Friday, February 15, 2013

The Obama plan

In his 'State of the Union' address,  B.Obama outlined a 'kennedian 'vision for the United States. The main thrust is economic recovery coupled with some equity measures for the middle class. Austerity or budget cuts are not seen as an economic policy in itself but as a marginal part of a wider strategy aiming to promote a more sustainable development based on clean energy and other environmental measures.

There are two new ideas in his speech. The first one is to increase the minimum wage from 7 to 9 dollars per hour. The significance of this measure is that economic recovery has to be supported by wage increases rather than reducing purchasing power through internal devaluation measures. As he said in his address: "Let’s declare that in the wealthiest nation on Earth, no one who works full time should have to live in poverty". Persistent high levels of inequality and concern for declining wages of working Americans have strongly influenced that decision. In fact, recent research found that despite the return of the US economy to growth, incomes remain flat but not for the 1% rich. 

The second idea is to " make high quality pre-school available to every child in America" with a view to offer better access to jobs while making savings for the entire society. The assumption is that "every dollar we invest in high quality early education can save more than seven dollars later on - by boosting graduation rates, reducing teen pregnancy, even reducing violent crime".

The agenda is not for 'big government' but rather 'smart government' based on quality and effectiveness of public intervention. But it contrasts strongly with austerity policies which are being pursued in Europe with severe consequences on living conditions of the majority of people.

Europe should take some inspiration of the Obama plan, even if it may appear modest in relation to the depth of the crisis. It has to abandon its destructive budgetary policies and launch a vigorous strategy for jobs and growth at the European level. No country will get out of the crisis alone with current fiscal policies.

Sunday, February 3, 2013

Inequality for All

Obama called inequality the 'defining issue of our time' and in his inaugural address took up this theme for his second term.  Over the past tewenty years, differences in in income have widening dramatically between the rich and the middle class. In his film Inequality for all, Robert Reich, the former Labor secretary under Clinton argues that there is no trickle down effect as the rich cannot spend enough to offset the loss of demand by the middle class.

Tribute to Albert Hirschman

Nowadays, there is a shortage of great thinkers with a sort of vision embracing different disciplines and areas of research. Albert Hirschman was perhaps one of the last great thinkers of the twentieth century. He was also a free thinker in the sense that he has never been tied up to any ideology. for over half a century, he was a living conscience for an entire generation of social scientists. Trespassing is perhaps the word which best characterizes his lifetime work.

He was an influential economist who wrote several books and articles on political economy.  His first major contribution was in the area of development economics where he emphasized the need for unbalanced growth. Like in F. Perroux's growth pole theory, he thought that industries with strong linkages with other industries should be encouraged. 

His later work was in political economy and there he advanced two simple but intellectually powerful ideas. The first describes the three basic possible responses to decline in firms : exit, voice and loyalty. The second describes the basic arguments made by conservatives: perversity, futility and jeopardy, in The Rhetoric of Reaction

But there is an intrinsic unity in all his work which is conducive to a deep reflection on the problem of development. He wrote: “ In dealing with the multiple and complex problems of development we have learnt that we must fashion generalizations at all kinds of ranges and be deaf, like Ulysses, to the seductive chant of the unique paradigm ”.

As the Economist pointed out, "Hirschman's exit will not silence his voice".