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Bank transactions by internet and mobile banking have sharply increased since the 2008 global financial crisis. In this digital environment, new technologies – such as advanced analytics and big data, in addition to the use of robotics, artificial intelligence, besides new forms of encryption and biometrics – have been enabling changes in the provision of financial products and services. The current wave of financial innovations is being increasingly oriented to more friendly digital channels through apps in the context of mobile banking strategies that privilege the development of open bank softwares and the interaction with social media.

Indeed, the increasing digitalization of financial transactions is also related to changes in the banks’ competitive environment, where the intense growth of the startups called fintechs, especially since 2010, has revealed a new articulation between finance and technology. Such fintechs are companies organized as digital platforms with business models focused on costumer relationship in the areas of payment systems, insurance, financial consultancy and management, besides virtual coins. The advantages of their business models are low operating expenses, greater operational agility and the ability to generate data for the design of customized financial products and services. As a result of the advance of these new non-bank competitors, big banks have begun to establish collaborative partnerships with selected fintechs in order to produce new technological solutions and to promote the development of a culture of technological entrepreneurship among bank workers.

Taking into account the global changes in the provision of financial products and services, Central Banks have closely followed the recent expansion of fintechs. Indeed, the transformations provoked by these startups in the financial markets have raised a relevant discussion about the impacts of recent technological innovations on the financial regulation agenda- mainly focused on the Basel Accords. The intense advance of fintechs is settling new questions for regulators: How to deal with loan activities that are being performed by means of electronic platforms? How to regulate the fintechs’ activities of consultancy and financial management that are characterized by the collection, treatment and custody of information from users? Which is the scope of the Central Bank and of other financial regulators when considering the surveillance over the fintechs? Moreover, there are legal concerns related to information security practices, legal validity of electronic documents, digital signatures and data storage in the cloud.

As a result of the new competitive digitalized and deregulated environment, the current wave of technological innovations will decisively affect the future of bank workers. Currently, one of the main cost-reducing bank strategies is centered on administrative expenses mainly labour costs that remain tightly controlled by banks in order to improve operational efficiency. In this scenario, technological strategies aimed to increase profitability will foster further organizational innovations and changes in labor relations. Thus, the future impacts on jobs in the financial sector will deepen the power of financial holdings, that is to say, of centralized blocks of financial capital that base their global expansion on the digitalization of products, services and delivey channels .

 

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The roots of gender and poverty studies began with Pearce (1978) who coined the expression ‘feminization of poverty’. Pearce considered female-headed families, excluding poor women who live in male- headed families, based on the argument that the proportion of families headed by women among the poor has been  increasing since the 1950s. In her opinion, women have become poorer because of their gender.

The recent dynamics of the global labour market has reinforced the precariousness of women’s employment and working conditions. Among other issues, the recent global highlights about the participation of women in the labour markets are listed below:

Unemployment: Women are more likely to be unemployed than men, with global unemployment rates of 5.5 per cent for men and 6.2 per cent for women

Informal Work:      In 2015, a total of 586 million women were own-account or contributing family workers. Many working women remain in occupations that are more likely to consist of informal work arrangements

Wage and salaried jobs: Moreover, 52.1 per cent of women and 51.2 per cent of men in the labour market are wage and salaried workers.

Jobs and occupations by economic sectors:  Globally, the services sector has overtaken agriculture as the sector that employs the highest number of women and men. In the period between 1995 and 2015, women are employed in the services sector: since 1995, women’s employment in services has increased from 41.1 per cent to 61.5 per cent.

High-skilled occupations: High-skilled occupations expanded faster for women than for men in emerging economies where there is a gender gap in high-skilled employment in women’s favour.

Part-time jobs: Globally, women represent less than 40 per cent of total  employment, but make up 57 per cent of those working on a part-time basis.

Hours of work: Across the global labour scenario, one fourth of women in employment (25.7 per cent) work more than 48 hours a week, mainly in Eastern , Western and Central Asia, where almost half of  women employed work more than 48 hours a week.

