Mark Blyth (7): “We can’t all export to Mars”

Click to listen to Chris’ conversation with Mark Blyth (20 minutes, 8 mb mp3)

Mark Blyth is flying us over the embattled Eurozone — populations aging, economies flagging, and now democracy shrinking as technocrats in bankers’ gray stand in this week for the elected political chiefs in Greece and Italy. The New York Times is in an editorial panic this morning about “Europe’s Contagion” — even “financial catastrophe.” Which sounds like what Professor Blyth, the political economist and excitable Scot on our Watson Institute corridor, was warning us about when Ireland’s crisis was the proverbial cloud no bigger than a man’s hand. It’s a year now of the Blyth color-commentaries on a rock slide — in which over-leveraged banks foisted their debts on their “sovereigns,” and a banking crisis fused a chain of political and national crises — and from there a crisis of European unity, maybe the Decline of the West. Somewhere near the core of the problem, in the Blyth narrative, is the fashionable fixation on public-sector austerity, choking the growth that might refloat the European economy and our own. Part of what’s thwarting a rescue of the Euro this week is the illusion that Europe’s single-currency zone is a single economy. I am wondering what it would take for Europe to go the last kilometer to an economic union, with a single central bank as powerful as our Federal Reserve. What would we learn from a popular referendum on the United States of Europe? If you can’t listen as fast as Mark Blyth talks, by all means listen twice.

Usually you do referenda in Europe to stop things happening. The Greeks were a classic example of this: would you like to have ten years of deflation and most of the smart people leaving the country and to be left with no tax base? No, thanks. It was a bargaining chip. If you want to say at this point, let’s sign up to what Merkel wants, “more Europe,” well what does that mean? … It assumes that the whole world can work as Germany, which is basically a giant exporter that runs a permanent surplus against the rest of the world. This is madness. You can’t run a permanent surplus. Somebody has to be importing for somebody to be exporting. Who’s going to buy all those BMWs? We can’t all export to Mars. CL: China does … China does precisely because America gives it the credit to. Germany was able to sell all that stuff to Southern Europe precisely because it gave it credit. Now they’ve stopped the credit lines. That’s the problem. What they should be doing is turning on the taps to provide credit, not to continue to buy things they can’t afford, but to allow enough liquidity in the economy to stop the banks seizing up. What’s happening is just that: the banks are seizing up…

Mark Blyth with Chris Lydon at the Watson Institute, November 17, 2011.

It’s still a banking crisis pretending to be an economic crisis, Mark Blyth would tell you. But couldn’t it still become a civilizational crisis unless the rest of us, non-bankers, wake up?

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  • Another excellent Blyth ‘cast. Please keep coming back!

    Question: is China likely to front money to the ECB, if the ECB decides to build up funds?

    PS: here’s that OECD stats URL, http://stats.oecd.org/Index.aspx

  • Oscar

    I believe I have now listened to all the Mark Blyth interviews on here and I find them very interesting. On the other hand I still feel like I only understand a fraction of what he is saying. Admittedly economics is not my area, but neither am I entirely ignorant in it, which has made me wonder who exactly these talks are pitched to. Half the time it is a matter of terminology: I know Mark is using ‘plain-speaking pub chat’ but someone could talk as plainly to me as possible and it still wouldn’t make sense if it was in another language, which is what this often feels like. Obviously the thing for me to do is to go and research all the terms, but I’m sure that half of this is also about breaking down concepts. Occasionally this is done very nicely, for example, I liked his explanation of how there are 4 ways out of a financial crisis: inflate, deflate, devalue & default (previous lecture?) and his myth-busting of debt as always being bad. More often than not however, a concept seems to be explained by reference to about 7 other economic concepts. I’m sure the fast-paced, correct-label approach is part of the package, and obviously open source isn’t interested in dumming-down it’s content or patronising it’s audience, but on the other hand using the label ‘plainspeak’ here does seem slightly misleading. I mainly suggest this as a humble observation from someone who otherwise loves the site. Maybe this could be fed back somehow since I’m sure I’m not the only one.

  • Rick

    An excellent series that I hope you will continue!

  • The question i have is if we built up a bubble after the 2008 meltdown which hasn’t deflated. And the crisis might be about having that bubble burst in the midst of what is already nearly a double dip recession.

  • Through the Blyth-casts –and it is worth listening twice–patterns in the carpet start to emerge. It appears that credit-default swaps may yet be the cause of Armageddon. I agree with Oscar that the ‘texts’ are dense, but they are art of a sort.

  • Potter

    I’ll challenge for village idiot. I listened a few times and my comprehension fading in and out, better each time, don’t test me on it. It does seem to me that leaders should by now know better and be more globally minded. What I hear is more a zero sum short term and Darwinian game economically and socially but with ( to use another cliche) heads stuck in the sand. The reality in terms of survival ( of us all) is something else.

    I don’t see how we can build a world ethic and have much of a future based on consumerism, making selling and buying. This is not sustainable since everyone wants to raise their living standard; the planet cannot support it. Maybe I walked into a Mark Blyth 7 interview having mistaken it for a Jeff Sachs interview of several years ago .

    The bottom line- “We can’t all expert to Mars”

  • Thank you Chris for an interesting broadcast. I have my own armchair solutions to fixing economical troubles at least if not for the entirety of America, for charities and non-profits which operate to help victims of schizophrenia, cancer, AIDs, and rape. It is a Triumpant Car Company to begin in 2016. It is my work. Check it out: http://www.youtube.com/watch?v=y8gcdb79FvQ.

  • TheParrot

    Superb discussion. Thank you Mark & Chris.

    “We can’t all export to Mars” Deserves to be a bumper stick, t-shirt meme du jour. Or, perhaps the name of a micro brewery beer.

  • Rick

    I check often to see if Mark Blythe has returned. I have a question: Who is buying these sovereign bonds? It seems they wield an amazing amount of power. They push policy. I have heard of “bond vigilantes”, whatever that means.

    I am re-listening to all of these podcasts and if I discover Dr. Blythe has answered this question then I will try to remember to type the answer.

  • Loay

    Wonderful. It would help to have previous exposure to Political Economy and Macro economics but all in all a tour de force. Bravo. Thanks Chris for creating a great platform. Radio opens source, Thinking Allowed with Laurie Taylor and Conversations with History with Harry Kreisler are fast becoming the only thing worth listen to .