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 current economic curriculum has  mostly neglected the active role of money and financial institutions and the destabilizing effect that speculative practices have on business cycles.

In truth, these issues have long been neglected by mainstream economists who argue that business cycles and financial crises result from misguided economic policies, particularly over-spending by governments. For instance, Milton Friedman said that financial crises are monetary phenomena that result from central banks’ wrong decisions. At the root of a financial crisis, the central bank is active in increasing the money supply in order to maintain the domestic income level higher than its non-inflationary level. Thus, the solution to end the crisis should be a restrictive monetary policy to stabilize prices and, therefore, the income level. Friedman’s theoretical approach emphasizes the distortions caused by monetary policy on the interest rate equilibrium level (natural rate). Focus is also given on government controls in credit markets which main effect is the reduction of loanable funds. Indeed, mainstream economists argue that financial deregulation is necessary to enhance efficiency in the allocation of funds  towards the non-inflationary income level.

Critical of mainstream economics, Hyman Minsky considered the role of finance in the business cycle and developed the financial instability hypothesis which states that financial crises are inherent to the capitalist economy. From the Keynesain tradition, Minsky considered the capitalist economy as a set of interrelated balance sheets and cash flows among income-producing companies, households and banks.

Minsky adds to our understanding that banks play a crucial role in determining the path of sustainable economic growth since investment decisions are, therefore, affected by available finance. Through the period of boom, entrepreneurs borrow from banks and accumulate debts.  A sentiment of euphoria takes over and entrepreneurs begin to be over-optimistic in their short-term expectations while financial innovations impact upon banks’ assets and  liabilities.

During the expansionary period of the business cycle, investment demand increases, so does the demand for finance and funding. However, as financial fragility grows,  lower levels of loans increase uncertainty and pessimism in the economy. Banks become unwilling to lend money because of higher credit risk since income flows turn out to fall short of debt repayment plans. As investment decisions collapse, through the multiplier process, employment, income and consumption fall leading to a recession. If the financial crisis also leads to a sharp decline in prices, debt deflation can occur, where asset prices fall.

In short, while considering the relevance of investment as the unstable component of aggregate demand, the Minskyan approach also points out how banks’ strategies and a weak financial regulation turn to induce financial fragility. The recent global crisis revealed that current global finance, as a historical set of institutions, behaviours and policies, has  increased the systemic risk with deep negative consequences for real economies and societies. In order to support sustainable economic growth, the economic curriculum should not neglect how current economic processes and social changes have been subordinated to trading private money.

 

greedIdeology and Science are diametrically opposed to each other. An ideology is a set of beliefs that is maintained even in face of strong empirical evidence to the contrary. Science is primarily concerned with explaining the empirical evidence. Theories which conflict with observations are rejected.  This does not mean that ideology is necessarily wrong or bad – we must maintain our belief in justice, morality, honesty, trust, integrity without any empirical evidence; indeed, even when strong empirical evidence suggests that these beliefs will not bring us popularity or personal benefits. However, ideological beliefs in wrong ideas can blind us to the facts and prevent learning which is essential to progress. Nobel Laureate Joseph Stiglitz remarked that modern Economics represents the triumph of ideology over science. This essay explains the reasons for his remarks.

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This post was meant to provide a framework for further elaboration of the idea of ET1% — the Economic Theory of the top 1% — as one ingredient of a Meta-Theory of Economics. However, covering necessary preliminary background already took up more than a thousand words, so this project has been deferred for a later post. The goal of this post is to explain why we need to focus on Meta-Theoretical aspects of social science, rather than whether or not economic theories are true or false. The perspective emerges from my understanding of the Methodology of Polanyi’s “The Great Transformation” [which was recently ranked as the 2nd most important book of the 20th Century in a Poll of RWER Blog Readers]

As the name indicates a Meta-Theory for Economics is a theory about economic theories. As we are all aware, economic theories evolve, change and mutate. Multiple rival conflicting and contradictory theories co-exist within the mainstream. Outside the mainstream, there are people (like myself) who claim that all of mainstream theories are fundamentally and deeply flawed.

A meta-theory studies the process by which new theories emerge. Some of the central questions for a meta-theory would be:

  • What are the circumstances which lead to the creation of new economic theories?
  • Who are the agents who create new economic theories?
  • Why are new economic theories created?
  • What leads some theories to become popular and widely accepted?
  • What leads other theories to be rejected, or neglected and ignored?

Those who refuse to think about meta-theories often commit themselves to an extremely simplistic meta-theory without realizing or explicitly acknowledging it. This simplest of meta-theories is based on the idea of “TRUTH”. According to this meta-theory, new theories are generated as part of a process of searching for the truth. A theory is adopted because it explains the observed phenomena well, and hence is likely to be true. Agents are motivated by the search for truth, and seek to improve the explanatory power of theories. New theories are created to bring wider range of phenomena within the scope of explanation. Theories which are able to explain a large range of observed phenomena become widely accepted and popular. Theories which conflict with observations are rejected and confined to the dustbin of history.

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In the post-war boom era of 1945 to 1971, the U.S. surplus was at the center of the global economic order. Throughout the Bretton Woods period, the United States recycled part of its surplus via foreign direct investment – mainly in Western Europe and also in Japan. Within the system of international economic flows, the U.S. exported goods to the rest of the world and also finance these purchases.  Besides, the United States created demand for the exports of  foreign countries, primarily Germany and Japan.

