Journal of
World-Systems Research, Vol V, 2, 1999, 253-274 http://jwsr.ucr.edu/ ISSN
1076-156X © 1999 Gernot Köhler.
1. Introduction
Something like "global Keynesianism" or "transnational socialism"
has been mentioned as a desirable alternative to global
neoliberalism ( Redmond 1997). However, a definition of this kind of
global Keynesianism is hard to find. Many leftists tend to associate
Keynesianism with corporate power. However, there are also numerous
other leftists who view this differently. For example, a member of
parliament for the German Green Party stated in a recent interview
that "a reformist party today has to be a left-Keynesian party which
contradicts the logic of capital" (Ebermann 1998). A number of
scholars from several countries, including Canada, pursue
post-Keynesianism, in the sense of left-Keynesian economics (e.g.,
Seccareccia 1991). However, available left-Keynesian literature, as
I see it, is lacking a world-system perspective. I am trying in this
article to synthesize the two perspectives -- namely,
left-Keynesianism and world-system theory, leading to a perspective
of global left-Keynesianism. This leftist global Keynesianism can,
perhaps, be described as an approach to economics which emphasizes
responsible public management of economic problems in a world-system
context. Common themes in global Keynesianism include the importance
of public management, democratic politics, the mixed economy, global
income distribution, the management of global demand, investment and
money, ecological sustainability and the importance of multiple
levels of public management -- local, national, regional and
global.
The intellectual history of the term "global Keynesianism" is
short. The expression "global Keynesianism" (or, "international
Keynesianism") appeared in the literature in the early 1980's and
was, initially, used by critics to describe the so-called Brandt
Report, which proposed a kind of Marshall Plan for the Third World
(Brandt Commission 1980). Critics left and right rejected that
approach at the time (e.g., Dauderstaedt/Pfaller 1983; Corden
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but the idea of global Keynesianism lingered on, partly, as a
whipping boy, but also as an inspiration. I am aware of two authors
who developed contributions to global Keynesianism with this
explicit label -- one American, namely, the global Keynesianism of
Mead (Mead 1989), and one European, namely, the global
left-Keynesianism of Elsenhans (Elsenhans 1996). One post-Keynesian
economist observed as recently as 1995 that global Keynesianism is
"only some system -- a mechanism that has not yet been worked out"
(Galbraith 1995).
This essay is exploratory and synthetic. I am attempting to pull
together various ideas which together might describe a perspective
of leftist global Keynesianism. These materials are of two types --
theoretical/analytic and praxeological/political. Keynesian
economics are traditionally interested in aggregate demand and its
management. That is why my presentation starts with the concept of
demand.
2. The Importance of Demand
The importance of aggregate demand has been acknowledged by such
diverse economic theoreticians as Sismondi, Marx, Keynes, Samuelson,
and Mandel, to name some. The concept of a market, as used in
economic theory, implies the presence of supply and demand. The
market mechanism is generally conceptualized as a process of
feedback and equilibration between supply and demand. Demand plays
an essential role in this mechanism; indeed, demand is a logical
prerequisite of a market. Without a demand side there is no market,
by definition.
There is consensus and controversy about the role of demand. A
fair amount of agreement exists on two points. First, demand is
important at the micro-level. If a supplier (individual or firm)
cannot find enough customers for his (her, its) products, he is
forced out of business or compelled to supply other goods or
services for which there is a market (i.e., for which there is
demand). Secondly, concerning aggregate demand (macro-level)
there is a fair amount of consensus that aggregate demand is
important in the short run. Thus, consumer spending and
business spending, as well as their intentions, are routinely
monitored through public surveys; and theoreticians tend to agree
that short-term movements of demand influence national product and
income (compare, for example, the textbooks, Heilbroner/Thurow 1978
and Mankiw 1994).
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Major controversy rages about the role of aggregate demand in
the long run; that is to say, about the importance of aggregate
demand for the long-term growth of GDP, productivity, income and
employment. Keynesians and Marxists tend to assign an important role
to aggregate demand in long-term economic growth (or, accumulation).
Others assign primacy to the supply side. Global Keynesianism
rejects a pure supply-side view, emphasizing the interactivity of
supply and demand, instead.
