A driving spirit of the modern age is the desire to banish all speculation about things beyond the physical and observable realms of our existence. This spirit was well expressed by one of the leading Enlightenment philosophers, David Hume, who called for burning all books which did not deal with the observable and quantifiable phenomena: “If we take in our hand any volume; of divinity or school metaphysics, for instance; let us ask, Does it contain any abstract reasoning concerning quantity or number? No. Does it contain any experimental reasoning concerning matter of fact and existence? No. Commit it then to the flames: for it can contain nothing but sophistry and illusion.”

This is a breathtakingly bold assertion. The literate reader may examine his or her bookshelf to see what little, if anything, would survive after applying Hume’s prescriptions. Nonetheless, the spirit of the secular age was very much in tune with Hume, and relegated vast areas of human knowledge captured in literature, history, and the arts, to second-class citizenship. The modern world has been shaped by this downgrading of the spiritual, intuitive, and mystical, and the elevation of the rational as supreme judge and arbiter over all other faculties.

The leaders of the Enlightenment advocated rationality as the sole criterion for establishing an authoritative system of ethics, aesthetics, and knowledge. This has led to a dualism which has become firmly embedded in the foundations of Western thought, and has created a social science incapable of perceiving, let alone solving the problems currently being faced by humanity as a whole. Western hegemony has led to the global and widespread acceptance of this dualism, clearly expressed by Hume, in embracing the quantitative and passionately and violently rejecting the qualitative. Exploring the full range of difficulties caused by this dualism would take several books. In this essay we consider just one of the salient problems. Harvard Professor Julie Reuben expressed it as follows: “Truth was (a united whole) embracing spiritual, moral, and cognitive knowledge. By the 1930’s, this unity was shattered; factual cognitive knowledge (was separated from) moral/spiritual knowledge.”

The Enlightenment project had aimed to provide rational foundations for all human knowledge. However, influential intellectuals like Max Weber, in the early twentieth century, argued that scientific knowledge had to be value-free, because values could not be established empirically. Widespread acceptance of this rejection of morality and spirituality has had dramatic consequences in all realms of human life. The most important questions that we face as human beings were declared to be meaningless, and unworthy of our attention and study. We all recognize that our own life is an infinitely precious gift; the most important question we face is: how should we use this gift? What is the purpose or meaning of life? What characterizes the ‘good life’ and what steps can we take to achieve a lifestyle which embodies the good?

Influential positivist philosophers argued that these questions had no meaning, because there was no empirical or observational evidence which could be used to answer them. All answers were equally valid. We should simply do with our lives whatever we desire to do. There were no ethical or moral standards to guide our behavior. As one of the leading positivist philosophers, A J Ayer, stated: “Moral judgments are as meaningless as a cry of pain”. Centuries of traditional wisdom about life was discarded as meaningless noise, and the new generations were encouraged to work out answers to these deep and difficult questions on their own, starting from scratch. To understand the catastrophic consequences of this, imagine what would happen if we threw out accumulated wisdom in medicine (or any other field of knowledge), and started again from scratch.

The key to the social sciences is an understanding of the nature of human beings. Can we understand human lives without understanding responsibility, conscience, courage, love, heroism and cowardice, trust, jealousy and the enormous range of human emotions? All of these elements of human lives are deeply and inherently qualitative and cannot be measured on any scales. Thus, by definition, these do not qualify for inclusion in the realm of scientific knowledge. The wisdom of the ancients, contained in books discussing these concepts in literary and philosophical terms, without measurement and data, would deserve to be burned according to Hume. But all this book-burning would leave us without any guidance on issues central to human affairs.

