Chomsky on public education

Defunding a program is the best way to promote privatization. He discusses here public education, but you can go down the line. The idea of voucherizing Medicare is basically a way of defunding it, worsening its quality and eventually move to private health (you get it if you pay for it). And on education note that while Chomsky is right that it worked well and is being defunded and privatized (think charter schools), it is also true that the system was always unequal and favored the middle class, since the value of housing determined the quality of the public schools.

Short excerpt from Requiem for the American Dream, which I highly recommend.

Ilene Grabel on capital controls

New paper on the resurgence of capital controls. From the Abstract:

The startling resuscitation of capital controls during the global crisis has substantially widened policy space in the global north and south. The paper highlights five factors that contribute to the evolving rebranding of capital controls. These include: (1) the rise of increasingly autonomous developing states, largely as a consequence of their successful response to the Asian crisis; (2) the increasing confidence and assertiveness of their policymakers in part as a consequence of their relative success in responding to the global crisis at a time when many advanced economies have and still are stumbling; (3) a pragmatic adjustment by the IMF to an altered global economy in which the geography of its influence has been severely restricted; (4) the intensification of the need for capital controls during the crisis not just by countries facing fragility or implosion, but also by those that fared “too well”; and (5) the evolution in the ideas of academic economists and IMF staff. The paper explores tensions around the rebranding of capital controls. These are exemplified by efforts to develop a hierarchy in which controls on inflows that are a last resort and are targeted, temporary, and non-discriminatory are more acceptable than those that are blunt, enduring, discriminatory, and that target outflows. In addition, tensions have increasingly focused on whether controls should be used by capital-source rather than just capital-recipient countries.

Read full paper here.

Slow recovery continues

In the first quarter the economy slowed down grinding nearly to a halt. Real Gross Domestic Product (GDP) slowed to a 0.5% annual growth rate in the first three months of 2016, according to the Bureau of Economic Analysis (BEA). By the way, federal government spending has been a drag on growth. And here in lies the problem. Don't expect any stimulus this year, and very unlikely that this would change significantly any time soon. The problem isn't secular stagnation, it is rather short-term inaction.

Bankers and economic theory

From the BBC Yes, Prime Minister comic series. True, most bankers never quite learned Keynes, and then had to learn the stuff from some other Milton.

Fabio Petri on non-substitution theorems

Sometimes there is simple and right

New paper by Professor Petri, which is always worth reading, titled "Nonsubstitution Theorem, Leontief Model, Netputs: Some Clarifications." From the abstract:

The nonsubstitution theorem concerns long-period technical choice and relative prices, and was so understood in its first (1951) formulations, but the modern advanced micro textbooks that present it do not make this clear, rendering the theorem impossible to understand for students. These modern presentations derive from a reinterpretation of the Leontief model as a ‘timeless’ economy in Walrasian equilibrium, capable of positive production in spite of zero initial endowments of all inputs except labour: an unacceptable interpretation, made possible by a use of netputs, to describe the economy’s production possibilities, that is illegitimate in this case even from a strictly neoclassical perspective. The notion of a ‘timeless’ economy disappears from the textbook presentations of the Leontief model and of the nonsubstitution theorem, but the result is that the nature of the model and of the prices to which the theorem refers is not clarified, inevitably leaving students utterly confused. This note remembers the true nonsubstitution theorem, points out that it had been correctly enunciated by Samuelson (1961), and suggests that the current inability to present it in a correct way is due to the absence of the notion of long-period prices from the theoretical horizon of contemporary neoclassical value theory. The paper opens with clarifications on the meaning of the Leontief model which prepare the ground for the discussion of the problem with netputs.

 Read full paper here.

Some brief thoughts on technical change

Engelbart's mouse

I have discussed some of these issues before (here, for example, or here). But it is the last week of my intermediate macro class, and I often end up with some discussion of growth. Mostly the Solow model, and some alternative demand-led growth model. I do only the simple models, Joan Robinson's banana model and Thirlwall's balance of payments constraint, to contrast with neoclassical supply constrained stories of growth.

But in the middle of that discussion, supply constraint versus demand led growth, a conversation about the nature of technological change is always inevitable. No, I'm not going to talk about Kaldor-Verdoorn now. There are two interesting aspects of technology that are often misrepresented in mainstream models.

First, in the Solow model technology is akin to a public good, meaning is non-excludable and non-rivalrous. So technology is relatively easy to acquire, difficult to preclude others from obtaining it, and the access to it by one group does not limit its availability to others. That, by the way, is the reason patents and copyright are supposedly needed, to preclude technology to spread too easily and to provide the incentive for innovators.

However, technology seems to be considerably more difficult to acquire than what the canonical neoclassical model presumes. I always tell students that technology acquisition resembles building IKEA chairs. You have the blueprint, but even then it is hard to interpret it, and the first one is always a bit wobbly, while the process of building new chairs implies that by the time you are done with the last (perhaps the third or fourth one) the process is completely mastered.

The second element of technology that is often misrepresented, and this also true of some neo-Schumpeterians, is the role of the entrepreneur, the innovator. There is overpraise of their role in the process of technological change. The flash of genius which allows the innovator to transform the whole world is glorified. In reality, technological change is a slow process, in which several flashes are necessary to eventually produce any significant change.

For example, I asked my students what made Bill Gates the wealthiest man on the planet. Only one, by the way, said Windows, the operating system that followed DOS, and that was in every PC, after his contract with IBM (yes that contract, and the fact that he could pile his other software with the operating system, is the real source of the wealth). The operating systems were bought from another company, and essentially copied from Apple. And yes, Steve Jobs got most of his ideas from a visit to Xerox Parc. So the names of the several people that were central for the development of the graphical interface with multiple windows on a screen are hardly household names.

Walter Isaacson's The Innovators, which does overall a good job of showing that technological progress is a team sport, even if he does also idealize the role of innovators (yeah, it's in the title) tells the story of one of the them, Douglas Engelbart. About him he says (and yes there is a bit of hero worship in this):

"Over the next six years, culminating in 1968, Engelbart went on to devise a full-fledged augmentation system that he called 'oNLine System,' or NLS. In addition to the mouse, it included many other advances that led to the personal computer revolution: on-screen graphics, multiple windows on a screen, digital publishing, blog-like journals, wiki-like collaborations, document sharing, email, instant messaging, hypertext linking, Skype-like videoconferencing, and the formatting of documents. One of his technocharged protégés, Alan Kay, who would later advance each of these ideas at Xerox PARC, said of Engelbart, 'I don’t know what Silicon Valley will do when it runs out of Doug’s ideas.'"