3. Critique of the Supply-Side Paradigm of Economic Growth and
Accumulation
Disagreements about paradigms cannot be resolved in a stringent
procedure of proof or falsification as in mathematics, logic or
hypothesis-testing. The discussion of paradigms involves an element
of philosophy or even persuasion. (Keynes wrote about the importance
of persuasion for a similar reason.) Therefore, I will not attempt
to "disprove" the supply-side paradigm. Instead, I will merely state
three reasons why I believe that a pure supply-side paradigm of
economic growth (accumulation) is inadequate. These reasons are: (1)
practical disappointment; (2) logical fallacy; (3) ideological bias.
By "paradigm" I mean paradigm, in the sense of Thomas Kuhn, as a set
of shared concepts, shared views about causality, shared views about
relevant evidence and pertinent research methodologies, as well as
shared values.
3.1 Practical Disappointment
The supply-side paradigm of economic growth gained increasing
prevalence around the globe, starting in the early 1970's with the
successive introduction of floating exchange rates, dismantling of
controls on international capital movements, policies of
deregulation and privatization, and so on. While these policies are
propagated with the claim that they are superior to Keynesian or
Marxist policies, they have, by and large, not generated impressive
economic growth rates and have, on the contrary, lead to a great
deal of wage stagnation, high unemployment, only modest productivity
growth in many countries, even to economic depression or collapse as
in some of the so-called transition economies of Central and Eastern
Europe (Tausch 1997). The fact that the (open) unemployment rate in
the United States is currently low, as defenders of neoliberalism
may point out, is welcome news but does not account for problems of
quality of employment (including the
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of part-time employment in total employment) and inadequate wage
levels of the working poor.
3.2 Logical Fallacy
The supply-side paradigm of economic growth has been formalized
in such formulae as Cobb-Douglas functions or the Solow model. The
Solow model postulates that long-term economic growth is caused by
the supply side -- and nothing but the supply side, namely, by the
conversion of three major categories of inputs into aggregate output
(Y). The factor inputs in this model are capital (K), labour (L),
and level of technology (A) -- according to the function Y =
f(K,L,A) (see, e.g., Solow 1956).
A major logical flaw in this model and the supply-side paradigm
of economic growth generally is with respect to causal inference.
The paradigm assumes that an economy functions like a machine
without any feedback between supply and demand. The causation
implied in this view is strictly uni-directional -- namely, from
capital, labour and technology (and their growth) to national
product (and its growth). However, the uni-directional view of
causality implied in the supply-side paradigm contradicts the very
concept of a market itself. In a market, aggregate outcome is
thought to be the result of an interaction between supply and
demand. Causation in a market is a two-way causation from supply to
demand and from demand to supply; or, in other words, a feedback
loop between supply and demand. The uni-directional view of
causality implied in a pure supply-side paradigm of growth ignores
the feedback mechanism in the concept of a market. The pure
supply-side paradigm of economic growth is a primitive machine
model, not a market model, which purports to explain economic growth
(accumulation) in a market economy, nevertheless. This is a
theoretical inconsistency and a logical fallacy.
3.3 Political Bias
The pure supply-side paradigm of economic growth neglects the
demand side, two thirds of which is made up of the consumption
demand of the mass of consumers. By neglecting this, the paradigm
neglects what matters to labour--namely, wages and salaries and
their role in national growth. The pure supply-side paradigm of
economic growth (accumulation) thus exhibits a strong pro-business,
pro-capital bias which is also evident in policies derived from this
paradigm, like deregulation, privatization and so on.
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The three points of criticism above are very brief and are merely
stated in order to indicate the position of global Keynesianism, as
I see it, for orientation purposes. The literature on these issues
is voluminous and there is no intention here to repeat at length
what is presented elsewhere.
4. Levels of Analysis
Global Keynesianism is concerned with the analysis and management
of global demand. Economic analysis distinguishes between micro- and
macro-analysis. These levels of analysis can be further subdivided
and augmented and we can speak of a variety of units and levels of
analysis, as follows:
- individual person - household - firm - industry -
sector (public-private; agriculture-industry-service) - class
or, geographically,: - local - sub-national region -
national - region (multiple countries, world region, like Africa
etc.) - global (all countries)
In global Keynesianism, all these levels are of interest, but it
is important that a global level of analysis is also present.
Whether action can or should be taken at the global level or,
rather, at regional, national, or sub-national levels is an
additional problem which must be addressed.
5. The Importance of World-System Demand (Global
Demand)
Global demand is aggregate (effective) demand in the entire
world-system (world economy), as opposed to demand in the economy of
a single country (state, national economy, macroeconomy).
