Gerald Epstein: Obama can’t use GOP Control of House as excuse for more Wall St. friendly appointments.
Paul Jay, Seniro Editor, TRNN: Welcome to The Real News Network. I’m Paul Jay in Baltimore. And welcome to this week’s edition of The PERI Report with Gerry Epstein, who now joins us from Amherst, Massachusetts.
Gerry is the cofounder/codirector of the Political Economy Research Institute in Amherst. He also teaches economics there.
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Thanks for joining us, Gerry.
Gerald Epstein, Codirector, PERI: Thank you, Paul.
Jay: So what are you thinking about this week?
Epstein: Well, the State of the Union Address is coming up tomorrow night, and we’re all thinking about what President Obama’s going to do in the next four years.
And there’s one positive thing, I think, he has been saying recently, which I’ve been thinking about, the idea that economic growth and development doesn’t come from the top down, from the so-called givers, but it comes from the middle out and the bottom up.
I think this is a good thing. This is something that many of us have been arguing for for a long time now. And the question is: what can he do about it? And, of course, he’s kind of boxed in because of the conservative Democrats and the control of the House by the Tea Party Republicans. But there’s actually quite a bit he can do globally.
You know, there’s a lot of criticism globally about the monetary policy of the Federal Reserve keeping interest rates so low. Now the Bank of Japan has been doing it, the U.K. banks, central bank in Europe and United Kingdom. They’re talking about currency wars. And this is something we’ve seen before. We’ve seen this in the 1920s and 1930s when in the Great Depression all these central banks were lowering interest rates and there was competitive devaluations, and it didn’t lead to any global reflation.
And John Maynard Keynes said, well, the answer to this is global coordination of more expansionary fiscal policy, job-creating government expenditure. Now, of course, President Obama can’t do this on his own, but what he can do is really push the IMF, the World Bank, other global bodies to adopt a much more reflationary fiscal policy, much more policy to redistribute income to the middle class, the poor. And he can do this without approval from Congress and the Senate. The way he can do this is partly by his appointments, his appointments at the IMF, his appointments at the World Bank, what he tells his appointments, the people he appoints there to do, to push. And I think this could make a very big difference on the global scene.
Jay: But he would have to want to. Is there any indication that he would want to? I mean, I take your point that in a sense he doesn’t have the excuse that the House won’t let him do it, although one could go back to when the Democrats did control the House, he still didn’t do nearly what you, I think, thought he should have. But even now, is there any sense he would want to?
Epstein: Yeah, well, that’s a good question, and this is a place to test. We know that with Geithner, Timothy Geithner—who’s leaving, thankfully—didn’t want to do this. He was the bankers’ guy, and his policy was just to try to keep the banks afloat and happy. And now, with him gone, Obama has a new chance, and he has a new chance to show whether he’s serious about this, even in an arena where he actually has some clout.
So there are appointments coming up at the United Nations Conference on Trade and Development. He has appointments coming up in the Treasury Department [incompr.] help set IMF policy. The United States is the most powerful country in the IMF.
We know there has been some change at the International Monetary Fund, the IMF. My colleague Ilene Grabel has been writing about productive incoherence and how with their right hand they’re trying to loosen their strictures on capital controls, but as Mark Weisbrot at the Center for Economic and Policy Research has shown, with their conditionality policy they’re still imposing neoliberal policies.
So there is a way in which, at the IMF, for example, if Obama wanted to, he could start really pushing this new policy that he claims that he wants, growing from the bottom up, from the middle out. And pretty soon, with the appointments he makes and what they start doing there, we can see whether Obama is serious or not. [crosstalk] serious, and I agree there’s reason to be skeptical, but let’s push him and see.
Jay: But couldn’t he have done this over the last four years?
Epstein: Well, he could have done this, but I think he has changed some. He has seen that the policies of the last four years that have been totally focused, in the financial realm, at least, on protecting the banks didn’t really pay off for him. I mean, look at what the banks did in the last election. They put all of their money, all of their clout, all of their political muscle against him. And if I were him, I’d be pretty pissed off, and I would see that that’s a losing proposition. So let’s see if he changes his tune a bit in realms where he still has some power.
Jay: Okay. So what’s the next appointment that would be a litmus test of this?
Epstein: The next appointment would be an undersecretary in the Treasury Department who’s in charge of international economic policy. And if he were to pick a progressive economist to do that, play that role, then that would be a good sign.
Jay: Okay. Well, we’ll see when that happens, and then we’ll come back to you and find out. It seems to me that, as I said, he could have done this in the last four years. And I’m not sure if there’s reason to think he isn’t essentially just a neoliberal, you know, politician and actually isn’t in favor of these things.
Epstein: Yeah, no. I think there’s a lot of evidence that what you’re saying is true. But I think those of us in the progressive area can really try to hold his feet to the fire now and push him in these directions where he can’t have excuses about being blocked by Congress.
Jay: Okay. Well, we’ll see. Thanks for joining us, Gerry.
Epstein: Thanks, Paul.
Jay: And thank you for joining us on The Real News Network.