A low volume, high quality source from the demand side perspective.The podcast is produced weekly. A transcript is posted on the day of.

Wednesday, October 31, 2012

Transcript: The real economy and Europe with Loukas Tsoukalis

Today on the podcast, some audio from Loukas Tsoukalis, a Greek perspective on the European situation, sober, reasoned, even if it is not entirely our view.

First a note:

The economy is real

Nothing is more real than this letter from Bill McKibbin:
Listen to this episode
Dear friends,

We woke up this morning with a deep sense of sadness.

Hurricane Sandy has brought serious hardship to many of the people we love and places we treasure. Large parts of New York City are underwater, millions are still without power, and tens of thousands have been evacuated from their homes. Last night the flood waters were swirling around the bottom floor of our Brooklyn offices.

Right now, the most important thing we can do is come together as a community and support the relief efforts that are already underway.

But we're not going to simply mourn our losses. The images coming out of the Atlantic seaboard, and from the refugee camps in Haiti, made us not just sad but angry. This storm was literally unprecedented. It had lower barometric pressure, a higher storm surge, and greater size than the region had ever seen before. It's as out of kilter as the melting Arctic or the acidifying ocean. And if there were any poetic justice, it would be named Hurricane Chevron or Hurricane Exxon, not Hurricane Sandy.

These fossil fuel corporations are driving the climate crisis and spending millions to block solutions. Instead of buying climate silence, the fossil fuel industry should be funding climate relief.


The fossil fuel industry has spent over $150 million to influence this year’s election. Last week, Chevron made the single biggest corporate political donation since the Citizens United decision. This industry warps our democracy just as it pollutes our atmosphere. And we’ve had enough.

In the coming year, we’re going to fight both forms of this pollution. Our biggest organizing effort ever begins one week from tomorrow, the Do the Math tour that will, we hope, ignite a long-lasting campaign to force the fossil fuel industry to change. We need you to get involved -- by coming out for the show, by spreading the word and joining this fight.

Sandy is what happens when the temperature goes up a degree. The scientists who predicted this kind of megastorm have issued another stark warning: if we stay on our current path, our children will live on a super-heated planet that's four or five degrees warmer than it is right now. We can't let that happen.
So let's get to work.

Many thanks,

Bill McKibben for the whole 350.org Team

The climate is real, and

The economy is real

We live in a real economy, most of us. The financial economy is a dissociated casino on the hill. We're fascinated by the action there. There seems to be so much money and power and wealth and self-confidence. But you don't have to look away very far to see the real economy is failing. Unemployment is stagnant at a high level, infrastructure is falling apart, obvious challenges are going unmet and even unacknowledged because there is no money.

Our young people are not able to find work and are borrowing their way to an education that too often graduates them into part-time restaurant and service work. At a time when roads and bridges and schools and public buildings are suffering irremediable damage for want of maintenance or reconstruction, we have millions of experienced construction workers idled.

I am not going to debate what value is, but I am going to point it out. Value exists in a healthy population, a government unburdened of poverty mitigation, an educated population, efficient transportation, efficient housing, in food, clothing, housing health care, education, transportation, communication. These are the vertebrae of a healthy real economy.

In other podcasts we might go off on the line that the financial economy has sucked the value to itself, not being willing to share the price of its own failure, and preferring instead to keep squeezing the stone in search for blood.

Today we just want to pose this question. Is it about jobs, jobs, jobs. Or is it about incomes?

Leon Keyserling is one of the featured economists in our book, Demand Side Economics, see it at DemandSideBooks.com. Keyserling was a key draftsman of the New Deal and later chief of the Council of Economic Advisers under Truman, probably the most powerful ever to hold that post. Leon Keyserling said this:
If I wrote on the left wall the policies most needed for economic growth, and on the right wall I wrote the policies most needed for distributive justice, they’d come to the same thing. I have indicted the economists for never seeing this.
Leon Keyserling

Later, out of government, Keyserling remained stalwart. In 1971 he wrote:
The bulk of economists never have realized that the whole problem, the whole American economic problem, is ultimately the improved distribution of income. If we solve that, we solve all of the problems. That’s all the inflationary problem really is, because it doesn’t matter if prices are going up through programs which improve the distribution. If we had had the price inflation [written in May, 1971] that we have had in the last few years through policies which created full employment and did justice to the old people, and cleared slums and renewed our cities and cleared up polluted air and water, the same amount of inflation purchased at that cost would be the best bargain you could ever drive.
The fact is that the financial crisis and economic malaise has risen with the rise of income inequality, and it is no accident. The multipliers in the real economy work when people are exchanging work for goods, not when they are servicing debt. The economy produces far more goods than bads when the distribution of income is better. Read Wilkinson and Pickett. The promise of technology was prosperity in the form of leisure.

So. Just to put that in the back of your mind.

The discussion today is dominated by the financial economy, money, and the measures to keep financial markets afloat. On a recent visit to a heterodox discussion, I found people looking at the IS/LM model and working out how it could work. IS/LM is the product of John Hicks, who actually won a Nobel for it, but later recanted. Because in the real world it doesn't work, it only serves as a nice mathematical demonstration of a false Keynesianism. Even modern monetary theory, as sound as it is, is focused on the financing. MMT will be proven in practice. No amount of discussion or persuasion will bring around the masses of uninformed. That practice ought to be direct employment, big public works, and so on.

So there, went on too long.

Now for a look at the European crisis from a Greek perspective. It is offered here not because we completely agree, but because it is offered in a historical and political context that makes it a useful antidote to the crisis a week and what do we do now mentality dominating policy these days.

This is Loukas Tsoukalis, Loukas Tsoukalis is Jean Monnet Professor of European Integration at the University of Athens and Visiting Professor at the College of Europe. He is President of the Hellenic Foundation for European and Foreign Policy, and has been Special Adviser to the President of the European Commission. He has taught at the University of Oxford, London School of Economics, Sciences Po and the European University Institute of Florence. He has written books and articles on European integration and international political economy.

He is speaking at the Institute of International and European Affairs, a top think tank in Dublin., Ireland.

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