Doing so can much reduce the total market liquidity now prevailing in the domestic US macroeconomy, helping to tame domestic inflation.
---
The paid-in capital of the state governments would be excluded from the calculation of state government budget deficits, and their borrowing on financial markets (if not restricted) would be recorded as AFI debts, not re-routed to the state governments.
With paid-in capital of US$ 1 trillion, say, such a Fund could perhaps leverage a total investment of around US$ 6 trillion over the next five years.
---
- vic lai Jul 5, 2022
  
  The denominations of the Special Bonds issued by the AFI can be deliberately made to be much smaller than usual, so that even the average households and private corporations can afford to buy, through retrieving part of their current excess savings in both the commercial banks and the MMFs.
  ---
  This kind of "induced savings" for the private sector is one of the best ways to clamp down on demand-pull inflation in the country, perhaps even superior to the Fed's one-size-fits-all interest-rate hikes and QTs which will easily pop the country's precarious everything asset bubbles.
  ---
  - vic lai Jul 6, 2022
    
    The political and macroeconomic regime shift in the US in the past decades has basically been about the relative balance of power between labor and capital, and will remain so in the coming decades.
    Who, labor or capital, can eat a bigger share of the slowly or quickly growing economic cake, determines what our political and economic institutions look like.
    ---
    After WWII, according to Dario Perkins, we had a regime where labor was basically dominant.
    The endgame of that was inflation strengthened by wage-price spirals, and trade unions becoming too powerful.
    We ended up in a pretty difficult place in the 1970s, a period to which we today definitely don't want to go back.
    Then we had an entirely different regime from the 1980s onwards, which was the dominance of capital.
    As always, the revolt against the old dominant regime had always been going to the opposite extreme, and so the pendulum had swung back from the far left to the far right starting from the early 1980s, and was further propelled rightward by the fall of the Soviet empire in the beginning of the 1990s.
    Then, we focused on inflation targets, keeping interest rates low, destroying militant trade unions through high-gear full re-globalization, propagating neoliberalism and Washington Consensus, and favoring mainly the capital (as discussed by Thomas Piketty).
    But we ended up in an equally bad position, with very high wealth and income inequalities, very low interest rates, lots of debt bubbles and crises, hollowing out of domestic manufacturing bases, low rise of productivities, secularly stagnating macroeconomy, a napping or inactive central government, and rise of disturbing populism.
    ---
    After the GFC of 2007-09, many people thought we needed another regime change, but the difficulty was that nobody really knew what to do.
    The old software was broken, but nobody knew what the alternative was.
    We couldn't beat something with nothing.
    ---
    - Peter Quennell Jul 9, 2022
      
      The US has ended up on the same rung of the ladder as so many other countries because its systems enhancements stagnated and so the others caught up. It did not have to be that way. In (slight) defense of those at the top it's pretty hard to realize bottom-up development top-down... Systems enhancement is very empowering; when not done, we get Trumps.
      A new reply to this comment has been posted.
    - vic lai Jul 6, 2022
      
