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

When journalists allow dangerous economic myths to pervade

Journalists have a lot to answer for in this modern era of constant media reporting across multiple modes of communication. I have previously argued that the trend has become one where journalists are used as broadcasting tools for press releases – that is, stories that appear to be news commentary are really just precised versions of some corporate press release or a statement from some right wing think tank. The lack of critical scrutiny where one line statements that on the face of it are highly contentious are allowed to ‘go through to the keeper’ is now the model for modern mainstream journalism. An example of this was the Australian Broadcasting Commission’s PM current affairs radio program last night (June 27, 2016) – Investors brace for another wild ride on international markets post-Brexit. The PM program is the ABC’s premier evening news and current affairs program where issues are meant to be taken apart and some so-called experts (from all sides) are meant to be interviewed so as to enlighten the public, who otherwise might be uncertain about the meaning and/or impact of some event. At least that was the intent of the program when it started many years ago. Now, it has become, like most of the ABCs current affairs reporting, a rather pale imitation of its original brief.

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Renewables now cheaper than fossil-fuel power generation

I do not have much time to write today. But this evening I am heading to a very exciting event in Newcastle run by – Sun Crowd. It is the first energy storage bulk-buy campaign in Australia and Newcastle is the first city to launch this initiative which will see hundreds of households go off the energy grid and rely on our copious supply of free solar energy. The bulk-buy campaign is a cooperative (not for profit) venture which allows many households to team up to achieve low cost purchases of storage batteries, panels (if you haven’t already got them) and receive technical advice to cut through the complexity of the technology. Our household, which already is ‘off the grid’ during daylight hours (thanks to our solar panels) will soon be able to store our excess electricity we generate during daylight hours and use it up at nights instead of exporting it into the national grid at ridiculously low prices (thanks to the power (excuse the pun) that the power companies have over state government policy. So we are off tonight to get a big mutha of a battery at discounted prices (due to the bulk buy) and free ourselves of the high charges the power companies. Our next step might be to set up a local community power company and generate free power co-operatively for all from the sun. So, pretty exciting. Today also marks the publication of Bloomberg’s – New Energy Outlook 2016 – which provides the latest data on the relative costs of solar/wind against coal fired power generation. The numbers are moving firmly in favour of renewables which should see many more households moving off coal-fired power in the next decade or so.

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Full employment = mass idle labour – detaching language from meaning

In the Golden Egg by Donna Leon, which I was reading on a flight over the weekend, there was a discussion about language and meaning. The detective in question was musing about how crimes are described and concluded that when we “detach language from meaning … The world is yours”. The worst crimes become anaesthetised. In my professional domain (economics), this detachment is rife and leads to poor policy choices. One such example, which is close to the focus of my own research work over the years has been the way in which the mainstream economists have revised the concept of full employment. We now read that Australia, for example, is at “full employment” when its official unemployment rate is 5.7 per cent (1.7 per cent above its previous low in February 2008), underemployment is 8.4 per cent, and the participation rate is still a full 1 percentage below its November 2010 peak (meaning some 190 thousand workers have dropped out of the labour force). By any stretch, the total labour underutilisation rate (that is, idle but willing labour) is in excess of 16 per cent. But to some smug journalists who cannot even get their facts straight, that is ‘full employment’. Mainstream economics – detaching language from meaning and misleading a nation as a result.

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OECD joins the rush to fiscal expansion – for now at least

In the last month or so, we have seen the IMF publish material that is critical of what they call neo-liberalism. They now claim that the sort of policies that the IMF and the OECD have championed for several decades have damaged the well-being of people and societies. They now advocate policy positions that are diametrically opposite their past recommendations (for example, in relation to capital controls). In the most recent OECD Economic Outlook we now read that their is an “urgent need” for fiscal expansion – for large-scale expenditure on public infrastructure and education – despite this organisation advocating the opposite policies at the height of the crisis. It is too early to say whether these ‘swallows’ constitute a break-down of the neo-liberal Groupthink that has dominated these institutions over the last several decades. But for now, we should welcome the change of position, albeit from elements within these institutions. They are now advocating policies that Modern Monetary Theory (MMT) proponents have consistently proposed throughout the crisis. If only! The damage caused by the interventions of the IMF and the OECD in advancing austerity would have been avoided had these new positions been taken early on in the crisis. The other question is who within these organisations is going to pay for their previous incompetence?

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Australia is caught in a cyclical malaise – there is nothing ‘new normal’ about it

There was another article in the financial media this weekend running the hypothesis that the stagnant economic conditions that Australia has found itself in is a “new normal”. This is now a repeating theme. I disagree with it. It ignores some basic realities and is ideologically loaded towards an austerity interpretation of the world. The article in the Fairfax press (May 21, 2016) – Low pay growth, price rises and the new normal – claims that the “central question in macro-economics today” is whether we are “waiting … for the economy to get back to normal, or has the economy shifted to a “new normal?”. I would pose the question differently. Waiting implies that we think it is just a matter of time before the ‘market’ does its work and restores normality. Moreover, Australia like most of the rest of the world remains locked in the aftermath of what we call a ‘balance sheet’ recession. As I explained to various audiences in Spain during my recent visit, this type of event is unusual (atypical or abnormal) and requires a quite different policy response to a normal V-shaped recession where private investment spending falls, governments stimulate, confidence returns and growth gets back fairly quickly on its trend path. The losses might be large but the recession and aftermath are short. A balance sheet recession requires elevated levels of fiscal deficits being maintained for many years to support growth as non-government sector spending remains below the norm while it reduces its debt levels (via increased saving). The problem in Australia, like elsewhere, is that governments have been hectored by neo-liberal ideologues to prematurely withdraw or reduce the fiscal support and growth has stalled. A range of problems then follow.

