Fiscal austerity – an interesting test is coming

The coming period will be an interesting test. I say interesting in the sense of an intellectual curiosity rather than anything that my sense of humanity might find to be acceptable. I am referring to the widespread acceptance by politicians around the world that fiscal austerity is good for growth. Governments are increasingly getting bullied into adopting austerity measures apparently thinking they will help their economies grow. My bet is that the austerity measures will undermine growth and when growth finally returns it will be tepid and as a result of other factors not related to the austerity. In the meantime there will be massive casualties among the poor and disadvantaged. So if the Flat Earth Theorists (FETs) are correct in a few months we should be seeing rapid growth and reductions in the deficits. Of the countries that have led the charge (for example, Ireland) things don’t look good for the FETs. So we will see. If they are wrong you can be sure that various ad hoc responses to anomaly will be forthcoming. For example, I lost my briefcase on the way to work which had a key to growth in it! Excuses like that. The mainstream have never and will never admit they are wrong. The task will be to show the people that this rabble of economists should be ignored.

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Flat earth theorists – dumb but sneaky

Last year (May 2009) I wrote that Flat Earth theory returns – budget aftermath. In that blog, I asked the reader to imagine the time when it was the mainstream view that the Earth was flat, representing an infinite plane. The view largely died at around 3 BC but there are still some characters out there who worry about falling off the South Pole. After all the Nile River runs for thousands of kilometres and drops barely a few feet over that distance which doesn’t fit well with convexity does it? We have been referring to the hysterical commentators and lobby groups who are seeking to undermine the use of fiscal policy as deficit terrorists. However, when I think about term it actually gives these characters too much credit. Terrorists are probably smart and possess skill notwithstanding that they are usually misguided. So we have decided to resurrect the term I used in that blog last year – flat earth theorists (FETs) – because that association more adequately captures how mindless they are.

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The real World Cup

Regular readers will by now know I am not a soccer fan. And my national team (now locally known as the shockeroos) seemed like rank amateurs the other day against the might of Deutschers. The German coach described the game as “a good warm-up”. Reality check! But of-course, there is a competition going on in South Africa that a lot of people are interested in. So I have been following it myself. I am of-course referring to the The First Poor People’s World Cup which is currently underway in South Africa. This event involves 36 teams from 40 different communities coming together on a shoe-string budget to play soccer. In cost benefit terms it will add a lot more value to South Africa than the other less important competition that is being simultaneously run in South Africa.

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The assault on workers’ rights continues

I have been trying to maintain a theme focusing on the absurdity of our economic systems and the way in which governments allow themselves to be held to ransom by a small group of largely unproductive financial traders and the associated institutions (credit rating agencies). I was reminded of this again today when I read a report on growing murders of trade union officials and the purging of working conditions in various countries as the economic crisis worsened. When you juxtapose this sort of news – about things that really matter – with the nonsensical antics of the financial markets in Europe you realise we have totally lost any notion of priority.

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The poet and the economist

Governments are starting to realise that the recovery is slowing and the previous estimates of growth are probably overly optimistic. The IMF and OECD have been pushing inflated forecasts throughout the crisis because they cannot face the fact that the policies they have advocated caused the crisis in the first place. So, in denial, they want to make it look as if things are better than they are so they can get back onto their mantra – cuts in deficits, etc. The austerity packages are being introduced into an environment where the probability of a global double dip recession is rising by the day. But worst, are the shameless sense of priorities being rehearsed by economists and policy makers as they carve into welfare and pension entitlements, privatise valuable public assets (handing them over the “markets”) and increase unemployment. But then the mantra comes back – the forced extra pain won’t be as bad as we expect. So the international agencies and mainstream economists inflate the good things and reduce the significance of the bad things as a way of covering their grubby tracks. And all the while, these estimates and prognostications are based on economic models that failed to explain the crisis or its remedy. It is back to ground zero – and the pain will mount for the most disadvantaged.

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I am in denial – but I know children are dying

Governments around the world are being stampeded by financial commentators and international organisations (IMF, OECD, G-20) to implement austerity programs to get their “deficits under control”. All sorts of horrendous predictions are being touted in the press daily by the deficit terrorists who focus their gaze on charts showing movements in financial ratios – such as the deficit to GDP and public debt to GDP ratios. They largely ignore history and when they do invoke it the introduce erroneous analyses which do not apply to the issue at hand. They erroneously conflate the Eurozone with sovereign monetary systems. And they never let up. But in all the talk of austerity the real dimensions of the problem get lost. That is what today’s blog is about – getting our focus down to the fact that thousands of children will die as a result of these unnecessary austerity programs which are just designed to satisfy the ideological hangups of the (mostly) high income and wealthy elites in our societies.

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The OECDs perverted view of fiscal policy

It is interesting how the big neo-liberal economic organisations like the IMF and the OECD are trying to re-assert their intellectual authority on the policy debate again after being unable to provide any meaningful insights into the cause of the global crisis or its immediate remedies. They were relatively quiet in the early days of the crisis and the IMF even issued an apology, albeit a conditional one. It is clear that the policies the OECD and the IMF have promoted over the last decades have not helped those in poorer nations solve poverty and have also maintained persistently high levels of labour underutilisation across most advanced economies. It is also clear that the economic policies these agencies have been promoting for years were instrumental in creating the conditions that ultimately led to the collapse in 2007. Now they are emerging, unashamed, and touting even more destructive policy frameworks.

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Who should be sac(k)ed?

When I saw the headline on this article – Time to plan for post-Keynesian era – in the Financial Times yesterday (June 7, 2010) I wondered which Keynesian era we were talking about. It was written by Jeffrey Sachs who is well-known for his anti-stimulus viewpoints. The upshot of his argument, however, is that he recommends deficit reduction strategies because the bond markets will get upset otherwise. At the same time he advocates medium-term investments in green technology and education which I support but which will not be consistent with deficit reductions.

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NSW state budget commentary

I wrote the following for the local Fairfax press and it covers my reaction to today’s NSW state budget. I had 500 words and so the arguments are not well developed. It will be largely of local interest and I am posting it here for the records.

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Amazing reversals … democratic repression

The G-20 held its annual Finance Ministers and Central Bank Governors Meeting in South Korea over the weekend. It was amazing to see just how comprehensive the impact of the deficit terrorists has been on the way in which the G-20 has shifted its views on the way to deal with the on-going economic crisis. The G20 communique released today clearly illustrates that the G-20 group have been won over by the terrorists and are now supporting austerity measures. This is another one of the amazing reversals in the public debate that are now becoming regular events. All of the reversals are making it harder for governments to do what we elect them to do – use their policy tools to advance public purpose. The increasing constraints that governments are voluntarily accepting to satisfy the demands of amorphous groups such as the “bond markets” impinge on the democratic rights of every citizen. We expect our governments will act in the best interests of the nation. Sadly they are no longer doing that because they have fallen prey of the deficit terrorists. We have a new term for this – democratic repression.

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