      Over the last 10 years, alternatives have started to spring up.
      The one that's getting all of the press recently is Modern Money Theory (MMT), which has been trying to recreate the post-WWII framework (with many new ideas of its own also), hoping to go all the way back to capitalism 2.0, which was before neoliberalism.
      But that old place was unambiguously bad, why on earth do we want to go back there ?
      ---
      The new software of MMT has some inherent biases and flaws in it.
      As shown by the inflation specter currently haunting the US, MMT will, if misused by the (well-intentioned) central government, take us back to an inflation regime.
      The current nominal bond yields at 700-year lows is screaming out for a different policy mix.
      If MMT is winning the debate in fiscal policy, it'll be a pretty good thing, because we've had this obsession with austerity, debts, and deficits for too long a period of time already.
      For the past 15 years after the GFC (and before that), MMT has been continuously right about almost everything, and they are winning this argument now.
      If we can end up in a regime where
      (i) there is some kind of MMT software built into fiscal policy, so that fiscal policy is no longer obsessed with debt or deficit, but worries about the inflation consequences of that debt or deficit,
      (ii) we retain an independent Fed,
      then we'll actually end up in a much better new regime, and is the best possible outcome we can get, because we'll end up with fiscal policy doing more, and monetary policy is being able to react to that.
      ---
      But that's not where MMT wants to take us.
      MMT wants to just deactivate monetary policy completely and focus entirely on fiscal policy.
      This concept of swinging back to the other extreme is risky and worries many people, because they don't know where it'll take us, but that can be 10, 20 or 30 years away.
      ---
      For this new regime we're entering into, it is unambiguously good, because the super-bold MMT-like pandemic-induced stimulus-check-giving "experiment" by the federal-government-cum-Fed was done so early before the full start of the next secular cycle, giving valuable lessons that can be learned by all of us, and so is actually a blessing in disguise.
      ---
      - vic lai Jul 6, 2022
        
        The US needn't search in the faraway places to know how to practice MMT in a very simple fiscal-policy-monetary-policy-cooperating manner ------ she just needs to look at her northern neighbor.
        ---
        1. “The Bank of Canada helps the Government of Canada to borrow money by holding auctions throughout the year at which new federal securities (bonds and treasury bills) are sold to government securities distributors, such as banks, brokers and investment dealers.”
        2. “the Bank of Canada itself typically purchases 20% of newly issued bonds and a sufficient amount of treasury bills to meet the Bank’s needs at the time of each auction.”
        3. “These purchases are made on a non-competitive basis … it is allocated a specific amount of securities …” by the Government.
        4. “The bonds are recorded as assets by the Bank and creates a deposit entry in the Government’s account at the Bank.“
        5. “The transactions consist entirely of digital accounting entries.”
        6. “Since the Bank of Canada is … wholly owned by the federal government, the Bank’s purchase of newly issued securities from the federal government can be considered an internal transaction.
        By recording new and equal amounts on the asset and liability sides of its balance sheet, the Bank of Canada creates money through a few keystrokes.
        The federal government can spend the newly created bank deposits in the Canadian economy if it wishes.”
        ---
        Which means, in the future,
        (A) at normal times, the several rounds of US's QEs so far will become a monthly or quarterly standing operation performed by the US-Treasury-cum-Fed, like the Fed's current standing facilities.
        The supported federal government deficit spending will help replenish the country's deficient aggregate demand, preventing the arrival of economic recessions, and will also, if spent on the really useful real-world projects, increase the overall productivity of the country vis-a-vis competing countries like China.
        (B) at abnormal times, say at the beginning of a financial crisis due to the popping of a big asset market bubble, the Fed's new ad-hoc QEs ("ad-hoc new money printing") can be used to finance all the standing or ad-hoc facilities provided by her to the domestic private and global public sectors all in urgent need of liquidity.
        Even more importantly, the Fed should immediately buy a necessary amount of the impaired financial assets (of high or even low qualities) in the domestic banking and non-banking sectors to help recover the level of sorely-needed liquidity in the macroeconomy, giving valuable time to the private sector to gradually recover the overall health of their impaired balance sheets.
        Also, the Fed will be bound to gain in such rescue operations, because, according to Richard Werner, even if all the highly-repaired financial assets bought by her drops to worth only US$1,000,000, her profit is still almost US$1,000,000, simply because she created the new money out of thin air to purchase those bad assets to begin with.
        Japan didn't do this in the early 1990s, hence many of her constantly-impaired commercial banks, with resulting deficient credit creation power to much increase the country's money supply in the coming years, have led to decades-long balance sheet secular recession in the country.
        So, QEs, contrary to popular perception, is not just only simple asset swaps between the Fed and the private sector !
        ---
        Note that
        (i) the Fed should only solve the market problem of liquidity, not that of solvency,
        (ii) if the Federal-government-cum-Fed deficit spends enough in ordinary times, as in scenario (A) above, scenario (B) above will seldom unfold actually !
        ---
        
