Publications
Eckhard Hein
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Working Paper No. 846 | October 2015
Steindl after Summers
The current debate on secular stagnation is suffering from some vagueness and several shortcomings. The same is true for the economic policy implications. Therefore, we provide an alternative view on stagnation tendencies based on Josef Steindl’s contributions. In particular, Steindl (1952) can be viewed as a pioneering work in the area of stagnation in modern capitalism. We hold that this work is not prone to the problems detected in the current debate on secular stagnation: It does not rely on the dubious notion of an equilibrium real interest rate as the equilibrating force of saving and investment at full employment levels, in principle, with the adjustment process currently blocked by the unfeasibility of a very low or even negative equilibrium rate. It is based on the notion that modern capitalist economies are facing aggregate demand constraints, and that saving adjusts to investment through income growth and changes in capacity utilization in the long run. It allows for potential growth to become endogenous to actual demand-driven growth. And it seriously considers the role of institutions and power relationships for long-run growth—and for stagnation.
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Working Paper No. 816 | September 2014
Policy Alternatives Addressing Divergences and Disparities between Member Countries
In this paper we outline alternative policy recommendations addressing the problems of differential inflation, divergence in competitiveness, and associated current account imbalances within the euro area. The major purpose of these alternative policy proposals is to generate sustainably high demand and output growth in the euro area as a whole, providing high levels of noninflationary employment, as well as preventing “export-led mercantilist” and “debt-led consumption boom” types of development, both within the euro area and with respect to the role of the euro area in the world economy. We provide a basic framework in order to systematically address the related issues, making use of Anthony Thirlwall’s model of a “balance-of-payments-constrained growth rate.” Based on this framework, we outline the required stance for alternative economic policies and then discuss the implications for alternative monetary, wage/incomes, and fiscal policies in the euro area as a whole, as well as the consequences for structural and regional policies in the euro-area periphery in particular.
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Working Paper No. 776 | September 2013
A Critique of the German Debt Brake from a Post-Keynesian Perspective
The German debt brake is often regarded as a great success story, and has therefore served as a role model for the Euro area and its fiscal compact. In this paper we fundamentally criticize the debt brake. We show that (1) it suffers from serious shortcomings, and its success is far from certain even from a mainstream point of view; (2) from a Post-Keynesian perspective, it completely neglects the requirements for fiscal policies of member-countries in a currency union and will prevent fiscal policy from contributing to the necessary rebalancing in the Euro area; and (3) alternative scenarios, which could avoid the deflationary pressures of the German debt brake on domestic demand and contribute to internally rebalancing the Euro area, are extremely unlikely, as they would have to rely on unrealistic shifts in the functional income distribution and/or investment and savings behavior in Germany.
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Working Paper No. 746 | January 2013
A Kaleckian Perspective
This paper examines a major channel through which financialization or finance-dominated capitalism affects macroeconomic performance: the distribution channel. Empirical data for the following dimensions of redistribution in the period of finance-dominated capitalism since the early 1980s is provided for 15 advanced capitalist economies: functional distribution, personal/household distribution, and the share and composition of top incomes. Based on the Kaleckian approach to the determination of income shares, the effects of financialization on functional income distribution are studied in more detail. Some stylized facts of financialization are integrated into the Kaleckian approach, and by means of reviewing empirical and econometric literature it is found that financialization and neoliberalism have contributed to the falling labor income share since the early 1980s through three main Kaleckian channels: (1) a shift in the sectoral composition of the economy; (2) an increase in management salaries and rising profit claims of the rentiers, and thus in overheads; and (3) weakened trade union bargaining power.
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Working Paper No. 734 | October 2012
The Crisis of Finance-dominated Capitalism in the Euro Area, Deficiencies in the Economic Policy Architecture, and Deflationary Stagnation Policies
View More View LessIn this paper the euro crisis is interpreted as the latest episode in the crisis of finance-dominated capitalism. For 11 initial Euro area countries, the major features of finance-dominated capitalism are analyzed; specifically, the increasing inequality of income distribution and the rising imbalances of current accounts. Against this background, the euro crisis and the economic policy reactions of European governments and institutions are examined. It is shown that deflationary stagnation policies have prevailed since 2010, resulting in massive real GDP losses; some improvement in the price competitiveness of the crisis countries but considerable and persistent current account imbalances; reductions in government deficit–to-GDP ratios but continuously rising trends in gross government debt–to-GDP ratios; a risk of further recession for the euro area as a whole—and the increasing threat of the euro’s ultimate collapse. Therefore, an alternative macroeconomic policy approach tackling the basic contradictions of finance-dominated capitalism and the deficiencies of European economic policy institutions and strategies—in particular, the lack of (1) an institution convincingly guaranteeing public debt and (2) a stable and sustainable financing mechanism for acceptable current account imbalances—is outlined.
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