Most of the time the several innovators needed to produce significant change are forgotten, and do not reap the financial benefits of their own innovations. In particular, because many times is difficult to sort out who had the original idea, where one innovation finishes and when the other starts. Technology more often than not develops as a result of a series of small steps, rather than by big leaps. Histories of technology should emphasize the role of institutions, like Bell Labs, and in particular for modern capitalist societies the role of the state.

On the blogs

Why not full employment? -- Chris Dillow on the abandonment of full employment as a policy goal. Personally, I'm not sure workers don't demand full employment now. I think they do, as they did back in the 1960s. But the conditions that allowed that to be an acceptable policy to the elites have changed significantly

Robert Lucas – Keynesian? -- ProGrowthLiberal at EconoSpeak. Yeah, sure it all depends on definitions, but it's a stretch

Enough central bank jazz hands… Why Labour should democratise the Bank of England -- Paul Mason's talk that has been all over the blogosphere. A quote if I may: "Under the Conservatives, monetary easing has been used simpy to offset the hit to the economy caused by fiscal tightening. Labour should, in future, use monetary policy to create fiscal space." Literately from Marriner Eccles book (see here)

What's the matter with Kansas at the Rick Smith Show

More on the GOP failure in Kansas. Rick Smith Show podcast here.

70 years ago

Keynes (1883-1946)

NYTimes Obituary here

Tom Palley on Inequality and Growth

New paper published by PERI. From the abstract:

This paper examines the relationship between inequality and growth in the neo-Kaleckian and Cambridge growth models. The paper explores the channels whereby functional and personal income distribution impact growth. The growth – inequality relationship can be negative or positive, depending on the economy’s characteristics. Contrary to widespread claims, inequality per se does not impact growth through macroeconomic channels. Instead, both growth and inequality are impacted by changes in the underlying forms and pattern of income payments. However, inequality is critical at the microeconomic level as it explains differences in household propensities to consume which are at the foundation of neo-Kaleckian and Cambridge growth theory.

Read full paper here.

Some thoughts on the impeachment and the right wing turn in Brazil

Riding the coup bike without the military

Brazilian President Dilma Rousseff has been impeached. The vice-president, Michel Temer, will assume the presidency temporarily while she is judged by the Senate. While the final outcome is still uncertain, it is very unlikely that she will return to office. This closes the long cycle of the left in Brazil, which started with the election of Luiz Inácio Lula da Silva to the presidency in 2002, and that led to the election and re-election of the candidates of the Workers’ Party (PT in the Portuguese acronym) since then. The roots of the current crisis are deep, and are not simply associated to corruption or to discontent with economic the poor performance of the country.

Protests started as far back as June 2013. The spark for those protests came from the cost of public transportation in São Paulo and other major cities, and the groups initially connected to the organization of the movement were clearly associated to left of center positions. On the other hand, as the protests gathered momentum the range of demands increased, to include spending with the 2014 World Cup and the Olympics and against corruption in general, with an increasing number of right wing groups linked to the popular demonstrations. In other words, there was a broad range of demands, and the groups associated with the popular protests had a mixed political character, from left of center movements to right wing libertarian groups, some of which were funded by the Koch brothers.

Many saw the 2013 protests as the beginning of the end of PT’s dominance in Brazilian politics. And it was true that some elements on the left were part of the protests, and that, in a range of issues from the economic to the social, PT had failed to live up to the expectations. It is important to note there were many reasons to be disappointed with PT’s achievements, since the party had accepted conservative economic policies early on in the 2002 “Letter to the Brazilian People,” in particular putting fiscal discipline and inflation at the center of the economic agenda. And Brazil’s economic performance was below the average for Latin America for most of the 2000s, with growth of about 3.5% per year between 2003 and 2014, which would be considered mediocre by the standards of the other BRICs that were lionized in the media as the next big thing in the world economy.

Further, the problems were not just in the economic front. Brazil was much slower, and considerably less effective than other left of center governed countries in the region in dealing with the human rights record of the military dictatorships. Something that also was to some extent expected by left of center groups. To make things worse, the security policies maintained a pattern of abuse of human rights, discrimination and racism, which have a long history in Brazil. The ‘pacification’ policies is in many cases were just part of a pattern of criminalization of poverty and state sanctioned killings of slum (‘favela’) dwellers. Not surprisingly the 2013 protests had a strong component of left wing participants.

On the other hand, in spite of the poor economic performance and the limitations of the human rights policy record, the expansion of formal employment, the doubling of the minimum wage, the expansion of the social programs, among them the Bolsa Família, the implementation of affirmative action policies and the expansion of public education, have led to a significant reduction of inequality over the last ten years, even if it is hyperbolic to suggest, as many social analysts have done and the mainstream media repeated ad nauseam, that a new middle class has emerged as a result. On the strength of the social record of her policies, Dilma won a narrow reelection in 2014, with the promise to expand social spending, to promote economic growth and to stand against banks' greediness, reducing interest rates. After the reelection, however, the government did a 180-degree turn, appointed a Finance Minister, Joaquim Levy, who came from one of the largest banks in the country, and adopted austerity policies, fiscal adjustment and higher interest rates to control inflation. Growth, not surprisingly, collapsed with a decline of GDP of about 3.8% in 2015.

Protests intensified in the streets, while the corruption charges, in particular those associated with the scheme of bribes and payments at the State oil giant Petrobras, within the so-called Car Wash (‘Lava Jato’ in Portuguese) Operation, taking center of stage. A few things should be noted in this context. Corruption is not limited to the government or the parties in its coalition, and in fact it is clear from the investigation that corruption at the state oil company goes back many years, certainly all the way to the government of Fernando Henrique Cardoso of the Brazilian Social Democracy Party (PSDB in Portuguese), a right of center party, in spite of its name. Interestingly enough, while Aécio Neves, the PSDB candidate that lost the last election in 2014, has been named in the corruption scandal, president Rousseff seems to be completely untainted by accusations of corruption. More importantly, the central issues related to corruption are the structural ones. That is the elements that make corruption a necessary feature to manage the country, like the need to buy votes in congress to pass legislation, something that has made the Brazilian Democratic Movement Party (PMDB in Portuguese) an essential element for governability. In fact, PMDB is at the center of all corruption scandals and the beneficiaries of the impeachment, including the Vice-President, are members of that party.

