The paper discusses the nature of the present era of financialisation, outlining the changes in t... more The paper discusses the nature of the present era of financialisation, outlining the changes in the financial sector and its relations with the real sector which are particularly relevant for the climate emergency. The relationship between growth of the financial sector ('financial development') and economic growth is reviewed, and the relevant of recent empirical findings for the role of the financial sector in addressing the climate emergency drawn out. It is argued that the policy approach to the climate emergency and environmental degradation should be embedded within an industrial strategy. Further, it is argued that the structures of the financial sector need to be changed to encourage financial institutions which are more favourably disposed towards to the allocation of funds to 'green investment'. It is also argued that the central bank should act in ways which are supportive of environmental policies but that their role is a rather limited one.
The paper explores how the Theory of Monetary Circuit can be developed to reflect some important ... more The paper explores how the Theory of Monetary Circuit can be developed to reflect some important features of the evolution of the financial system in the past three decades, which have been associated with what may be termed 'financialisation . For this purpose, we embed the benchmark single-period monetary circuit scheme proposed by in a richer set of institutional arrangements. The stock-flow consistent modelling technique pioneered by Godley and Lavoie (e.g.
A central and crucial feature of Kalecki’s analysis is the view that developed capitalist economi... more A central and crucial feature of Kalecki’s analysis is the view that developed capitalist economies are characterised by oligopoly, imperfect competition and monopoly, particularly in product markets. He regarded the widely adopted assumption of perfect competition as ‘a most unrealistic not only for the present phase of capitalism but even for the so called competitive capitalist economy of past centuries: surely this competition was always in general very imperfect’ (Kalecki, 1971a, p. 158). It could be said that throughout his work, Kalecki stressed the monopolistic nature of modern capitalism, and perhaps neglected the rivalrous aspects. This point is developed in Chapter 8 when we compare the works of Kalecki with those of Marx.
Any person who does any unauthorized act in relation to this publication may be liable to crimina... more Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages.
The paper develops a macro-economic analysis along broadly defined Post Keynesian and Kaleckian l... more The paper develops a macro-economic analysis along broadly defined Post Keynesian and Kaleckian lines, which incorporates ecological constraints on the pace of economic growth. Since growth is viewed as demand-driven, this involves bringing demand into lin . A simple model of demand-driven growth is constructed from which some basic conclusions are drawn of the consequences of slower growth and lower investment including those for the rate of interest and the rate of profit. The macroeconomic policy to deliver full employment is indicated. The growth of the effective labour force and the -driven rate of growth explored. The macroeconomic analysis has to be embedded with analysis of the monetary and financial system. For this purpose a circuitist analysis is presented. The paper considers the ways in which the monetary and financial systems should be re-structured to be consistent with sustainable growth and low unemployment. The major aims of this re-structuring would be to underpin financial stability, and more importantly to focus the financial sector on the allocation of funds into environmentally friendly investment.
O debate acadêmico na América do Sul pertinente à proposição de unificação monetária para o Merco... more O debate acadêmico na América do Sul pertinente à proposição de unificação monetária para o Mercosul tem como referências teórica e prática, respectivamente, a concepção de Áreas Monetárias Ótimas (AMOs) e a experiência do euro e da União Monetária Européia (UME). Este artigo objetiva discutir se a proposição de se adotar uma moeda única, nos moldes da UME, é apropriada e factível para o Mercosul. A partir da experiência da UME, três lições devem ser levadas em consideração quando as atenções voltam-se para o Mercosul: primeiro, a adoção de um modelo de união monetária a la UME deverá resultar em políticas deflacionárias; segundo, via de regra, há um dilema entre união política e integração econômica; e, terceiro, a necessidade de se levar em conta seriamente as preocupações da literatura relacionada às AMOs. O artigo também mostra que não há evidência de convergência macroeconômica no Mercosul, uma vez que os critérios básicos definidos pela literatura da AMO foram alcançados apenas minimamente.
