Tag: Economics

Two Proposals to Foster Autonomy, Renew Democracy and Exit Post-Truth Politics

By: Marco Senatore

In a world where money is the only universal means of exchange, how different would society be if racists had economic incentives to embrace human rights, and the average citizen found it profitable to foster democracy? In this article I will attempt to answer this question.

Last year the neoliberal narrative suffered a major blow in the United Kingdom, with the vote for Brexit, and in the United States, with the election of Donald Trump as President. By neoliberalism here I mean that political and cultural model that subordinates every public decision to economic rationality, and adapts the state and the whole society to the needs of the market. More specifically, I include in neoliberalism the Ordo-liberal School that influenced the architecture of the Economic and Monetary Union, the Chicago School, the so-called Washington Consensus and, somewhat, the Third Way developed during the 1990s. Beyond its economic principles, neoliberalism has also been important in supporting human rights and rule of law, as they facilitate the functioning of the markets.

In the current juncture, highlighting the risks of populism and of post-truth is an important and useful exercise. It is obvious that the manipulation of facts, racism and other forms of discrimination make populists much more dangerous for democracy than most politicians who have ruled the world in the recent decades.

However, in order to change some of the paradigms that are shaping the political debate in America and – to a less extent, after Macron’s election – Europe, it would be essential to deal also with the flaws of that neoliberal order, whose contradictions have helped the rise of populists. After recalling some elements that are shared by populism and neoliberalism, I would like to propose two forms of social interaction, aimed at overcoming these elements.

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Rethinking the Goals of Finance: Lessons from the Amherst Arbitrage

By: John Brodie Gay & Jeremy Kingston Cynamon

I. BACKGROUND

Financial devices, like all technologies, develop – sometimes intentionally, sometimes by historical accident – to benefit particular interests and reinforce certain values at the expense of others. Therefore, the form in which we encounter these various technologies today is not a necessary characteristic of those technologies, but the result of their respective histories. If those histories had unfolded differently, then those technologies might benefit sharply different values and interests. Given this contingency, we can plausibly pursue different ways of repurposing financial devices (as well as technology more generally) and thereby altering the interests and the values they protect. With a bit of imagination, we can realize alternative potentials in these devices.

The sort of argument just previewed has been largely ignored by the left. In general, progressives tend to treat the financial sector as a scapegoat for the ills of society.  In our view this is a mistake.  There is nothing inherently problematic about finance. Insofar as our contemporary financial practices are troubling, they are troubling because of their execution, not because finance is itself problematic. To the contrary, finance – if directed purposely – can be a great asset to the political programs of any stripe.

Our goal in this short essay is merely to demonstrate the aforementioned contingency and transformative potentials in our financial devices. We argue by way of example, using a peculiar story about the use of credit default swaps after the 2008 mortgage crisis to illustrate our larger themes.

II. FINANCIAL DERIVATIVES

We begin with a rather strange fact: our financial system allows individuals and firms to place side bets on any homeowner’s ability to pay his/her mortgage. Known as financial derivatives, the total amount gambled in these bets can greatly exceed the outstanding amount on the underlying mortgage. Bizarre as it may seem, this is the financier’s utopia: a “complete market” that allows participants to bet on any chance event. Natural catastrophe, the result of an election, even a terrorist attack could be the source of profits for the shrewd gambler.

In theory, these financial derivatives can be tools for prudently distributing risk across parties. In practice, however, the use of financial derivatives often results in dangerous concentrations of risk. As it happens, a significant proliferation of these sorts of financial derivatives coincided with the real estate bubble and the subsequent 2008 mortgage crisis.[1] Though much has been written about that crisis, the story presented in the following section will likely be unfamiliar to most readers – even to those who keep up with this sort of thing. This is probably not a coincidence. The story illustrates the potential inherent in our financial technologies and devices to disrupt the common practices of finance and harness its power for varying purposes.

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Liberal Values in Market Society

By: Jeremy Kingston Cynamon

Much of political philosophy concerns itself with devising a priori systems (derived purely from theory) for organizing society. However, in doing so it tends to overlook many extant structures – particularly those of the economic sphere. In this piece I examine what it is that these a priori systems overlook, as well as the ways that the existing structures alter the institutions haphazardly placed on top of them. I devote the bulk of my attention to the frequent attempts made to overlay liberal values into our market society.

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Iceland as a Model for Popular Mobilization in a Post-2008 World

By: Hayden Eric Godfrey

Fellow Icelanders,

The task of the authorities over the coming days is clear: to make sure that chaos does not ensue if the Icelandic banks become to some extent non-operational. For this the authorities have many options and they will be used. Both in politics and elsewhere it will be important to sheathe our swords. It is very important that we display both calm and consideration during the difficult days ahead, that we do not lose courage and support each other as well as we can. Thus with Icelandic optimism, fortitude and solidarity as weapons, we will ride out the storm.  

God bless Iceland [1] Prime Minister Geir Haarde, 6 October 2008

The connection between political corruption and popular mobilization against a small cadre of rulers is a tale as old as the concept of government itself. From the French Revolution of 1789, in which mobs of starving peasants took to the streets in a revolt against the ancient political order that took the blame for their destitution, to the age of extremist politics that emerged out of the Great Depression of the 1920s and 30s in Europe, this relationship rears its head in frequently dramatic fashions that reorient the power dynamics within society. In recent times, however, this revolutionary spirit has been absent in the majority Western societies, in which oligarchic domination of the political systems has created paradigmatic complacency in regard to a corrupted, broken status quo within their political economies.

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