Clearly, the impeachment of Dilma Rousseff is not about corruption, and the actual process hinges on the delay in the payments to public banks (the so-called 'pedaladas'), which in the view of some imply the government is borrowing from public banks, which is against the Law of Fiscal Responsibility, but not on the corruption scandal per se. Note that this fiscal accounting devices were a common practice, even in previous governments, were never questioned, and can hardly be considered a crime that requires the impeachment of the president. Further, although her government is highly unpopular, since even left of center groups have been protesting, and more so since she embraced the austerity policies after reelection, it is not true that the impeachment is popular. Public manifestations against the impeachment have been as large, if not larger, than pro-impeachment protests, and the country remains essentially evenly divided, as it was during the 2014 election. In that sense, the impeachment is certainly not about the preservation of democratic institutions.

Socioeconomically speaking the poorer and the afro-descendants tend to be against impeachment, and that was reflected in the votes in Congress, to a great extent because these groups were the main beneficiaries of PT’s social policies, and real wage increases. On the other hand, the middle class and the business groups, as represented by Federation of Industries of the State of São Paulo (FIESP in Portuguese), have been decidedly in favor. There is a clear class, and that in Brazil means race too, component to the impeachment process. So there are good reasons to believe that the impeachment represents a modern type of coup, based on the utilization of media for the mobilization of public opinion, and for bringing down a government, that, even if moderately, has reduced inequality in one of the most unequal countries in the world. The impeachment is about social class and inequality, and the possibility of a left of center project.

Moody's upgrades Argentina credit rating status

Mainly because of their "expectation that Argentina will settle holdout creditor claims which will result in a lifting of court injunctions and clear the way for Argentina to access international capital markets." Fair enough, access to capital markets would lift the balance of payments constraint, even if the agreement is a complete surrender to the Vultures demands. But the most interesting argument for the improvement in the credit rating is that it results from "economic policy improvements since the Macri administration took office last December." So what happened since December (btw, mostly what I said it would).

The figure above from The Economist shows that inflation went up, and the economy was thrown into a recession. Fiscal deficits will likely increase, in spite of spending cuts, and reduction in public employment, since with the recession revenue will fall (Moody's expects the deficit to be about 5% GDP).

And yes fiscal deficits in domestic currency are mostly irrelevant for the discussion of ability to pay foreign obligations in dollars (the only reason to care is if the deficits are caused by more spending, and lead to current account deficits, which do increase the needs for foreign currency, which is not the case in Argentina now). Actually, I also think that the economy will eventually improve (that was the plan all along), just in time for the next presidential election.

The problem of course is that growth will accelerate very likely with an increase in current account deficits, as much as it happened during the Menem years in the 1990s. A more depreciated currency will do very little to solve that problem, which will likely be possible because the government will push ahead with international borrowing. Foreign debt driven growth essentially. But we know what tends to happen with this kind of policy.

There is a long history of external debt cycles in the country. This kind of frivolous economic policies, that push short term political gains (Macri's reelection like Menem in the past) at the expense of sustainable policies (it's the current account, not the fiscal idiot!) is what should be termed populism. Current account populism that is.

PS: Moody's does not even say anything about Macri's name appearing in the Panama papers.

What's the matter with Kansas?

In 2010 Tea Party favorite Sam Brownback was elected governor and he had Republican majorities in both houses of its legislature. The GOP program was put in place. What happened, you ask?

The result of the GOP tax cuts is significantly lower employment growth than in the national economy. By the way, lower income tax and higher sales taxes, a very regressive tax policy, has led to a persistent overestimation of revenue, and tax shortfalls that led to spending cuts, which in part explains the employment problems (see here). And that is essentially the same program that the 3 national candidates are defending this year. Supply-side economics has been debunked several times, but it surprisingly survives. Zombienomics.

New York Times on the Brazilian coup... I mean impeachment

So for the correct view (yes, it was a coup) see Laura Carvalho here. As she says:

The impeachment process of President Dilma Rousseff started as a retaliation by the speaker of Brazil’s lower house of Congress, Eduardo Cunha, indicted for taking as much as $40 million in a kickback scheme at the state-owned oil company Petrobras. Cunha, whose name is also tied to the Panama Papers, initiated the impeachment process shortly after a public announcement by government allies that they would not stop investigations in the Congressional ethics committee that could lead to his removal.

And, as I noted before the actual farce in Congress last Sunday, Dilma is accused of something trivial, delays in payments to public banks, which is certainly not an impeachable crime. The opposite view here, for what is worth.* Hard to agree with the criminalization of fiscal policy. With that criteria several heads of state should be impeached, including in the US (see IMF on this, which suggests that there are several ways to improving fiscal accounts through accounting devices).

It's also important to note that Obama and his State Department have been silent about this coup in a crucial country in the region.** Mark Weisbrot speculated about Obama's role in all of this. He said:

The massive spying on Brazil — and especially state-controlled oil company Petrobras — that Edward Snowden and Glenn Greenwald revealed in 2013 also points in this direction [Washington's support to undermine Workers' Party government]. It could be a coincidence that all this information about Petrobras was gathered by the U.S. government just prior to the scandals at the company; or perhaps Washington shared some information with its allies in the Brazilian opposition. And there is no doubt that the biggest players in this coup attempt — people like former presidential candidates José Serra and Aécio Neves — are U.S. government allies.

What's next? That's the important question. In terms of the economic policy expect more fiscal adjustment, including cuts in social programs (Delfim Neto, which had supported the Workers' Party for most of their governments, today refers to recipients of the Bolsa Familia program as parasites; sign of things to come).

* I'll try to have something longer on this later, but in my view the deep causes of the impeachment are ultimately related to class warfare. The improvement in the minimum wage, and the share of wages in income, ultimately caused the reaction from the elites and a good chunk of the middle class.

** Glenn Greenwald on this here.

Brazilian growth during the Workers' Party adminstration

Overall from 2003 to 2016 about 2.4%. If the last two years (2016 being an estimate are not counted) it's 3.5%.

The collapse does not explain the impeachment (on this more later). It's more the result of the Workers' Party administration already caving and accepting the austerity policies promoted by the opposition.

Prebisch's dynamic theory

New paper with Esteban Pérez published in ECLAC Review; for now only the Spanish version is available, but soon there will be an English version (they always release it later).

