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August 01, 2018


mike W

'If it does raise rates, the Bank is just being the messager - the message being that actually-existing UK capitalism is unable to provide decent living standards for millions, and that genuinely full employment is impossible. This is a Marxian message.

Thank you, best short essay I have read (anywhere) in years. Super stuff.Great punchline at the end. :) Really made me think about this in a new way. I have, in the past, found myself ending up with, 'well you don't believe the UK Guv unemployment/ employment figures do you? When discussing the MMT version of this point, with regards to the JG.

'Wide'/Broad measure v Narrow measure will really help the debate IMHO.I need to read Blanchflower Bell paper cited (I assume it is the source of the graph). Does it also look at a model of the Self-employed data which must surely include those who 'declare' they are Self-employed to escape the DWP 'hostile environment' after experiencing, sanctioning or means testing? So called 'Voluntary' National Insurance contributions data, I guess, was looked at too?


«actually-existing UK capitalism is unable to provide decent living standards for millions»

The political question is: do the votes if any of those millions matter? Or do they matter more than the votes of millions of upper-middle class property owners who have had for decades zooming incomes without working for them, thanks to upward redistribution arranged by New Labour and the Conservatives?

My impression is that the BoE, who is always on the side of the finance industry and the property owners, might listen more to arguments that rising active interest rates might cause a fall in property prices.

But since a fall in property prices is the only thing that can stop Brexit, any move either by the BoE is going to have huge political repercussions...


The Bank of England raising interest rates is about values, not results. Western Central Banks care more about inflation than employment. Since wages have risen so slowly in the current economic cycle the argument can be made that the negative impact of inflation is greater than the positive impact of further gains in employment.

Full employment is possible under capitalism, if productivity growth were higher and wages were lower in real terms then that would be possible.


Of course, in a big sense the Bank is not to blame for this. It is not its job – and certainly not its job alone – to ensure a low Nairu.

I would be very careful about using assuming a NAIRU exists, especially if I were a Marxist. What are the reasons you believe it does exist? There is no evidence of it - even many neo-classical economists admit that. You can have high employment and high inflation, and the reverse. It is true there may be a capacity constraint in the economy, but most likely that has nothing to do with the level, or the overall level, of unemployment. Such capacity constraints are likely to be a micro-level issue, that can't be fixed with monetary policy.

NAIRU is a misleading, and particularly dangerous, way of thinking.


Just to add, a capacity constraint is unlikely to be fixable with any type of aggregate demand expansion or contraction - including through fiscal policy - unless it targets the problem (ega shortfall of trained workers in a certain key sector or a certain type of capital equipment or raw materialt). But that is not an AD issue.

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