Volume 10 • Number 2 • Summer 20219

All articles below are read and used under the Creative Commons Attribution License (CC-BY License) (see which permits use, distribution and reproduction in any medium, provided that the article is properly cited.



The Rise and Fall of Unproductive Activities in the US Economy 1964–2015: Facts, Theory and Empirical Evidence

Lefteris Tsoulfidis, Achilleas Tsimis and Dimitris Paitaridis

Abstract: The general idea about unproductive labor and the activities associated with it is that they tend to expand and by expanding, reduce the investible product and the growth potential of the economy, however, little is known about the determinants of their movement. In this study, we take a closer look at the US unproductive labor and activities in general during the 1964–2015 period. As possible determinants of the movement of unproductive activities, we consider the economy-wide average rate of profit, the real interest rate and the degree of capacity utilization. The Toda Yamamoto causality tests, as well as the ARDL econometric model, lend support to the view that the unproductive expenditures and activities are determined by rather than determine the above variables. Furthermore, the error correction term indicates that a long run equilibrium relationship exists, and it is attainable after the passage of not too long a time.

Keywords: unproductive expenditures, rate of profit, great recession, ARDL

 “Creating Wealth” through Debt: The West’s Finance-Capitalist Road

Michael Hudson

Abstract: Volumes II and III of Marx’s Capital describe how debt grows exponentially, burdening the economy with carrying charges. What policies are best suited for China to avoid this neo-rentier disease while raising living standards in a fair and efficient low-cost economy? The most pressing policy challenge is to keep down the cost of housing. Rising housing prices mean larger and larger debts extracting interest out of the economy. The strongest way to prevent this is to tax away the rise in land prices, collecting the rental value for the government instead of letting it be pledged to the banks as mortgage interest. The same logic applies to public collection of natural resource and monopoly rents. The US and European business schools are part of the problem, not part of the solution. They teach the tactics of asset stripping and how to replace industrial engineering with financial engineering, as if financialization creates wealth faster than the debt burden. Having rapidly pulled ahead over the past three decades, China must remain free of rentier ideology that imagines wealth to be created by debt-leveraged inflation of real-estate and financial asset prices.

Keywords: Capitalism, financialization, debt, crisis, rentier

Towards a Theoretical Framework for Understanding Capitalist Violence against Child Labor

Raju Das and Ashley Chen

Abstract: More than 150–200 million children work for a living in the world. A large number of them experience violence. The economic aspect of child labor has received much attention (as has the topic of violence against children as children), and rightly so. But the extra-economic aspect of child labor (i.e., the sheer violence against children as workers in the market-place and the workplace) has been relatively neglected. It is necessary to conduct empirical studies on the topic, which, however, require prior theoretical work. The aim of this paper is to provide a theoretical framework on violence against child labor. Central to this framework are three inter-connected arguments: the fact that under certain circumstances, and contrary to a widely-prevalent standpoint, capitalism produces, and makes use of, a pool of workers who lack the freedom to enter and exit a labor contract; the universal logic of capitalist accumulation interacting with the context where some workers are children; and finally, the fact that violence against child labor is enabled by a specific cultural aspect of capitalist society, “childism.”

Keywords: capitalism, logic of accumulation, labor unfreedom, child labor, violence

The Welfare State and Liberal Democracy: A Political Economy Approach

Arne Heise and Ayesha Serfraz Khan

Abstract: This article attempts to shed some light on the developments of welfare states in highly developed nations since World War Two (WW2) within the context of a narrative which seeks to combine institutional distinctions, termed “varieties of capitalism,” with the historical regimes of regulation theory in a political economy perspective which puts interested political actors at center stage. It will be argued that in a liberal democracy, the elite has the framing and agenda-setting power to “manufacture a political will” according to its interests. The welfare state is not the result of a long social struggle on the part of the needy; rather, it results in its general features from the minimal state of meritocratic exigencies. Under the very peculiar circumstances of the post-WW2 era, this even translated into a rise in social welfare spending to more than a third of national income. The particular design of welfare state organization was the subject-matter of political conflict, and a clear distinction between liberal and coordinated market economies can be attributed to cultural differences and institutional settings. Yet the core of the welfare state conception serves the interest of the meritocracy as much as those who benefit from social programs and redistribution. And the neoliberal attack on the welfare state since the 1980s is not a necessary re-calibration due to changing economic conditions or a growing lack of solidarity among the people but an expression of a modified cost–benefit analysis from the elite’s perspective.

Keywords: welfare state, Keynesian national welfare state, Schumpeterian competition state, elite, agenda theory

A Critique of Econometrics

Bin Yu

Abstract: As a result of the use of mathematical tools, Western econometrics is regarded as a symbol of what is, as well as trends of, real scientific economic research. It has become an excuse and tool for the uncritical maintenance of Western macroeconomics and microeconomics, opposing and marginalizing Marxist political economy. However, mathematics is not derived or used scientifically in econometrics, so the research results are not scientific but ideological. This paper will explore, in addition to the lack of scientific economic foundations, uncritical data use, insufficient philosophical guidance and mathematical foundations, and some other defects that have also existed in econometrics. The application of mathematics in economic research must strictly follow the theory-praxis principles of Marxist political economy, otherwise even minimal deviation may result in wide divergence from aspects of reality analyzed and modeled. Besides, the laws of mathematics must be strictly followed, the limitations of mathematics should be paid attention to, and mathematics should never be applied in ways that hide rather than illuminate reality. Otherwise, nothing will be obtained except chaos, fallacies and ideology-rhetoric.

Keywords: econometrics, economic research, Marxist political economics, applied mathematics, mathematical statistics

Book Review

Systemic Fragility in the Global Economy by Jack Rasmus

Review by: Lawrence A. Souza

Abstract: Global central banks are unwinding their balance sheets, flattening the yield curve, and inverting it; with global trade tensions, appreciating dollar (liabilities), and emerging capital market stress (bond sell off/capital outflows), the global economy is extremely fragile and could experience a financial crisis and recession by 2020 (the consensus is by 2021). Systemic fragility is caused by policy mistakes, made by central bankers. These decisions make the financial system more fragile, as current central bank ideologies and orthodoxy are deficient, and unorthodox. Central bank policies are making matters worse, by driving costs of capital to zero (negative), replacing real for financial assets, printing trillions to bail out banks, and purchasing bad debt and defective financial products, allowing massive leakage of capital to flow unregulated (shadow banking) across globe platforms, etc.; and all with no effect on real economic growth, wage growth, labor participation, inflation, and more importantly, standards of living and social welfare.

Keywords: global financial crisis, financial fragility, macroeconomics, monetary policy, financial institutions
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