On the blogs

Regress in Macroeconomic Knowledge Over the Past 83 Years Blogging -- Brad DeLong on Raghuram Rajan. And the problem isn't debt overhang, low productivity or lack of more aggressive and unconventional monetary policy. It's fiscal policy stupid!

Neoliberalism – the ideology at the root of all our problems -- George Monbiot on Neoliberalism. I'm not sure Keynesianism needs a new program, but if you need one a Green New Deal should make Monbiot happy

Clinton vs. Sanders on Big Banks -- Bill Black and Paul Hodes on the Real News Network

Kalecki's Fable

By Jan Toporowski (Full paper published by ROKE here)

Following the death, in 1935, of the Polish military dictator Józef Piłsudski, his regime continued under a group of his military cronies, known as the ‘colonels’, who increasingly modeled their regime on that of Mussolini in Italy. One of the colonels, who was responsible for economic development, wanted to understand the economic principles behind government stabilization. He called in Kalecki's colleague from the Institute for the Study of Business Cycles and Prices (Instytut Badań Konjunktur Gospodarczych i Cen), Ludwik Landau, to explain the principles behind the ‘new economics’. Landau had just been fired from the Institute and was now working at the national statistical office, Główny Urząd Statystyczny (see Kalecki 1964 [1997]; Landau 1957).

Landau explained at length the principles of effective demand and credit cycles underlying levels of output and employment at any one time. The colonel had evident difficulty in grasping this. So, finally, Landau explained by telling the following story:

In an impoverished Jewish shtetl in Eastern Poland, whose residents were mired in debt and living on credit, a wealthy and pious Jew arrived one day and checked into the local inn, taking care to pay his hotel bill in advance. On Friday, to avoid breaking the Sabbath injunction against carrying money, he handed over to the inn-keeper for safe-keeping a $100 note. Early on Sunday, the wealthy and pious Jew left the inn before the inn-keeper had had a chance to return the banknote.

After a few days, the inn-keeper decided that the wealthy Jew was not going to return. So he took the $100 note and used it to clear his debt with the local butcher. The butcher was delighted and gave the note for safe-keeping to his wife. She used it to clear her debts with a local seamstress who made up dresses for her. The seamstress was delighted, and took the money to repay her rent arrears with her landlord. The landlord was pleased to get his rent at last and gave the money to pay his mistress, who had been giving him her favours without any return for far too long. The mistress was pleased because she could now use the note to clear off her debt at the local inn where she occasionally rented rooms.

So it was that the bank-note finally returned to the inn-keeper. Although no new trade or production had occurred, nor any income been created, the debts in the shtetl had been cleared, and everyone looked forward to the future with renewed optimism.

A couple of weeks later, the wealthy and pious Jew returned to the inn, and the inn-keeper was able to return to him his $100 note. To his amazement and dismay, the wealthy Jew took the note, set fire to it, and used it to light his cigarette. On seeing the inn-keeper's dismay the wealthy Jew laughed and told him that the banknote was forged anyway.

Landau finished his story and waited for understanding to seize the colonel. Beads of sweat appeared on the colonel's forehead, from the intellectual effort at comprehension. Finally, as if he had stumbled on the explanation, the colonel exclaimed: ‘Ah, I knew from the very beginning that there was something wrong with that Jew. Of course, the money was forged!’

Kalecki's conclusion from this was that unfortunately too many people think like the colonel, and very few people understand the story as we do.

References:

M. Kalecki, '‘Ludwik Landau – Economist and Statistician’', in J. Osiatyński , Collected Works of Michał Kalecki Volume VII, Studies in Applied Economics 1940–1967, Miscellanea, (The Clarendon Press, Oxford (1964 [1997])) 325-329.

L. Landau, Wybór Pism, (Państwowe Wydawnictwo Naukowe, Warszawa 1957).

Kicking Away the Ladder, Too: Inside Central Banks

Last January the Association for Evolutionary Economics (AFEE) sessions at the Allied Social Sciences Association (ASSA) meetings revolved around the theme of "Inside Institutions," meaning that within institutions there are many actors with different sets of interests, so one must look under the hood, so to speak, of the institution itself to understand its actions. My paper followed my previous discussion of the historical evolution of central banks, and a brief discussion within the Argentine Central Bank. From the abstract of my paper:

Central banks are evolving institutions. In developed countries, particularly in Britain, central banks were used as instruments of the state to finance government and to promote economic development. However, once they went up the economic ladder, advanced economies kicked it to preclude developing countries from climbing it, too. It is in this context that the modern independent central bank, concerned with inflation targeting alone, which harkens back to the Victorian era, should be interpreted. This paper analyzes the recent evolution of the Argentine central bank in this broad historical perspective.

Download full paper here.

PS: This are the proofs and there are some mistakes. And yes, it should say seventeenth century in the first paragraph.

Latin American corner: When will they ever learn?

By Naked Keynes (Guest Blogger)

The latest IMF World Economic Outlook (April 2016) projects stagnation in World Growth (3.1% and 3.2% in 2015 and 2016) both in advanced economies (4.0% and 4.1% in 2015 and 2016) and emerging market and developing economies (1.9% and 1.9% for 2015 and 2016). The prospects for 2017 are hardly any better with an estimate of 3.5% for global output and continuing stagnation of advanced economies. But things could get worse.

The current outlook scenario depends on very optimistic assumptions which as mentioned in the report (p. 18) are “subject to sizable downside risks.” These include: (i) improved conditions for economies under stress; (ii) successful rebalancing in China; (iii) improved economic activity in commodity exporters; (iv) resilient growth (whatever this may mean) in emerging and developing economies other than commodity exporters.

The stagnation and possible reduction in world growth is not traced to transitory shocks or disruptions, or god forbid to demand conditions. It is rather traced directly to the production function (the core of mainstream economic theory) and more precisely to a decline in potential GDP levels and growth due to population aging, slow growing investment and total factor productivity (See also IMF, WEO, April 2015). This reasoning with its specific conditions not only applies to developed economies but also to developing economies including Latin American economies. In the case of Latin American economies the slow growth is traced to weak productivity and investment caused by government intervention.

The IMF assessment has two major and dangerous implications for future growth.

The first is that demand policies and more generally counter cyclical policies are simply out of the question. Government and economics agents must adapt to lower potential GDP (natural GDP) levels and growth. The IMF is thus restating its case for pro-cyclicality (contractionary policies) during a slowdown. Counter-cyclicality is only justified to rein in spending during an upward or boom phase of the economic cycle.