Wallerstein observed about "world-system demand" that:
"there are ‘expansions’ and
‘contractions’ in the world economy ... I think they are linked to a
basic contradiction of the system, which has to do with
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and demand, that is, world-system supply and world-system
demand, not firm supply and demand, nor state supply
and demand, but world-system supply and demand." (Wallerstein 1978:
232; emphasis original)
The concept of global demand is important in light of past and
present world developments; it has been part of the analyses of a
number of scholars and is also appearing in contemporary
journalistic literature. The observers who have been interested in
world-system demand (global demand) tend to be of various
persuasions. Their theoretical differences notwithstanding, they
tend to share the view that global demand is, tends to be, or is in
danger of being, inadequate. Here are some samples of opinion from
diverse backgrounds:
An anonymous editorial writer, writing about the "overcapacity
bomb", stated: "It may be time to begin focusing policy on
inadequate global demand, especially in Asia. Just as Keynesian
economics is about to be buried, John Maynard Keynes's attention to
demand may be more salient than ever -- even if his solutions are
not." (Anonymous 1997: 138) Allen and Vines report various results
and conclusions based on econometric modelling of the global
economy. The authors refer to a "global paradox of thrift", which is
Keynesian vocabulary, and the authors raise this question: "(T)here
is paradoxically the problem that the world is currently in
Keynesian recession. What could be worse than a massive reduction in
injections of expenditure into the global economy, particularly for
the developing countries, whose export revenues might appear to be
particularly vulnerable?" (Allen and Vines 1993: 134) Mead developed
a comprehensive set of policy proposals for the global and national
levels. He writes: "The new system proposed here can be best
described as multilateral global Keynesianism" (Mead 1989: 427).
Singh and Zammit analyze unemployment and underemployment in the
North and South of the world and conclude that global unemployment
and underemployment are caused by inadequate global demand. They
speak of a global "demand constraint", which they describe as
"deeply institutional in nature". The authors call for three types
of institutional/structural reform, namely: (1) "a new institutional
and behavioural framework within the North"; (2) "within the South,
a major change in policy direction"; (3) "(o)n the global scale, a
rather different system of international arrangements between the
North and the South." Furthermore, the authors note that such
reforms "will have to pay full attention to ecological
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(Singh and Zammit 1995: 109-110) Elsenhans developed a leftist
theory of global Keynesianism in which a "global demand gap" is a
central concept. Furthermore, Elsenhans observes: "Enterprises are
virtually incapable of expanding the market. They also cannot
sustain the regulatory policy framework in its entirety. For this,
they require the intervention of other social forces, for instance
the labour movements and the state..." (Elsenhans 1996: 26). Mandel
discusses global demand, for example, in The Second Slump
(1978), from which the following quotations are taken.
Mandel states: "Whatever the deeper meanderings of the analysis,
the first phenomenon that must be grasped is this sharp break in the
unstable equilibrium between supply and demand of commodities..."
and : "Nothing illustrates the capitalist character of the market
economy and its unjust and inhuman consequences better than this
spectacle of half of humanity afflicted by hunger not because of
lack of food products, but because money demand cannot keep
up with physical demand." (Mandel 1978: 169 and 146, emphasis
added)
The above quotations show that authors from different traditions
who studied global demand converged on two opinions, namely: (1)
global demand matters (is important); and (2) global demand may be
inadequate at times; or tends to be inadequate; or is usually
inadequate.
6. Absolute and Relative Inadequacy of Global Demand
"Inadequacy of global demand" has two distinguishable meanings
which are frequently mixed together, namely:
(a) Absolute Inadequacy of Global Demand
(social-existential meaning) -- The people (workers, labour,
global masses) do not have enough purchasing power for a decent
standard of living. This meaning of "inadequate global demand" is an
observation and judgement about an existential reality experienced
by people.
(b) Relative Inadequacy of Global Demand
(circulatory-systemic meaning) -- There is a gap between global
supply (aggregate production power) and global demand (aggregate
purchasing power). This global demand gap is important in the
circulatory flow of the world economy and has been alternately
described as a problem of "overproduction" or a problem of
"inadequate demand", reflecting different analytic and political
emphases. I concur with Mandel who argues (see above) that one
should not exaggerate the
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between these two interpretations. In my opinion, "overproduction"
should be, more properly, called "relative overproduction" which
coexists with "absolute underproduction" of goods and services for
the provision of basic needs of masses of people.
