Minimum wage

Students will have a midterm soon. There will be some questions on the very likely shutdown (using the ISLM) and the minimum wage. The figure below shows the real (deflated with CPI) and nominal minimum wage for the US since 1939.

No surprises in the story. Minimum wage in real terms peaked in 1969, a culmination of an expansion that started in the 1950s. It fell significantly starting in 1979, with the Volcker shock and the fixed nominal minimum wage during the Reagan years, and never recovered the Golden Age peak. Since the 1970s, Dems managed to increase the rate in nominal terms (Carter, Clinton and Obama), but not reverse its decline in real terms. So far Congress has managed to stop the Biden administration attempts at raising the rate. And even when procurement contracts should give the executive some power over minimum pay, conservative judges have acted to stop it.

Dollar Hegemony, coming soon

The dollar's hegemony rests on the economic, military, and international political power of the USA. There have been two eras of dollar hegemony which were characterized by different models. Dollar hegemony 1.0 corresponded to the Bretton Woods era (1946-1971). Dollar hegemony 2.0 corresponds to the Neoliberal era (1980-today). The deep foundation of both models is USA power, but the two models have different economic operating systems. The articles in this book explore this and consider two further questions: what is the future of dollar hegemony? And: is there a better way of organizing the world monetary order? There has been considerable speculation of a drift to currency multipolarity but, so far, there is little evidence of that. The Chinese renminbi might join or displace the dollar as the world's hegemonic currency, but that will require China making significant changes to its financial markets and monetary policy. Dollar hegemony imposes significant costs on developing and emerging market economies, but the international political economy of systemic reform is fraught, making reform unlikely.

Book Presentation “India from Latin America. Peripherisation, Statebuilding, and Demand-Led Growth” by Manuel Gonzalo

A demand-led growth perspective of Indian development. Book available here. Comments by Alex Thomas.

The menace of the myth of General Pinochet’s Chilean economic miracle

By Thomas Palley

September 11, 2023, marks the fiftieth anniversary of General Pinochet’s military coup against Chilean President Salvador Allende. While it is now widely recognized that Pinochet authorized large-scale human rights abuses, there is an accompanying narrative that he also unleashed an economic miracle via embrace of Milton Friedman’s “Chicago Boys” vision of a market economy.

The “Pinochet economic miracle” narrative is profoundly misleading. Worse yet, it is a political menace for two reasons. First, it risks tacitly promoting the notion that dictatorship may be legitimate to the extent it offers a road to prosperity. Second, the Pinochet regime embraced Neoliberalism which promotes anti-democratic tendencies by fracturing society. The claim of a Pinochet economic miracle lends support to Neoliberalism, thereby encouraging acceptance of Neoliberalism despite its anti-democratic proclivities.

For those reasons, debate over Pinochet’s economic policy remains of vital importance. The fiftieth anniversary of Pinochet’s coup is an opportunity to challenge the pernicious miracle myth which is increasingly part of the conventional wisdom.

Read rest here.

Structuralism, Classical Political Economy and Demand-led Growth

 

Roundtable with Esteban, and Carlos Bastos Pinkusfeld on Structuralism, Classical Political Economy and Demand-led Growth at the Instituto de Economia, at my alma matter earlier this summer.

Hysteresis in economics

 

Hysteresis, not hysteria

New paper by Thomas Palley. From the abstract:

This paper argues for broadening the application of hysteresis to institutions, policy lock-in, psychology, identity, and economic ideas. Hysteresis is an element of historical processes, and the real world is historical. That explains why hysteresis is pervasive and important. Hysteresis should be a fundamental building block of political economy. Expanding its application in economics is both an opportunity and a challenge. The opportunity is that it provides a means for incorporating political, sociological, and
psychological forces which economics tends to neglect. That will enrich economics and can also provide a mutually enriching bridge to other social sciences. The challenge is introducing such concerns raises questions about the character of economics’ knowledge claims, which is likely to trigger resistance from economists.

Serrano on conflict inflation and inertia (in Portuguese)

Must see video (but I'm sorry to say in Portuguese). The talk at the last Demand-led Growth conference not yet available was in English, but much shorter. Once that is published I'll link it here.

Lulismo’s Past and Present

Lula da Silva’s return to the presidency in Brazil has opened up the possibility of deepening democracy and expanding the scope of egalitarian advance for the Brazilian working class. In what ways might his administration pursue expansionary fiscal and redistributive policies that would improve the conditions of his political base?

In the latest print issue of Catalyst, Matías Vernengo explores the historical and contemporary contours of Brazil’s political economy and outlines how the Lula administration can trade a restrictive economic policy for a broadly redistributive one.

Read more here.