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WRPE 2.4 (Winter 2011) –Contents

ARTICLES

The Possibility of Creating a Global Currency, and the Path to Its Realization

Enfu Cheng and Cui Wang

Abstract: The more that economic globalization develops, the greater the need for unity of world currency. At present, people have come to realize the dangers of US hegemony so they strengthen national and regional monetary cooperation. The birth of the euro proved the possibility of the removal of sovereign national currency within a region. Therefore, the idea of achieving broader monetary cooperation and establishing a single world currency and world central bank should be put on the agenda for the elimination of the international financial crisis and global economic governance. This article first analyzes the existing contradictions in the world economy, and then discusses the necessity and possibility of creating a global currency and the path to its realization.

Key words: international monetary system; world currency; US dollar; euro; Asian dollar; global currency; renminbi

 

The Crisis of the Early 21st Century: General Interpretation, Recent Developments, and Perspectives

Gérard Duménil and Dominique Lévy

Abstract: The current crisis is analyzed as a crisis of “neoliberalism,” a social order established in the wake of the structural crisis of the 1970s, to the benefit of upper classes, that is, capitalist and managerial classes. The crisis was the expression of the inner contradictions of this social order. On the one hand, the quest for high income on the part of these classes led to the extraordinary expansion of financial mechanisms and globalization. On the other hand, the US macroeconomy followed an unsustainable trajectory of disequilibrium (as the deficit of foreign trade). This fragile trajectory was destabilized by the subprime crisis. Credit and demand policies were conducted. The crisis entered into a second phase whose main feature was the crisis of sovereign debt. The action (quantitative easing) of the Federal Reserve was spectacular in the United States. In Europe the lack of governance and solidarity slowed down the bailout of the most affected economies, but the consequences on the rate of exchange of the euro remained very limited. The crisis will be long in the old world, though the “national factor” in the United States, confronted with the loss of its international hegemony, could stimulate much more active policies. Many countries in the periphery are now growing more rapidly, defining a new international configuration.

Key words: crisis; sovereign debt; neoliberalism; capitalist classes; managerial classes

 

The Global Crisis and the Governance of Power in Finance

Gary A. Dymski

Abstract: This article examines why the global financial crisis that began in 2007 has intensified policy debate about financial regulation and governance, and brought about the end of polite discourse in economics. Coming into the crisis, the received view on financial regulation equated power in finance as a matter of market concentration alone, and understood concentration as stabilizing and an indication that competitively fit firms were dominating the market. This article argues that the current crisis necessitates a reframing of our understanding regarding the governance—not simply regulation—of finance. At the core of this reframing must be a much richer, multi-dimensional conception of power and its implications in financial systems. This article argues that the locus of power in finance has shifted with the rise of the “originate-and-distribute” model in the 2000s. This shift created new possibilities for rent-extraction and speculation, to which the existing model of regulation was not prepared to react. The subprime crisis emerged precisely, in the view developed here, in the context of this crisis in the governance of power in finance. So restoring effective financial regulation will require a deep rethinking of what finance has become, and what it should be. The challenge is profound, for resolving the nearly global crisis of financial systems—and, by extension, of macroeconomic stagnation—depends on recognizing and responding to the considerable, multi-dimensional power accumulated by the very financial firms whose dysfunctionality helped create that crisis in the first place.

Key words: financial regulation; financial governance; power; banking concentration; megabanks; subprime crisis; originate-and-distribute; speculation

 

The Marxian Optimal Growth Model, Reproduction Scheme, and General Law of Capitalist Accumulation

Hiroshi Onishi

Abstract: As Professor Okishio proved the existence of exploitation mathematically, the birth, growth and death of capitalism should also be proved mathematically, and for this purpose we formulated the so-called Marxian optimal growth model. This is not a model in value-term because peoples’ direct interest is not value itself but utility and firms’ interest is not value but profit. However, a very important finding of this article is that such a non-value-term model can be translated into a value-term model, and we introduce a value-term reproduction scheme from the Marxian optimal growth model. In this form, we confirm that our model fulfills the conditions of simple reproduction and extended reproduction. However, a more important fact we found is that this optimal path shows (1) rising organic composition of capital, (2) falling rate of profit, and (3) falling ratio of output of the first sector. The second fact contradicts the Okishio Theorem, and the third contradicts Lenin.

