ChatGPT-assisted summaries of recent blog posts by Michael Roberts, a UK Marxist economist.
November 18, 2023
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Lenin In Disguise: He is Making a Comeback.
From A Sahm Recession To Global Downturn
Michael Roberts
This article was originally published: November 12, 2023
The selected text discusses the current state of the US and global economies, highlighting potential risks and challenges they may face. It mentions differing opinions on whether the US will avoid a recession in the next 12 months, with William Dudley, former New York Fed chief, believing that the chances of a recession increase dramatically once the unemployment rate rises by a certain amount. Claudia Sahm, a former Fed economist, has developed the Sahm rule, which accurately predicted recessions since the 1970s, and notes that the reading on the Sahm Rule in October was 0, indicating a potential recession.
The text also mentions that even if the US avoids a contraction in real GDP, it is likely to experience a significant slowdown next year, with inflation remaining above the pre-pandemic average and the Fed's target of 2%. It highlights that major economies worldwide face the risk of recession, as global business activity stalled in October and the global PMI fell below 50, indicating contraction. The Eurozone, Sweden, Canada, and the UK are already experiencing economic contractions, with the UK potentially heading into a technical recession.
The IMF projects a global growth slowdown in 2024, particularly in the European Union, China, and India. Many emerging market economies are facing a debt crisis, with rising debt servicing costs and vulnerability to currency crashes. The World Food Program estimates that food insecurity will affect around 345 million people in 2023, driven by high energy prices and reliance on higher-emission fuels.
The underlying cause of the slowdown in productivity and world trade, as well as the increased geopolitical rivalry, is attributed to the slowing of productive investment growth in the major economies. The text suggests that unproductive investment in finance, real estate, and military spending has been keeping growth up, while investment in technology, education, and manufacturing has dropped away. The global profitability of productive capital has been stagnating or even declining in the 21st century.
The IMF calls for structural reforms, including labor market flexibility, fiscal consolidation, clean energy investment, and increased multilateral cooperation to address global challenges and prevent further fragmentation. However, the text argues that these proposals may be unrealistic given the increased spending on fossil fuel production and rising global temperatures. The IMF's support for financial globalization is also criticized, as it exposes countries to certain risks and can be used as blackmail to stop national governments from implementing measures to stop financial globalization.
In summary, the selected text highlights concerns about the possibility of a recession in the US and major economies, as well as the challenges posed by inflation, debt crises, and food insecurity. It emphasizes the potential slowdown in global growth and the need for sustainable and resilient economic policies.
The selected text is a review of Branco Milanovic's book "Visions of Inequality" by an economics website. The book explores the evolution of thinking about economic inequality over the past two centuries, focusing on the works of influential economists. Milanovic's analysis of Karl Marx's views on inequality is highlighted in the review.
Milanovic argues that Marx's theory of value can be separated from his discussion of forces that affect income distribution between classes. However, the reviewer questions this observation, suggesting that Marx did address inequality in his writings. According to Milanovic, Marx believed that attempts to reduce inequality within the capitalist system would only lead to reformism and trade unionism, and that the institutions of capitalism needed to be abolished.
The reviewer acknowledges that descriptions of poverty and inequality are present in Marx's work, but argues that they are meant to illustrate the reality of capitalist society and the need to end the wage-labor system, rather than advocate for reducing inequality within the existing system. Milanovic suggests that Marx's view of capitalism and inequality was unfinished, with some important parts of his work remaining incomplete.
The text also mentions other economists discussed in Milanovic's book, such as François Quesnay, Vilfredo Pareto, and Thomas Piketty. It highlights the debate surrounding Marx's interest in inequality and his belief that addressing it requires the abolition of capitalist institutions.
The text provides historical data on wealth and income inequality in the UK and the US during the 18th and 19th centuries. It notes that wealth inequality in the UK was exceptionally high during Marx's time, with the top 1% of wealth-holders owning around 60% of the country's wealth. Income inequality was also high, with capitalists and landlords earning significantly more than workers.
Marx's theory of exploitation is discussed, which is based on the idea that workers produce value greater than the value of their labor-power, leading to profit for capitalists. The text also mentions Marx's theory of classes in capitalist society, which is derived from his theory of value.
The text concludes by mentioning the debate about whether the exploitation of the Global South by the rich imperialist bloc is mainly due to low wages or the productive power of the imperialist bloc. Marx's observation that the value of labor-power differs according to historical and social needs is highlighted in this debate.
Overall, the selected text provides an overview of Milanovic's book and focuses on his analysis of Marx's views on inequality. It highlights the debate surrounding Marx's interest in inequality and his belief that addressing it requires the abolition of capitalist institutions. The text also provides historical data on wealth and income inequality and discusses Marx's theories of exploitation and classes in capitalist society.
The selected text discusses the debt crisis faced by Sri Lanka and the role of China in this situation. It highlights the recent court decision to grant Sri Lanka a six-month pause on a creditor lawsuit filed by Hamilton Reserve Bank, which holds a significant portion of Sri Lanka's defaulted bonds. The court's decision allows Sri Lanka to negotiate with other private sector creditors, bilateral lenders, and the International Monetary Fund (IMF) to arrange a deal and obtain new funds.
The text argues that China is not a major lender to Sri Lanka compared to Western creditors and multinational agencies. Japan and the World Bank remain significant lenders, while China's share is equal to theirs. Commercial lenders now account for nearly 50% of Sri Lanka's debt. The rise in Sri Lanka's debt burden is attributed to the corrupt and autocratic Sri Lankan government's mismanagement rather than China's alleged debt trap.
