The Sydney Morning Herald’s economics editor Ross Gittins wrote an article today (June 20, 2012) – This is no Sunday school: prosperity comes with pain – where he argued that the real world is not like his Sunday School (where all was forgiven) and that “discord and suffering are the price we pay for getting richer”. He might have also qualified that statement by saying that some get richer while others endure discord and suffering. I thought about that because I have been reading a number of related reports on the concept of the working poor – workers who for various reasons (pay, hours of work, job stability) live below the poverty line. I usually focus on the pain that unemployment brings but the working poor, many of whom are full-time workers, are also a highly disadvantaged cohort. It is not enough to just create growth that creates full employment. The policy framework also has to take responsibility for making sure that no-one who works is in poverty. A rising proportion of workers classified as working poor indicates according to metrics I use a failed state. The US is one such state.
Over the last week, a Londoner and a Glaswegian have publicly embarrassed themselves with statements made about the current economic situation. One is an academic historian who hasn’t fully understood history. The other a politician who is seeking to deny the obvious and somehow blur his own culpability in driving the British economy back into a double-dip recession. I guess the smokescreen approach works if yesterday’s Greek vote is anything to go by. I saw a headline in Bloomberg this morning which said that “Greece avoids chaos …”, which prompted me to wonder what chaos might look like if it is not hospitals unable to get access to essential supplies, a government killing its private sector by cutting spending and not paying legitimate bills, and an unemployment rate creeping towards 25 per cent and 50 per cent for youth. The Greeks were bombarded it seems with wilful lies and even then the conservatives on just led the vote count from their main anti-austerity rival. In all the denials and bluster, what I know categorically is that in the real world where we all live – sustaining rates of youth unemployment above 50 per cent – is definitely not protecting the grandchildren.
I was reading the recently published (June 11, 2012) – CBI Education and Skills Survey 2012 – from the Confederation of British Industry today. A day after the Report was published, the British Office of National Statistics released the latest (April 2012) – Index of Production – data which shows that “the seasonally adjusted Index of Production fell by 1.0 per cent” over the 12 months to April 2012 and that in the last month the “seasonally adjusted Index of Manufacturing fell by 0.7 per cent”. That is a large collapse. Since 2008, British production has slumped by 10 per cent overall even though the currency has depreciated by around 20 per cent against the Euro over the last 5 years. Earlier today I saw news footage of ignorant males (mostly) beating each other up over a soccer game in Warsaw. And in recent national elections, polarisation towards the extremes is evident. And all the while, technocrats that dominate organisations such as the IMF and the ECB are, inexorably, pushing economies into even more dire situations that we could have imagined four years ago, when the neo-liberal bubble burst. And in my own sector (higher education) the buzz is STEM and technocrats are using that buzz agenda to pursue strategies that will diminish our futures irrevocably. All these events, outcomes, strategies etc are related and cry out for a major shift in thinking by governments and educational institutions.
I went for a walk at lunchtime through a main shopping area where I am working today. In the past you saw Sale signs twice around twice a year – post Xmas and mid-year. The advertised discounts at this time were modest except for some enticement items that might have been discounted by 30 per cent or so. You rarely saw Closing Down/All Stock must go signs. You rarely saw massive discounts – such as 80 per cent off and the like. Times have changed and there seems to be a permanency to these sales and the discounts are huge. Previously well-to-do shopping strips are now slowly being punctuated with empty shops so the Sale/Closing Down signs are now interspersed with For Lease signs. And Australia is meant to be going through a one-in-a-hundred years mining boom and the Government tells us we are doing so well that they have to undermine aggregate demand by running a surplus to give the economy room to grow even more. The problem is that our political leaders are in denial and continually bombard us with lies to perpetuate their ideological stances which work against the well-being of the majority of citizens. It is clear that the system is failing and that means we have a choice. The problem is that we first have to identify that we have that choice.
I often get E-mails from readers – some hostile others more reasonable – telling me that I should stop arguing for more economic growth. The reasoning is relatively straightforward – the Earth is buckling under the rapacious resources demands of the capitalist system and not only is that process likely to be finite, notwithstanding substitution via technological advances, but also in the process of exhaustion the amenity declines. The argument juxtaposes ecological claims with other claims relating to the desirability of the current neo-liberal dominated system which relies, seemingly, on creating more inequality, a reduction in government oversight and allows the worst aspects of the capitalist system to run amok. However, somewhere along the way, the 99% or whatever percentage it is (I think it is substantially lower than 99) miss the boat. The current crisis is used to demonstrate that conjecture. I haven’t time to reply to all the E-mails and I try to provide “collective” replies (which should tell you something in itself) via my blog posts. So today I am addressing that issue. The message is simple – I am very sympathetic to localised, new economy-type collective ways of organising social and economic activities. I support egalitarianism and co-operative solutions rather than competitive, dog-eats-dog approaches. I don’t mind working and giving my surplus to aid those who are unable for whatever reason to achieve the same material outcomes by their own hand. I am happy with consolidation rather than growth. But despite the romantic appeal of all this – as the solution – we have to understand that there is still something called a monetary system and a currency to deal with. Localised solutions are still constrained by the sovereign state they are located in and their fortunes are determined in no small way by the way the currency-issuing government conducts its fiscal policy. There is no escape from that.
