The catch-all category for my blogs reflecting my professional expertise as a full professor of economics.

World Bankspeak – how to hide the failure of a mission!

As the title of my 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale – indicates, I am interested in both economics and patterned behaviour within groups and the way groups erect edifices (such as, denial) to defend positions. I am also interested in the way groups use language. In an upcoming edition of the Journal of Post Keynesian Economics, I have an article written with Dr Louisa Connors entitled – Framing Modern Monetary Theory, which discusses this topic. Framing and language is a tool that reinforces Groupthink and allows group (organisations) to engage in denial even though the facts convey a different message. A 2015 analysis of World Bank Annual Reports from 1946 to 2012 is illustrative of the way in which framing, grammar and word usage can be used to clothe reality. The analysis published by the Stanford Literary Lab – Bankspeak: The Language of World Bank Reports, 1946-2012 – documents the shift in language by the World Bank between the first two decades of Annual Reports to the second two decades. They show how the Bank shifts from a language that is readily understood and considers a concrete world and offers very little prescriptive input to a narrative that becomes so opaque and filled with financial buzz words that comprehension is lost. They document the emergence of what they refer to as “Bankspeak”. Groupthink requires a certain language to reinforce the increasingly unsustainable reality that the group lives within. That is the role of the World Bankspeak! The Literary Lab analysis is worth reading because it provides a coherent analysis of the way words and sentence structures (grammar) are manipulated to shift focus, allay concern and basically, undermine accountability mechanisms that were established to ensure an institutional mission was being faithfully pursued.

Read more

Humans are intrinsically anti neo-liberal

Over the course of my academic career and even outside of that I have often been regaled with the claim (as if it is science) that capitalism is the ‘natural’ system for humans because our nature biases us to competitiveness and selfishness. So Marx’s famous epithet in his Critique of the Gotha program (1875) – “from each according to their ability to each according to their need” – was dismissed as being against our natural tendencies – a denial of basic human nature. It then followed that planned economies and economies where governments intervened strongly to ensure equitable distribution of opportunities and outcomes, was in some way contrived and would surely fail because our human nature would find ways to thwart such interference. This has been a compelling and dominant narrative over the last several decades as neo-liberal think tanks, biased media outlets, and politicians from both sides of politics (homogenised into a common economic mantra) reinforced it continuously in print, spoken word and policy. We shifted from living in societies where collective will and equity was deemed important organising principles to living in economies where every outcome was in the hands of the individual – including mass unemployment – and the concept of systemic failure that could be ameliorated by state intervention was rejected. State intervention was cast as the devil. It is no surprise that economic outcomes for a rising proportion of the population deteriorated as we shifted from society to economy – from collectivism to individualism. It turns out that the research into human nature, motivation, decision-making etc largely rejects the ‘competitive selfish individual’ narrative. We are intrinsically cooperative and care about equity. Our basic propensities appear to be collective and cooperative. Funny about that.

Read more

Australia’s Overseas Aid cuts reveal a nation that has lost its spirit

In last week’s fiscal statement (aka ‘the budget’), the Australian government decided to make the poorest citizens in the world, including those living in close proximity to our shores, the target of its austerity mania. It decided to increase Overseas Development Aid (ODA) to match the inflation rate until 2018 and then freeze that contribution for the next two years after that. Effectively cutting real aid over the next four years at a time it forecasts strong growth in total national income. The Government claimed it was just a “pause” and follow several years of cuts in absolute levels of aid. The austerity is not only hampering growth in Australia and maintaining elevated levels of labour underutilisation, but, it is also revealing how mean we are as a nation. As one of the wealthiest nations in the world (currently we are ranked 2nd behind Switzerland for per capita wealth), we are now cutting into the resources we extend to poorer nations in our region as part of a mindless quest for surplus. The problem is not only the economic idiocy that underpins these cuts. The other, perhaps larger problem, of which the first is a symptom is that, as a nation, Australia is losing its moral compass. In this neo-liberal era, we have become an increasingly ugly nation – lacking in generosity to each other and to outsiders. We engage in criminal behaviour (indefinitely detaining refugees in prisons on remote islands; engaging in illegal invasions of foreign nations, etc) and punish poverty rather than do everything we can to reduce it and provide the equal opportunities to all that we so often congratulate ourselves as being champions of. We are a mean-spirited nation these days and an international pariah. There is no pride in holding an Australian passport. It is easy to live here if you have money. The climate is good, the beaches great, plenty of open terrain, great sport – but our national spirit is disappearing.