Gender wage gap: Globally, women earn 77 per cent of what men earn.

 

Indeed, although women have been increasing their participation rate in the labor market in the last decades, they worked in more precarious occupations. This situation characterized by precarious jobs, mainly based on short-term contracts, enhances the vulnerability of workers, mainly women, as the financialization of management strategies turns out to be subordinated to economic efficiency targets, that shape employment relations, overwhelmed by longer working hours, job destruction, turnover and outsourcing. Workforce displacement and loss of rights could also be part of the spectrum of management alternatives aimed at cost reduction. In addition to the wage gap, women’s participation is stronger in the services sector where working hours are longer and wages lower.

Besides, unpaid work could also be considered an extra onus on women. In addition to women´s challenges in the labour market, the increasing weight of unpaid work is more likely when women become unemployed and return to their homes and take more responsibility for housework than men, or because the loss of family income makes it impossible to support the remuneration of domestic workers. Gender-differentiated time use patterns are affected by many factors, including:  household composition (age and gender composition of household members); seasonal considerations; regional and geographic factors; availability of infrastructure and social services. But social and cultural norms also play an important role both in defining, and sustaining rigidity in, the gender division of labour.

Building on the United Nations goals, gender equality is required for the erradication of the many dimensions of poverty and to promote sustainable human development. Taking into account a macroeconomic approach to the labour markets, the “vicious circle” of impoverishment could be surmounted if policy makers rethink employment an income policies under a gender approach to the labour markets.

References

Ilo (2016) http://www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/—publ/documents/publication/wcms_457086.pdf

Pearce, Diana (1978). “The feminization of poverty: women, work, and welfare”. Urban and Social Change Review, Special Issue: Women and Work, Vol. 11, No. 1-2, pp. 28–36.

aaeaaqaaaaaaaahhaaaajdq5nmzhzwvllwmxn2utndg0yy05mtg2lwe5ymqxzjhhmji0nqThe first post on Reading Keynes provided an outline of the reasons why this is a good idea. It is clear that economics is broken. We need a new macroeconomics for the 21st century, one which can solve the massive problems which humanity as a whole is facing on political, social, economic, and environmental dimensions. Keynes faced similar problems, and found solutions which guided economic policy in the mid twentieth century. It is always useful to absorb the insights of our predecessors, before trying to build upon them. Such a methodology is essential for the advancement, progress and accumulation of knowledge. Our current stock of human knowledge is based on the collected insights and labors of hundreds of thousands of scholars, accumulated over the centuries. We would return to the stone ages if we were to reject it as being full of contradictions and errors (which it is). Instead, progress occurs by absorbing the past accumulated wisdom, and trying to remove the errors, or add missing insights, building on our heritage, rather than discarding it and starting over from scratch.

Several of the central Keynesian insights into the causes of the Great Depression never made it into the economics textbooks. However, our goal in studying Keynes goes far beyond just the re-discovery of these lost Keynesian insights.   A central goal is to apply and illustrate a radically different methodology for studying economics in particular, and social science in general. This is derived from a study of The Methodology of Polanyi’s Great Transformation. This is an extremely important point, which we proceed to amplify and explain further.

1.       Problems with contemporary economic theory arise from a fundamentally flawed methodology, which is incapable of learning from real world experiences. As Romer said, macroeconomics has gone backwards for the last several decades. This is because the methodology currently in use does not lead to progress and accumulation of knowledge. Very briefly, this is because current methodology is the Axiomatic-Deductive Methodology of Greek Geometry, which was never successful in dealing with natural phenomenon. Instead, what is needed is scientific methodology as practiced and demonstrated by Ibn-ul-Haytham. Unfortunately, logical positivism created massive confusions and misunderstandings regarding scientific methodology, which persist to this day, despite the fact that logical positivism has been rejected.

