By Marc Morgan
Students of the economic science from now 30 countries are leading a much-awaited intellectual rebellion against the current teaching establishment. ‘The International Student Initiative for Pluralism in Economics’, of which I myself am a participant, has gained much international press coverage, and the support of notable academic economists, including Robert Skidelsky, Ha-Joon Chang, Thomas Piketty, James Galbraith and Steve Keen, among others. This grassroots student movement has a simple objective: to broaden the economics curriculum in terms of the theories and methodologies that are taught, so that students receive a ‘pluralist’ education in the discipline.
This hardly seems to be a matter of contention for an outside observer. It is self-evident that proper mastery of a subject should involve acquaintance with the multiple theories that have defined its existence. This should be especially the case for subjects with no linear progression in the explanation and thus prediction of its objects’ behavior (i.e. those subjects within the social sciences – economics, sociology, psychology, politics). In the sphere of the social sciences, there is no ‘creative destruction’ in the theoretical process, as there is in the natural sciences, where new theories build on from old theories, eventually replacing the old theories. This means that there should not be only one way to learn economics. Relying on just one theoretical lens from which to look at the world severely limits what can be observed, explained and hence anticipated. This is emphatically conveyed in the overwhelming majority of economists, trained exclusively in the neo-classical school of economic thought, who failed to foresee the latest financial crisis.
By Antoine Cerisier
On 12 June 2013, the Gava courthouse in Barcelona filed a case against Lionel Messi. The Argentinean player and his father are suspected of using companies based in Uruguay and Belize to defraud the state of more than 4 million euros. A few months earlier, Bayern Munich’s general manager Uli Hoeness and French Budget Minister Jérôme Cahuzac were both accused of evading taxes through undeclared bank accounts in Switzerland. Ironically, the latter was leading the fight against tax fraud in France. A number of European multinationals, such as UBS and Vodafone, have also been suspected of taking part in proven or alleged evasion schemes. These high-profile cases have raised public awareness of tax dodging in Europe and given credit to its detractors. For instance, the Tax Justice Network estimated that 20 to 30 trillion dollars are currently held in tax havens worldwide. The issue is especially sensitive for European countries in the current context: securing stable tax revenue has become an urgent priority in times of recession and high public debt. Furthermore, the existence of tax havens within Europe – including Switzerland, Luxembourg and the Channel Islands – remains a pressing challenge for the continent.
French Budget Minister Jérôme Cahuzac “fighting against tax fraud” in November 2012
A contemporary criminal epidemic
Is the subject of this polemic
Its epicentres are the financial sectors
In the United Kingdom and United States
And its reverberations have left entire countries in dire straits
That crime is corporate fraud
Committed by the banks and the fraudulent accountants
Fraud by the hedge funds and ratings agencies
And in the fraudulent delivery of fraudulent securities
To people who hardly knew an asset from a liability
by Antoine Cerisier
“An unexciting truth may be eclipsed by a thrilling falsehood”, Aldous Huxley, Brave New World
A Brave New World?
European economies have been facing severe difficulties since the outset of the global financial meltdown. The Eurozone crisis makes the headlines in financial publications and the mainstream media virtually every week. The accepted wisdom on economic recovery and debt reduction has rarely been questioned by journalists and policymakers. If a Martian were to land on earth – say in The Economist’s London press room – with no preconceived ideas or previous knowledge of our old continent, he would probably come to the following conclusions. In this world, Scandinavian countries like Sweden, with high taxes and bloated welfare states, cannot reverse their inevitable decline and will soon be faced with mountains of debt. Britain, he would think, is on the verge of becoming Europe’s new economic superpower thanks to a vibrant financial sector and courageous reforms undertaken by David Cameron’s coalition government since 2010. Southern European economies like Greece, Spain and Portugal are quickly recovering from recent debt crises and can expect a future of prosperity and competitiveness. And they lived happily ever after.