The dualism that deified science, and scoffed at that qualitative and unmeasurable, resulted in a tremendous loss of knowledge about the nature of human beings and society. We are living with the consequences of a college education which teaches students how to build bombs, but nothing about the ethics of killing innocents. As a chilling example, consider the changing attitudes towards torture and murder. Japanese soldiers were executed for torturing American POW using waterboarding, and American soldiers in Vietnam were tried for such treatment of Vietnamese prisoners. But recent Presidents have thrown their full support behind the use of extreme torture techniques, officially approving their use. Hollywood movies glorify and justify torture, even though empirical evidence shows that it does not work to obtain useful intelligence. Official reports show that senior officials in the UK and the US concocted evidence to fool the public into supporting the invasion of Iraq, resulting in deaths of millions of innocent civilians, and unnecessary expense of trillions of dollars. But no one has been convicted of any wrongdoing. MBAs are taught that the bottom line is all that matters, and social responsibility should not interfere with the pursuit of profits. Thus, there is no outrage at the deaths of the poor and hungry farmers, caused by millions of dollars spent on research to produce genetically modified terminating seeds, so that rich organisations can make more profits by selling seeds every year. Even justice has been separated from morality; in the adversarial system, lawyers are taught that their responsibility is to win the case for their clients, regardless of whether or not justice would be served by this win. Reform requires deep and fundamental changes in the system of education, which needs to be firmly grounded in all those ideas that have been kicked out of the curriculum as ‘unscientific’.

Short Posts on Diverse Topics: My author page on LinkedIn. Other works: Index . Related: Re-Enchanting the World.

Published in The Express Tribune, August 15th, 2016.ethicseducation

The World Economics Association Online Conferences format, designed by Edward Fullbrook and Grazia Ietto-Gillies, makes full use of the digital technologies in the pursuit of the commitments included in the WEA Manifesto: plurality, reality and relevance, diversity, ethical conduct, and global democracy.

The Call for papers for the current conference Food and Justice is now open.

Food production has always been present in the economic debate because of the concern about population growth and demographic changes. In spite of the Malthusian concern, new methods of food production have emerged which allowed the increase in food supply. Technological changes, however, have not occurred uniformly throughout the world. Indeed, some countries have managed to expand their production and trade surpluses while situations of hunger remained a reality in many parts of the world.

In addition to technological factors in food production, other political and economic issues are involved in the access to food. In the 21st century, the scenario of changes in food production means that even with a larger supply of food, many people, mainly the poor ones, still live in a situation of starvation. In addition to the challenges in food access, other relevant issue is food waste. Actually, a large percentage of the world food production is lost throughout the different stages of production, transportation, processing and consumption. Indeed, among the current concerns, there is the need to search for actions that can reduce the food losses that could face the situation of hunger of millions of people.

The agriculture and food industries are part of the list of “global” sectors. Indeed, a global network of institutions supplies the worldwide food markets. In this scenario, one of the major outcomes of the expansion of the global supply chain is the changing role of the local farm sector under the pressure of international competition. Contract farming and integrated supply chains are deeply transforming the structure of the agriculture and food industries. Besides, the advance of the biotech revolution and the introduction of genetically improved varieties have also fostered structural changes in the global industry. These systemic changes are linked to financial and trade flows largely driven by the search for wider markets and less expensive sources of raw material.

This process of globalization of capital in food production arises other problems related to the growth of investments in big projects led by investment funds and transnational companies that purchase land in various parts of the world in order to increase global production. In truth, these investments often expose small farmers to a situation of hunger and food insecurity by expelling them from the land where they live.

Considering this backgorund, the purpose of the Conference Food and Justice is to enhance a debate that could stimulate the articulation of various aspects of the relationship between food and justice.  Although the scope and intensity of these challenges vary according to the economic situation of countries, the debate has been global. Current food challenges involve issues ranging from food access to national and international regulation.

The WEA Online Conferences seek to engage professional economists – academics or not – besides graduate and undergraduate students in Economics considering the variety of theoretical perspectives and the study of the world’s diverse economies.

We invite you to submit a paper to weafoodconference@gmail.com by 15th  September, 2016. 

Visit the Conference website http://foodandjustice2016.weaconferences.net/

 

 Special contribution from Grazia Ietto-Gillies

The business media is awash with news about transnational companies (TNCs) be they in the services or manufacturing or agriculture sector. The news may refer to performance or strategies or plans for real investment (or the lack of them) or takeovers. There is currently also considerable interest in their tax minimization strategies.