The second is that the only way to revamp growth is through supply side policies which even if successful (something unlikely as illustrated by the experience of Latin America) could take years to implement. It is not coincidental that the IMF WEO third chapter is titled Time for a Supply-Side Boost? Although the chapter focuses on advanced economies, mainstream economists in Latin America are preaching exactly the same policies for developing countries.

In short, the policy proposals point to reinforcing the fundamental failures of capitalist economies: continuing and self-fulfilling low growth, unemployment and poverty, inequality, and instability. When will they ever learn?

A Terse Elucidation of Marx’s Concern with Alienation in the Mature Writings

By David Fields

Note: The references below are drawn from The Marx-Engels Reader, edited by Robert C. Tucker.

Is Marx’s concern with aspects of alienation subsumed in his mature writings? To suggest so is a falsity. Marx’s depiction of the proletariat becoming, in the Hegelian sense, emancipated from the objective conditions of estranged labour, is not withered as the analysis moves toward the technical conditions of production. Marx’s humanism is still apparent.

In Wages, Labour, and Capital, Marx explicates that labour power is a life activity (204). It is the manifestation of human creativity, so that when it is sold as a commodity, a worker, in fact, sacrifices his life; the “product of his activity is no longer the object of his activity” (204-205). Life, as such, no longer has meaning.

Marx asks a pertinent question: “And the worker, who for twelve hours weaves, spins, drills, turns, builds, shovels, breaks stones, carries loads, etc.-does he consider this twelve hours’ weaving, spinning, drilling turning, building, shoveling, stone breaking as a manifestation of his life, as life” (205)? The answer is a resounding no: “On the contrary, life brings for him where this activity ceases, at table, in the public house, in bed […] The twelve hours’ labour, on the other hand, has no meaning for him as weaving, spinning, drilling etc., but [only] as earnings […] If the silkworm were to spin in order to continue its existence as a caterpillar, it would be a complete wage-worker” (205).

Another example is Marx’s attention to commodity fetishism: “In production, men not only act on nature but also on one another. They produce only by co-operating in a certain way and mutually exchanging their activities. In order to produce, they enter into definite connections and relations with one another and only within these social connections and relations does their action on nature, does production, take place” (207). This actuality is mystified given that “the noble reproductive [labour] power that the worker surrenders to the capitalist [for sustenance]” (209) is the mechanism that generates the “means of employment” (210), of which labour, which by definition “possesses nothing but its capacity to labour” (208), socially depends on. This social dependency is the force that manufactures ‘false consciousness for “to say that the worker has an interest in the rapid growth of capital is […] to say that the more rapidly the worker increases the wealth of [capitalists], the richer will be the crumbs that fall to him” (211).

In Marx’s Grundrisse, there are more examples of where Marx alludes to alienation. For instance, Marx begins his analysis with a scathing critique of Enlightenment ideology: “The [rational] individual [who] belongs among the unimaginative conceits of the eighteenth-century Robinsonades […,] which brings natural independent, autonomous subjects into relation and connection by contract”, is an “ideal whose existence is [systematically] project[ed] […] by [the] detach[ment] [of the individual] from [his] natural bonds” (222). Hence, “forms of social connectedness confront the individual as mere means toward his private purposes, as external necessity” (223). And to suggest that material production, of which forms the bedrock of society, is determined “by isolated individual[s] […] is as much as an absurdity as is the development of language without individuals living together and talking to each other” 223). Society “does not consist of [isolated] individuals, but expresses the sum of interrelations, the relations within which […] individuals stand” (247).

In continuance with a concrete understanding  of the nature of commodity fetishism, Marx indicates that the unity of production, distribution, and consumption is a mystification that clouds the reality that the worker is inherently an agent in production, of which the worker’s social position determines its pattern of distribution, and ultimately its pattern of consumption (223-234)…the unperceived “mutual interaction” that consummates the capitalist system as an “organic whole” (236).

Furthermore, Marx discerns that when labour exchanges with capital in the selling of labour power, a worker “divests himself” of his “vital forces” to the submission of superfluous “forced labour”, surplus value, of which work in production is in excess of that which is necessary for the means for “mere subsistence”, to generate a “general form of [capitalist] wealth (247-249). This facet of capitalism is striking for that it inevitably blinds the worker from realizing that his social condition is, indeed, a relation of domination similar to that of slavery, or what Marx defines as “direct forced labour” (250). Work in capitalist production is “indirect forced labour” for that wealth generated from labour is not accumulated for the gratification of overlords, but exploited to foster general industriousness that generates the means of employment, the means of subsistence, of which labour, by definition, socially depends on. Workers are nothing else than soulless cogs in a wheel, an “alien person”, whose objective social conditions appear as separated, independent, and of another kind (252-253).

Examples of Marx’s adherence to the thesis of alienation are also prevalent in Das Kapital. We again see commodity fetishism highlighted: “A commodity is […] a mysterious thing, simply because in it the social character of men’s labour appears to them as an objective character stamped upon the product of that labour; because the relation of the producers to the sum total of their own labour is presented to them as a social relation, existing not between themselves, but between the products of their labour. This is the reason the products of labour become commodities, social things, whose qualities are at the same time perceptible and imperceptible by the senses” (320). Commodities thus appear, according to Marx, as a social hieroglyphic (322), an alienating state of existence where one “cannot decipher the peculiar social character of the labour that produces them […] in the same way [that] light from an object is perceived […] not as the subjective excitation of the optic nerve, but as the objective form of something outside the eye itself” (321).

Marx also rehashes his argument, albeit in condensed form, of labour power as a life-activity that is ultimately dispossessed in capitalist exchange. When a capitalist purchases labour power for capitalist production, “the labourer, instead of being in a position to sell commodities in which his labour is incorporated, must sell that very labour-power, which exists in his living self” (337). Workers are free in the double sense; on the one hand, “as a free man, [the worker] can dispose of his labour power as his own commodity, on the other hand […] he has no other commodity for sale, which is short of everything necessary for the realization of his labour power”. This is an estrangement whose unadulterated existence makes the so-called rational-maximizing individual a self-perpetuating mythological understood form of social life (324).

In hindsight, Marx’s interest with the social conditions of alienation is not abandoned as he matures. To suggest that this is indeed the case would be to assume that there is supposedly an epistemological break between Marx’s early and later writings. This, however, would ignore a critical comprehension of Marx’s work as a totality.

