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

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.

Read more

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.

Read more

RBA spills the beans on Australia’s failed fiscal strategy

The Governor and other senior officials of the Reserve Bank of Australia (RBA) appeared before the House of Representatives Standing Committee on Economics yesterday (August 20, 2014), as part of the review by the Government of the 2013 RBA Annual Report. The Governor and the RBA Board are, ultimately, creatures of the political process, being appointed by the Government, which tells you that all the guff about central bank independence is just a smokescreen. Further, the insights that the RBA officials provided to the Economics Committee should leave no-one in doubt that the Federal government’s fiscal strategy is a failed vision for the prosperity of our nation.

Read more

Real wages falling and Treasury continues to deceive

There is growing pressure on Australia’s wage setting tribunals to scrap penalty and overtime rates, allegedly because they damage employment and firms are just busting to put more workers on as long as wages drop. I have had a long association with these tribunals as an expert witness and I cannot recall the employers’ representatives ever agreeing that the time is right for wage rises. If their submissions are to be taken on their word then there would never be any wage increases. The facts are that real wages continue to fall in Australia – more rapidly in the private sector than the public. The Australian Bureau of Statistics published the latest – Wage Price Index, Australia – for the June quarter yesterday (August 13, 2014) and the data shows that hourly wage inflation is running at 2.4 per cent per annum, which is well below the current inflation rate. Real wages growth is also well below the growth in hourly productivity, which means that the Australian distribution system is still redistributing real national income to profits. And all the while employment growth is flat or negative. Meanwhile, our cigar-smoking Treasurer sees it as his role to berate the poor for being poor and distorting the public data to hide the fact that the May fiscal statement (aka budget) significantly cuts the real standard of living for low income earners and leaves the top income earners relatively unscathed. But all of this is in the name of fiscal austerity (aka madness).

Read more

Fiscal policy saved the world

There was an article in the Melbourne Age this morning (August 12, 2014) – As jobless numbers climb, RBA is perilously close to a rare mistake – that is running a theme that is increasingly being played out by the financial commentators. Basically, that monetary policy saved the world from the GFC but that central bankers may lose their resolve and hike interest rates too quickly. While I certainly do not advocate interest rates going up anywhere (that I am familiar with), what seems to be forgotten is that monetary policy is relatively useless at encouraging growth. It was fiscal policy that saved the world.

Read more

MMT is not conservative thought

Last night I sent the final manuscript of my Euro book to the publisher and felt somewhat downcast – that always happens after an intensive piece of work is finished. But this morning, I woke up free of that and focusing on the next task in the list. The list is always bubbling away and one juggles multiple projects at the same time, with more or less intensity. Curiosity demands that. But at some point more effort goes into one to complete it and the others wait in the queue for their turn. My next major deadline is an Modern Monetary Theory (MMT) compilation commissioned by my publisher Edward Elgar. The compilation will be my version of the roots of MMT and the development of its major ideas and influences. I have to write an overview piece explaining why I selected the literature and how it fits into the intellectual MMT tradition. It will obviously be an eclectic exercise and there is no certainty that my other original developers of what is now more broadly known as MMT will agree with my compilation or emphasis. I plan to start with Theories of Surplus Value – for reasons I explained in this blog – We need to read Karl Marx. I also do not plan to eulogise John Maynard Keynes, even though many of my colleagues think he is the most important link in the chain. It is here that I have to walk the fine line between technical detail and a broader reflection on how values intersect with what we might call the facts.

Read more

Intergenerational fairness improved by fiscal deficits

There was an interesting article in the UK Guardian today (August 6, 2014) – Debt and housing costs make young worse off than past generations – which reported on the so-called ‘intergenerational fairness index’ published by the – Intergenerational Foundation, which is a UK-based organisation which “researches fairness between generations” and believes that “government policy must be fair to all”. The – 2013 Edition – is the most most recent published version of the index. The UK Guardian journalist has the most recent index, which has not yet been publicly released (probably in London later today). The points I wish to make are not dependent on knowing the detail of the 2014 result. My concern is about principles and basic neo-liberal macroeconomic myths that are embedded in an otherwise reasonable exercise. A case of progressives shooting themselves in the foot again!

Read more

When the left became lost – Part 1

I read a book a long time ago (1994) called “The Principle of Duty: An Essay on the Foundations of Civic Order”. I note it was republished in 2009. The book by David Selbourne – who is a British philosopher and these days writes regularly for the British Magazine New Statesman. His latest article (July 24, 2014) – How the left was lost: the need to relearn what true progress means – reprises the argument made in his book. He has been making the argument for a long time, which, in itself is not a bad thing if it a reflection of a good idea being ignored. At the time I read the book the Dark Age of neo-liberalism that we are within was forming but its internal contradictions had not yet manifested fully. But the left had certainly lost direction by then, getting caught up in a Post Modernist haze with career politicians and their union buddies abandoning progressive principles and, instead, adopting neo-liberal economic stances to prove that they were ‘responsible’. The aim – to get power. That was the end game. Selbourne’s book and current article captures a lot of that but, I think, also misses some vital parts of the story.

Read more

Macroeconomic textbooks ripe for composting

I have been travelling a lot today – train, car, plane, car – and in between speaking and other commitments so not much time to type some thoughts. Also a detective novel I am reading was quite interesting on the plane, which didn’t help. But I have been thinking about our upcoming textbook and what will differentiate it from the others apart from nearly everything. I have also been looking into what has been sponsored by George Soros’s iNET initiative (the so-called CORE curriculum) and the latest versions of the dominant macroeconomics book Mankiw’s textbook (now in its 8th edition). Juxtaposing those developments (if we can call retrogression development) with some papers that have come out recently from central bank economists and then thinking about my own project with Randy Wray makes it seems as though the so-called progressive development (iNET) is a ‘try hard’ effort to disguise a neo-liberal heart with some comforting concessions to reality, while the avowedly mainstream approach represented by Mankiw has barely learned a thing about reality and essentially aims at business as usual. That business is the business of deception. Here are some thoughts on this.

Read more

IMF wrong on QE

Yesterday the IMF released new analysis of Quantitative Easing, specifically in relation to the Euro Area – Euro Area – Q&A on QE. This is in the context of the ECB beginning to discuss the possibility of introducing a large sovereign debt buy-up as the euro-zone inflation rate looks to be close to deflating (negative inflation). Once again, all the financial commentators are rehearsing their usual claims about driving up inflation etc. The reality is the QE will not provide much help for the euro-zone economies which are mired in recession or stagnant, low growth. What is needed are fairly substantial increases in the fiscal deficits in all Member States and none of the neo-liberal ideologues want to face up to that. So, instead, we get these ridiculous debates and analyses of QE – good and bad and all the rest. The IMF is wrong on QE. But then why should we be surprised about that. An apology or admission of error will be issued down the track, notwithstanding that in between all sorts of spurious forecasts about inflation, inflationary expectations and growth will be issued by them.

Read more
Back To Top