7. The Global Unemployment Equilibrium
The concept of an unemployment equilibrium has been developed by
Marx and Keynes, where Marx was thinking more of the long term
(permanent feature of the capitalist economy) and Keynes more of the
short term (depression of the 1930's). Marx explained how the
capitalist economy, as a system, generates a "reserve army of the
unemployed". Keynes, who was aware of Marx's work, explained how a
demand gap in the economic system can lead to a stable unemployment
equilibrium -- as in the depression of the 1930's. In global
Keynesianism the concept of a systemic unemployment equilibrium is
applied at the global level of analysis, leading to the notion of a
global unemployment equilibrium, or a world-system
unemployment equilibrium.
7.1 Global Equilibrium and National Equilibria
The world can, alternatively, be viewed as a single world-system
("one world") or as two hundred countries (nation-states, national
macro-economies). Correspondingly, we can speak, alternatively, of a
single global unemployment equilibrium or of two hundred
national unemployment equilibria. The two levels of analysis
coexist. The one global equilibrium and the many national equilibria
exist at the same time. The equilibrium of the entire world-system
functions as the "environment", as one might say, within which the
many national equilibria exist. While there are relationships
between the global-level equilibrium and the national-level
equilibria (i.e., between the state of the world and the state of
the nation), one cannot simply deduce one from the other. Thus, the
world-system in its entirety may be in a state of a global
unemployment equilibrium, which may have a depressive effect on all
national equilibria. However, it is possible that, at the same time,
an individual country may escape the global depressive effect and
may be relatively free of unemployment -- just like a
national economy may be in an overall state of recession or
depression, while some individual firms may do well (as, for
example, the alcohol industry in the United States during the
depression of the 1930's).
At the present time, the United States has a lower unemployment
rate than the majority of OECD countries and, traditionally, the
OECD countries (core of the world system) have had less unemployment
and underemployment than the non-OECD countries (periphery of the
world system). According to the world-system view implied in global
Keynesianism, the national equilibria of the two hundred countries
are not totally isolated from the overall global equilibrium.
The transmission mechanisms between the global equilibrium and
the national equilibria require special investigation. Since
virtually all national economies are so-called "open economies" at
the present time, transmission of misery or well-being (contagion)
between countries and between the global and national levels occurs
through such mechanisms as global investment flows (monetary and
real investment), global trade flows, the global exchange rate
system, global technology transfers, global institutional
arrangements (organizations, rules and laws), global labour
migration and brain drain, global spread of environmental decay, and
so on.
In line with these theoretical considerations, it cannot be said
that national unemployment and underemployment is an
exclusively national phenomenon. The global reserve army of
unemployed and underemployed is shared between nations; and the
unemployment and underemployment generated by the global
unemployment equilibrium is shared by two hundred national
economies. It is easier for a national economy to have full
employment when the entire world-system is in a full-employment
equilibrium than when the entire world economy is in a global
unemployment equilibrium, producing massive world-wide unemployment
and underemployment. In response to a miserable global
underemployment situation, which generates pressures for massive
international migration (economic migrants), USA, the European Union
and others have tough laws and law enforcement for keeping economic
migrants from entering their economies and, once entered illegally,
for expelling them.
7.2 Static View of the Global Unemployment Equilibrium
The world market economy, as a market in the sense of economic
theory, has two constituent forces which interact -- namely,
aggregate supply and aggregate demand. Whichever force of the two is
smaller, determines the
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of total economic output and total employment (with additional
influences from other variables). Both Keynesian and Marxist
economics call attention to the fact that all the time (Marxist), or
many times (Keynesian), the system has a tendency to generate an
excess of aggregate supply over aggregate demand ("overproduction",
Marxist), or a shortage of aggregate demand relative to aggregate
supply ("demand gap", Keynesian). The smaller of the two forces --
namely, aggregate demand, limits ("constrains") the magnitude of
total economic activity and output (GDP). Given the production
methods available at any time and in the aggregate, an aggregate
relationship exists between total economic activity and total
employment. As a result, aggregate demand, as the constraining
factor, limits total employment. Global Keynesianism claims that
this situation exists in the entire world-system at the present time
and that this situation of a relatively stable global
unemployment ( underemployment) equilibrium can only be overcome
through public intervention ("public management"), broadly defined.
This is in contradiction to the neoclassical / neoliberal opinion
that the critically constraining factor in the world market economy
is the supply side and that the free play of "market forces" can
solve the problem without public intervention.
7.3 Dynamic View of the Global Unemployment Equilibrium
In the dynamic view, more attention is paid to time, process and
growth rates than in the static view. Marxist analysis is
traditionally dynamic in this sense and Keynesian and post-Keynesian
scholars have also developed dynamic views of the problem (e.g.,
Asimakopulos 1991). In global Keynesianism, "dynamic view" means
that growth rates of global product (global GDP) and global
employment are an outcome of the interaction between the growth
rates of global aggregate supply and global aggregate demand.