Yet economics textbooks and courses are still shying away from this most relevant part of our contemporary economies. This is true of both orthodox/neoclassical approaches and – I regret to say – of alternative ones as a quick analysis of textbooks recommended in the WEA Pedagogy page shows.

It could be argued that the nationality of the investor, employer, or producer does not matter: a firm is a firm and the task of economics is to study it independently of where it invests or its nationality. I have argued (Ietto-Gillies, 2004 and 2012: introduction and Ch. 14) that the existence of nation-states with their different regulatory regimes makes a specific study of the TNC necessary. The regulatory regimes refer to taxation or labour and social security or currencies or environmental laws. The differences in regulatory regimes across different countries generate opportunities for alternative, profitable strategies for firms able to operate across national frontiers. Such operations allow the TNC to take advantage of different fiscal, currency or labour and social security or environmental regulations. Most relevant, transnationality increases the bargaining power of TNCs over labour as we see on an almost daily basis throughout the world. On the fiscal side the advantages that TNCs derive from their tax minimization strategies are partly linked to strategic location of their headquarters in tax-friendly countries and partly to the widely used manipulation of transfer prices (Eden, 2001; OECD, 2010).

Additional advantages of transnationality for companies may also derive from: (a) the spreading of risk across different locations; and (b) the acquisition of knowledge from a variety of cultural and business contexts that the location of production in different countries allows. There are, of course, also costs and risks associated with operating in different locations.

There is more to this issue. Most of us who have embraced alternative and realist approaches to the study and teaching of economics are still, on the whole, stuck with the distinction between micro and macro economics largely taken by us from the orthodox literature. How appropriate is this distinction in a world in which a few firms dominate markets and industries even at the global level? The domination is not just in terms of market shares. On the production side we must take account of the domination that principal firms exercise over smaller contractors many of which operate in other countries. The domination by a few large firms in a particular industry affect labour, consumers and smaller firms linked to the large ones by contractual arrangements. It also affects governments and their policies. Celi et at. (2017: Ch 2) show how the offshoring and outsourcing investment strategies of French, German and Italian automobile manufacturers can largely explain changes in the country’s trade balance. The micro is almost the meso and greatly affects the macro. Governments and labour force as well as economics teachers take note.

If we WEA economists want to disseminate among our students an alternative and realist approach to the study of economics, then we need to include the study of TNCs in our courses. The task is feasible because there is, indeed, a large literature on theories and effects of TNCs and their activities. The topic is widely researched mostly in Business Schools. Here are some sources of literature.

UNCTAD publishes, among others, the following:

  • World Investment Report: a yearly thematic analysis with considerable empirical content; full databases available free online.
  • Transnational Corporations: a quarterly academic, peer reviewed journal which focuses on analysis and policy.

Among the many journals that deal with ‘International Business’ are the following:

Journal of International Business Studies (JIBS)

International Business Review (IBR)

Critical Perspectives on International Busines (CPoIB).

Most of the journals tend to be multi- and inter-disciplinary dealing with economics, management, accounting and organizational issues. CPoIB deals also with social and political issues and its content can be of particular interest to WEA members. It has published, among others, papers by a radical accountant, Prof. Prem Sikka of Essex University (including Sikka and Wilmott, 2013).

My (2012) listed below has a comprehensive treatment of the various theories of the TNCs (Part II) and of their effects (Part III) with suggestions for further reading at the end of each chapter. The chapters on theories first summarize a specific theory and then critically analyses it in a separate section.

See also ‘The theory of the Transnational Corporation at 50+’ in the WEA journal

Economic Thought:

http://et.worldeconomicsassociation.org/papers/the-theory-of-the-transnational-corporation-at-50/

The same issue of the journal has a debate on the questions raised in the article with John Cantwell as a result of the Open Peer Review process.

 References

Eden, L. (2001), Taxes, Transfer Pricing, and the Multinational Enterprise, in A.M. Rugman and T.L. Brewer (eds), The Oxford Handbook of International Business, Oxford: Oxford University Press, ch. 21, pp. 591-619.

Celi, G., Ginzburg, A., Guarascio, D. and Simonazzi, A (2017), Northern and Southern Europe in the long European Crisis: a core-periphery perspective, forthcoming, London: Routledge (fortcoming).

