Everything Must Change so that the IMF Can Remain the Same

Recent paper reviewing the role of the IMF after the Global Crisis and the supposed changes in its theoretical views and policy stances, co-authored with the late Kirsten Ford. We concluded that: "The IMF remains fundamentally an instrument of advanced and creditor countries, to force contractionary adjustments on poor, indebted countries."

On the theoretical front, it is worth remembering what Blanchard, the current IMF economic counsellor, said back in 2010:

"It is important to start by stating the obvious, namely, that the baby should not be thrown out with the bathwater. Most of the elements of the pre-crisis consensus, including the major conclusions from macroeconomic theory, still hold. Among them, the ultimate targets remain output and inflation stability. The natural rate hypothesis still holds, at least to a good enough approximation... Stable inflation must remain one of the major goals of monetary policy. Fiscal sustainability is of the essence." [Emphasis added]

So the whole change is a slightly higher inflation target, and a bit more expansionary fiscal policy, when the rate of interest is close to zero. You can read the rest, but if you have doubts about policy check what are the ones promoted by the IMF in the European periphery. As we argue: "If there is any change in the IMF policy advice it is difficult to find in its policies."

Kirsten Ford, a young Old Institutionalist

Kirsten Ford (1976-2014)

I first met Kirsten in the mathematics leveling class for the incoming PhD students. I think it was in 2007, but it might have been the year before. She felt she needed to take more math courses, and did so at Westminster College, where she had obtained her Bachelor's degree. She had come to economics out of a concern with social justice, and her early views were shaped in Dick Chapman's classes on Keynes' General Theory and Chace Stiehl's discussion of classical political economy authors, both PhDs from Utah's graduate program, which influenced her choice for her graduate studies.

At that time I taught two regular courses in the graduate program, the second required macro class, which basically reviewed heterodox approaches and growth theory (both conventional and heterodox views), and the second history of economic thought course, which went from the Marginalist Revolution to the post-capital debates developments (the change in the notion of equilibrium, and what I referred to as the return of vulgar economics; the first part of the course on classical political economy and Marx was taught by E.K. Hunt). She and her classmates, which were among the best cohorts of students in the PhD program I can remember, took also two other elective courses with me. A seminar on Sraffian topics, and a course in international economic history.

That course was not chronologically organized. The topics covered emphasized unresolved controversial issues in international economic history, e.g. whether there was an Industrial Revolution, the critique of Eurocentric interpretations of History, and the revival of cultural and geographical explanations for relative backwarderness. One of the most fun courses I ever taught, not just because I basically taught what I wanted, but more importantly because I never learnt as much from my students as I did in that opportunity.

Kirsten's interests were broad, but she had a particular concern with the institutional aspects of economic development, approached from a historical perspective, and that would include the history of ideas. That was very much in line with the institutional/Marxist traditions that already existed in Utah's economics department, and fit with my own work in what might be called the Classical-Keynesian tradition (classical meaning the old classical political economists, including Marx, as interpreted by Sraffa, while Keynesian puts an emphasis on the radical followers of Keynes and Kalecki).

She published early on a paper (in a Brazilian journal called Versus, which I suggested as a venue; accessible version here) that was based on a previous one done in a development course with Nilüfer Çağatay. It was a critique of the New Institutionalism of Douglas North, and a discussion of the Veblenian, or Old Institutionalist roots in the radical development economics of Ha-Joon Chang. She also published, with Bill McColloch, one of her colleagues in the graduate program, a paper on the Journal of Economic Issues on the methodological compatibility between Marx and Veblen (working paper version available here), influenced by Hunt's views on the topic, to some extent.

Kirsten also collaborated with me, and Nathaniel Cline, another graduate student at the U, on a paper on the persistence of mainstream policy advice, even after the crisis of the marginalist paradigm in the 1970s, in which we hinted that a real world economic crisis, like the Global Recession of 2008, was an unlikely cause for significant changes in the direction of research, which was published in the Journal of Philosophical Economics (see here). Kirsten was particularly interested in the role of the IMF as a the institutional instrument by which conservative policies were maintained in developing countries. Further research on the lack of change in the IMF policy positions that she conducted will be published later this year in Development and Change.

She was also interested in the role of institutionalist authors during the New Deal, and helped me to do research on Marriner Eccles papers at Marriott Library. We had a project of publishing some of Eccles speeches as the chairperson of the Fed.

Kirsten was extremely generous in her intellectual exchanges, unwilling to take her contributions as exclusively her own, and sharing them as part of the knowledge of the group. Surprisingly that's not common among the heterodox tribe, in which pride and the desire for prominence often lead to fratricidal disputes. She was also generous with her time, dedicating immense amounts of it to organize the Heterodox Economics Student Association (HESA), and making the economics department better for other graduate students, and to her classes and her students. Economics as a profession is a little bit better because of her work.

Living wage, fast food walkouts, and Henry Ford's $5

Something I have not posted about, but that deserves attention is the organization of fast food workers this summer, and the series of walk outs to demand a living wage of $15 per hour (see here, for example). Note that the current minimum wage is less than half at $7.25 per hour, last raised in 2009. Figure below shows the real value now is well below the average of the 1960s and 1970s (data for nominal minimum wage here).

Since the 1980s the real minimum wage has fluctuated at a lower level. One can only hope that fast food workers, with the support of the Service Employees International Union (SEIU), manage to obtain some concessions from junk food corporations.

For a discussion of the Living Wage see this paper by Bob Pollin, and his book (here).

PS: Only recently I've learned that Henry Ford's famous $5 a day wage (which would be more or less $14 per hour today), which went together with  reduction of work time to 8 hours per day, was controlled by the Sociological Department, which required workers not to drink, that they saved money, that they attended church, that they proved a record of saving part of the wages, and of course it was for married men, not for singles or women, since that would not lead to family values. It was also part of a broader program to make good American citizens of the immigrants in his factory. While some progressives actually liked Ford's program, like the institutionalist economist Commons, others like the radical John Reed were not convinced. For more go here.