The paper focuses on the unemployment crisis within the Economic and Monetary Union, and the futu... more The paper focuses on the unemployment crisis within the Economic and Monetary Union, and the future prospects for employment and unemployment within the euroarea. It considers the 'structural reforms' agenda for labour markets, and argues that at best that agenda would be neutral for unemployment. The 'fiscal compact', if it is adhered to will re-impose austerity. The lack of concern over resolving the balance of payments imbalances threatens to confine many countries to high levels of unemployment.
The purpose of this contribution is to look into the fiscal and debt policies in the UK and also ... more The purpose of this contribution is to look into the fiscal and debt policies in the UK and also discuss the future prospects of them. In doing so we begin with a discussion of the sustainability of deficits and debt, along with what precisely sustainability is, followed by a focused discussion of issues that relate to debt and growth, which in its turn requires a comprehensive analysis of the inter-temporal budget constraint thesis. Two further, relevant and important issues are subsequently addressed. These are, first, the relationship between the inter-temporal budget constraint thesis and sustainability, and, second, its consistency with household behaviour. The sustainability of deficits and 'functional finance', structural budgets and the impossibility of balanced structural budget are then discussed. Finally, the future of UK fiscal policy is addressed before we summarise and conclude.
Immediately following the global financial crisis of 2007–2008, budget deficits rose from the ope... more Immediately following the global financial crisis of 2007–2008, budget deficits rose from the operation of the automatic stabilisers and some mild discretionary actions to bolster demand in the face of the economic downturn. This was soon replaced by drives to reduce budget deficits and debt ratios even though unemployment continued to be high and output well below previous levels. The ‘debt scare’ behind fiscal consolidation is examined and found wanting on empirical and theoretical grounds. The nature and estimates of ‘the multiplier’ are examined and the consequences of the wide range of estimates considered. There has been a shift to the formulation of fiscal policy in terms of a balanced structural budget. This shift relies on discredited ideas, such as a well-defined and stable non-accelerating inflation rate of unemployment, and brings back the notion that savings and investment necessarily balance at a full employment equilibrium.
Structural Change and Economic Dynamics, Dec 1, 2021
The purpose of the paper is to provide a comprehensive comparison of fiscal and monetary policies... more The purpose of the paper is to provide a comprehensive comparison of fiscal and monetary policies with different forms of public expenditure, including a job guarantee (JG) plan. Our key findings are as follows. First, expansionary fiscal policies (including JG) are effective in reflating the economy independently of the way in which they are funded. However, deficit monetization should be expected to be more effective in the short run, while bill-funded government spending is likely to be more effective in the long run. Second, expansionary monetary policies are reflationary in the short run. However, they may have deflationary effects on the economy in the medium to long run. Third, a lower reserve requirement can reflate the economy, but the expected impact is rather weak. Fourth, non-selective tax cuts are effective, but less effective than government spending. Fifth, the impact on the price level is harder to predict than the impact on output. Sixth, conventional spending outclasses JG in terms of GDP growth and inflation rate control, but the JG is a better option in terms of employment results and income distribution.
This paper revisits the writings of Michal Kalecki which relate to issues of fiscal policy, budge... more This paper revisits the writings of Michal Kalecki which relate to issues of fiscal policy, budget deficits and securing full employment in capitalist economies. It seeks to relate those writings to the recent fiscal policy debates after the global financial crises. It covers the issues of the financing and funding of public expenditure and private expenditure. The relationship between the scale of budget deficit and the achievement of full employment is considered. Kalecki's approach to the 'burden' of debt is elaborated. The social and political constraints on the achievement of full employment are revisited.
In this chapter, we begin with a consideration of the views of Kalecki on the nature of money, sp... more In this chapter, we begin with a consideration of the views of Kalecki on the nature of money, specifically that in conditions of developed capitalism money is predominantly credit money created by the banking system. This leads into consideration of the way in which the banking system and the expansion of the money supply is an important ingredient in any expansion of the economy. Specifically, there is a need to consider the financing requirements of an expansion of investment demand. The interaction of the demand for money by the public and the banks’ willingness to supply money are seen as determining short-term interest rates, with long-term interest rates based on the expectations on future short-term interest rates. The final section of the chapter deals with the restrictions placed on the expansion of any single firm by the finance capital market.