Ietto-Gillies, G. (2004), ‘Should the study of transnational corporations be part of the economics syllabus?’, in Fullbrook, E. (ed.) A Guide to What is Wrong with Economics, Ch. 26: 289-98,  London: Wimbledon Publishing.

Ietto-Gillies, G. (2012), Transnational Corporations and International Production. Concepts, Theories, Effects, Second Edition, Cheltenham, UK and Northampton, MA, USA: Edward Elgar

Organization for Economic Cooperation and Development (OECD), (2010), Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrators, Paris: OECD

Prem Sikka and Hugh Willmott, “The Tax Avoidance Industry: Accountancy Firms on the Make”, Critical Perspectives on International Business, Vol. 9, No, 4, 2013, pp.415-443.

 

G.iettogillies@yahoo.co.uk. I am grateful to Maria Alejandra Madi for useful comments on an earlier draft and to Andrea Ginzburg for information on offshoring in the European automobile industry.

Global financial integration has augmented the exposure to macroeconomic and financial vulnerabilities. In this scenario, prudential financial regulation presents challenges to success. First, banking assets and liabilities are vulnerable to changes in macroeconomic conditions. Second, segmented supervisory authorities do not cope with the universal scope of banks. Third, new regulatory patterns are generally proposed after banking innovations. At last, the consolidation of larger banks, stimulated by financial liberalization, changes in financial savings, capital adequacy requirements and information technology, have favoured the action of central banks as agencies that arbitrate competitive struggles.

Looking back, in the late 1980s,  there was a  global concern  around the development of a new regime of prudential banking regulation, founded on the ratio of capital to risk-adjusted assets. The first Basel Capital Accord introduced the 8 % capital requirement on the risk-weighted value of a bank’s assets, mainly credit-risk.  As of 2004, a new Capital Accord, Basel II, was settled and underlined three pillars: a bank’s core capital requirement; supervision and market discipline. This Accord aimed to spread out mechanisms of protection  in order to avoid financial systemic risk and to favour informational transparency (disclosure). Therefore, the institutional set up would enhance more efficient financial leverage systems and greater transparency to financial regulators and investors.

Throughout the implementation of Basel II, banks proved to enhance asset-liability management (ALM), or even, balance sheet management, to reduce legally capital requirements. At the operational level, ALM involves new management practices and techniques to manage risks that arise due to imbalances in assets and liabilities.  For example, banks could manage the credit risk with further securitization transactions. ALM could also be used to analyse market risks related to trading in capital markets. Besides, low capital requirements were supported by off balance sheet assets since great volumes of their trading books were shifted into SIVs (structured investment vehicles).  The 2008 global crisis showed that innovations, such as banks’ asset-liability management, have reinforced systemic risks.

In the aftermath of the crisis, global  biggest banks increased write-downs on loans while credit losses put pressure on profitability. The reduction of leverage and new strategies related to the internal reassessment of risks (credit, currency, interest, liquidity) have been implemented to maintain existing capital levels. Besides, uncertainty about the future evolution of the global economy has reduced the bank’s interest in foreign markets, mainly in  U.S. and Europe.

Supervisory authorities have searched for setting new rules that could make the financial system more resilient in response to the crisis,. Among other issues, i) banks will need to hold larger capital requirements against further potential losses, ii) financial products’ approval would involve extensive disclosure requirements and iii) banks would be induced to negotiate standardized products. As a result, capital market transactions and trading income would lose their importance in a context where regulators would demand that some credit risk would be retained on the banks’ books. Due to higher equity ratios, future banks’ profitability (returns on equity) would probably shrink.

In the attempt to face the regulators’ potential actions,  global biggest banks have already been seeking for new strategies and practices. Nevertheless, lower risk-weighted assets and higher capital ratios represent a challenge for increasing assets and profitability.  As a result, global biggest banks seem to shrink under pressure  from regulators.

