Daniela Gabor Profile picture
Mar 4 17 tweets 5 min read
fascinating @adam_tooze on whether we'll see Russia abandon its Wall Street Consensus macrofinancial regime - fiscal austerity, floating exchange rate, domestic bond finance - that it deployed to accumulate a foreign reserves war chest.

adamtooze.substack.com/p/chartbook-91…
first, the constraint of market access - so very familiar to poor & middle income countries negotiating Debt Service Suspension Initiative - is gone.

if you dont care what foreign investors think of your macro stance, the world is your oyster.
your oyster as in you can:
1. Choose to reorient your macro choices towards aggressive short-run stabilisation
2. Bring back developmental state that aims to structurally change your economy

both require an ideological cover, and MMT can offer that
problem for short-run demand management: Russia's mon policy rate at 20% + sanctions-related supply bottlenecks that increase inflationary pressures.

So war Keynesianism means it cannot fight inflation via aggregate demand management but price controls (ahem @IsabellaMWeber )
with extensive price controls, Russia can then unleash massive fiscal expansion - compensation for families of dead soldiers, for massive unemployment caused by sanctions/withdrawal of multinational corporations/loss of export markets
the shortage economy is baaaack!

the state channels petrodollars into war spending + safety net for citizens + industrial policy.

and industrial policy speaks to ideas of transforming the central bank into an 'institute for development'
to be clear, I dont think MMT ever claimed to be a theory of the developmental state.

MMT is a theory of why the macro constraint to a developmental state project is not 'how will we pay for it'.
MMT is right that you cannot have a developmental state project under Wall Street Consensus macrofinance.

but once you make that intellectual leap, slope just gets steeper.

reviving a developmental state project under conditions of war and sanctions is, in my view, impossible
a developmental state first needs goal for structural transformation - I doubt it would be decarbonisation since this is a a petrodollar state.

traditionally, it used to be industrial upgrading, for which you need export markets - but where? China/African countries?
then the Mkandawire test for developmental state:
1. Ideologically, it needs social consensus around developmental project. Being a dictatorship helps.
2. Structurally, it needs technocracy that can design and implement a project that upends a 30 year old macro consensus.
With ideology/structure nexus in place, developmental state has to overcome twin financial & technological dependency.

It needs hard cash to import capital/intermediary inputs for new industries it plans to promote.

Russia has hard cash but sanctions make it difficult to use
Some have argued sanctions won't bite if Russia turns to China/Asia + Africa. But Russia decoupling from 'Western' liberal capitalism doesnt mean countries in Asia/Africa would join it.
And btw I am not an 'optimist' on macrofinancial regime change in Russia - I am just mapping potential avenues. Very skeptical on revival of developmental state, somewhat skeptical on short-run aggressive stabilization
mind blown by trolls who think you can run a war economy on tight status-quo macro
yet again, the question inevitably will be what can Russia spend its petrodollars on - cc @dsquareddigest

@dsquareddigest it may not even be about a new growth model, but the implosion of the existing one

how many of these can survive under sanctions hitting critical imports @BuddyYakov?

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More from @DanielaGabor

Mar 3
if you were hoping that the silver lining of Russia's aggression is a new macrofinancial regime in Europe, sorry to disappoint.

the freshly minted revision to the European 'green, digital resilient and inclusive' Growth model is a lot more of the same
ec.europa.eu/info/sites/def…
first, you want to window-dress the malfunctioning of the 'austerity first, mobilise private capital next' model - hello secondary axis.
the macro information wars - a slap in your incredulous face

Read 8 tweets
Mar 1
and the week UCU is on strike, so I cant comment the pluuuumbing :)
I can tweet about the @ucu strike fund - remember Maggie Thatcher gave employers the upper hand to confiscate pay for each strike day, so academics are taking home half of their pay this month.

Read 6 tweets
Feb 27
oh, now that you ask Germany, how about rewiring the macrofinancial consensus that is not even working for you, let alone Europe?
1. set the Maastricht sacred cows free, forever out of sight
2. let @ecb work closely with governments to protect fiscal space
3. drop the 'mobilisation of private investment' language, time to discipline financiers into doing what we want, instead of bribing them.
if there is some silver lining in this super depressing glorification of war/arms etc, let it be this one

Read 4 tweets
Feb 25
if your macro narrative is 'well done Germany, your balanced budgets have created the fiscal space you need now to deal with geopolitical challenges posed by Russia' - your austerity ideology is blinding you to the obvious
my bet - European Commission will embrace this narrative next week and double down on its Carbon Contracts for Difference strategy of derisking private investments in decarbonisation, ignoring the painful lessons from Germany's Energiewende
have spent this week in class discussing a 2009 Lin vs Chang debate on industrial policy that goes at the core of the decarbonisation debate - what do we mean when we discuss the revival of industrial policy?

onlinelibrary.wiley.com/doi/10.1111/j.…
Read 5 tweets
Jan 27
want to understand the incoming Age of Institutional Landlords - minting assets out of your houses - and the state's role in it?

our new report 'My House is an Asset Class' w @sebastianmkohl for @GreensEFA has (nearly) all the answers

extranet.greens-efa-service.eu/public/media/f…
first, institutional landlords are not just notorious private equity firms like Blackstone, but your pension fund, insurance companies, family offices and endowments, cash-rich multinational corporations, Sovereign Wealth Funds and asset managers - a glut of institutional capital
institutional capital targeting European housing is large, a portfolio glut ready to deploy trillions if it can find houses to purchase at scale
Read 24 tweets
Jan 19
the #GlobalGateway strategy seeks to 'unleash' EUR300 bn for infrastructure investments around the world based on 'values, transparency and sustainability'
values first infrastructure is a new one:

wonder what values embodied by (German) Compact with Africa push for PPPs in health or education that force user-fees and de-facto privatisation of social infrastructure
Read 6 tweets

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