2.       Why have modern economists adopted and practiced a deeply flawed methodology? This is a complex and tangled tale, but its origins lie in the Battle of the Methodologies (Methodenstreit) in the 1890’s. In this battle, the German Historical School of Schmoller, which advocated a contextual and historical approach lost to the Austrian School of Menger, which advocated a more scientific, mathematical and a-historical methodology. The details and consequences have been explained at length in “How Economics Forgot History” by Geoffrey Hodgson. As a consequence of the economists’ search for scientific laws which are universal invariants, economic theorists have invented an artificial world of maximizing robots without history, culture, institutions, and social norms.The process of economic modelling — learning to think like an economist — involves translating economic problems to this artificial world and then calculating the results. This can be done because all the robotic agents behave in predictable ways, and the environment is sterilized of all particular historical, social, environmental elements. However, most often, economic outcomes in this artificial world bear no resemblance to outcomes in the real world. Mistaking a highly distorted map for the territory, economists are confused when real world phenomena do not match the results of their models.

Some of the key methodological issues which we will try to develop in this re-reading of Keynes are highlighted below:

3.       Theories cannot be separated from their historical context. Thus Keynesian theory can only be understood within its historical context. We cannot understand Keynesian theory as a collection of principles and/or mathematical laws, taken out of context and understood to apply to all economies across time and space. When placed within it historical context, Keynes becomes much easier to understand.

4.       Even more important, theories interact with history. Human being formulate theories in order to try to understand and explain changing social circumstances. When circumstances change rapidly, theories are devised to understand the change. These theories, whether right or wrong, are used to  respond to changes, and thus end up shaping history. From this perspective, it is important to study Keynes, regardless of whether his theories were right or wrong, because economic policies from mid-twentieth century onwards were guided by his views. Thus Keynesian theories have shaped economic history. There is a complex interaction of theories and history, and we cannot understand history without theories, just as we cannot understand theories without their historical context.

5.       Because of the central importance of point 4 above, we provide a simple illustration to clarify it. As described in greater detail by Polanyi, the process of enclosures of common land deprived the masses of access to livelihood and created poverty on a large scale in England. Large numbers of authors described the problems and searched for causes of this phenomena. However, the analysis of Malthus, which blamed the problem on the excessive fertility of the poor, came to dominate. His theories deeply influenced the Poor Laws, and the British response to poverty, and thus millions of lives. Even though Malthusian theories about the arithmetic increase of food and the geometric increase of population were empirically incorrect, we must understand Malthus to understand the economic policies and circumstances of England at that time.

Accordingly to widely accepted methodological principles underlying the development of modern economics, theories are formulated without historical context. In addition, economics is studied in isolation from politics and society. We propose to study Keynesian theories within their historical context. This will substantially enrich our understanding of Keynes. In addition, the historical context includes the political, social, and economic environment, which will allow us to see that economic events cannot be studied in isolation, since all these dimensions of human lives interact with each other. Again our approach goes against a core methodological commitment of modern economics, which insists that economics can be separated from political and social circumstances and studied in isolation.

HOMEPAGE for Re-Reading Keynes. Links to more material on Methodology

austerityThe IMF has been among the principal architects, executors and enforcers of the neoliberal agenda all over the globe for several decades. This is why an IMF publication with an article entitled “Neoliberalism: Oversold?” is as surprising as an ISIS article entitled “Violence: Oversold?” would be. Has neoliberalism become so unpopular that even the IMF does not want to be associated with it? In this essay, we study the lessons that the IMF claims to have learnt from experience with its single-minded drive to enforce the neoliberal agenda throughout the globe.
The article by Ostry, Loungani, and Furceri, starts out by praising the neoliberal agenda for getting many things right. The authors write that they will confine their critique to two aspects. The first is capital account liberalisation, which means freely allowing capital flows across national borders. The second is “austerity”, which requires tight control of budget deficits, raising taxes, lowering expenses and making borrowing costly for the government.