Originally posted on URPE Blog

Maurice Obstfeld and the IMF push structural reforms

Spot the difference

The new World Economic Outlook (WEO) is out, now under the direction of Maurice Obstfeld, after the retirement of Olivier Blanchard. They suggests many reason for why the global economy has been Too Slow for Too Long, as the title of the report indicates. In the forward Obstfeld tells us that part of the solution would be to promote:

"structural reforms in product and labor markets [since this] can be effective in boosting output, even in the short term, and especially if coupled with fiscal support. Tax reform, even when budget neutral, can create demand if well targeted, while simultaneously improving labor force participation and enhancing social cohesion."

So the idea is to liberalize labor markets, and reduce the costs of hiring labor (wink, wink, nudge, nudge, they mean reduce benefits).

So this pretty much confirms that nothing much has changed at the IMF. For more go here.

On the Panama Papers at the Rick Smith Show

A Short Account of The Rise of Neoliberalism

By David Fields

Between roughly the early 1940’s and early 1970’s, the financial architecture of the world economy centered on a US engineered Keynesian accumulation agenda, as a response to the devastation wrought by the Great Depression. The capitalist institutional structure, or social structure of accumulation (Kotz, McDonough, and Reich, 1994), rested on finance being subservient to the promotion of  industrial enterprise. With socially-engineered capital-labor compromises in core-capitalist countries, neo-colonial governing institutions in the periphery, and the Bretton Woods system (along with the Marshall Plan), the immediate post-World War II era was a so-called ‘golden age’ of ‘regulated capitalism’.

By the late 1960’s, nevertheless, capital movements began to undermine the Bretton Woods preoccupation with capital controls, as US officials began actively encouraging the growth of the Euromarket—the pool of unregulated dollar reserves concentrated in the City of London. Moreover, with traditionally marginalized segments of the population in core capitalist countries demanding social, political, and economic rights, and national liberation movements in the periphery overthrowing oppressive governments, calls for expanded role of the state in meeting citizen’s needs dramatically circumscribed global capital accumulation. Pressures for higher nominal wages spawned wage-price spirals. Consequently, the rate of profit fell in core capitalist countries (Dumenil and Levy, 2004: 24).

The globalization of finance became the means for international financial markets to allow industrial enterprise to rebuild the conditions for future profitability. From the 1970’s, activity in financial markets began to rise relative to non-financial economic activity, reflecting not international traded goods and services, but speculative capital flows. Foreign exchange transactions in the world economy rose from $15 billion per day in 1973 to $80 billion in 1980 and $1,260 billion in 1995 (Kotz, 2008). In this sense, the inherent conflict between financial and non-financial capital became relatively obsolete.

Speculative capital flows, however, began to undermine the capacity for the US to guarantee the convertibility of dollars into gold at fixed parity (Triffin, 1960). In 1974, Nixon closed the gold window and loosened capital controls. This marked the end of the Bretton Woods arrangement and the breakdown of the social structure of accumulation that specifically rested on material expansion.

The deregulation of financial markets established a global market of mobile financial capital, yet Keynesian inspired institutional arrangements remained intact, especially the maintenance of cheap money policy for aggregate demand management. As such, hyper-inflationary crises stemming from labor militancy, coupled with international capital movements, turned real rates of interest negative by the mid 1970’s. Although the US became a financial hegemon (cf. Fields & Vernengo, 2013), so to speak, in the sense that its currency became a global fiat money standard, allowing the US to borrow in international markets in its own currency (and essentially perform macroeconomic policy on a global scale), without the friction of gold, price instability undermined real rate of return. As a result, global commitment to deflationary policies was marked by the appointment of Paul Volker as the chairman of the US Federal Reserve in 1979.

The Volker ‘shock’, as it came to be known, reflected the complete shift from finance subservient to industry to industry subservient to finance with the imposition of fiscal and monetary discipline as the means to constrain the capacity of national governments to pursue expansionary policies (that ultimately favor the working class). The high real interest rates set in motion an increasing financial-market orientation of US-led global capitalism. As interest payments, as a factor in capitalist investment (with respect to expected future earnings), rose substantially from 1980 to 1982, leading to the worst recession (at the time) since the Great Depression, a new organization of capitalism was introduced. Capital would no longer rest on production, sales, and growth, but on a speculative strategy of ‘downsize and distribute’ for immediate short-term maximization of shareholder value (Campbell, 2004; Lozonick & O’Sullivan, 2000).

If the monetary authority increases and maintains high interest rates for long periods of time, then for given nominal wages and given nominal exchange rates, there will be falls in real wage and appreciations in the domestic currency. Tight monetary policy will be sustainable, if, and only if, the depression of real wages is accepted, i.e. there is an absence of real wage resistance, and if exporting industries affected by currency appreciation do not have the power to react. The US was victorious in this capacity through successful attacks on labor, along with institutionalizing the so-called Washington Consensus (cf. Meeropol, 1998; cf. Pollin, 2005).

Originally posted on URPE Blog.

References:

Campbell, A. (2004): “The Birth of Neoliberalism in the US: A Reorganization of Capitalism.” in A. Saad-Filho & D. Johnston (ed.) Neoliberalism: A Critical Reader. London and Ann Arbor, MI: Pluto Press

Duménil, G. & D. Lévy (2004): Capital Resurgent. Boston: Harvard University Press.

Fields, D. & M. Vernengo (2013): “Hegemonic Currencies during the Crisis: The Dollar versus the Euro in a Cartalist Perspective.” Review of International Political Economy, 20(4): 740-759

Lazonick, W. & M. O’Sullivan (2000): “Maximizing shareholder value: a new ideology for corporate governance.” Economy and Society, 29(1): 13-35

Kotz, D. (2008): “Neoliberalism and Financialization.” Political Economy Research Institute, University of Massachusetts Amherst, mimeo

Kotz, D., McDonough, T. and Reich, M. (1994) (eds.): Social structures of accumulation: The political economy of growth and crisis. Cambridge: Cambridge University Press.