 

Further reading

Bank of International Settlement (BIS) (2012)  “Post-crisis evolution of the banking sector”, In:  BIS 82nd Annual Report, Basel: BIS. Available at http://www.bis.org/publ/arpdf/ar2012e6.pdf (accessed on June 25th, 2013).

Carey, B. (2016)  Cleaned up, shrunken banking sector may now be too small, The Sunday Times, August 7th.   Available at http://www.thetimes.co.uk/article/cleaned-up-shrunken-banking-sector-may-now-be-too-small-76mwtdvvx

Dermine, J. and Bissada, Y. (2007), Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, London and New York: Financial Times and Prentice Hall.

Saunders, A. (1994), Financial Institutions Management: A Modern Perspective, Burr Ridge, IL: Richard D. Irwin.

Saunders, A. and Cornett, M.  (2002), Financial Institutions Management: A Risk Management Approach, Columbus: McGraw-Hill College.

Popper, N. and  Corkery, M. (2016),  Shrunken Citigroup Illustrates a Trend in Big U.S. Banks, New York Time, April 15th, on line edition http://www.nytimes.com/2016/04/16/business/dealbook/shrunken-citigroup-illustrates-a-trend-in-big-us-banks.html

The Economist (2011) The great unknown. Can policymakers fill the gaps in their knowledge about the financial system?, Jan 13th, print edition

The World Economics Association Online Conferences format, designed by Edward Fullbrook and Grazia Ietto-Gillies, makes full use of the digital technologies in the pursuit of the commitments included in the WEA Manifesto: plurality, reality and relevance, diversity, ethical conduct, and global democracy.

The Call for papers for the current conference Food and Justice is now open.

Food production has always been present in the economic debate because of the concern about population growth and demographic changes. In spite of the Malthusian concern, new methods of food production have emerged which allowed the increase in food supply. Technological changes, however, have not occurred uniformly throughout the world. Indeed, some countries have managed to expand their production and trade surpluses while situations of hunger remained a reality in many parts of the world.

In addition to technological factors in food production, other political and economic issues are involved in the access to food. In the 21st century, the scenario of changes in food production means that even with a larger supply of food, many people, mainly the poor ones, still live in a situation of starvation. In addition to the challenges in food access, other relevant issue is food waste. Actually, a large percentage of the world food production is lost throughout the different stages of production, transportation, processing and consumption. Indeed, among the current concerns, there is the need to search for actions that can reduce the food losses that could face the situation of hunger of millions of people.

The agriculture and food industries are part of the list of “global” sectors. Indeed, a global network of institutions supplies the worldwide food markets. In this scenario, one of the major outcomes of the expansion of the global supply chain is the changing role of the local farm sector under the pressure of international competition. Contract farming and integrated supply chains are deeply transforming the structure of the agriculture and food industries. Besides, the advance of the biotech revolution and the introduction of genetically improved varieties have also fostered structural changes in the global industry. These systemic changes are linked to financial and trade flows largely driven by the search for wider markets and less expensive sources of raw material.

This process of globalization of capital in food production arises other problems related to the growth of investments in big projects led by investment funds and transnational companies that purchase land in various parts of the world in order to increase global production. In truth, these investments often expose small farmers to a situation of hunger and food insecurity by expelling them from the land where they live.

Considering this backgorund, the purpose of the Conference Food and Justice is to enhance a debate that could stimulate the articulation of various aspects of the relationship between food and justice.  Although the scope and intensity of these challenges vary according to the economic situation of countries, the debate has been global. Current food challenges involve issues ranging from food access to national and international regulation.

The WEA Online Conferences seek to engage professional economists – academics or not – besides graduate and undergraduate students in Economics considering the variety of theoretical perspectives and the study of the world’s diverse economies.

We invite you to submit a paper to weafoodconference@gmail.com by 15th  September, 2016. 

Visit the Conference website http://foodandjustice2016.weaconferences.net/

The global scenario has restated the menace of deep depressions among the economic challenges. Indeed, in the current setting, the principles of corporate behaviour have reinforced the lack of commitment to long-run social and economic sustainability.