While the rest of the world learnt this lesson after the East Asian Crisis in 1997, the IMF took two additional decades to catch on to the fact that free flows of capital across national boundaries are destabilising. Ostry et. al. write that growth benefits from capital flows are negligible, while the costs in terms of volatility and financial crises are high. They calculate that since 1980, there have been 150 episodes of surges in capital inflows with more than 30 resulting in crises. Many of these crises have resulted in large and sustained losses in economic output. They conclude that capital flows often create financial crises, and adversely affect economic growth, contrary to neoliberal theory. In addition, capital flows create increasing income inequality. In the era when capital account liberalisation was taken as the gospel truth, “capital controls” were taboo, considered akin to the suggestion of bloodletting for medical problems. Therefore, it is surprising that Ostry et. al. conclude their discussion by suggesting that direct capital controls may sometimes be the only effective method to prevent booms and busts due to short term capital flows. In the era of financial liberalisation, mechanisms for capital controls were dismantled all over the world, including Pakistan. To follow IMF advice, based on bitter experience, we will need to restructure capital controls, in a manner suitable to the substantial advances in electronic financial flows, which are characteristic of the modern age.
The question of ‘austerity’ is more subtle and complex. Thinking intuitively, it seems reasonable that governments should balance budgets, and not spend in excess of what they earn. This is called fiscal responsibility, and is strongly urged by advocates of austerity. In the aftermath of the Great Depression of 1929, JM Keynes revolutionised economics, and created the field of macroeconomics by showing that recessions are caused by shortfalls in aggregate demand. The anti-austerity measures of printing money, and government spending, financed by deficits if necessary, could make up for the shortfall in demand, and lift the economy out of recession. In the post-Depression era, President Roosevelt was defensive about the deficit spending required to carry out New Deal programmes. Keynes visited him in 1934 to try to convince him to increase deficit spending, but was only partially successful. The recession was substantially prolonged because of Roosevelt’s timid and hesitant anti-austerity measures, running deficits of only around three per cent. It was more aggressive deficit spending necessitated by the war that finally lifted the US out of depression.
Why was this basic Keynesian lesson forgotten by the IMF, an institution which was created by Keynes? Although top level decision-making at the IMF lacks transparency, one can guess at the motive by following the money. Austerity helps richer countries, since scarcity of money allows them to lend at higher interest rates and extract greater concessions from poorer countries. The massive flows of interest payments from the poorest countries to the richest provides evidence for this view.
Among US Army generals who were the most brutal and savage in the persecution of Native Americans, many would become their strongest defenders after retirement. Perhaps the mea culpa of the IMF is motivated by guilt and remorse. However, it is more likely that they are backing away from an unpopular position.

Short Posts on Diverse Topics: My author page on LinkedIn. Other works: Index . Related” The Keynesian Revolution and the Monetarist Counter-Revolution

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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

FullEmplWe are used to thinking that there is progress in knowledge. As we gain experience, the collective wisdom of mankind increases. The story of economics in the twentieth century provides the most amazing example of the opposite: How precious knowledge of vital importance for the welfare of humanity was gained and then lost. Many studies show that a meaningful job is the most important determinant of life satisfaction, and among the thing most desired by the general public. Economists learned how to create full employment, leading to a period of tremendous prosperity. How and why these lessons were forgotten provides a perfect illustration of the thesis that knowledge is shaped to protect the interests of the powerful.

Before the Great Depression of 1929, dominant economic theories stated that the free market automatically eliminates unemployment. Obviously, a theory which does not recognize the existence of a problem cannot provide solutions. Before the Great Depression, the economy was booming, with jobs for all and high levels of production. After 1929, factories lay idle, there was massive and persistent unemployment, and correspondingly high level of general misery. Why did unemployment persist, and how could we get the economy back to full employment of all the resources now lying idle? The revolutionary accomplishment of Keynes was to recognize the source of the problem, and provide an effective remedy.

