In this issue, we publish the summary of an important new document, setting out prospects for a popular political economy in Europe, which has great significance both globally, and for the development of economics as a discipline. This is the latest, 2019 analysis from an international grouping of progressive economists and others, namely European Economists for an Alternative Economic Policy in Europe – the ‘EuroMemo Group’.Footnote1
Grounding their analysis within the context of current global developments, the EuroMemo group note, in what is their latest annual Report, that ‘the Trump administration has responded to US trade deficits with demands for major partners to reduce their surpluses’. This represents a deep historical irony – relevant to the history of political economy, as well as to current and future policy making – in that during the Bretton Woods discussions of how a new international economic system might be devised following World War II to avoid deflationary pressures that might push the world back into a 1930s style depression, Keynes argued that when such trade imbalances emerge, the onus should indeed be on the surplus economies to expand, drawing in additional imports, thus reducing the imbalances. The opposition to this came from the US delegation, as the US was the surplus country par excellence, and they wished the onus to be on others to have to take action, not them. This was the occasion when Keynes famously retorted, on being told that the US delegation would not accept Keynes’ proposals – and that the British would, as ever, fall into line with the US demands – ‘So because they won’t listen to sense, you propose to talk nonsense?’.
In terms of Europe, ‘there has been a deepening productive divergence between the countries of the North and the South’, with the manufacturing fabric in the latter countries having been weakened by austerity, with Italy, in particular, having ‘registered virtually no growth since joining the Euro’. Macroeconomic policy in the EU, the EuroMemo document argues, needs a fundamentally different approach, to secure full employment and equitable growth, requiring:
The replacement of balanced budget requirements by a balanced economy requirement – including the objective of high and sustainable levels of employment.
In the long run, a substantial EU-level budget (in the order of at least 5% of EU GDP) – capable of running deficits or surpluses as required by the economic conditions – should be used to finance EU-wide investment, as well as public goods and services, and to establish a counter-cyclical European-level fiscal policy to support national fiscal policies.
A long run European investment strategy to actively promote public investment and to support private investment in key economic, social and environmental areas, with structural and industrial policies geared towards making manufacturing, transport and energy systems more ecologically sustainable.
Starting from the mutual recognition that surplus countries have as much responsibility as deficit countries to resolve imbalances, surplus countries should aid that resolution through intensified policies of internal reflation.
Tax competition creates injustice, whereby large sections of the population cannot avoid being taxed, while big corporations and the rich enjoy opportunities for tax avoidance and evasion; measures to limit tax evasion, therefore, should be greatly reinforced.
The mobilisation of new standards of productivity in certain sectors (especially digital industries) for developing pathways of development – this includes not least the urgent quest for shortening working hours, while fully respecting and extending workers’ rights.
Prospects for a popular political economy in Europe also makes important points regarding the dangers posed by policies to promote ‘labour market flexibility’ – which often undermine the processes by which both employers and employees invest in productivity-enhancing practices; the fact that the current form of globalisation is neither inevitable nor appropriate; and the need to create an environmentally sustainable future.
This links to the subsequent paper in this issue on ‘Renewable energy investment and employment in China’, in which Ying Chen estimates the employment impacts of renewable energy investments versus spending within the traditional fossil fuel sectors based on input-output modelling with data on China – where there has been a big push from government to invest in renewable energy since 2007. Chen reports that spending within three segments of the renewable energy sectors – solar, wind and bioenergy – produces twice as many jobs per dollar of expenditure than an equal amount of spending on fossil fuels.
Both these papers – from the EuroMemo Group and from Ying Chen – reflect the aims and purpose of the International Review of Applied Economics, which was formed precisely to draw lessons from the experience of one country for the benefit of others, and to discuss policy issues from theoretical positions neglected in other journals; formed in 1987 by Professor Malcolm Sawyer, one of the leading progressive economists of the past 40 years or more, both in Britain and internationally – including as an active member of the EuroMemo Group. This issue includes a Call for Papers which aims to advance the agenda and mission to which Professor Malcolm Sawyer has contributed so much over the decades. This festschrift on ‘Capitalism: an unsustainable future?’ aims to reflect upon the last four decades – of neo-liberalism, globalisation and financialisation, through to the financial crisis of 2007/08, and subsequent global recession and years of austerity. Papers are particularly welcome within the broad themes of the sustainability of global capitalism, and the current varieties of capitalism; alternative futures for ownership forms, environmental sustainability, and economic organisation; and recent and future trends and policies regarding neo-liberalism, globalisation, financialisation and inequality.
Notes
1. The full document is at http://www2.euromemorandum.eu/uploads/euromemorandum_2019.pdf.