Articles from Prospect Magazine
The early 19th-century founders of the classical school of economics reasoned that the distribution of a society’s income depended crucially on who owned its productive resources. David Ricardo identified three classes of producer, landlords, capitalists and workers. Each of these classes owned a factor of production—land, capital and labour. With land and capital scarce relative to labour, landlords and capitalists could claim a disproportionate share of the produce that they and the workers jointly produced. Workers’ pay would be forced to subsistence. Classical socialism, as Karl Marx conceived it, was a branch of this tree. Abolish private ownership of land and capital (and the power which this gave) and one would abolish the “rents”Continue reading...
Where do we go from here?
| Wednesday, December 17, 2008
Any great failure should force us to rethink. The present economic crisis is a great failure of the market system. As George Soros has rightly pointed out, "the salient feature of the current financial crisis is that it was not caused by some external shock like Opec… the crisis was generated by the system itself." It originated in the US, the heart of the world's financial system and the source of much of its financial innovation. That is why the crisis is global, and is indeed a crisis of globalisation.
There were three kinds of failure. The first, discussed by John Kay in this issue, was institutional: banks mutated from utilities into casinos. However, they did so because they, their regulators and the policymakers sitting on top of
Essay: Keynes is Back
| Wednesday, October 22, 2008
I have always said that Keynes would live as long as the world needed him. What the world decided, 30 years ago, was that it no longer needed him. The Keynesian revolution had been reduced to a mechanical system for stabilising economies by means of budget surpluses and deficits—more deficits than surpluses, as it turned out, leading to the “stagflationary” crises of the 1970s. Keynes, the theoreticians said, was redundant, having failed to prove that the world needed “Keynesian” policies. The market system was automatically self-correcting; Keynesianism led only to inflation.
And from their point of view, the theoreticians were right. The only acceptable basis of economic theorising is the assumption that human beings are rational
Portrait: Joseph Schumpeter
| Saturday, December 01, 2007
Joseph Alois Schumpeter (1883-1950) was one of the greatest economists of the 20th century—commonly bracketed with such giants as Keynes, Hayek and Friedman. He is best known for his theory of "creative destruction"—the view that the capitalist system progresses by constantly revolutionising its economic structure. New firms, new products, new technologies continually replace old ones. Since innovation comes in fits and starts, the capitalist economy is naturally, and healthily, subject to cycles of boom and bust. The agent of this revolutionary process is the heroic entrepreneur: the individual owner in the 19th century, big business in the 20th. Innovation needs its reward, hence a dynamic economy is one which allows the innovator hugeContinue reading...
Essay: Putin’s Patrimony
| Thursday, March 01, 2007
When asked about the effects of the French revolution, Zhou Enlai is famously supposed to have said: "It is too early to tell." After only 15 years, post-communist Russia is still near the start of a film which clearly has a long time to run. Official and editorial commentary from the west takes the form of criticism and exhortation—the attitude of an improving, sometimes despairing, schoolmaster. Recently Russia has had an exceptionally bad press. The expulsion of "illegal" Georgian and other trans-Caucasian, central Asian and Chinese immigrants, the unexplained murders of Anna Politkovskaya and Alexander Litvinenko, the interruption of oil supplies to Belarus, the forced sale to Gazprom of a controlling stake in Royal Dutch Shell'sContinue reading...