Keynes argued that the key to the problem was depressed investor expectations about the future. Investors were afraid to produce goods because they did not foresee any demand. If they did take a risk and start producing, the demand would be created, because they would provide jobs to people in the process of production. People with jobs would have income and demand goods. Thus a favorable future forecast would create a self-fulfilling prophecy. People were not demanding goods because they did not have jobs. Producers were not providing jobs because they did not see any demand. This deadlock could be broken by the government in several ways. Lowering interest rates and making money cheaply available would reduce the costs of production, and might induce producers to take a risk on starting investments and production. Indeed, just printing a lot of money and throwing it from helicopters would be enough – people with money would demand goods, and producers would start hiring people to fulfill the demand for goods. The “Helicopter Money” scheme could fail for a number of reasons. The alternative was for government to step into the gap, and start hiring people itself. Even meaningless jobs like digging ditches and filling them up again would be enough to start off a chain reaction which would lead to full employment.  Using the secrets of Keynesian demand management, Western governments managed to achieve near full employment, and widespread prosperity for fifty years.

Unfortunately, general prosperity of the 99% does not suit the interests of the 1%. Full employment leads to an unruly labor class, who can walk out of unsatisfactory jobs to find a better one. Secondly, direct government investment can interfere with business profits. Thirdly, before the Keynesian era, politicians understood that business confidence was essential to economic prosperity and votes. Keynes freed the government from this dependence, much to the annoyance of business leaders.

The story of how Keynesian theories were ridiculed and discredited, and completely fallacious pre-Keynesian theories were re-furbished to take their place is long and complex, and cannot be detailed here. The punchline is that the remedies to today’s economic ills are known, but they are not being implemented because they go against the interests of the powerful. There has been a huge increase in debt globally; Debt forgiveness would remove the heavy weight dragging down aggregate demand which is weighing down the economy. Helicopter money is being dropped but into the vaults of the banks instead of the pockets of the public, and Keynes is being blamed for the lack of effectiveness of this ridiculous policy. Zero interest loans to producers are not working, so negative interest rates are being talked about. Meanwhile, everyone ignores the elephant in the room, a fully effective Keynesian theory which explains exactly how we can stimulate aggregated demand to revive the global economy.

Above 700 Words published in Express Tribune on Tuesday 30th  For short posts on diverse Topics see my author page on LinkedIn. Other works: Index . More material on Keynesian Economics. Some additional materials for readers of WEA Blogs:

Some of ideas are taken from Kalecki’s insightful note on why captains of industry resist full employment, even though it bring benefits to them as well. There is very strong evidence from multiple sources that their is a finance mafia in operation globally, which thrives on poor economic performance. This enables them to make multi-billion dollar loans and reap in interest payments. Enforcement of austerity is a crucial element in this scheme, since creation of Sovereign money — which is also done indirectly by deficit financing – by states would deprive them of their most valuable weapon — they have money while others don’t.  Keeping an economy starved of the money lubricant required for smooth functioning helps the 1% at tremendous cost to the 99%

Post 4/4 about Economic MethodologyFriedmanKeynes

Before Keynes, Classical Economic Theory (CET) was based on three principles. The First Principle is that Unemployment is automatically eliminated by the free market. The Second Principle is the Quantity Theory of Money, which states that money supply makes no difference to real economic outcomes. The Third Principle is that private investors automatically find the right investment opportunities to create the best economic outcomes for future. The realities of the Great Depression of 1929 clashed violently with these three principles which hold only in an imaginary world bound by axioms and logic. Keynes followed scientific methodology to create a new theory which rejected all three axioms of CET, so that Keynesian theory would match the experienced realities of the Great Depression. This is the distinguishing feature of science, that theories are devised and changed in light of experience. In contrast, Greek axiomatic-logical methodology disregards conflict with observational evidence.

