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1. Zombies at Large? Corporate Debt Overhang and the Macroeconomy

Author:
Òscar Jordà, Martin Kornejew, Moritz Schularick, and Alan M. Taylor
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
What are the macroeconomic consequences of business credit booms? Are they as dangerous as household credit booms? If not, why not? We answer these questions by collecting data on non-financial business liabilities (primarily bank loans and corporate bonds) for 17 advanced economies over the past 150 years. Unlike household credit, business credit booms are rarely followed by macroeconomic hangovers. Data on debt renegotiation costs—instrumented by a country’s legal tradition—show that frictions to debt resolution make recessions deeper and longer—an important factor in explaining the differences with household credit booms.
Topic:
Debt, Economics, International Political Economy, Global Recession, Macroeconomics, Credit, and Corporations
Political Geography:
Global Focus

2. Inclusive American Economic History: Containing Slaves, Freedmen, Jim Crow Laws, and the Great Migration

Author:
Trevon Logan and Peter Temin
Publication Date:
01-2020
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
This paper records the path by which African Americans were transformed from enslaved persons in the American economy to partial participants in the progress of the economy. The path was not monotonic, and we organize our tale by periods in which inclusiveness rose and fell. The history we recount demonstrates the staying power of the myth of black inferiority held by a changing white majority as the economy expanded dramatically. Slavery was outlawed after the Civil War, and blacks began to participate in American politics en masse for the first time during Reconstruction. This process met with white resistance, and black inclusion in the growing economy fell as the Gilded Age followed and white political will for black political participation faded. The Second World War also was followed by prosperity in which blacks were included more fully into the white economy, but still not completely. The Civil Rights Movement proved no more durable than Reconstruction, and blacks lost ground as the 20th century ended in the growth of a New Gilded Age. Resources that could be used to improve the welfare of whites and blacks continue to be spent on the continued repressions of blacks.
Topic:
Economics, Race, History, Capitalism, and Slavery
Political Geography:
United States and Global Focus

3. The Political Economy of Europe since 1945: A Kaleckian perspective

Author:
Joseph Halevi
Publication Date:
06-2019
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
This paper analyzes the early stages of the formation of the Common Market. The period covered runs from the end of WW2 to 1959, which is the year in which the European Payments Union ceased to operate. The essay begins by highlighting the differences between the prewar political economy of Europe and the new dimensions and institutions brought in by the United States after 1945. It focuses on the marginalization of Britain and on the relaunching of French great power ambitions and how the latter determined, in a very problematical way, the European complexion of France. Because of France’s imperial aspirations, France, not West Germany, emerged as the politically crisis prone country of Europe acting as a factor of instability thereby jeopardizing the process of European integration, Among the large European nations, Germany and Italy appear, for opposite economic reasons, as the countries most focused on furthering integration. Germany expressed the strongest form of neomercantilism while Italy the weakest.
Topic:
Economics, Political Economy, Global Political Economy, World War II, and Common Market
Political Geography:
United States, Europe, Germany, and Global Focus

4. From the EMS to the EMU and...to China

Author:
Joseph Halevi
Publication Date:
11-2019
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
The paper highlights the position of German authorities, showing that they were quite lucid about the fundamental weaknesses inherent in a process that separated monetary from fiscal policies by giving priority to the centralization of the former. Instead of repeating the well known critiques levelled against the EMU – for which readers are referred to the unsurpassed treatment by Stiglitz, the essay highlights the splintering of Europe in the way in which it has unfolded during the 1990s and in the first decade of the present millennium. In particular the early economic and political origins of the terminal crisis of Italy are located between the late 1980s and the 1990s. France is shown to belong increasingly to the so-called European periphery by virtue of a weakening industrial structure and persistent balance of payments deficits. The paper argues that France regains its central role by political means and through its weight as an active nuclear military power centered on maintaining its imperial interests and posture especially in Africa. The first decade of the present millennium is portrayed as the period in which a distinct German economic area had been formed in the midst of Europe with a strong drive to the east with an increasingly powerful gravitational pull towards the People’s Republic of China.
Topic:
Economics, International Political Economy, Political Economy, History, and Macroeconomics
Political Geography:
Africa, China, Europe, Asia, Germany, and Global Focus

