Post WW 2 International Competitive Adjustments
Economic Growth Has
Winners and Loses
A
nalysis by Political Economist Mark Blyth

Quick Notes by Walter Antoniotti
See
U.S. Russia, China: Rivals, Adversaries, Enemies?

Return to Political Economy Book Summaries  12/14/19  Please share!

Prelude

The Why

Low Unemployment became "the" Public Policy Goal to counter Europe's post depression/recession,
and Russia's latest 5 year plan.
 Post WW2 Pent-up Demand  increased AD, increasing both US wages and Profits.
But the resulting High Inflation pushed interest rates up.

The FED broke the inflation spiral and lowered interest rates.
This helped maintain profit margins
 as Western business refinanced with continuously falling interest rates.
 Leveraged was also increased to maintain high profit.

2. The Change

Western Business Adjusted  to a mounting profit squeeze caused by increased flat world's AS.
Outsourcing, first to the US South and West and then to Asia was the process.
 "Wages fought profit and Profit Won."

But wealthy European and Asia countries ran trade surpluses
 so only U.S. Increasing Demand was available  to solve AS > AD.
But too many world economies require a trade surplus so something has to give.?

3. The Prediction

Resulting Political Turmoil
will continue but its effects may be less volatile, or maybe not.

Fiscal Policy AD Increases with of infrastructure spending
and or helicopter money like tax reductions could help.

Government Debt Guarantees
all could contribute to >2% real 1950's style economic growth.


See U.S. Post WW 2 Adjustments Part 1     Part 2

Can Democracy Survive Global Capitalism? 100 min video

   Political Economy Summary

1. The Good

Cold War to 1980
AD > AS

A Full Employment Goal Created  Inflationó a Debtors Paradise

2. The Bad

A Neo Liberal Reset 1980-2008
Almost Solved AS > AD

Business Responded to Inflation by going global, lowered wage growth and in the US,
a Creditors Paradise

3. The Ugly

Reactions to Neoliberalism 2008-

Sustained Deflation had Winners-Losers
Globalization Failed
Pickett's R > G created inequality
Equilibrium meant Increased Inequality

Structural Causes

Structural Causes to 1980

Strong Unions
Restricted, Rigid Labor Markets
Central Government Strong
Central Bank Weak
Finance Weak

 

Economic Effects
Sustained Inflation
Wages Share All Time High
Corporate Profits All Time Low
Real Value ff Debt Decreases
Inequality Low
 
Structural Causes
1980-2008

Weak Unions
Open Flexible Globalized Labor Markets
Government Less Economic Responsibility
Central Bank More Economic Responsibility
Finance Strong
 

Economic Effects
Secular Deflation
Wages Share All Time Low
Corporate Profits All Time High
Inequality High

 

Structural Causes  2008-
Lack of Bank Regulation

High Leverage
Short-Term Commercial Bank Reserves Were in Euros When Dollar Reserves Were Required.
Neoliberal Economist Under Estimated Economic Effects of Financial Market on Economic Activity.
Government t Helped the Top and the Bottom Creating Middle Income Envy.
 
Economic Effects
Winners Losers
Populist Nationalist Parties
attracted voters with renationalization
and anti-austerity policies.
Center Left Parties
lost control as lower wages and fighting more over less,
 and cartel politics blamed capitalism and globalism.

Center right parties in control blamed immigrants and globalism.

Debtors Can't or Won't Pay
Deflation Kills Wage Growth
Real Debt Value Increases
Creditors lost as
Real Value of Debt Up But Some Don't Pay
 

World's Very Poor and Very, Very Rich Won

Middle Earners of Rich Western Nations income Stagnated.

Everyone loves Paul Volcker. Everyone is wrong.

Bottom Line

A Return on Capital Growth R > Growth rate of the Economy G.

90% of Income Gains Went to Top 1% and since 2012,
most of it (70% of that 90%) went to Top 1/10 of 1%.

Continued Expansion of Credit aided by low interest rates,
to consumers, business and governments  to equate AD with AS.

Trump

Could the The_4G's of Politics, not economic inequality,
be the cause of world wide constitution?

 

 A Worldwide Threat Assessment From GZERO media

As we noted in the Wednesday edition, the US intelligence community
 has released its latest Worldwide Threat Assessment.

Much of the media focus this week has fallen on
President Trumpís criticism of the US intel chiefs,
but letís begin with the report itself. Here are its key findings:
The Trump administrationís trade policies have damaged US interests
by pushing allies to build new relationships with other governments.

ďAt present, China and Russia pose the greatest espionage and cyber attack threats

ISIS isnít finished.

Climate hazards
such as extreme weather are intensifying,
threatening infrastructure, health, and water and food security.Ē

North Korea
ďis unlikely to completely give up its nuclear weapons and production capability.Ē
North Korea has continued nuclear development in some areas
and taken actions that are reversible in others.

Iran continues to support terrorist groups in the Middle East and Europe,
but itís still complying with the terms of the nuclear

See

Mark Blyth explains
Competitive Adjustment in European Market Area
Competitive Adjustment Applied to Trumpism starting at 4 min 15 sec mark

Short Term Politics Versus Long-Term Returns  Video from Prof. Mark Blyth PhD -

Crashed Video and book-review of Crashed:
How a Decade of Financial Crises Changed the World
by Adam Tooze
 Part 1-3 author/editor
Walter Antoniotti

Post WW 2 U.S. Growth Alternate Version