Key words: death of capitalism; reproduction scheme; falling rate of profit; organic composition of capital; general law of capitalist accumulation

 

Parameter Estimation for the Marxian Optimal Growth Model

Atsushi Tazo

Abstract: In this article, we conduct an empirical analysis of a model called the Marxian Optimal Growth Model proposed by Yamashita and Onishi (2002). Mathematically, the Yamashita-Onishi model is the same as the neoclassical optimal growth model. Therefore, if analysis is limited to the steady state in the Yamashita-Onishi model, it is possible to use the techniques of macro-econometrics based on the dynamic stochastic general equilibrium model developed in the field of mainstream macro-econometrics. Examination of the analysis results showed that most of the discrepancies between the model and data are explained by error terms. To a certain extent, this could have been foreseen from the unrealistic assumptions of the basic Yamashita-Onishi model, and the fact that it was confirmed through actual analysis is significant. In this article, we must also note the fact that, although a Bayesian estimation approach was used in the analysis, the posterior distribution of the parameters derived as a result of the analysis is strongly affected by the prior distribution. This trend is particularly striking due to the small number of data items in the macroeconomic field.

Key words: Marxian optimal growth model; parameter estimation; Japanese economy

Classes and Class Differentiation in India’s Countryside

V. K. Ramachandran

Abstract: Central to an understanding of the agrarian question is the identification of the nature of classes that arise on the basis of the development of capitalism in agriculture. We need to understand classes in order to understand social and economic inequality, the nature of the state in India, and the ways in which the state intervenes in the countryside. In identifying classes, our task is two-fold: on the one hand, to establish certain general theoretical categories and criteria in order to distinguish classes in the countryside, and, on the other hand, to identify classes in situ, that is, in the specific agro-economic and social circumstances that prevail in different regions and localities.

Key words: agrarian relations; peasant differentiation; the state in India; agricultural labor

 

Marx, Marxism and the British Working Class Movement: Some Continuing Issues for the 21st Century

John Foster

Abstract: For Marx the British working class was both a practical inspiration and a challenge. Britain’s was the world’s first majority proletariat and in the 1840s was also the first to create a mass working class party. Yet in the second half of the 19th century British trade unions changed direction, allied themselves with bourgeois political parties and worked within the assumptions of the existing system. Marx’s explanation of this transformation is, the article argues, of continuing importance for our understanding of working class consciousness—with its key elements carried forward by both Luxemburg and Lenin in their critique of the revisionism of the Second International. The main intent of the article is to use more recent examples of working class mobilization in Britain to show the continuing relevance of this analysis. It focuses in particular on the issue of the relationship between the working class and a Marxist party. In doing so it draws on the Soviet school of Vygotsky and Leontiev to argue for a dialectical and materialist understanding of the development of working class consciousness in which the role of a Communist Party, in Marx’s terms, remains critical.

Key words: Communist Party; Marx; Lenin; British working class; social consciousness; Vygotsky

 

The Relationships among Certain Political and Socioeconomic Variables with Economic Efficiency: An Exploratory Article

Thomas E. Lambert

Abstract: This article is an empirical note that links measures of macroeconomic efficiency constructed through data envelopment analysis (DEA) with measures of inequality, poverty, as well as government debt, welfare spending, taxation and unionization in OECD nations from the last decade. In the course of minimizing the amounts of resources or inputs necessary to generate an optimal amount of GDP, those nations which are the most efficient in resource allocation and input minimization are also hypothesized to be those with higher levels of poverty and inequality yet lower levels of government spending and debt, tax revenues, and unionization, all else held constant. Much has been written about how market efficiency is either compatible or incompatible with these variables, and this article tries to offer more evidence by looking at how DEA measures of economic efficiency either correlate or do not correlate with them.

Key words: data envelopment analysis; economic efficiency; government spending; government debt; inequality; OECD; poverty; taxation; unionization; welfare

 

COMMUNICATIONS

The Interpretation of Capital: An Interview with Michael Heinrich

Xiaoping Wei

 

 

PEOPLE

The Academic Thought and Achievements of Xunhua Zhang

Yi Zhou

 

 

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