by Joseph Markus
Over the past few days much has been written seeking to predict the course of events in the New Year. Among the left-leaning columnists and writers, social security – a “war over benefits” – tops the list. That this is the case should not surprise anyone. This year will be the year when, for the first time, social security payments will fail to keep pace with the rising costs of living caused by inflation. We have also seen Iain Duncan Smith, Secretary of State for Work and Pensions, unleashing splenetic attacks on the alleged overspending of the last Labour government, most recently in relation to tax credits. This is the same Mr Duncan Smith that believes in the Romney-esque mantra that the worst possible thing that society can do for the poor and out-of-work is to maintain their “dependency” on the state.
by Antoine Cerisier
Environmental issues have gained salience over the past decades due to greater awareness of ecological degradation and growing scientific research on climate change. The latter issue has been particularly present in the media in the last ten years. Numerous scientific reports on global warming and sea level rise have been made public; a recent World Bank publication observed a 4 degree rise in global temperatures by the end of the century “would push some countries or regions to the brink of collapse”. US politician and activist Al Gore even won the 2007 Nobel Peace Prize, along with the UN Intergovernmental Panel on Climate Change (IPCC). But environmentalism did not start with Al Gore and his emphatic coverage of climate change: environmental concerns lie far back in time.
By Marc Morgan
“If I have seen a little further, it is by standing on the shoulders of giants.” (Isaac Newton, 1676)
A simple idea, embodied in a proverb, has been at the core of mainstream economic theory since the conservative-libertarian economist Milton Friedman popularised it in 1975. This is that “there is no such thing as a free lunch”. Essentially what this proverb intends to say is that one cannot get “something for nothing”. The first reference to this idea originated in 19th century US saloons whereby free lunches were offered to customers who purchased at least one drink. The foods, being high in salt, would entice customers to consume more drink, usually beer. As such the “free lunch” carried a hidden cost, namely the price paid for each extra unit of drink, which effectively ended up paying for the lunch. In economic terminology “no free lunch” represents the trade off (or opportunity cost) that must be made between two things that one values.
By Marc Morgan
The IFSC: where the decisions are really made?
Earlier this year, formal records were released under the Irish Freedom of Information Act which revealed the intertwined relationship between the Irish Government and the Irish Financial Services Centre (IFSC). These records become known to the general public on Monday October 8th in an article by The Irish Times. The relationship between the two parties has been, and continues to be, played out within the IFSC Clearing House Group, a lobbying group, chaired by Martin Fraser, the secretary general of Government. The group comprises of civil servants from state agencies like the Industrial Development Agency (IDA) and Enterprise Ireland, as well as representatives from the principle financial corporations in the country; JP Morgan, Citigroup, State Street, Barclays, KPMG, Bank of America, Bank of Ireland, among others. Meetings between the two parties take place in Government Buildings, so it is no surprise that the Government’s policy bears striking resemblance to the Group’s position in two related areas: tax incentives for the financial industry and the stance on the EU’s proposal of a European-wide financial transactions tax (FTT).
If insanity is doing the same thing over and over again and expecting different results
Then calamity is clearly what these guys are all about
It doesn’t make you a Luddite to say
“Well, with hindsight, our confidence in the ratings agencies was totally misplaced”
Does anyone else remember the way
That they acted yesterday?
They said to put your mind at ease with a few of these mortgage-backed securities
Good enough for Lloyds TSB
Endowment funds at universities
And public sector retirees
Whose pension funds are intentionally designed not to invest in anything
Under a couple of B’s
By Antoine Cerisier
French Industry Minister Arnaud Montebourg among Arcelor Mittal workers in Florange
It has been almost six months since French voters elected François Hollande as their new President, giving his party – Parti Socialiste – the absolute majority in Parliament several weeks later. His victory came as a great relief for those critical of the rightward shift operated by the French conservatives since Nicolas Sarkozy’s election in 2007 – which I addressed in a previous contribution to this blog. However, both Mr Hollande and his quiet Prime Minister Jean-Marc Ayrault have been suffering from a sharp decrease in popularity in the last few weeks: more than half of French citizens seem to disagree with their policies. Part of the explanation lies in the current socio-economic context. Unemployment just hit the three million mark and is expected to rise in 2013; dire growth prospects may undermine the government’s efforts to reduce the deficit; and massive layoffs often make the news, including those incurred by the recent closure of Arcelor Mittal’s blast-furnace facilities in North-Eastern France.