Looking backward, in the context of the 1930 Great Depression, John Maynard Keynes pointed out that the evolution of capital markets increases the risk of speculation and instability since these markets are mostly based upon conventions whose precariousness affects the rhythm of investment and employment. Keynes called attention to the fact that the capitalist system has endogenous mechanisms capable of destabilizing the levels of spending, income and employment. He suggested a reconsideration of the understanding of the relations among individuals, society and governments within the market where institutions and conventions could shape human behaviour. Aware of the need to overcome the concept of rationality that overwhelms the homo oeconomicus, his contribution enhances a more extended understanding of the entrepreneurs’ and investors’ behaviour, as well as of their strategies and decisions.

Following these ideas, the Keynesian approach to business dynamics enhanced a more fruitful apprehension of the real-world where the outcomes of the entrepreneurs’ and investor’s decisions are not submitted to stochastic behaviour, that is to say, they are not predictable. Indeed, the process of decision making is based on conventions. As uncertainty is present in all decisions, Keynes relied on the concepts of credibility and degree of confidence on a conventional judgment that is historically built within the markets. In a specific historical setting, the average opinion on future scenarios shapes a convention based on a precarious set of expectations about the behaviour of aggregate demand (consumption, investment, net exports, for example). The degree of confidence on this convention could affect the expected return on investment- the so called marginal efficiency of capital. He explained that the incentive for long-run expanding productive capacity is highly dependent on the state of confidence about the business environment. In his view, the trust in conventions has a social nature and impacts the path of entrepreneurial development. In Keynes’s view, trust is a conventional concept related to the level of confidence in the business environment, that is to say, in the legal, regulatory, macroeconomic and political setting that shape the evolution of the markets.

As a matter of fact, the environment of business changes and new elements might arise that affect investment decisions under conditions of uncertainty. In General Theory, chapter 12, Keynes focused the analysis on the long-term expectations associated. In his own words:
The state of long-term expectation, upon which our decisions are based, does not solely depend, therefore, on the most probable forecast we can make. It also depends on the confidence with which we make this forecast on how highly we rate the likelihood of our best forecast turning out quite wrong. If we expect large changes but are very uncertain as to what precise form these changes will take, then our confidence will be weak. The state of confidence, as they term it, is a matter to which practical men always pay the closest and most anxious attention. But economists have not analysed it carefully and have been content, as a rule, to discuss it in general terms. In particular it has not been made clear that its relevance to economic problems comes in through its important influence on the schedule of the marginal efficiency of capital. There are not two separate factors affecting the rate of investment, namely, the schedule of the marginal efficiency of capital and the state of confidence. The state of confidence is relevant because it is one of the major factors determining the former, which is the same thing as the investment demand-schedule” (Keynes, General Theory, 12, II).

As Keynes warned, the influence of capital markets reinforces the conflicts between business strategies that favour short-run profits, on one side, and those strategies that favour long-run  investment decisions, on the other.  This idea is extremely important today, since the global reorganization of markets has been overwhelmed by the financial logic of investment. Within this framework, the corporations’ strategies have turned out to focus on short-term profits and the distribution of dividends to shareholders, that is to say, to investors.

Over the last two decades, the leveraged buyout business model of private equity firms, as the main agent for mergers, has fed a broader process of increased financialization of corporate behaviour. It is relevant to apprehend this recent business trend since private equity firms have been responsible for the employment standards of tens of millions of workers worldwide. While private equity firms have become important in many economic sectors, the experience of workers and trade unions arises deep concerns because of job losses, reduction in payment conditions and entitlements (including retirement incomes), besides the displacement of business and persons.

Recalling Minskly, in contemporary capitalism,  corporate behaviour and business instability need to be analysed in a framework where the role of finance is outstanding. Corporate behaviour has been increasingly subordinated to financial commitments and, therefore, finance determines the pace of investment and employment.

 

The adoption of the appropriate exchange rate  has been largely considered by the canonical theoretical literature about fixed and floating exchange rate regimes. While  the fixed exchange rate is pegged  by the Central Bank in relation to the currency of another currency,  in the floating exchange rate regime  a country’s exchange rate  evolution depends on the  market forces without intervention of the Central Bank.