The experience of the Great Depression showed that free markets cannot eliminate unemployment. The role of expansion of money stock in the boom, and of restrictive money in the recession, became clear to economists. Keynesian theory incorporates this experience and asserts the extreme importance of money in the real economy, contrary to the Quantity Theory of Money. Also, Keynes argued that the future was unpredictable. Investor sentiment and expectations about future governed their investment decisions, but these could become artificially depressed. This would choke off investment and badly affect the future of the economy. In such situations, the government should step in with investments to compensate for shortfalls in private investments. This type of fiscal policy would be able to restore full employment and generate growth. This Keynesian prescription is diametrically opposed to the Third Axiom of CET which argues that governments should not intervene in economic activity. Keynesian theories were “scientific” in the sense that they were based on observations and economic experiences, and conflicted with the Greek axiomatic approach of CET.

Banks had lost fortunes, and wiped out lifetime savings of many depositors in the Great Depression. Soon afterwards, a strong set of laws were enacted which sharply regulated financial institutions, prohibiting them from speculation, and placing many other restrictions on their activities. Financial regulation restricted the power of the wealthy to generate income from their existing wealth. This meant a sharp reduction in money generated by non-productive financial activities like interest based loans. At the same time, the main thrust of Keynesian theory was that the government had the responsibility to maintain full employment, and undertake investments necessary for growth. Investments flowed to the real sector, instead of the financial sector, and full employment meant that all the productive capacity of the economy was utilized. Empowering the working classes, investing in growth, and restricting the financial sector, led to decades of prosperity in the Western world.

In order to understand what happened next, we have to look at the dramatic impact of the three Keynesian policies of financial regulation, full employment, and government investments, on the income distribution in the USA. From 1930 to 1980, the share of wealth accruing to the bottom 90% increased from a low of 15% to a high of 35%. At the same time, the share of wealth accruing to the top 0.1% decreased from a high of 25% to a low of 5%. This reversal of fortunes was not acceptable to the extremely wealthy, who plotted a coup against Keynesian theories with patience and persistence. Their last bastion and stronghold was Chicago University, which was virtually solitary in its advocacy of free market economics in the days of dominance of Keynesian theories. In their paper “Winning Ideas”, Sabena Alkire and Angus Ritchie have provided detailed information about the campaign to spread, popularize and implement free market ideas. One key strategy was the utilization of economic and political crises and disasters to rush in with revolutionary changes. Naomi Klein has documented this aspect in her brilliant book “The Shock Doctrine: The Rise of Disaster Capitalism” which details how crises were used or generated all over the world as a means of introducing free market policies which could not be achieved by popular vote.

In the USA and UK, the oil crisis in early 1970’s created an opportunity which was seized upon by the Chicago School to create the Monetarist Counter-Revolution against Keynesian ideas. All economic troubles were blamed on Keynesian policies and financial regulation, and a strong push was made for financial liberalization, and for restricting the authorities and power of the government. One weakness of Keynesian theory was that while macroeconomics was scientifically based on observed behavior of real world economies, microeconomics was based on an axiomatic-logical Greek approach to consumer theory. Progress would have involved changing microeconomic theories to match observations of real world consumer behavior. Instead of this, the monetarist counter-revolution succeeded in dislodging Keynesian theory by arguing that these macro theories were not consistent with the axioms for consumer behavior in microeconomic theories. This return to Greek axiomatic methodology effectively divorced economics theories from reality. Keynesian Nobel Laureate Robert Solow remarked:  “Since I find the fundamental framework [of Chicago economists Lucas & Sargent] ludicrous, … I respond by laughing.” Financial liberalization together with repeal of Keynesian economics had exactly the effects desired by the wealthy. The share of the top 0.1% has steadily risen from its bottom at 5% to the current 25% and is steadily rising. The share of the bottom 90% has fallen from its top value of 35% to its current 15% and is steadily declining. The Global Financial Crisis has wiped out the middle classes and further enriched the wealthy financiers. The use of a Greek methodology which confines economists to the study of an imaginary world is extremely helpful in perpetuating the current state of affairs as it prevents the public from noticing essential aspects of the economic system. This is why scientific methodology, which would be based on close observations of contemporary realities of the economic system, is shunned by economists.

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