        vic lai Jul 6, 2022
        
        (iii) if the well-intentioned Federal-government-cum-Fed deficit-spends too much in non-financial-crisis ordinary time, as during the aftermath of the pandemic of 2020-21, solely with the help of new ad-hoc QEs, the specter of inflation will come back to haunt the US macroeconomy after a time-lag period of 12 to 24 months (if there is no imposed price control).
        ---
        While it's important for the US Federal government to deficit-spend enough to help crowd-in more private sector real-economy investments in both ordinary and crisis times, it's equally important, perhaps even more important, for the US private sector herself to real-invest much more in the real economy most of the time, rather than just using their retained earnings, or borrowing cheaply from the financial market, to buy back their own shares and distribute dividends to the shareholders.
        The US tax codes should be amended accordingly to give more incentives to the US private sector to do so.
        ---
        According to Erica York, "lawmakers can prevent the upcoming tax increase on investment in machinery and equipment by making full expensing a permanent part of the tax code, giving businesses the certainty they need that their expanded capacity will be financially viable in future years.
        Making full expensing of machinery and equipment permanent is one of the most cost-effective reforms lawmakers could enact.
        The provision is entirely aimed at lowering the cost of capital for new investments, and a higher level of capital investment leads to increased productivity, wage gains, and economic output ------ all well-suited to help with the recovery (and to reduce the frequency of economic recessions)."
        ---
        Besides the Fed's "demand destruction," "supply creation" by the Federal government can also be used to cool off inflation, especially in the longer term.
        ---
        
        vic lai Jul 8, 2022
        
        Whether the coming new macroeconomic paradigm, or Bretton Woods III, will be characterized by a commodity standard, in the far future, remains to be seen.
        But I think, in the near future, BW III should also be
        (i) in the form of a much closer cooperation between the central bank's monetary policies and the central government's fiscal policies, under the overall guidance of the sectoral balance equation (S - I)/GDP = (G - T)/GDP + (X - M)/GDP, and
        (ii) a greater re-concentration by the central bank on the macroeconomy's total quantity of money supply (or the sum of both public and private liquidity), rather than the central bank's current sole concentration on the price of money supply (the effective overnight Fed Funds interest rate).
        Even though the total quantity of MS is hard to ascertain correctly, but according to Keynes, being approximately correct is still better than being exactly wrong.
        The long-term goal should be the golden rule of a yearly rise of 5 to 6% of M2 and an inflation rate of around 2%.
        ---
        Care must be taken by the Fed-cum-Federal Government-cum-Congress to carefully determine or optimize
        (a) the size of (G- T)/GDP, and
        (b) how the ex-ante deficit spending is to be financed (the ex-post deficit spending will also be affected by the macroeconomy's already installed automatic stabilizers).
        ---
        (A) In the ongoing overheated US macroeconomy,
        (i) the size of (G - T)/ GDP should be smaller, or even become negative (surplus budgets), and
        (ii) the deficit spending should be financed by the Federal government's borrowing from the private sector (no longer by the Fed's new QE money printing), thereby using "quantity-crowding-out" to reduce the aggregate demand (a one-dollar for one-dollar zero-sum game).
        Much more central government treasuries can be issued to the private sector, and the raised money can be stored temporarily in the Fed's TGA, unspent until the current inflation subsides.
        (B) In the coming recessionary US macroeconomy, if any, (say as a result of the Fed's over-reacted interest-rate-hiking and QT cycles),
        (i) (G - T)/ GDP should become positive and bigger, and
        (ii) depending on the inflation situation at that time, (a) the increased deficit spending should be financed by the Federal government's borrowing from the private sector, again using quantity-crowding-out to fight inflation (also a zero-sum game), (b) the increased deficit spending should be financed by either the money stored temporarily in the TGA above, or, if not enough, further by the Fed's renewed QE new money printing (now a positive-sum game), if inflation is no longer rampant.
        ---
        