In the monetarist model, the adoption of a flexible regime lets an open economy achieve full employment with price stability. While each country has to take care of its monetary policy, the demand and supply forces of the free markets fix the relative prices between currencies. In the long-run, in each country, the stock of money supply and the domestic price level favour full employment, price stability and balance of payment equilibrium. Accordingly this approach, in a flexible exchange rate regime, the monetary rule is given by the Central Bank and it conditions the evolution of the exchange rate. In other words, the exchange rate fluctuations make possible the achievement of the monetary rule. The defence of exchange rate flexibility, in the orthodox view, also focuses on the argument that exchange rate fluctuations equilibrate the gap between prices and costs among countries. Consequently, Central Banks rescue the autonomy of monetary policy. Nowadays, Central Banks usually adopt floating exchange rate regines, follow the adoption of monetary rules (centred on interest rules) and compels fiscal surplus to finance government commitments.

The critique of this approach  has been developed by Post Keynesians. Under the Keynesian analysis to open economies, the financial challenges for exchange rate stability and the loss of Central Banks’ autonomy  in policy making have been highlighted. Taking into account the challenges for sustainable fixed exchange rate regimes, the Keynesian approach explains that the Central Banks’ actions in the exchange rate market are limited by the degree of capital mobility since exchange rate crises may happen as the result of the abrupt reversal of global financial cycles. This is explained in a context of speculation and uncertainty where decisions to balance risks and yields are not submitted to stochastic behaviours, that is to say, they are not predictable. In addition, in the context of random behaviour of investors and capital mobility,. floating exchange rate regimes bring out higher risks to manage domestic interest rates – and therefore to implement those Central Banks’ discretionary policies aimed to influence  the levels of product, employment  and prices.

What the Post Keynesian approach adds to the students’ understanding about the deep current challenges in the global economy is that the evolution of the exchange rates actually highlights some key-problems, such as the diversity of the process of economic global integration, the arbitrage/speculation within financial  global markets and the challenges for Central Banks.

At the beginning of XX century, Joseph Schumpeter developed the concept of creative destruction  to characterize the waves of development based on clusters of innovations -both technical and institutional. In the last decades, these waves have included petrochemical products, automobiles, information technologies and biotechnologies, especially genetic modification.

Looking back, throughout the postwar era in advanced Western societies, scientific research and technological development included research councils, scientific advisory boards, expert commissions and specialized government agencies in different areas, such as health, agriculture and especially atomic energy. The target was to transform the scientific and technological development in a profitable process. As a result, for instance, new kinds of chemical products have been introduced, especially fertilizers, insecticides and additives used in food production.

Accordingly Eric Hobsbawn (1997), deep concerns turned out to grow because of the social implications of these scientific and technological trends in the 1960s.  Indeed, in Western societies, signals of social discontent included the critique of science and technology applied to military targets, and of the deleterious effects of automation technologies on labour and working conditions.  In addition, high concern also arose on behalf of health and environmental costs that resulted from the widely-used chemical in agriculture.

More recently, the outcomes of globalization revealed the impacts of financial and business interests on scientific and technological development. For instance, among others, these outcomes have included the “restructuring” of universities and research institutes.

Recalling Pierre Dardot and Christian Laval (2013, there is a set of values spread in Western societies that supports progress as a “truth” called efficiency. This scenario calls for a serious reflection about the social implications of current scientific and technological trends and the ethical issues that overwhelm the current manifestations of disembeddedness and the commodification of science and technology.

 

References

Dardot, P. and Laval, C. (2013) The New Way of the World: On Neoliberal Society. New York: Gregory Elliott London.

Hobsbawm, E. (1994) The Age of Extremes: The Short Twentieth Century, 1914-1991, London: Michael Joseph.

Jamison, A. (2012) “Science and Technology in Postwar Europe”. In Oxford Handbook in Postwar European History. Oxford: Oxford University Press.

Polanyi, K. (1944) The Great Transformation: The Political and Economic Origins of Our Time, New York: Rinehart.

Schumpeter, J.A. (1912 [1934]) The Theory of Economic Development. Cambridge, MA: Harvard University Press.

 

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