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Published January 1, 2017
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January 28, 2024
Interesting Hungarian economist who settled in Belgium in 1949, where Léon Dupriez - Keynesian economic historian - became his mentor. Was a commercial banker at the Banque de Bruxelles, worked at the Bank for International Settlements and later founding president of the European Monetary Institute. Received title of baron in Belgium. This is a collection of essays spanning his entire life, but I only focused on two periods: His early work on Belgian manufacturing and his work on financial stability in the '80s.
Early work on Belgium manufacturing is good. Still in his Keynesian spirit, used the theory of Kaldor to explain low profits and low growth of Belgian industry between 1945 and 1957. He shows how Belgium found itself in a vicious cycle, "tied" to its outdated industries. Since Belgian industry had a lot of sunk costs in textile and steel - products where international competition was high, while the total volume of international trade of these commodities (strangely enough) stagnated - they had low profits. These low profits resulted in limited additional capital investments, and those who were done, were small adaptations to the already existing factories. These small investments were absolutely necessary to keep the existing industries competitive (operationalise latest technology, invest in labour saving machinery after the dramatic rise in real wages), but it soaked up all profits, leaving no room for industrial change. Thus, low profits, low investments, while labour productivity did grow. Really interesting stuff here, and relevant, as we're still discussing the reasons for Wallonian decline.
Other stuff on financial stability is also good, but given the last decade's surge in research on the topic, not really that enlightening. I recommended reading just "Structural Change in International Financial Markets" from 1986, which is the best and well-structured summary of his views. It's theoretically close akin to Minsky in a way, but he's more practical, more detailed, less pessimistic, and eventually a liberal: He thinks that, in the end, deregulation is good, as long as both central banker and banker do it responsibly and with caution.
You have to give the guy respect for making broad summaries of what's going on while history was still unfolding. He's writing about financial internationalisation, innovation, and increased instability in 1984... He has a special interest in 1982 debt crises, where he stresses the fact that for each "overborrower" (the blame was often put on the developping states for having been to eager), there's also an "overlender", which is the kind of discourse we needed for the Greek crisis 30 years later. The "overlender" is, of course, product of the recently financialised system (he doesn't use the term though).
Last thing I liked about these essays is his emphasis on the '70s crisis for financial internationalisation and innovation. Sure, he refers to 'a fever of deregulation' that cleared the room for new stuff and pushed financial innovation, and 'oil money that had to be recycled' which is something we hear a lot nowadays, and is just not that convincing. But then he also shows how much of the international flows of capital and new financial products were designed to limit the financier's exposure to 1) high inflation and 2) monetary instability after Bretton Woods, which were direct threats of the '70s crisis.
Early work on Belgium manufacturing is good. Still in his Keynesian spirit, used the theory of Kaldor to explain low profits and low growth of Belgian industry between 1945 and 1957. He shows how Belgium found itself in a vicious cycle, "tied" to its outdated industries. Since Belgian industry had a lot of sunk costs in textile and steel - products where international competition was high, while the total volume of international trade of these commodities (strangely enough) stagnated - they had low profits. These low profits resulted in limited additional capital investments, and those who were done, were small adaptations to the already existing factories. These small investments were absolutely necessary to keep the existing industries competitive (operationalise latest technology, invest in labour saving machinery after the dramatic rise in real wages), but it soaked up all profits, leaving no room for industrial change. Thus, low profits, low investments, while labour productivity did grow. Really interesting stuff here, and relevant, as we're still discussing the reasons for Wallonian decline.
Other stuff on financial stability is also good, but given the last decade's surge in research on the topic, not really that enlightening. I recommended reading just "Structural Change in International Financial Markets" from 1986, which is the best and well-structured summary of his views. It's theoretically close akin to Minsky in a way, but he's more practical, more detailed, less pessimistic, and eventually a liberal: He thinks that, in the end, deregulation is good, as long as both central banker and banker do it responsibly and with caution.
You have to give the guy respect for making broad summaries of what's going on while history was still unfolding. He's writing about financial internationalisation, innovation, and increased instability in 1984... He has a special interest in 1982 debt crises, where he stresses the fact that for each "overborrower" (the blame was often put on the developping states for having been to eager), there's also an "overlender", which is the kind of discourse we needed for the Greek crisis 30 years later. The "overlender" is, of course, product of the recently financialised system (he doesn't use the term though).
Last thing I liked about these essays is his emphasis on the '70s crisis for financial internationalisation and innovation. Sure, he refers to 'a fever of deregulation' that cleared the room for new stuff and pushed financial innovation, and 'oil money that had to be recycled' which is something we hear a lot nowadays, and is just not that convincing. But then he also shows how much of the international flows of capital and new financial products were designed to limit the financier's exposure to 1) high inflation and 2) monetary instability after Bretton Woods, which were direct threats of the '70s crisis.
Displaying 1 of 1 review