The Sri Lankan government turned to international sovereign bonds to finance its spending after the 2008 Global Financial Crisis. However, the COVID-19 pandemic further worsened the country's economic situation, with the tourism sector being severely affected. Increased spending and imports, coupled with a decline in foreign currency reserves, led the government to print money to cover deficits, resulting in high inflation.
The text emphasizes that Sri Lanka's debt crisis was primarily caused by domestic policy decisions and facilitated by Western lending and monetary policies. The government's sustained budget deficit was financed by foreign borrowing, with a significant portion owed to private financial institutions. Despite warnings about the Sri Lankan economy, foreign creditors continued lending, and the government refused to change course for political reasons.
The text also addresses the issue of the Sri Lankan port project, often cited as an example of China's debt trap. It argues that China did not propose the port project, and it was driven by the Sri Lankan government's aim to reduce trade costs. The debt trap was a result of domestic policy decisions and facilitated by lax governance and inadequate risk management on both sides.
The article concludes by mentioning the political instability in Sri Lanka, with former President Rajapaksa being forced out of office and replaced by his close supporter, Ranil Wickremesinghe. Despite agreeing to fiscal measures with the IMF, Wickremesinghe has been unable to secure approval for fund release, and the debt rescheduling agreement remains unachieved. Hamilton Reserve Bank is opposing any agreement and demanding full repayment on its Sri Lankan bond holdings.
In summary, the selected text highlights the complexities of Sri Lanka's debt crisis, challenges the notion of China's debt trap, and emphasizes the role of domestic policy decisions and Western lending in exacerbating the situation.
50 Years Of Dependency Theory
Michael Roberts
This article was originally published: November 4, 2023
The selected text discusses dependency theory, a critique of modernization theory that emerged in the 1960s and 1970s. Dependency theorists argue that poor countries are systematically exploited by wealthy countries and that economic development does not apply to economies in South America, the Middle East, or Africa. The theory identifies two main groups of countries in the global economic system: the core and the periphery. The core countries are wealthy and control the global economy, while the periphery countries are poor and dependent on the core countries for trade, investment, and technology.
The text also references Marx's belief that the more industrially developed countries show the less developed countries an image of their own future. However, only a small group of industrial and commercial capitalist economies achieved Marx's prediction, and these dominant imperialist economies continue to control the world's technology, finance, and resources.
The author, Claudio Katz, focuses on the Marxist variant of dependency theory, which argues that countries remain "dependent" due to the extraction of value from labor in their economies to the imperialist bloc through trade, finance, and technology. The theory of "unequal exchange" in international trade is a fundamental component of Marx's theory of value.
Differences arise within dependency theory regarding the nature of unequal exchange. Some argue it is due to wage differences, while others attribute it to technologically driven productivity differences. The author agrees with the latter perspective, emphasizing that value transfer from the periphery to the core economies is mainly due to productivity differences and technological superiority. The concept of "super-exploitation," where wages in the periphery fall below the value of labor power or below the average international wage, is also discussed. However, the author argues that super-exploitation cannot be the main determinant of value transfer between rich and poor countries.
The text also touches on the role of monopoly power in the dominance of imperialist companies. While some dependency theorists claim it is the main cause, the author argues that it was not the case according to Marini, a prominent Latin American Marxist dependency theorist.
Overall, the text provides a comprehensive overview of dependency theory, its Marxist variant, and the key debates within the theory. It emphasizes the exploitation of poor countries by wealthy countries and challenges mainstream development economics. The author also discusses the concept of "sub-imperialism" and its relevance in understanding contemporary capitalism, but expresses skepticism about its usefulness. The text concludes by highlighting the importance of integrating the theory of value into the explanation of dependency and understanding the logic of underdevelopment in present-day capitalism.
The selected text discusses the increasing rate of debt distress in both poorer countries and the Global North. It highlights how poorer countries struggle to prosper due to international forces setting commodity prices for their exports. Debt owed by poor countries to richer ones in the Global South has been rising rapidly, and debt servicing costs have mounted despite relatively low interest rates. The recent global inflationary spike has led to a sharp rise in interest rates on debt, further increasing the burden of servicing that debt. The contraction of world trade growth, particularly in resource commodities, has also contributed to the debt distress.
In the Global North, rising debt levels and costs are affecting both the capitalist sector and governments. US companies are already facing high interest rates, with borrowing costs for some firms doubling or nearly tripling in 2023 compared to previous years. This has led to an increase in bankruptcy filings and the rise of "zombie" companies that survive by borrowing more because they do not generate enough profit to service their existing debt. The increasing number of corporate defaults and the pressure on creditors, particularly banks, is highlighted as a potential consequence of rising debt distress.
The public sector is also facing debt servicing pressure. The US government, for example, has seen a significant increase in the cost of borrowing due to rate hikes by the Federal Reserve, resulting in substantial spending on interest payments.
Overall, the selected text emphasizes the growing debt distress in both poorer countries and the Global North, highlighting the challenges faced by governments, companies, and the public sector in servicing their debts. The text suggests that debt must be reduced, central banks must keep interest rates up, and governments must reduce deficits through fiscal austerity. The US stock market has already fallen over 10% in the last few months as the cost of borrowing has risen.
The text also mentions the need for entitlement reforms, such as raising retirement pension contributions and the age threshold, and cutting public services. It suggests that many emerging market and developing economies need to reduce the footprint of state-owned enterprises through privatization. The text argues that putting "fiscal houses in order" is essential to ensure governments can deliver for their people, but questions whether this approach is the right way round. It suggests that planned investment in productive sectors and government services globally could lead to economic growth, which would then put fiscal houses in order and alleviate debt distress.
