When neoliberals masquerade as progressives

One wonders what goes on in the heads of politicians sometimes. Perhaps not much other than a warped sense of their purpose in life – which for some seems to be to advance themselves rather than advance societal well-being. In recent days, fiscal debates have raged on both sides of the Atlantic. In the US, there is the Trump tax cut debate. The correct progressive response would be to focus on why these cuts will not advance anybody but the rich and will do very little if anything to create new jobs. Unfortunately, prominent Democrats such as the awful Nancy Pelosi have been spouting stuff about the tax cuts increasing the federal deficit and federal debt. At a time, when the Republicans are abandoning the deficit terrorism to advance their own interests, the Democrats seems to be reinforcing the ‘deficits are bad’ narrative. Instead, they could have seized the opportunity to say to the American people – see deficits are fine but the real issue is what we do with them. Pelosi and her ilk seem incapable of adopting that quality of leadership. In the UK, the reality is dawning on the British government that the austerity harvest is anything but what they had hoped it would be. No surprises there. Austerity undermines growth which can easily increase the fiscal deficit when the goal is the opposite. But the way that reality is being handled in the progressive press is pathetic. The UK Guardian, for example, has headlines about ‘black holes’ and is giving oxygen to reports that talk about the deteriorating fiscal situation in the UK. Readers are left with nothing but neoliberalism reinforcement of the ‘deficits are bad’ myth. A shocking indictment of the progressive debate in the UK.

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British mainstream media spreading dangerous MMT ideas

The British newspaper, The Independent seems to be getting in beds with Commies lately. The evidence I elicit is the recent article (November 4, 2017) – Actually the magic money tree does exist, according to modern monetary theory – by a journalist Youssef El-Gingihy. It gives oxygen to the views of an Australian economist, one William Mitchell who espouses what is known as Modern Monetary Theory (MMT) – yes, you got it in one – another crackpot economic approach that fails to recognise that most professional economists reject it, which means it must be wrong. Right! More than two thousand people have shared the article, which means the socialist cancer is being spread by these Modern Monetary Theory (MMT) fanatics. One commentator thought it was a “rearly stupid article”. Don’t worry about the spelling error. The opinion is what mattered and it was dead-centre true. Mitchell must be one of the most stupid economists ever. Like his MMT mates who seem to be tweeting and being retweeted in ever increasing frequencies these days, which just goes to show that people can be indoctrinated to believe anything. Some comments were made on the article, which just reflected what anybody who knows anything about economics would say – you know – government spending will ultimately cause “hyperinflation” – everybody knows that. Further, one insightful commentator noted that because Britain is not at war there is “no justification to rack up big debts” – everybody knows that. Mitchell obviously wants the government to rack up huge debts, although he doesn’t actually say that. But if the government does run deficits it will obviously intend “to soft-default on debts through inflation” which will then mean “the markets will smash the pound”. Everybody knows that too. For me, I couldn’t get any traction in the comments section – most commentators seemed to be supportive of this mad professor’s crazy ideas – so I decided to E-mail him. I didn’t get any satisfaction from that either. He is obviously a commie in disguise. He said something about Chartalism. I think that was just a typo in his reply – probably he was trying to say that he was a charlatan. What is the world coming to!

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Updating the impact of ageing labour force on US participation rates

Yesterday, I discussed the latest US labour market data, including the 0.4 percentage point drop in the participation rate, which is a large decline for a month. Whether that is subject to revision or not remains to be seen. The monthly data fluctuates quite a bit due to sampling errors and uncertainties regarding population benchmarks. It is clear that during the recession, many workers opted to stop searching for work because there was a dearth of jobs available. As a result, national statistics offices considered these workers to have stopped ‘participating’ and classified them as being ‘not in the labour force’, which had had the effect of attenuating the official estimates of unemployment and unemployment rates. These discouraged workers are considered to be in hidden unemployment. But the participation rates are also influenced by compositional shifts (changing shares) of the different demographic age groups in the working age population. In most nations, the population is shifting towards older workers who have lower participation rates. Thus some of the decline in the total participation rate could simply be an averaging issue. This blog updates my previous estimates for the US. The aggregate participation rate has been in decline since the beginning of this century and the compositional shifts account for around 73 per cent of the decline over that time.

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US labour market – uncertainty remains paramount with data volatility

On November 3, 2017, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – October 2017 – which showed that total non-farm employment from the payroll survey rose by 261,000 in October, which the BLS said “mostly offset … a decline in
September that largely reflected the impact of Hurricanes Irma and Harvey”. For more on that issue see my analysis from last month – US labour market – hit by two hurricanes but improvement suggested. While the payroll data showed a strong rebound in employment, the Labour Force Survey data estimated a sharp drop in employment (484 thousand) in October while the labour force was also estimated to have contracted sharply by 765 thousand. The latter was due to a rather implausible decline in the participation rate (0.4 points), which will probably be revised next month. But, taking the data on face value, the BLS estimated that unemployment fell by 281 thousand and the official unemployment rate fell by 0.2 points to 4.1 per cent. There is still a large jobs deficit remaining and other indicators suggest the labour market is still below where it was prior to the crisis. What was striking about the October data though was the dramatic fall in the labour force participation rate – by 0.4 percentage points allied with the decline in the Employment-Population ratio (0.2 points). I analyse those movements in this month’s focus section of this blog. On the face of the aggregate data, the US labour market is getting back to its pre-GFC position but there is evidence that the quality of work has declined and negative cyclical effects remain in the system.