Read more

Resistance and change doesn’t come from going along with the (neo-liberal) pack

I get a lot of E-mails that accuse me of being politically naive. The accusations were rekindled by yesterday’s blog – British labour lost in a neo-liberal haze. I imagine if I wrote a blog where I outlined support for Marine Le Pen in the context of a two-way fight against the worse-of-the-worst neo-liberals Emmanuel Macron the accusations would turn uglier even. My support for Brexit was met with similar hostility from a range of (self-styled) ‘progressives’ as being naive and offensive. Why, Brexit was a conservative plot wasn’t it? How could I have missed that? Progressives are now advocating votes for Macron even though they know he is an archetype neo-liberal – the anathema of what they believe. And they tell me every day in these E-mail tirades and other blogs that I should give people like Jeremy Corbyn some slack because he knows better than me that to advocate a major departure from the neo-liberal macroeconomic narrative would be political suicide. So why don’t I just shut up and recognise that politics is beyond my grasp and I should desist. Basically that is the message I get regularly. Well, I am sorry to say, such views completely misunderstand the role of an academic and the way in which resistance is constructed.

Read more

Deutsche Bundesbank exposes the lies of mainstream monetary theory

On one side of the Atlantic, it seems that central bankers understand the way the monetary system operates, while on the other side, central bankers are either not cognisant of how the system really works or choose to publish fake knowledge as a means to leverage political and/or ideological advantage. Yesterday, the Deutsche Bundesbank released their Monthly Report April 2017, which carried an article – Die Rolle von Banken, Nichtbanken und Zentralbank im Geldschöpfungsprozess (The Role of Banks, Non-banks and the central bank in the money-creation process). The article is only in German and provides an excellent overview of the way the system operates. We can compare that to coverage of the same topic by American central bankers, which choose to perpetuate the myths that students are taught in mainstream macroeconomic and monetary textbooks. Today’s blog will also help people who are struggling with the Modern Monetary Theory (MMT) claim that a sovereign government is never revenue constrained because it is the monopoly issuer of the currency and the fact that private bank’s create money through loans. There is no contradiction. Remember that MMT prefers to concentrate on net financial assets in the currency of issue rather than ‘money’ because that focus allows the intrinsic nature of the currency monopoly to be understood.

Read more

Recessions are never desirable events and are always avoidable

Bloomberg published an article last week (April 7, 2017) that it should not have published given that the article offers only fake knowledge to its readership. The article in question – Australia’s Delayed Recession Fallout Is Showing Up in Its Jobs Data – carried the sub-title “There may be trouble ahead” and purported to argue that because the Australian government’s fiscal stimulus allowed our nation to avoid a recession in 2009 we now have to ‘pay the piper’ and take our medicine and suffer a recession anyway. The proposition is ridiculous to say the least. The article uses as authority some nonsensical statements from a “business management consultant”, who doesn’t appear to have a very sound grasp of either history or what is actually going on. This is another case of misinformation. The fact is that the Australian government’s fiscal stimulus in 2008 and 2009 saved the economy from recession. The current slowdown and parlous labour market is not some delayed effect from that. Rather, it is because the Australian government caught the ‘fiscal surplus bug’ obsession, and began a misguided pursuits of surpluses, irrespective of what the external and private domestic sectors were doing. It caused an immediate slowdown and all the virtuous dynamics that were accompanying the stimulus-led growth (for example, fall in household debt and the rise in the household saving ratio) were reversed, as we would expect. Far from being delayed effects, the poor jobs data is because current fiscal policy is too restrictive. Simple solution: expand the discretionary fiscal deficit (preferably with a large-scale public sector job creation strategy).