5. Macroeconomic Management Meets the New Economy

Author:
Commission on Global Economic Transformation
Publication Date:
05-2019
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Finance and the macroeconomy, both policy and industry practices as well as academic research, have evolved substantially in recent years. While the old questions of business cycles, macroeconomic management, financial regulation, and social protection are still being debated, we are now confronted with new developments in the economy, characterized by digital technology, new modes of production and business models, and changing employment relations. Macroeconomics and finance need urgent rethinking as the global economy transforms. Our gathering on March 5, 2019 brought together economists, policymakers, financial regulators, and industry practitioners from around the world. We heard diverse perspectives on multilateralism, pension and labor market reform, international trade, and risks in the world economy, and we grappled with issues on stagnant wages, public debt, fiscal and monetary policy, and banking reforms. Our discussion was by no means exhaustive or conclusive, but we attempted to harness the group’s collective wisdom to address some of the most prominent questions of our day. This document is intended to inform our commissioners as they develop CGET’s final report and to share our timely conversation with policymakers and the general public. Fomenting multidisciplinary, critical discourse is one of the most important responsibilities of this initiative, and we sincerely thank the staff at the Institute for New Economic Thinking (INET), our dedicated Commissioners, and our outside experts for helping us to promote this dialogue.
Topic:
Economics, Industrial Policy, Regulation, Digital Economy, Economic Theory, and Macroeconomics
Political Geography:
United States and Global Focus

6. Demand-determined potential output: a revision and update of Okun’s original method

Author:
Claudia Fontanari, Antonella Palumbo, and Chiara Salvatori
Publication Date:
05-2019
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
This paper challenges the mainstream view of potential output, and enquires into the supposed effects of Great Recession on potential growth. We identify in the demand-led growth perspective a more promising theoretical framework both to define the notion and to gauge the long-term effects of a demand slow down. Based on the poor reliability of standard estimates of potential output, we also propose an alternative calculation. This is based on an update of Arthur M. Okun’s original method for estimating potential output, which, differently from the estimation methods currently in use, does not rely on the notion of NAIRU, thus being immune to its theoretical and empirical shortcomings. Our calculation, based on a re-estimation of Okun’s Law on US quarterly data, shows both how far an economy generally operates from its production possibilities, and how much potential growth is affected by the actual growth of demand over time. These wide margins for expansion of actual and potential output growth imply that a determined policy of demand expansion would create, given time, the very capacity that justifies it.
Topic:
Economics, Global Recession, Economic growth, Macroeconomics, and Demand
Political Geography:
United States and Global Focus

7. Technological Disruption in the Global Economy

Author:
Commission on Global Economic Transformation
Publication Date:
04-2019
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Technology has become the most powerful disruptive force in our economy. It bears on the future of work, competition, market power, and national security, and it binds the other major areas of our commission’s investigation: macroeconomics and finance, globalization, and climate change. In essence, technological progress propels global economic transformation. Our gathering on February 6, 2019 brought economists together with leading voices from academia, labor, private industry, and the nonprofit/NGO sector. We heard from industry leaders with deep roots and history in the Silicon Valley technology revolution, academics who have also spent time in the policy arena, and from individuals who are already considering new models and approaches to digital rights and the future of work. Our discussion was by no means exhaustive or conclusive, but we attempted to harness the group’s collective wisdom to address some of the most vexing questions of our day. This document is intended to inform our commissioners as they develop CGET’s final report and to share our timely conversation with policymakers and the general public. Fomenting multidisciplinary, critical discourse is one of the most important responsibilities of this initiative, and we sincerely thank the staff at the Institute for New Economic Thinking (INET), our dedicated commissioners, and our outside thought leaders for helping us to promote this dialogue.
Topic:
Economics, Science and Technology, Global Markets, Digital Economy, Global Political Economy, and Macroeconomics
Political Geography:
United States and Global Focus