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The Weekend Quiz – November 4-5, 2017 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Q&A from British Labour Party Annual Conference Event, September 2017

This blog is short and only serves to provide a link to the video of the Q&A that followed my presentation at the British Labour Party Annual Conference Fringe Event on September 25, 2017. The presentation introduced the Reclaiming the State Project – and discusses my new book (with Thomas Fazi) – Reclaiming the State A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto, September 2017).

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IMF policies undermine the health of mothers and children in the poorest nations

In our new book Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017) – Thomas Fazi and I argue that a new progressive agenda would see the abolition of the IMF and the World Bank and the creation of a new multilateral institution that is entrusted with ensuring poor nations can access necessary funds to prevent their societies collapsing. This organisation would not be a bulwark for inflicting neoliberal policies on the poorer nations, but rather, a body that assisted nations in developing first-class health, education and environmental care capacities and infrastructure in a fully employed environment. It would help insulate such nations from the vicissitudes of global finance by supporting capital controls and other anti-speculative policy tools. The current multilateral framework dominated by the likes of the IMF and the World Bank have failed categorically in this regard. Recent research, which, in part consolidates a rich body of research going back to 1987, has found that the so-called ‘structural adjustment policies’ that accompany assistance from these organisations have materially damaged child and maternal health in the nations where these conditionality programs have been imposed. The IMF likes to talk about intergenerational fairness, especially in relation to the alleged burdens that fiscal deficits leave for future generations, but then they support and implement policies that unambiguously damage the health and well-being of children in poorer nations, while allowing real resources to be sucked out of those nations to the benefit of the global rich. A criminal enterprise.

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Australian inflation outlook benign – room for fiscal stimulus

Central banks around the world have been demonstrating how weak monetary policy is in trying to stimulate demand. They have been building up their balance sheets (massively) by creating reserves in return for government and corporate paper in an attempt to push their inflation rates up. But the data suggests their efforts are in vain. Which should inform all those who think that if the government stopped issuing debt to match their deficits there would be horrible inflation to think again. Progressives should be calling for their governments to abandon the gold standard practice of issuing debt, which would change the political dialogue considerably. Australia is also struggling to push it inflation rate into the so-called policy range of 2 to 3 per cent. Last week’s Australian Bureau of Statistics inflation data release – Consumer Price Index, Australia – data for the September-quarter 2017 showed that the September-quarter inflation rate was 0.6 per cent with an annual inflation rate of 1.8 per cent (down from 1.9 per cent last quarter). The headline inflation rate has been below the Reserve Bank of Australia’s lower target bound of 2 per cent for nearly two years now. Clearly, within their own logic where an inflation rate within the 2 to 3 per cent band reflects successful monetary policy, the RBA is failing. The RBA’s preferred core inflation measures – the Weighted Median and Trimmed Mean – are also now below the lower target bound and are not showing signs of moving up. The most reliable measure of inflationary expectations has also fallen quite sharply. With the labour market data demonstrating weakness and the economy stuck in this low inflation malaise, it is clearly time for a change in policy direction.

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Europhile Left deluded if it thinks reform process will produce functional outcomes

A recent twitter exchange with some Europhiles who believe that it is better to wait for some, as yet unspecified, incremental reform process for the Eurozone rather than precipitate exit and the restoration of currency sovereignty was summed up for me by one of the tweets from Andrew Watt. In trying to defend the abandonment of sovereignty and make a case for continuing with the so-called reform dialogue, he wrote (October 27, 2017): “Unemployment in “periphery” was v hi before €. Fell rapidly. Then rose sharply, has now fallen somewhat. So picture very mixed.” I found that a deeply offensive claim to make and responded: “It is not a mixed picture at all. Youth unemployment has never been as high. Greek unemployment was never > 12%. Now > 20% indefinitely.” I also attached a graph (see over). I think this little exchange captures the essence of the delusion among many in the Left that we document in our new book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017). The Europhiles maintain a blind faith in what they claim to be a reform process, which when carried through will reduce some of the acknowledged shortcomings (I would say disastrously terminal design flaws). They don’t put any time dimension on this ‘process’ but claim it is an on-going dialogue and we should sit tight and wait for it to deliver. Apparently waiting for ‘pigs to fly’ is a better strategy than dealing with the basic problems that this failed system has created. I think otherwise. The human disaster that the Eurozone has created impacts daily on peoples’ lives. It is entrenching long-term costs where a whole generation of Europeans has been denied the chance to work. That will reverberate for the rest of their lives and create dysfunctional outcomes no matter what ‘reforms’ are introduced. The damage is already done and remedies are desperately needed now. The so-called ‘reforms’ to date have been pathetic (think: banking union) and do not redress the flawed design. And to put a finer point on it: Germany will never allow sufficient changes to be made to render the EMU a functioning and effective federation. The Europhile Left is deluded if it thinks otherwise.

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