        vic lai Jul 9, 2022
        
        The coming new paradigm should be characterized by a rebalance of power from capital back to labor, with the help of the central government, through
        (i) the retirement of neoliberalism,
        (ii) the elimination of the biased elections of the President and the Congress by the money-donating big enterprises, say through the help of provisions of a suitable set amount of audited election fees to the candidates, financed solely by the Federal government (no other sources of finance are allowed),
        (iii) the greater use of pro-labor fiscal and income policies,
        (iv) re-activation of anti-trust laws, particularly against those too-powerful ICT giants, energy and food corporations, and commercial banks,
        (v) the re-activation of the Glass-Steagall Act, separating once again commercial banking from investment banking, now that the competition facing the US commercial banks from abroad is no longer very acute, thereby reducing the frequency of financial crisis,
        (vi) the country's re-metropolitanization, with lots of new high-rising apartments in and near the super-big cities, and away from further sub-urbanization, to
        (a) gain agglomeration economies,
        (b) mitigate the further worsening of the Ponzi-scheme-like fiscal conditions in the suburbia,
        (c) reduce the frequency of working at home, otherwise the resultant lack of people's face-to-face interactions will mean a secular drop in innovativeness of the American people,
        (d) reduce the use of private vehicles, through the help of mass transit rail systems around the metropolitan cities, and so also reducing traffic congestion, the emission of polluting air, and the use of global-warming fossil fuel .
        ---
        The use of more (pro-labor) fiscal policies will also lead to more rent-seeking (aka corrupt) behavior, but this is unavoidable and so can be regarded as a necessary evil.
        ---
        
        vic lai Jul 11, 2022
        
        (vii) the suppression of
        (a) privatization of government-provided public services (like the country's prisons),
        (b) the private equity industry, preventing it from buying up family homes (and buying out the rest of the US).
        ---
        (viii) the retirement of the Fed's QEs, through the help of QTs.
        After the normalization of the Fed's interest rate in the coming years, the good-old-day interest-rate-setting open market operations (OMOs) should be resumed by the Fed, in which new government treasuries are issued, not to finance the federal government's deficit spending, but to absorb any excess reserves left in the commercial banking system after the deficit spending, according to MMT, to prevent the interest rate from dropping to the ZLB.
        The current interest rate corridor, bounded by IOR and ONRRP, should be discarded.
        ---
        The mission of the Fed's QEs has been accomplished, and is no longer needed.
        Note that the GFC-inflicted US macroeconomy of 2007-09 was eventually rescued not by the Troubled Asset Relief Program (TARP) and QEs as claimed by the Treasury, the Fed, and the politicians, but by Barney Frank, who proposed the elimination of mark-to-market accounting (M2M) on March 9, 2009, like FDR did back in 1937.
        Milton Friedman explained in his book "The Great Contraction, 1929-1933" how M2M rules, not bad loans, caused bank failures in the early 1930s.
        ---
        Conventional wisdom believes that without government intervention the free market economy is nothing more than a casino.
        This is just not true.
        The forgotten 1921 depression was a crash that, according to James Grant, cured itself.
        ---
        
        Peter Quennell Jul 11, 2022
        
        Sensible ideas here, Vic, you are essentially talking better systems, but dont hold your breath, they will never be implemented top-down. In fact the smaller the role of top government the better, bureaucracies are intentionally steady-state. Parallel processes in national and international communities with the UN agencies and universities and colleges as intellectual resource will make your day. Look around for some chums and pedal to the floor. Email me if you like.
        
        vic lai Jul 12, 2022
        
        The neoliberal soldier dies but will never surrender.
        This is for sure.
        
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