The paper discusses the nature of the present era of financialisation, outlining the changes in t... more The paper discusses the nature of the present era of financialisation, outlining the changes in the financial sector and its relations with the real sector which are particularly relevant for the climate emergency. The relationship between growth of the financial sector ('financial development') and economic growth is reviewed, and the relevant of recent empirical findings for the role of the financial sector in addressing the climate emergency drawn out. It is argued that the policy approach to the climate emergency and environmental degradation should be embedded within an industrial strategy. Further, it is argued that the structures of the financial sector need to be changed to encourage financial institutions which are more favourably disposed towards to the allocation of funds to 'green investment'. It is also argued that the central bank should act in ways which are supportive of environmental policies but that their role is a rather limited one.
The paper explores how the Theory of Monetary Circuit can be developed to reflect some important ... more The paper explores how the Theory of Monetary Circuit can be developed to reflect some important features of the evolution of the financial system in the past three decades, which have been associated with what may be termed 'financialisation . For this purpose, we embed the benchmark single-period monetary circuit scheme proposed by in a richer set of institutional arrangements. The stock-flow consistent modelling technique pioneered by Godley and Lavoie (e.g.
A central and crucial feature of Kalecki’s analysis is the view that developed capitalist economi... more A central and crucial feature of Kalecki’s analysis is the view that developed capitalist economies are characterised by oligopoly, imperfect competition and monopoly, particularly in product markets. He regarded the widely adopted assumption of perfect competition as ‘a most unrealistic not only for the present phase of capitalism but even for the so called competitive capitalist economy of past centuries: surely this competition was always in general very imperfect’ (Kalecki, 1971a, p. 158). It could be said that throughout his work, Kalecki stressed the monopolistic nature of modern capitalism, and perhaps neglected the rivalrous aspects. This point is developed in Chapter 8 when we compare the works of Kalecki with those of Marx.
Any person who does any unauthorized act in relation to this publication may be liable to crimina... more Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages.
The paper develops a macro-economic analysis along broadly defined Post Keynesian and Kaleckian l... more The paper develops a macro-economic analysis along broadly defined Post Keynesian and Kaleckian lines, which incorporates ecological constraints on the pace of economic growth. Since growth is viewed as demand-driven, this involves bringing demand into lin . A simple model of demand-driven growth is constructed from which some basic conclusions are drawn of the consequences of slower growth and lower investment including those for the rate of interest and the rate of profit. The macroeconomic policy to deliver full employment is indicated. The growth of the effective labour force and the -driven rate of growth explored. The macroeconomic analysis has to be embedded with analysis of the monetary and financial system. For this purpose a circuitist analysis is presented. The paper considers the ways in which the monetary and financial systems should be re-structured to be consistent with sustainable growth and low unemployment. The major aims of this re-structuring would be to underpin financial stability, and more importantly to focus the financial sector on the allocation of funds into environmentally friendly investment.
O debate acadêmico na América do Sul pertinente à proposição de unificação monetária para o Merco... more O debate acadêmico na América do Sul pertinente à proposição de unificação monetária para o Mercosul tem como referências teórica e prática, respectivamente, a concepção de Áreas Monetárias Ótimas (AMOs) e a experiência do euro e da União Monetária Européia (UME). Este artigo objetiva discutir se a proposição de se adotar uma moeda única, nos moldes da UME, é apropriada e factível para o Mercosul. A partir da experiência da UME, três lições devem ser levadas em consideração quando as atenções voltam-se para o Mercosul: primeiro, a adoção de um modelo de união monetária a la UME deverá resultar em políticas deflacionárias; segundo, via de regra, há um dilema entre união política e integração econômica; e, terceiro, a necessidade de se levar em conta seriamente as preocupações da literatura relacionada às AMOs. O artigo também mostra que não há evidência de convergência macroeconômica no Mercosul, uma vez que os critérios básicos definidos pela literatura da AMO foram alcançados apenas minimamente.