The global unemployment equilibrium is a growth equilibrium
between growing (or declining) global aggregate supply and growing
(or declining) aggregate demand. In the evolution of these growing
(or declining) aggregates, the global demand gap is ever-changing in
its magnitude, both in absolute and relative terms, and the
world-system has a tendency to generate a demand gap
(tendency toward relative overproduction) of varying magnitude at
all times or most of the time. Detailed analysis of these dynamic
processes is complex and a great variety of views and models exist
to describe these processes
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the national level, but less literature deals with the global level
of analysis. In very general terms, the factors and processes
invoked to describe this dynamic reality can be grouped under two
headings -- (a) conjunctural factors and processes; and (b)
structural factors and processes. This distinction is in use at the
national level of analysis and can also be applied at the
world-system level.
7.4 Conjunctural and Structural Determinants of the Global
Equilibrium (Disequilibrium)
The factors and processes determining the global equilibrium
(disequilibrium) can be loosely grouped under two headings,
namely:
(1) conjunctural determinants (including "cyclical", in
the sense of the short business cycle, and other short-term
factors); and (2) structural determinants (including
distributional, institutional, secular trends, long cycles,
etc.)
For example, consider Mandel's analysis (see above). Mandel
mentions the following with respect to the world recession of the
1970's: (1) conjunctural demand factor -- namely, contraction of
world trade due to recession in the imperialist countries (core of
world-system); (2) conjunctural management -- namely, "neo-Keynesian
recovery techniques" ("enormous injection of purchasing power") in
the core countries, which lead to a short-term surge in demand for
consumer goods, which "effectively halted the recession"; and (3)
structural demand factors -- namely, (a) marginality of people --
the starving billion of the world does not have enough food money to
buy existing global food stuffs; (b) marginality of countries -- the
global periphery generates comparatively modest trade demand in the
international trading system. These structural causes of inadequate
world-system demand place a major limit on the expansion of global
economic growth, in Mandel's opinion, and, we may add, perpetuate a
dynamic global unemployment equilibrium.
8. Global Full Employment Equilibrium
When the world-system (world economy, world market) is analyzed
in terms of a dynamic equilibrium (or disequilibrium), we may
observe that a global unemployment equilibrium exists; we can also
postulate the possibility
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a global full employment equilibrium -- that is to say, a state of
the world in which aggregate supply and aggregate demand have a
configuration in which all globally available labour is fully
employed. Since a state of global full employment is mostly a dream
(a utopia), the door is wide open for disagreements about praxeology
(i.e., about how to get there). The traditional disagreements with
respect to full employment at the national level carry over to the
global level of analysis and action -- namely, in the traditional
Marxist view, global full employment can only be achieved through an
abolition of the capitalist world-system (world revolution); in the
global-Keynesian view, global full employment can be achieved
through active public management of the system; in the
global-neoliberal view, global full employment is either (a) not
desirable, or (b) of no particular interest, or (c) is thought to
come about through the free play of "market forces". The
global-Keynesian presumption is that a key role in achieving global
full employment is played by active management of global demand.
This global demand management must not be confused with, or reduced
to, the old-Keynesian concept of "pump priming" (indiscriminate
pumping of money into the system). Rather, new, more appropriate
techniques of anti-cyclical and anti-structural demand management
must be devised. In this context, more and more authors mention a
global "Tobin tax" (tax on international financial transactions),
global ecological taxes, transnational capital controls, and other
global, regional, transnational, national and local instruments.
Much more work is required to develop a full set of institutional,
political and economic instruments. The political feasibility of
such measures depends, to a large extent, on the ability to organize
countervailing pressure throughout the world-system against the
dominating interests of business (global capital).
9. The Importance of Anti-Structural Global Demand
Management
Keynesianism at the national level has traditionally operated
with a concept of anti-cyclical demand management (with reference to
the short business cycle). At the world level,
anti-structural demand management appears to be as important
as, or more important than, anti-cyclical demand management. This
view can be supported by three observations -- namely, (1) due to
the multitude of two hundred national economies in the world, the
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cyclical developments in each national economy tend to neutralize
each other to some extent in the global aggregate; (2) from a
management point of view, it is relatively more difficult to
"fine-tune" any global short-term cycles which may exist at the
world level, than to "fine-tune" national business cycles, albeit
this is also very difficult; (3) the major demand problems in the
world economy as a whole (in terms of magnitudes) tend to be more
structural than (short-term) cyclical in nature -- notably, demand
problems caused by the global monetary and exchange rate system,
demand problems generated by the global income distribution, demand
problems caused by the globalization of production, and so on.
