Australian national accounts – weak and getting weaker

When the first-quarter National Accounts data came out for Australia I noted that despite the relatively strong growth recorded in that period, the Australian economy was in a fragile state and the contemporary indicators (given that the real GDP data is 3 months old by the time it is published) were indicating that the economy would slow significantly in the June-quarter. Today’s Australian Bureau of Statistics – Australian National Accounts – for the June-quarter 2014, confirms that prediction. Real GDP growth grew by 0.5 per cent down from 1.1 per cent in the June-quarter 2013. The annualised growth rate of 3.1 per cent is being held up by the strong June-quarter growth but something around 2 per cent per annum looking forward is a more realistic assessment of where the economy is at present. The external sector is now a negative influence on growth as is the government sector. In this quarter, there was a large inventory adjustment (up) which was the difference between positive and negative growth overall. That short of inventory swing will not continue. With export prices plummetting due to a glut in iron ore shipments to China, the external sector will continue to be a drag. Fiscal austerity is set to worse, which means that the data paints a fairly gloomy picture for the Australian economy for the rest of this year at least.

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Same old story – poor getting poorer and more indebted and the rich …

I have started to research the idea of the disappearing or shrinking middle class as part of a book project (for 2015) I am amassing materials for. The idea is simple but the conceptualisation and demarcation of the idea is rather complex. The hypothesis is that Capitalism is now striking at the income and wealth segment that has helped give it stability (which in this sense relates to not having a revolution rather than eliminating major economic cycles and mass unemployment). Marx said that religion was the opiate of the masses that kept them in line whereas in modern times it is mass consumption and credit that seems to keep the middle class in line. The rise in income and wealth inequality over the last 3 decades under the watch of neo-liberalism is obvious and initially showed up as a widening 90/10 gap (the numbers being deciles in the relevant distribution). But as the lowest income groups were marginalised, the dynamic moved on and started hollowing out the middle deciles. Real wages have lagged well behind productivity growth and mass unemployment is infiltrating the middle-income cohorts who typically have superior education, which has insulated them from job loss. The US Census Bureau provides excellent data on – Wealth and Asset Ownership, which allows us to trace the trends in household net worth and debt in the US in some detail. This blog just documents some of the characteristics of those distributions – it is preliminary work for me but of interest nonetheless.

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Large-scale employment guarantee scheme in India improving over time

Today I am reflecting on employment guarantees. I ran into a mate in a computer shop in Melbourne yesterday, totally by accident. He happens to be one of the big players in the job services sector – the unemployment industry. We exchanged our usual pleasantries and then we got angry together about the government policies – the usual interaction. Then I said well what we need is all you guys and the related charities (such as the Brotherhood of St Laurence, the Smith Family) and other groups (such as Greenpeace, Amnesty International etc) all getting out of their comfort zones and agreeing that being angry is stupid and that action is required. These are the people who lobby government. Academics only create ideas and write them out. I suggested that these groups use their significant public profiles to organise a coalition of support for the Job Guarantee and really push it hard – if only to expose the denials and failures of the orthodoxy that besets us all. Anyway, that conversation just happened to dove-tail with an article I read last week about employment guarantees in practice that I found interesting and which was exposing the deniers for what they are – ideological sycophants. That is what this blog is about.

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Saturday Quiz – August 30, 2014 – answers and discussion

Here are the answers with discussion for yesterday’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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Friday lay day

Its Friday lay day, where I don’t really write a blog anymore. Whatever! Over the last few weeks, I have written a few blogs that have examined the state of affairs in France – for example, Germany contracts as the French suggest defiance and French government in tatters and the financial markets want growth. I recall that earlier this year (January 28, 2014), the French President Francois Hollande told the press that unemployment in France had “finally peaked” (Source). Every month since he made that prediction, unemployment has risen.

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Why we should close the ‘unemployment industry’

This morning I gave a Keynote presentation to the Jobs Australia conference in Melbourne, which is a gathering of people who work in what I call the extra industry – the ‘unemployment industry’ – which has sprung up in the neo-liberal period to manage the unemployment that the government has deliberately created as a result of its obsession with fiscal austerity (trying to run surpluses when increased and on-going deficits are required). I take no umbrage with individuals who work in the ‘industry’ but its productivity is close to zero (you cannot search for jobs that are not there) and they have become co-opted servants of the pernicious government policy regime. The facts are clear – we have erected a massive corporate sector funded by government to manage the fiscal failure. The problem is that all these job service providers are not just shunting inanimate widgets around into so-called training schemes etc but are dealing with very disadvantaged people, which the capitalist system is excluding from the opportunity to engage in paid and productive work. The ‘unemployment sector’ is the Government’s front-line attack dog on the victims of the policy failure.

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Real GDP growth now requires less energy but is that the point?

Regular readers will know that I am pro-growth – economic growth that is. I get criticised for saying that by Greens and such because they only consider GDP growth within their own economic paradigm, which is tainted, if only subconsciously, by neo-liberal conceptions of enterprise and employment. I would say that I am as Green as anyone but also understand that being engaged in employment is a basic human endeavour. I also agree that our usual conceptions of gainful employment – working for a capitalist to make them profits – will typically not place the ‘greenness’ of the jobs as a priority, and will, in many cases involved environmentally destructive resource use. The key to disengaging growing employment and hence, economic growth, from activities that are environmentally destructive is to redefine what we mean by productive and useful employment. But, there is also evidence that within the mainstream world of markets, private firms are starting to disengage the link between energy use and economic growth. But will that be enough? This blog is just sketching my own catchup on the latest energy use data. You might find it interesting.

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French government in tatters and the financial markets want growth

The French government is in tatters after a number of the more enlightened members of parliament resigned as a protest against the mindless austerity that Hollande is imposing on his nation, which is causing the already desperate unemployment situation to worse. Le Monde ran a story (August 25, 2014) – La dernière chance du président (The last chance for the President) and said that the political season just became explosive for the President and the Prime Minister as a result of some of his senior ministers walking out in protest over the austerity obsession that Hollande has imposed on the French government. Despite all the scaremongering that financial markets love austerity and see it is a move to stability, the ‘markets’ appear to be rejecting austerity and voting for growth. We will see.

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Eurozone has failed – a major shift in direction is needed

The central bankers of the World met at Jackson Hole, Wyoming last week for their annual gathering far from the madding crowd. And as far away from the mess they have helped to create as you could imagine. Out of sight out of mind I guess. The ECB boss felt it his purpose at the gathering, which you can guarantee is plush in all respects (catering, wines, etc), to urge politicians to introduce more “growth-friendly policies”. He claimed in his speech – Unemployment in the euro area – that the so-called “sovereign debt crisis” had disabled “in part the tools of macroeconomic stabilisation”. Which is only true if one accepts that a central bank should play no role in supporting fiscal policy and that fiscal policy should be constrained by innane rules that deliberately prevent it from having sufficient latitude to meet foreseeable crises. Which is about as inane as one could get. But then none of these central bankers are accountable for anything much. They can swan around to meetings and issue ridiculous statements about growth-friendly policies, while supporting austerity, and nothing much happens to them personally.

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