Read more

Currency-issuing governments never have to worry about bond markets

How many times have to heard a politician claim they had to cut government spending and move the fiscal balance to surplus because they had to engender the confidence of the bond markets. Apparently, this narrative alleges that if bond markets are not ‘confident’ (whatever that means) then they will stop begging treasury departments for more debt issues and the government, in question, will run out of money and then pensions will stop being paid and the public service will be sacked and public trains and buses will stop running and before we know it the skies will blacken and collapse on us. The narrative ignores the usual statistics that bid-to-cover ratios are typically high (hence my ‘begging’ terminology) which are supplemented by well documented cases where the bond dealers (including banks etc) do actually beg central banks to stop driving yields down in maturity segments where these characters have pitched their “business model” (read: where they make the most profits). The facts are exactly the opposite to the neo-liberal pitch. Currency-issuing governments never need to worry about how bond markets ‘feel’. Essentially, the bond markets are irrelevant to the ability of such a government to design and implement its fiscal plans. And, the central bank always can counteract any tendencies that the bond markets might seek to impose where governments do actually issue debt.

Read more

Big business wants government to cut funding them immediately (if only)

Maybe the Australian Government should examine all its contracts with the biggest 121 companies in Australia and cancel them. Perhaps it should, where these companies provide public infrastructure consider setting up not-for-profit public companies to compete against the private 121 (thus lowering prices) and direct all public procurement to these new public institutions. The reason I suggest that is because the Business Council of Australia, which represents the largest companies in Australia (membership equals 121) is demanding the Australian government introduce rather sharp spending cuts or “suffer the consequences”. Okay, a good place to start, might therefore be to cut all public assistance to the companies that are members of the BCA, which would generate huge reductions in government spending. Do you think they would be so aggressive if that was on the table? Not a chance. This is a tawdry lot of corporatists who have had a long history of whingeing about government intervention unless, of course, it is helping grease the profits of their membership. Why the media has given their latest calls for fiscal rectitude the coverage it has reflects on the quality of our media these days.

Read more

Amazing what politics does to people

In 2012, while unemployment and underemployment was still at elevated levels after rising in the early days of the GFC, non-government spending was weak, the external deficit was around 4 per cent of GDP, real GDP growth remained well below its trend in the 5 years before the GFC, and the economy was no-where near full employment, the then Treasurer, Wayne Swan launched into the largest fiscal shift away from deficit in recent history (in the modern era since 1970). He was obsessed with ‘getting the budget back into surplus’ in the following year because somehow he had gleaned from the work of John Maynard Keynes that a responsible government has to pay back deficits with surpluses. The Australian government’s deficit had risen because tax revenue had fallen as a result of the slowdown in activity and because the Government introduced a rather large fiscal stimulus, which saved Australia from going down the recession route that other nations were mired in. Maintaining that deficit or enlarging it with further stimulus is what a responsible government should have done. But Swan, apparently thought that with Europe heading further into the morass (as a result of mindless austerity) that he had to show the world what a good government does – run surpluses. Apparently, he thought the credit rating agencies would close the government down. Apparently, he thought inflation would runaway from its low levels. Apparently, he believed the lie that fiscal deficits pushed up interest rates. Apparently, he didn’t know that introducing fiscal contraction when non-government spending was weak would further slow the economy and damage confidence. All of which happened. Quite obviously he didn’t know a thing. Swan, ever the politician (but in opposition now) is apparently thinking differently – now he is claiming fiscal deficits have to rise to push the economy towards full employment. This chameleon-like performance is rather sickening given the damage he caused when he was actually the Treasurer in charge of fiscal policy and full of neo-liberal lies and confusion.

Read more

When fake knowledge peddled by macroeconomics starts to fail the ‘investors’

Last Tuesday, in Maastricht, I gave one of two lectures I presented in a series (the other was on the previous Monday night). The first lecture, which was public, focused on the Eurozone disaster and I outlined why an orderly breakup of the failed monetary union would be in the best interest of all (I will post video of that lecture next Monday). The next lecture, which was to staff and students only, focused on the failure of macroeconomics and I juxtaposed fake news with the fake knowledge of mainstream macroeconomics. I want to expand a little on that topic. The Wall Street Journal published an article last week (March 6, 2017) – Everything the Market Thinks About Inflation Might Be Wrong – which bears on the validity of Modern Monetary Theory (MMT) relative to mainstream monetary economics. What I would call actual knowledge (MMT) and fake knowledge (mainstream theory). The article is not without its issues but it correctly notes that the underlying basis of orthodox inflation theory is false and fails to explain movements in inflation.

Read more
Back To Top