The paper focuses on the unemployment crisis within the Economic and Monetary Union, and the futu... more The paper focuses on the unemployment crisis within the Economic and Monetary Union, and the future prospects for employment and unemployment within the euroarea. It considers the 'structural reforms' agenda for labour markets, and argues that at best that agenda would be neutral for unemployment. The 'fiscal compact', if it is adhered to will re-impose austerity. The lack of concern over resolving the balance of payments imbalances threatens to confine many countries to high levels of unemployment.
The purpose of this contribution is to look into the fiscal and debt policies in the UK and also ... more The purpose of this contribution is to look into the fiscal and debt policies in the UK and also discuss the future prospects of them. In doing so we begin with a discussion of the sustainability of deficits and debt, along with what precisely sustainability is, followed by a focused discussion of issues that relate to debt and growth, which in its turn requires a comprehensive analysis of the inter-temporal budget constraint thesis. Two further, relevant and important issues are subsequently addressed. These are, first, the relationship between the inter-temporal budget constraint thesis and sustainability, and, second, its consistency with household behaviour. The sustainability of deficits and 'functional finance', structural budgets and the impossibility of balanced structural budget are then discussed. Finally, the future of UK fiscal policy is addressed before we summarise and conclude.
Immediately following the global financial crisis of 2007–2008, budget deficits rose from the ope... more Immediately following the global financial crisis of 2007–2008, budget deficits rose from the operation of the automatic stabilisers and some mild discretionary actions to bolster demand in the face of the economic downturn. This was soon replaced by drives to reduce budget deficits and debt ratios even though unemployment continued to be high and output well below previous levels. The ‘debt scare’ behind fiscal consolidation is examined and found wanting on empirical and theoretical grounds. The nature and estimates of ‘the multiplier’ are examined and the consequences of the wide range of estimates considered. There has been a shift to the formulation of fiscal policy in terms of a balanced structural budget. This shift relies on discredited ideas, such as a well-defined and stable non-accelerating inflation rate of unemployment, and brings back the notion that savings and investment necessarily balance at a full employment equilibrium.
Structural Change and Economic Dynamics, Dec 1, 2021
The purpose of the paper is to provide a comprehensive comparison of fiscal and monetary policies... more The purpose of the paper is to provide a comprehensive comparison of fiscal and monetary policies with different forms of public expenditure, including a job guarantee (JG) plan. Our key findings are as follows. First, expansionary fiscal policies (including JG) are effective in reflating the economy independently of the way in which they are funded. However, deficit monetization should be expected to be more effective in the short run, while bill-funded government spending is likely to be more effective in the long run. Second, expansionary monetary policies are reflationary in the short run. However, they may have deflationary effects on the economy in the medium to long run. Third, a lower reserve requirement can reflate the economy, but the expected impact is rather weak. Fourth, non-selective tax cuts are effective, but less effective than government spending. Fifth, the impact on the price level is harder to predict than the impact on output. Sixth, conventional spending outclasses JG in terms of GDP growth and inflation rate control, but the JG is a better option in terms of employment results and income distribution.
This paper revisits the writings of Michal Kalecki which relate to issues of fiscal policy, budge... more This paper revisits the writings of Michal Kalecki which relate to issues of fiscal policy, budget deficits and securing full employment in capitalist economies. It seeks to relate those writings to the recent fiscal policy debates after the global financial crises. It covers the issues of the financing and funding of public expenditure and private expenditure. The relationship between the scale of budget deficit and the achievement of full employment is considered. Kalecki's approach to the 'burden' of debt is elaborated. The social and political constraints on the achievement of full employment are revisited.
In this chapter, we begin with a consideration of the views of Kalecki on the nature of money, sp... more In this chapter, we begin with a consideration of the views of Kalecki on the nature of money, specifically that in conditions of developed capitalism money is predominantly credit money created by the banking system. This leads into consideration of the way in which the banking system and the expansion of the money supply is an important ingredient in any expansion of the economy. Specifically, there is a need to consider the financing requirements of an expansion of investment demand. The interaction of the demand for money by the public and the banks’ willingness to supply money are seen as determining short-term interest rates, with long-term interest rates based on the expectations on future short-term interest rates. The final section of the chapter deals with the restrictions placed on the expansion of any single firm by the finance capital market.
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Papers by Malcolm Sawyer