Meeropol, M. (1998): Surrender: How the Clinton Administration Completed The Reagan Revolution. Ann Arbor, MI: University of Michigan Press

Pollin, R. (2005): Contours of Descent: U.S. Economic Fractures and the Landscape of Global Austerity. London and New York: Verso

Triffin, R. (1960): Gold and the Dollar Crisis: The Future of Convertibility. New Haven, CT: Yale University Press

A Brief Sketch of the Classical-Keynesian Perspective

By David Fields

From a Classical-Keynesian perspective (Bortis, 1997, 2003), rates of interest regulate rates of profits (Panico, 1980, 1985), and, thus, real wages are endogenously determined. The presence of financial instruments, which represent titles to future flows of income, makes it so that the actual center of distributive conflict in capitalism lies not in the technical conditions of production, but is rather governed by the real rate of interest, which is a conventionally-determined exogenous variable that reflects the relative powers of finance capitalists vis-à-vis industrial capitalists & labour (Pivetti, 1985, 1991, 2001).

The rate of profit, as a ratio, has a significance, which is independent of any prices, and can well be ‘given’ before the prices are fixed. It is accordingly susceptible of being determined from outside the system of production, in particular by the level of money rates of interest. (Sraffa, 1960: 33)

In this sense, high real rates of interests induce industrial capitalists to prefer short-term speculative financial investment, instead of long-term productive real investment, since access to credit is expensive. Consequentially, industrial capitalists center attention on the pursuit of immediate surplus value realization, via speculation, in order to handle the burden of costly interest payments—the social cost being nominal wage suppression, which, by implication, exhibits an enlargement of the reserve army of labour.

[…] the credit system, which has its focus in the so-called national banks and the big money-lenders and usurers surrounding them, constitutes enormous centralisation, and gives this class of parasites the fabulous power, not only to periodically despoil industrial capitalists, but also to interfere in actual production in a most dangerous manner— and this gang knows nothing about production and has nothing to do with it. (Marx 1894: 544-45)

Along these lines, heterodox growth and distribution models have been put forward (cf. Hein, 2008), highlighting the need for a redistribution of income from finance/industrial capitalists to labour (Lavoie and Seccareccia, 1999) and making unemployment the primary policy target (Smithin, 2004). Underpinning these models are works that incorporate Keynes’ principle of effective demand and Sraffian price theory in a long-period analysis of capital accumulation (Park, n.d.; Cesaratto et al. 2003). These studies pay considerable attention to the extent to which the Hicksian supermultiplier concept effectively explicates the degree to which induced consumption and investment, via the accelerator, determine average levels of total output (Serrano, 1995) and, thus, normal capacity utilization (Amadeo, 1986; Trezzini, 1998), with the richness of a framework inspired by Kaldor and Pasinetti (Docherty, 2012) that meticulously constitutes the palpability of Kalecki’s famous aphorism that ‘capitalists get what they spend…workers spend what they get’.

Originally published in the URPE blog.

References:

Amadeo, Edward J. 1986. “Notes on Capacity Utilisation, Distribution and Accumulation.” Contributions to Political Economy 5(1):83–94.

Bortis, Heinrich. 1997. Institutions, Behaviour and Economic Theory: A Contribution to Classical-Keynesian Political Economy. Cambridge: Cambridge University Press.

Bortis, Heinrich. 2003. “Keynes and the Classics: Notes on the Monetary Theory of Production.” In Modern Theories of Money: The Nature and Role of Money in Capitalist Economies, (eds.) Louis-Philippe Rochon and Sergio Rossi. Cheltenham, UK: Edward Elgar.

Cesaratto, Sergio, Franklin Serrano, and Antonella Stirati. 2003. “Technical Change, Effective Demand and Employment.” Review of Political Economy 15(1):33.

Docherty, Peter. 2012. “Long Period Interest Rate Rules in a Demand-Led Kaldor-Pasinetti-Sraffa-Keynes Growth Model.” Journal of Post Keynesian Economics 34(3):521–46.

Hein, Eckhard. 2008. Money, Distribution Conflict and Capital Accumulation: Contributions to 'Monetary Analysis'. Basingstoke: Palgrave Macmillan.

Kalecki, Michal. 1971. Selected Essays on The Dynamics of the Capitalist Economy 1933-1970. Cambridge: Cambridge University Press

Kaldor, Nicholas. 1955. “Alternative Theories of Distribution.” The Review of Economic Studies 23(2):83–100.

Kaldor, Nicholas. 1966. “Marginal Productivity and the Macro-Economic Theories of Distribution: Comment on Samuelson and Modigliani.” The Review of Economic Studies 33(4):309–19.

Lavoie, Marc, and Seccareccia, Mario. 1999. “Interest Rate—Fair.” In Encyclopedia of Political Economy, vol. 1, (ed.) Phillip Anthony O’Hara. London: Routledge.

Marx, Karl. 1894. Capital Vol. III. New York: International Publishers.

Panico, Carlo. 1980. “Marx’s Analysis of the Relationship between the Rate of Interest and the Rate of Profits.” Cambridge Journal of Economics 4(4):363–78.

Panico, Carlo. 1985. “Market Forces and the Relation between the Rates of Interest and Profits.” Contributions to Political Economy 4(1):37–60.

Park, Man-Seop. n.d. “Towards a ‘Classical-Keynesian’ analysis of Effective Demand in the Long Period.” Retrieved May 8, 2014.

Pasinetti, Luigi L. 1962. “Rate of Profit and Income Distribution in Relation to the Rate of Economic Growth.” The Review of Economic Studies 29(4):267–79.

Pasinetti, Luigi L. 1974. Income Distribution and Growth. Cambridge: Cambridge University Press

Pivetti, Massimo. 1985. “On the Monetary Explanation of Distribution.” Political Economy: Studies in the Suplus Approach 1(2):73–104.

Pivetti, Massimo. 1991. An Essay on Money and Distribution. London: Macmillan.

Pivetti, Massimo. 2001. “Money Endogeneity and Monetary Non-Neutrality: A Sraffian Perspective.” In Credit, Interest Rates and the Open Economy, (eds.) Louis-Philippe Rochon and Matias Vernengo. Cheltenham, U.K: Edward Elgar.

Serrano, Franklin. 1995. “Long Period Effective Demand and the Sraffian Supermultiplier.” Contributions to Political Economy 14(1):67–90.

Smithin, John. 2004. “Interest Rate Operating Procedures and Income Distribution.” In Central Banking and the Modern World, (eds.) Marc Lavoie and Mario Seccareccia. Cheltenham, UK: Edward Elgar.

Sraffa, Piero. 1960. Production of Commodities by Means of Commodities. Cambridge: Cambridge University Press.

Trezzini, Attilio. 1998. “Capacity Utilisation in the Long Run: Some Further Considerations.” Contributions to Political Economy 17(1):53–67.