After the 1970s, this system of international economic flows changed.  From 1971 to 2008, there is the expansion of the age of high finance where the U.S. deficits have been at the center of the global economic order. Considering this background, What Yanis Varoufakis (2013) calls the “Global Minotaur” is the system of international economic flows built after the 1970s. According to this system, the whole world surpluses aimed to finance the unsustainable expansion of a double deficit on which the US built its political and economic hegemony.  The American trade surplus turned into a large and increasing deficit that joined the government deficit to form the twin deficits. These twin deficits characterize the “Global Minotaur era”.

Without the Wall Street institutions recycling the global surpluses, the U.S. had not been able to hold its twin deficits. Indeed, the new global order after the 1970s was supported thanks to the close collaboration of the expansion of high finance overwhelmed by the political power of economic neo-liberalism.  Besides, the global expansion of corporations and supply chains enhanced business models based on increasingly lower wages. As a result, the global surplus recycling mechanism reversed the flow of global trade and capital flows: the United States provided sufficient demand for manufacturing in foreign countries – mainly China –  in return for  capital inflows.  As a matter of fact, between 1971 and 2008, the era of high finance supported the expansion of global trade at the cost of financial bubbles, corporate mega-profits and increasing social inequalities. In this scenario, mainstream economics supported the free market efficiency discourse.

However, accordingly Varoufakis (2013), the “Global Minotaur” has a crucial weakness. Indeed, the last cause of the global crisis is founded on the Minotaur’s dynamics that is synonymous to the global asymmetries on which the global architecture has been built after the 1970s.  Indeed, the maintenance of the U.S. supremacy requires global permanent unbalances. Consequently, the current global surplus recycling mechanism could not stabilize the world economy.

As the fundamental structural flaws in the global economy have not been addressed since the 2008 financial crisis, there are serious concerns that a new global economic crisis of unprecedented magnitude could still happen.

 

Reference

The Global Minotaur: America, Europe and the Future of the Global Economy, by Yanis Varoufakis, Zed Books, New York, 2013.

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Max Weber wrote that “The fate of our times is characterized by rationalization and intellectualization, and, above all, by the ‘disenchantment of the world.’ Precisely the ultimate and most sublime values have retreated from public life …” The disenchantment of world leads to the modern view of the heart as merely a pump for circulation of blood.  The ancients had deeper understanding; as Pascal said “The heart has its reasons, which reason does not know. We feel it in a thousand things. It is the heart which experiences God, and not the reason. This, then, is faith: God felt by the heart, not by the reason.” Elevation of the head above the heart has led to a loss of wonder at the myriad mysteries of creation which surround us, and also caused deep damage to human lives in many dimensions. As our Poet Laureate Allama Iqbal emphasized: “At the dawn of Judgment, Gabriel told me, Never accept hearts which are enslaved by the mind.” Read More

The perpetuation of inequality through clustering in neighborhoods is graphically depicted in: “Living in a poor neighborhood changes everything about your life” by Alvin Chang. Of course, this concept cannot even be formulated in conventional economic theory. I think we must move beyond the idea that neoclassical economic theory is “wrong” and come to the realization that neoclassical economist accomplishes perfectly what it is designed to do. It is designed to conceal those aspects of economic reality which could create unrest among the bottom 99%, as well as those aspects which enable the 1% to achieve extraordinary privilege and power at the expense of the rest. For instance,  “The Veil of Money” shows that QTM and standard monetary theory is designed to conceal how the mechanism of money creation provides enormous advantage to the wealthy. “The Fairy Tale of GNP” shows how standard economic theory measures of progress are designed to conceal inequality and distributional injustice. The standard DSGE model, with only one representative agent, is designed to conceal the presence of disadvantaged groups, minorities and laborers.

In reading obits to prepare  an article in memory of Muhammad Ali, I came across something to the effect that Muhammad Ali was a child prodigy. In any just society, given educational opportunities, he would have grown up to be a scholar, a philosopher, a statesman, or other kind of superstar. However, given the realities of discrimination, he could only become a boxer. The drastically different economic realities of heterogenous communities within societies are systematically concealed by economic theory. The article below, about Muhammad Ali, was published in Express Tribune on 13 June 2016, with the title: “Remembering an Icon

The Greatest 

The dramatic shifts of fortune experienced by Mohammad Ali, who died recently on 3rd June 2016, reflects the checkered fortunes of the minorities he represented. It requires effort for contemporary mindsets to visualize the Civil Rights era of the 1960’s where Black Americans were fighting not just for social, economic and political equality, but most fundamentally, the right to lead lives with human dignity. Mohammad Ali was among the most colorful champions of equality in a now nearly forgotten era of Black liberation. He came to prominence on the world stage after a surprise victory against reigning heavyweight Champion Sonny Liston, when 7 to 1 odds were given against Ali. He earned the anger and ire of white public when he publicly announced his conversion to Islam, and renounced his “slave name” of Cassius Clay.

Muhammad Ali’s status as world champion provided him with the platform to express and articulate the sentiments of the oppressed Black minority regarding the Vietnam War.  He refused to “drop bombs and bullets on brown people in Vietnam while so-called Negro people in Louisville are treated like dogs and denied simple human rights”. [ read more]

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