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British Left reject fiscal strategy – speculation mounts, March 1976

This blog continues the discussion of the British currency crisis in 1976. Today we discuss the rejection of the 1976 Public Expenditure White Paper by the British Parliamentary Left who wanted an expansion of the fiscal deficit given that unemployment was well in excess of 1 million people in early 1976. Soon after Harold Wilson resigned as Prime Minister and James Callaghan, took over. He was by then ‘anti-union’ and was, increasingly, making statements about trade union power that played into the hands of the conservative push for an increased share of national income. After the rejection of the fiscal strategy, the sterling sell-off intensified. It was no coincidence.

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ATTAC should drop the ATT part!

Last Thursday evening in Madrid, I was invited as a guest of the local ATTAC chapter to talk about the Eurozone at a public meeting. I say guest, because one would be excused for thinking that the local ATTAC President was in fact the guest given that he launched into a 25 minute diatribe, masquerading as the first question after my presentation, that attacked Modern Monetary Theory (MMT) for (allegedly) ignoring taxes (no: we just say they do not fund spending) and basic income (no: we just prefer employment guarantees). While it was obvious he hadn’t actually read my book (despite claiming to be commenting on it), he also claimed that I was just another apologist for capitalism and had failed to advocate any fundamental changes to the system. It was quite a performance as you might guess, but I thought it rather odd that the president of ATTAC, which takes its name from its principal advocacy of a Tobin Tax (financial transactions tax), a small little surcharge on the Wall Street excesses, rather than a head-on attack on the legitimacy of the financial markets in general, would dare criticise others for advocating policies within the capitalist realm. I have long written about the need to control financial speculation via regulation rather than through the ‘price system’ (by taxing it). Those who think that working through the price system is the way to change behaviour are operating within neo-liberal logic. It is much more effective to just work through the legal system and ban something that is damaging to the prosperity of nations. That is the MMT position on these financial market excesses – where they just involve wealth shuffling and serve no productive purpose, the state should just legislate them into oblivion. But the so-called revolutionary ATTAC (if my understanding of the president’s ravings were correct) just wants to impose a small tax on Wall Street. And, I guess they will have to go looking for the cash in Panama or somewhere!

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There is no secular stagnation – just irresponsible fiscal policy

I am in Barcelona today until later then I am off to Valencia for two days. More on the Spanish tour later. The latest edition of the ECB’s Economic Bulletin released on May 5, 2016 carried and – Update on economic and monetary developments – provides more evidence, as if any was needed, that the current reliance on monetary policy – standard or otherwise – to reboot the stagnant economies of Europe has failed and will continue to fail. Why? It is the wrong policy tool. Journalists are increasingly writing that policy options are exhausted because central bankers ‘have fired all their shots’ and the “more shots they fire, the less effective they become”. The implication is that the world is locked into a future of secular stagnation with elevated levels of unemployment and low productivity growth. They seem to have forgotten that fiscal policy remains effective if it is used properly. There is no secular stagnation – just irresponsible fiscal policy use.

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Solving Our Unemployment Crisis presentation, April 19, 2016

Today, I am in Madrid for the start of the public events associated with the promotion of the Spanish version of my current book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale. I travelled this morning from Granada to Madrid and am tied up for the rest of the day. So here is a video of a keynote address I presented on April 19, 2016 to the inaugural Australian Unemployed Workers’ Union Conference Solving Our Unemployment Crisis in Melbourne, Australia. You can find out more about the Union from their – homePage – and their – Facebook Page. They need more members and the support (funding, promotion etc) from all employed people who care about the problem of unemployment. The talk and questions go for about 37 minutes.

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The Left confuses globalisation with neo-liberalism and gets lost

Financial Times journalist Wolfgang Münchau’s article (April 24, 2016) – The revenge of globalisation’s losers – rehearses a common theme, and one which those on the Left have become intoxicated with (not implicating the journalist among them). The problem is that the basic tenet is incorrect and by failing to separate the process of globalisation (integrated multinational supply chains and global capital flows) from what we might call economic neo-liberalism, the Left leave themselves exposed and too ready to accept notions that the capacity of the state has become compromised and economic policy is constrained by global capital. This is a further part in my current series that will form the thrust of my next book (coming out later this year). I have broken sequence a bit with today’s blog given I have been tracing the lead up to the British decision to call in the IMF in 1976. More instalments in that sequence will come next week as I do some more thinking and research – I am trawling through hundreds of documents at present (which is fun but time consuming). But today picks up on Wolfgang Münchau’s article from the weekend and fits nicely into the overall theme of the series. It also keeps me from talking about deflation in Australia (yes, announced today by the Australian Bureau of Statistics) as the Federal government keeps raving on about cutting its fiscal deficit (statement next Tuesday). I will write about those dreaded topics in due course.

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