Tom Palley on Inequality, the financial crisis and stagnation

From the abstract:

This paper examines several mainstream explanations of the financial crisis and stagnation and the role they attribute to income inequality. Those explanations are contrasted with a structural Keynesian explanation. The role of income inequality differs substantially, giving rise to different policy recommendations. That highlights the critical importance of economic theory. Theory shapes the way we understand the world, thereby shaping how we respond to it. The theoretical narrative we adopt therefore implicitly shapes policy. That observation applies forcefully to the issue of income inequality, the financial crisis a nd stagnation, making it critical we get the story right.

Read full paper here.

The student loan crisis

The student loan situation is critical, and the WSJ (subscription required) suggests that there are increasing worries that a large number of borrowers will default. The numbers are indeed concerning with 43% in default already, delinquent or in postponement as shown below.

This has had strange implications. But while I think that the increase in student loan debt is part of the increasing inequality in the country, and one might add, the increasing costs of college education, that forces kids to borrow large amounts for a shot at a better life, it's unlikely that it would lead to a short run crisis, and a recession. In contrast to the sub-prime and mortgage based borrowing, student loans are about the possibility of future income, not short run consumption. So I would not expect a collapse of current consumption, if the default rate increases significantly. And I doubt that there is a large bank, like Lehman, that would go under if a large number of borrowers default (of course I might be wrong on that).

At any rate, that does NOT mean that the problem is minor. Quite the opposite. By reducing the ability of people to spend earlier in life, and delaying other normal commitments like, for example buying a house, the increase in the student debt burden might be drag on long term growth prospects. That's why a bailout of students is necessary, and a permanent solution for the cost of college education is needed.

Economists don't read (enough) books

So Ann Petiffor twitted a link to a post on why economists do not read Polanyi's The Great Transformation (or the other GT; yes the one is Keynes' General Theory) The author, Marko Grdesic, basically suggests that economists do not read books, period.* I would add, let alone Polanyi that was always at the fringes of mainstream economics. He estimates that about 3 percent of economists have read Polanyi. That reminded me of a story that Eichengreen had told me about a course he taught based on reading books, since he thought that graduate students in economics do not read them anymore, and, even worse, do not quite get the point of writing books. He was nice to twit the link to the current version of the course. I taught in Utah a course that was not directly based on books, but instead on what I referred to as unresolved issues in economic history. These are the ones that involve the big questions, the ones economists do not deal with anymore, at least not often (as discussed yesterday). In a way, I think that the inability to read and appreciate books is also connected to the reduced ability to engage in the big questions.

* He points out that: "one economist said, 'I haven’t read Polanyi, nor have I read Smith, Keynes, Hayek, Schumpeter, or Friedman'." Yes, we noticed it.

Year of the Outsider: Why Bernie Sanders’ Democratic Rebellion is so Significant

By Thomas Palley (Guest blogger)

2016 was supposed to have been the year of Jeb Bush versus Hillary Clinton: the year when the established Bush dynasty confronted the upstart rival Clinton Dynasty. But the year of the insider has turned into the year of the outsider. On both sides, voters have unexpectedly given vent to thirty years of accumulated anger with neoliberalism which has downsized their incomes and hopes.

Though the Republican rebellion has been more clear-cut in its dismissal of insider candidates, it is Bernie Sanders’ Democratic rebellion that is of potentially far greater historic significance.

Read rest here.

Big Think and the nature of capitalism

Jack Goody was one of those rare thinkers that tried to think big. Not common in economics anymore, and less clear in other social sciences, as somewhat narrowly defined techniques take over the breadth of historical understanding. I've only read before his The Theft of History, somewhat iconoclastic book in which he debunks the idea that individualism, democracy and freedom were somehow invented by modern Western society.

I started reading now his Metals, Culture and Capitalism. There are already some interesting things associated to his emphasis on iron, rather than precious metals, in the trade interaction between the West and the Rest. Note that this suggests, probably against the grain of Goody's concern, that the metallurgic advantages of the West, played an early role in the so-called Rise of the West.

But what caught my eye is the following quote:

“In this piece I have covered a long period of time and will undoubtedly have got some things wrong, although I hope my references will usually bear me out. On few, perhaps none, of the subjects am I expert, but the expert does not always see the wood for the trees. One reason for my taking a long time-span is that historians have taken a much too restricted view of their subject and this has prevented them from going back to the commonalities which join us both to the Near and the Far East of what is essentially one continent. For this reason I would question the history cultivated in part of that region, in Europe since the eighteenth, but especially the nineteenth and twentieth centuries when the west led the way in many things. They emphasised the development of ‘capitalism’ as a new mode of production in Europe (an idea not limited to Marxism) and have therefore overlooked the commonalities of which I have spoken.”

First of all, there is the admission that to think big it requires to deal in areas that one is not a specialist, and that leads to mistakes. But most of the mistakes are not central to the argument in my view (see for example, the discussion with Brad DeLong related to David Graeber's book on debt; see comments section).

The second and more relevant point is that he seems, as much as Gunder Frank in ReOrient, to suggest that the notion of mode of production is problematic, and that the very idea of capitalism should be questioned. While I find revisionism with regards the timing and the causes of the Rise of the West (including the work of Gunder Frank, but even more Pomeranz and Bin Wong) relevant to understand the limits of conventional views on the subject, both that it happened much recent than normally thought and that demand forces might have played a role, I find the dismissal of the notion of capitalism problematic (I discussed some of that here). In extremely simplified way, one could argue that it's capitalism that is behind the Rise of the West.

On the blogs

How Much Has Global Economic Power Really Shifted? -- C.P. Chandrasekhar and Jayati Ghosh suggest that less than you might think

Prime-Age Workers Re-Enter Labor Market -- Dean Baker on the job numbers

Economic Rationality Explains Everything and Nothing -- Geoffrey Hodgson on rationality and utility maximization

Labor market numbers at the Rick Smith Show

Payroll employment rose by 215,000 in March

That's more or less the same pace of growth as before, and suggests that the slow recovery continues. The unemployment rate ticked up to 5%, since the labor force participation rate increased from previous month. (but still below the pre-recession level, as shown below). So in this case, a slightly higher rate of unemployment is not a bad thing. It means more people are confident they can find jobs.

Notice that manufacturing employment has declined for the third month in row.  This also might add to Yellen's reasons for being dovish, as discussed earlier this week.

PS: Report here.