I will select and examine three problem areas in which the
world-system (the present "global formation" -- Chase-Dunn, 1989)
has major structurally induced demand problems -- namely, (1)
globalization of production; (2) global money and finance; and (3)
exchange rate system.
10. Globalization of Production and Global Demand
Capitalism has always operated simultaneously in a national and a
worldwide context, including international and colonial trade and
investment. In recent decades, the production and supply of goods
and services has increasingly been globalized through multinational
production and marketing techniques. Multinational (transnational,
global) corporations have been, and are, moving more and more
production to countries were wages and other costs are low and are
trying to sell as much as possible in countries where incomes are
high. This global "buy-and-produce low and sell high" principle
makes supply-side sense and tends to increase the efficiency of
global production. However, this practice increases, on a global
basis, the disequilibrium and gap between global supply and global
demand, since a shift from high-wage to low-wage production
(globally) has the effect of generating relatively less global
aggregate demand. This mechanism has been recognized and has been
called a "race to the bottom" or a "downward spiral". For example,
Brecher and Costello write:
"The most direct symptom of globalization is the ‘race to the
bottom’ itself -- the reduction in labor, social, and environmental
conditions that result directly from global competition for jobs and
investment." (Brecher/Costello 1994: 22) Furthermore: "As
corporations move jobs that paid $10
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hour to countries where they pay $1 per hour, workers can buy less
of what they produce." (Brecher/Costello 1994: 25) And:
"Unemployment and falling real wages led to declining consumer
demand for products worldwide..." (Brecher/Costello 1994: 55)
Closely related to the globalization of the supply-side
(globalization of production) is the issue of technological
progress. New technologies of a labour-saving kind render the
supply-side more efficient through automation and other kinds of
labour-saving. On the one hand, technological advances are desirable
for the sake of long-term economic growth. On the other hand, if
such supply-side improvements are not matched by compensating
job-creation and/or wage increases, then the relation between supply
and demand is disturbed (the disequilibrium is exacerbated),
nationally and/or globally. Furthermore, technological advances are
not neutral with respect to ecological sustainablity (Daly 1996;
Douthwaite 1998).
11. Global Money and Global Demand
11.1 Global Circulation of Money
Global demand is composed of global consumption demand (private
and public) and global (fixed-)investment demand (private and
public, including foreign direct investment). Money which circulates
in the world-system may appear in a "real" (physical) economic
circuit as effective demand for goods and services or in a "nominal"
(financial) circuit in search of financial investment. Keynesians
have traditionally analyzed this in terms of the relationship
between aggregate saving and aggregate investment; Marxists in terms
of surplus value. In both traditions, the circulation of money is
closely related to the disequilibrium between supply and demand in
the system.
In 1993 the global GDP was valued as 23.6 trillion U.S. dollars
(World Bank 1995: 29). For the same time, the World Bank estimated
the total resources of international financial institutions at about
14 trillion U.S. dollars (Patterson 1997). Whether one takes a
Keynesian or Marxist view of this, the amount of global money which
is withdrawn from, and circulating independent of, the real economy
of world-system supply and world-system demand is enormous. This
global situation is similar to what Keynes described, with respect
to the depressed national economies in the 1930's, as a situation of
"poverty in the midst of plenty" (Keynes 1964: 30); the world
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awash with money, yet much of this money is not used to create
employment or real consumption value.
11.2 Volatility of Global Finance
A problem which has received widespread attention is the
volatility and instability of global financial investments. The
deregulation of global capital markets has lead to a situation in
which large amounts of finance capital can easily be moved from one
country or world region to another. This has lead to drastic swings
in effective demand (fixed investment and consumption) for countries
and regions thus affected, either positively or negatively.
11.3 Exchange Rates and Global Demand
The distribution of global demand between high-income and middle-
to low-income countries is distorted as a consequence of the
existing exchange rate system. The currencies of peripheral and
semi-peripheral countries (low- and middle-income countries) tend to
be undervalued in relation to the currencies of high-income
countries. The last point is contentious and has been argued by
Yotopoulos (1996), Havlik (1996) and Kohler (1998), whereas a
majority of contemporary economists tend to take the opposite point
of view.
