Bill Gibson

Terms of Trade and Class Conflict in a Computable General Equilibrium Model for Mexico

A computable general equilibrium model for Mexico is constructed in which class conflict over the distribution of the surplus is the principal determinant of the terms of trade. The model consists of seven social classes and eight productive sectors. Classes are distinguished as ‘fundamental’ or ‘subsumed’ according to whether their incomes are primarily determined by conscious class struggle or by the resulting system of relative prices. Flexible prices are assumed to clear markets for which non‐produced means of production, such as agricultural land, limit supply while output in the remaining sectors is determined by the level of effective demand. For the latter sectors, two theories of price formation are compared and are seen to differ radically in their implicit conception of the nature of class conflict. A ‘Keynes‐Kalecki’ closure is considered in which prices are determined by a fixed mark‐up on costs. This enables capitalists to protect themselves from incursions on the rate of profit due to labou...

Unequal Exchange: Theoretical Issues and Empirical Findings

Recent critics of unequal exchange have argued that not only does the theory critically depend upon the unrealistic assumption of complete speciali zation (no nonspecific commodities) but also that unequal exchange tends to be self-cancelling and empirically insignificant. Each of these criticisms is examined and found to be lacking. The theory is first extricated from the confusing and ir relevant environment of the labor theory of value and a price-denominated fun damental theorem is stated and proved. Unequal exchange is then generalized to account for nonspecifics in a logically consistent way. Though the fundamental theorem does not hold for nonspecifics, a numerical example in which surplus is transferred shows that any criticism of unequal exchange based on its alleged in ability to handle nonspecifics must be empirical in nature rather than logical. It is next shown that while unequal exchange may indeed disappear in the long run for a variety of reasons, nothing in the theory itself implies that it is necessarily self- cancelling. It is argued that capitalists are not attracted to the periphery by low wages but by high profits which depend upon transportation costs and nontraded goods as much as low wages. Finally a 67-sector model of world trade is intro duced in an attempt to assess the empirical relevance of unequal exchange. It is shown that some 38% of the value of peripheral exports is required to equalize the rate of profit under existing wage differentials.

Trade, growth and distribution in the South African economy

This article examines the impact of changes in the volume and structure of trade on major macroeconomic variables, including growth in GDP, inflation, interest rates and the distribution of income. Five‐year projections are made using a nine‐sector, dynamic, computable general equilibrium (CGE) model Two simulations are considered, one in which growth in the mining sector is autonomously increased by 1 per cent and a second in which the nominal exchange rate is devalued by 3 per cent. CGE evidence supports the conclusion that an export‐oriented growth strategy which does not promote traditional exports will fail Collaborative macroeconomic policies are also necessary to ease the balance of payments constraint, but must be combined with more direct intervention in order to avoid significant deterioration in the distribution of income.

An essay on late structuralism

Lance Taylor is widely considered to be one of the pre-eminent development economists in the world and is known for his work on development planning, macroeconomics of development, stabilization policy, and the global economy. He has also been the major force behind structuralist economics, which is seen by many to be a major alternative to orthodox development economics and policy prescriptions. The essays in this volume, written by well-known scholars in their own right, make contributions to each of these areas while honoring the contributions made by Lance Taylor.

Alternatives to coca production in Bolivia: a computable general equilibrium approach

Pressured and aided by the United States, Bolivia has reembarked on a program to eradicate the cultivation of coca used for cocaine production. Over the next three years the United States plans to inject US

Terms-of-trade policy in a model with non-produced means of production☆

SOO million into Bolivia to wean the country from producing drugs and replace the cultivation of coca with other crops and agricultural activities. Previous research has shown that coca cultivation and cocaine production benefits the Bolivian economy (De Franc0 and Godoy, 1992) by raising income, creating employment, and increasing the availability of credit, particularly for smallholders and the informal sector (Melvin and Ladman, 1991). Given that the macroeconomic impact of a reduction in coca leaf production could devastate the economy, the Bolivian government has little economic or political incentive to eradicate coca. A solution could be to find substitute crops and agricultural activities which would provide comparable levels and distribution of income. We use a computable general equilibrium (CGE) model to study the effects of alternatives to coca production. The model contains 38 sectors’ and four social classes. The model allows for a detailed assessment of the economic feasibility of switching from coca to other crops. In the simulations we reduce coca production and allow each substitute to adjust to restore the real income of smallholders which existed before eradication. Twenty-one crops are then ranked by the feasibility of the needed price and output change, the effect on Gross Domestic Product (GDP), inflation, and workers’ real incomes. The results of the simulations suggest that sugar, cattle, forestry,’ and maize are the strongest candidates for a coca substitution program, but there are practical complications in implementing each of the substitutes, as will be discussed below. Indeed, the results of this study justify the reluctance on the part of the Bolivian authorities to fully cooperate with US efforts to eradicate coca. Section 2 provides the background to Bolivia’s coca dependence. In section 3 we develop the model and in section 4 we present the equations and an explicit closure statement for the model. The results of the simulations are discussed in section 5. The conclusion (section 6) contains a discussion of the problems likely to surface in implementing alternatives to coca cultivation.

Towards a growth strategy for the South African economy

Abstract Terms-of-trade policies between agriculture and industry are analysed in a two-sector Sraffian model. If both sectors use only produced means of production and labor, it can be shown that an improvement in agricultures terms of trade always leads to higher profits in agriculture. However, when non-produced means of production are introduced an exogenous increase in the relative price of agricultural commodities may cause the rate of profit in agriculture to increase, remain constant, or even decrease. Two preconditions are identified for the case in which a favorable movement in agricultures terms of trade decreases that sectors profit rate. First at least one quality of competitively priced land must be scarce relative to the total output required. Second, the initial, economy-wide rate of profit must be positive. Finally, the effect of an input subsidy used in conjunction with terms-of-trade policy is considered. It is shown that under certain conditions reducing the price of production inputs can also cause profits to fall and rents to rise in agriculture.

Thinking Outside the Walrasian Box

This article outlines the elements of a growth strategy, that is, a set of policies designed to promote an increase in real income in the medium term. The consistency of the policy package suggested here is investigated by way of a multi‐sectoral, dynamic computable general equilibrium model. A savings‐based growth strategy is compared with a more heterodox approach in which public sector spending lowers the marginal capital‐output ratio in various sectors, small and medium‐sized enterprises are encouraged and some real devaluation is achieved. The results show considerable improvement in growth and employment performance vis‐a‐vis the orthodox model.

The Environmental Consequences of Stagnation in Nicaragua

Colanders paper marks a potential turning point in the evolution of postwar economic theory. It includes a call for analytical political economists indeed, all heterodox economists to join a wider methodological circle, alternative to, rather than simply critical of the Walrasian system. This paper argues that both analytical political economists and heterodox economists as a whole should

Nonproduced Means of Production: Neo-Ricardians vs. Fundamentalists

Abstract A decade of war and revolution under the Sandinistas caused macroeconomic chaos but may have been indirectly beneficial to the environment. Now the country is a ward of the international financial community with foreign debt at almost six times GDP and few policy options. The Chamorro government, elected in 1990, has reduced the role of government and restored the price system as the principal means of resource allocation and income distribution. A three-gap model is used to show that environmental deterioration is likely to accelerate as a result of pursuing neoliberal policies. The analysis is based on a distinction between intensive and extensive environmental decay.