Issues of finance and power run through many of the papers in this issue. Castro and Martins analyse the ‘political business cycle’, whereby government fiscal decisions are influenced by the electoral timetable, including the division between capital and current expenditures.
Mona Ali argues that whilst a country’s Balance of Payments dynamics will depend in part on that country’s degree of monetary sovereignty, it will also be influenced by the country’s position within the global financial order. Ali suggests that this should have been an additional consideration within discussions around Brexit, since leaving the European Union would impact upon Britain’s place in the global financial order, introducing a degree of uncertainty. Thus, whilst leaving the EU would in theory enable Britain to ‘take back control’ over its Balance of Payments, because of the additional constitutional autonomy, this change in Britain’s place in the global financial order might diminish its degree of effective autonomy, or power, hence leaving it with a lower degree of control in practice. Thus, one’s power to act depends both on one’s right to do so, and one’s ability in the sense of capacity, and both aspects need to be considered together.
These are all issues that Keynes analysed in detail. Keynes proposed policy measures in terms of global institutional arrangements, and advocated the use of domestic fiscal policy in tackling economic recessions and unemployment. Armstrong revisits Keynes’s view of budget deficits, and argues that Modern Monetary Theory is both the appropriate way in which to interpret Keynes’s work, and the proper way to consider the role of fiscal policy. He argues that this approach to analysing and understanding fiscal policy enables a proper understanding of the scope to which fiscal policy can be pursued, which, he argues, is much greater than might otherwise be realised.
In various ways, then, the papers in this issue shed light on the way in which what are generally considered to be Keynesian approaches to economic policy are and can be pursued in today’s world. The global institutional context remains important – indeed, perhaps more so than ever. So in this sense what is needed is a new Bretton Woods. And today a major focus of any such agreement would have to be on the need to diversify the global economy away from oil and gas – as analysed in the article by Hendrix. At the same time, Keynes’s advocacy of active government is argued by Armstrong to be not only more relevant than ever, but to have greater scope and potential than mainstream theory would suggest.