Undervalued exchange rates contribute to unequal exchange and a
distorted distribution of global demand. Unequal exchange (Emmanuel
1972), refers to imperialism of trade and exploitation through
international trade. World tables of unequal exchange have been
published for the year 1995 which show the magnitudes of losses and
gains due to unequal exchange, resulting from undervalued exchange
rates, for 119 countries (Kohler 1978). Based on these world tables
of unequal exchange for 1995, it can be observed that the equivalent
of 6.6 percent of global GDP (in 1995) was transferred from low- and
middle-income countries to high-income countries as an "unrecorded
transfer of value" due to distorted currency values. This amount
corresponds to 24 percent of the combined GDP's of non-OECD
countries (as a loss) and to 8 percent of the combined GDP's of OECD
countries (as a gain). In 1995 the three countries with the highest
amounts of unequal-exchange losses were China, Indonesia and Mexico;
the three countries with the highest amounts of unequal-exchange
gains were Japan, USA and Germany.
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12. Global Keynesianism as Policy, Management, Action
(Praxeology)
In addition to theoretical literature, a wide range of literature
exists on policy proposals which may be called global-Keynesian,
broadly conceived. Many of these proposals have been criticized for
being either interventionist and dirigistic (neoliberal critique) or
pro-capitalist and unrealistic (Marxist critique). Nevertheless,
many of these ideas are valuable; some are receiving increasing
public attention and acceptance.
12.1 What global Keynesianism is not
Global Keynesianism may be a rather fuzzy project, but it is not
any of the following, as some critics may be inclined to think. (1)
Global Keynesianism does not advocate indiscriminate "pump priming"
or "printing of money". (2) Global Keynesianism is not limited to a
"global Marshall plan", as proposed in the Brandt Report of 1980;
this is only one of several proposals made from a global-Keynesian
perspective. (3) Global Keynesianism may engage in global-level
analysis (world-system analysis); this does not mean that the
proposed policies or management techniques are necessarily at the
global level; they may also be at a regional or national levels of
action. (4) Global Keynesianism is not necessarily anti-ecological.
The very term "sustainable development" originates in a report using
a global-Keynesian paradigm, namely, the Brundtland Report
(Brundtland Commission 1987). (5) Global-Keynesianism is not in bed
with global corporations; rather, it advocates controls and
containment of global capitalism.
12.2 Levels of Action and Management
The expression "global Keynesianism" should not mislead one into
believing that global Keynesianism has only one level of action
(i.e., the global level). I have pointed out earlier that
global-Keynesian diagnostics, analysis and theory operate with many
levels of analysis. Similarly, global-Keynesian praxeology operates
with multiple levels of action, policy and management. These include
agents (actors, units of action) like individual, class and state
and levels of action and policy from local to global. For example,
global-level diagnostics may lead to the conclusion that the most
effective response to a problem is at the sectoral level (e.g.,
transnational collective bargaining by labour unions) or,
alternatively, at the regional level (e.g., organization
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regional development banks). Of course, the diagnosis may also lead
to recommended action at the national level or the global level. For
policy-, management-, and action-purposes, the world-system must be
seen as a multi-level system with multiple levels of actors and
multiple levels of activity and management.
12.3 Goals of Global Keynesianism
Global Keynesianism is not a political party but a fuzzy point of
view. The goals of global Keynesianism have not been neatly
catalogued anywhere. However, it may be fair to say that the broad,
overall, long-term goals of global Keynesianism include: (1) global
full employment; (2) improvement of the global income distribution;
(3) world-wide social security; (4) economic growth (of the
sustainable kind); (5) ecological sustainability; (6) democratic
process; where the numbering does not imply a rank ordering of
goals; all of them are important.
13. Selected Action Proposals of Global Keynesianism
Individual proposals for policy and management which are of a
global-Keynesian nature, may conflict with each other, and various
experts who may have global-Keynesian points of view or inclinations
may not agree on individual proposals. Global Keynesianism is a
pluralistic, open project, in a state of collective learning, where
theory and practice have certain vague shapes, but are by no means
crystallized into a fixed system. This may be a disadvantage, but
may also be an advantage, as open-mindedness in an uncertain world
can be a virtue.
13.1 Improving the global income distribution
Global Keynesianism is generally in favour of improving the
income distribution between high- middle- and low-income countries.
To this end literature with a global-Keynesian perspective supports
(1) debt relief or debt forgiveness for certain categories of
countries; (2) commodity price stabilization schemes; (3) foreign
aid from high-income countries; (4) improved terms of trade for low-
and middle-income countries, and other policies familiar in the
"development" literature.
