Democratic Economics Global Keynesianism: A Long-overdue Vision Of Progressive Politics - by Heikki Patomäki

In a global world, the question of solidarity is acquiring new dimensions. Transnational solidarity seems an adequate response to the power of multinational corporations and global finance. A number of analysts have depicted how activists are now working across state boundaries and forming transnational networks, campaigns and organisations.

The problem is that more often than not, the new forms of solidarity have been limited to resisting privatisation, deregulation flexibility, and welfare cutbacks. At the same time the emerging field of transnational labour regulation has been mostly confined to the private, voluntary sphere. A wider and deeper conception of solidarity seems to be missing.

It is time to do some systematic rethinking. From a political economy point of view, the relevant whole is not the nation but the world economy. The mutual dependency of the parts and whole works out, for instance, through effective demand and the multiplier effect. For (post-)Keynesian economic theories, there is no automatic mechanism synchronising diverse temporal processes. Aggregate supply (the total productive capacity of the world economy) does not usually equal aggregate effective demand (total spending capacity in the world economy).

Without mechanisms to ensure a sufficiently high level of effective demand for the goods and services produced, these developments will result in excess capacity and unemployment. Demand is always monetised, so what matters is whether the interested consumers and investors can afford to buy the goods and services. As the propensity to consume decreases with rising income, demand depends also on income distribution. Due to degrees of monopoly – always part and parcel of developments in capitalist market economies – and financial and other more or less fixed temporal commitments, prices do not easily decrease so as to match insufficient demand. And if prices do fall, a self-reinforcing deflationary spiral becomes rather likely.

Read more: Democratic Global Keynesianism: A Long-overdue Vision Of Progressive Politics - Social Europe Journal