I have been number crunching today – heavy sort of crunching. One of the on-going discussions in the Australian context is the dual pattern of growth that is being observed here – which has arisen largely because, in essence, we are a primary commodity producer (and exporter) rather than an industrial nation. At present, some sectors (such as manufacturing and tourism) and regions (such as Sydney and Melbourne) are struggling while other sectors (such as mining) and regions (such as Western Australia, Northern Queensland and the Northern Territory) are booming. The East Coast where the majority of Australians live and work is probably close to recession. These trends – popularised by the term ‘two-speed economy’ – whereby serious sectoral and regional imbalances accompany overall economic growth, challenge the fundamental patterns of our economic and social settlements and threaten the financial viability of many Australian households. So I was computing job destruction and job creation rates today as part of an investigation of how the labour market is reacting the dual nature of economic outcomes at present. And then … the ABS published the Retail Sales data for April 2012 today and, as usual, everyone could interpret it in their own way. But it does bear somewhat on how we consider this dual growth pattern.
In the New Scientist last year (June 13 , 2011) there was an interview – A field guide to bullshit – with London-based academic philosopher Stephen Law about his book – Believing Bullshit: How not to get sucked into an intellectual black hole. I thought about that when I was reading the documentation relating to the latest con by the British government – its StartUp Loan scheme which will give tiny loans to vulnerable youth to launch businesses into a recessed economy. In fair times, the failure rate of small business is very high. Put inexperienced youth in the frame and it gets higher. Overlay a double-dip recession that will get worse (with perhaps an Olympic blip delaying the decline) over the next 12 months and you have another policy that will do very little to bring the 1 million plus youth unemployed back into productive life. The neo-liberals in the UK are increasingly chanting slogans like “MAKE A JOB DON’T TAKE A JOB” to extol the virtues of people creating their own work as a way of covering up the fact that the Government is deliberately destroying employment prospects (especially for the young). Schemes like the StartUp Loans join a long history of proposals designed to deal with mass unemployment which fail to understand the cause of the problem. Modern Monetary Theory (MMT) tells us that mass unemployment arises because the budget deficit is too small given the saving intentions of the non-government sector. Aggregate demand has to rise to reduce unemployment. Providing a pittance to small businesses will not relieve the demand constraint on the labour market. It might redistribute the unemployment but will not do anything to significantly reduce it.
The head of the IMF gave an extraordinary interview to the UK Guardian (May 25, 2012) – Christine Lagarde: can the head of the IMF save the euro?. It is extraordinary because of the language used by the IMF boss and the almost shameless increase in the intensity of Troika bullying of Greece at its prepares for another round of national elections to attempt to resolve the impasse that was left after the last election. The Troika know full well that the majority of people in Greece hate austerity and support an alternative growth-oriented policy agenda. The Troika also knows that its spin that austerity means growth is not resonating with European voters who can read the newspapers and understand the blatant untruth of the fiscal contraction expansion narrative. So they are exploiting the irrational view held by the majority of Greeks that they are better off staying with the Euro. By making out that the issue is about membership of the Euro, the Troika are introducing fear into the voting process to reinforce the TINA line that austerity is the only show in town. The Greek voters will succumb to that fear because they do not appreciate that membership of the Euro is austerity under current arrangements.
I have been noticing that a new narrative is coming out of the financial journalists acting as mouthpieces for various politicians and neo-liberal think-tanks around the place – along the lines that we have got it wrong – the debate now is not about austerity versus growth – but, rather, it is about structural reform and freeing up markets. The austerity is just a re-alignment of the public-private mix. I find that offensive but also odd – given that private businesses are being undermined at a rate of knots by the austerity and capital formation is stagnant (thereby undermining future prosperity). But amidst all this reinvention you still read the same scaremongering and mis-information along the traditional lines – austerity is good and the hope that increased spending can help is a pipe dream.
The International Labour Organization (ILO) released its Global Employment Trends for Youth 2012 report today (May 22, 2012). It is harrowing reading and I will consider it later in the week. It tells us that youth unemployment is rising and will be unlikely to see any improvement until at least 2016. The ILO recommend a raft of government initiatives which would require budget deficits to expand. But, of-course, the dominant political narrative is to cut deficits in the false belief that this will engender growth. Exactly the opposite is happening and for good reason. I came across an article from 1982 today which tells us why austerity is dangerous and damaging. It also conditions us to understand that budget deficits are neither good nor bad but policy choices can be.