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13.2 Improving global and regional organizations
From the perspective of low- and middle-income countries,
regional organization of economic interests has been advocated in
order to fight global income polarization, for example by Amin and
his concept of a "polycentric world" (Amin 1997). From the
perspective of labour in high-income countries the implementation of
labour charters in existing regional organizations like European
Union or NAFTA is important.
13.3 Strengthening national management
It has been observed that the power of the (nation-)state
vis-a-vis global investors and global corporations has declined
(e.g., Cox 1994: 47-48). Global Keynesianism supports a re-assertion
of national management within a global context, as opposed to
outright abdication of national power to "global markets" (global
capital).
13.4 Strengthening Collective Bargaining Globally
Wallerstein has pointed out that a major strategy for increasing
effective demand in the world-system is through "renegotiation of
historically given wages" (Wallerstein 1978: 233). Collective
bargaining between labour and capital is thus important for global
demand management. Global Keynesianism looks toward worldwide
strengthening and protection of collective bargaining, including
transnational collective bargaining, as a major institutional
feature for a sound world-economy.
13.5 Controlling Global Financial Capital
As a protection against the excessive power of deregulated and
unregulated global financial capital ("the markets", as they are
called in the media), global Keynesianism favours controls on global
capital movements. For this purpose, a frequently quoted proposal is
the "Tobin tax", namely, a tax on international financial capital
transactions, with the purpose of slowing down speculative
developments. Another strategy is, for example, the strengthening of
regional organization. Thus, some see the strengthening of the
European Union as a method for asserting more political control over
unregulated global financial forces (Misik 1997).
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13.6 Managing Global Fixed Investment
The traditional Keynesian view, namely, that fixed investment may
not be forthcoming in sufficient quantity from the private sector or
may not be well-distributed, is also applicable at regional and
global levels. Here are some sample proposals: (1) The Brandt Report
sought to respond to this need by proposing a global Marshall plan,
financed by the high-income countries (Brandt 1980). (2) According
to another proposal, global demand is crucially dependent on global
credit creation and, whatever global credit is created, must be
apportioned equitably between rich and poor countries, rather than
in a biased manner toward the rich countries (Moore, 1988: 382,388).
(3) Amin called for the creation of a "reformed" World Bank which
would manage global credit for fixed investment in a more
satisfactory manner than the present World Bank (Amin, 1997:54).
13.7 Exchange Rate Reform
The present exchange rate system distorts the distribution of
global demand and generates unequal exchange (see above). Various
reforms of the exchange rate system have been proposed, including
(1) the institution of national currency boards, (2) return to
exchange rate controls (e.g., Kuttner 1998); (3) purchasing power
parity rates, (4) regional currencies, or even (5) a single global
currency (Keynes's "bancor" proposal, which was reiterated by Mead
1989:434).
13.8 Other Proposals
There are other proposals which can be grouped under a "global
left-Keynesianism" label. My objective in this section was to give
some examples of global-Keynesian praxeological thought, rather than
to critically review all that has been written. As global reality
unfolds, old proposals may become obsolete and new praxeological
thought may become necessary.
13.9 Feasibility of Global Keynesianism
A key problem is feasibility. For example, the Brandt Report,
which triggered the talk about global Keynesianism in the 1980's,
was published precisely at a time when dominant elite opinion was
moving in the opposite
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-- namely, in the direction of "Thatcherism" and the "Washington
consensus" of global neoliberalism. Economic analyses may lead to a
call for political-institutional change or to the despairing
observation that "the political will" for proposed changes is
missing. The feasibility of the ideas and proposals which may be
called global-Keynesian depends, in part, on their intrinsic merits
and persuasiveness and, in large measure, on the successes of the
political movements, parties and other organizations which fight
against the errors of global neoliberalism.
14. In Conclusion
I have attempted in this essay to describe a theoretical and
praxeological perspective which is rather new so that it does not
have an agreed-upon name yet. Call it global left-Keynesianism or
transnational socialism or perspective X; here it is called global
Keynesianism and beyond. This perspective combines left-Keynesian
economics with world-systems theory (in the form of a preliminary
outline). Hopefully, some others will find this useful and I also
hope that this will, ultimately, have some practical value for
presently living people (Çakmak 1998). "You don't see those who
stand in the dark" (line from Brecht/Weill, "Three Penny Opera"),
but those in the dark could use some effective help from the
presently living intelligentsia.
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