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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Hype aside – the Juncker Plan – a failure from day one

When Jean-Claude Juncker took over the Presidency of the European Commission in November 2014 – yes, 18 months ago. His record before that should have warned everyone of where his ideological preferences lay. He was the President of the Eurogroup from January 1, 2005 to January 21, 2013, serving two terms and overseeing harsh austerity programs and continually hectoring Member States to obey the rules that would see millions of citizens deliberately rendered jobless. Not only was the Eurozone a deeply flawed construction but the fiscal rules that were enforced for the weaker states (not Germany in 2004) were the anathema of responsible economic policy given the scale of the recession. The Eurozone is still teetering on the brink of crisis some 8 years after the GFC began. It is no surprise that he was termed “the most dangerous man in Europe” by the British press on June 4, 2014 (Source). They noted that he was a “ruthless opportunist” who “admits lying and backs ‘secret’ debate on European finances”. He was previously forced out of his position as Prime Minister of Luxembourg in 2013 as a result of his ‘political responsibility’ for illegal spying by that nation’s secret police on individuals, including rival politicians among other sins. This is the man that is now in charge of the dysfunctional European Commission. When he was eleted to the European Commission Presidency, his main strategic initiative, which was promoted with much fanfare was the so-called €300 billion investment offensive. It was adopted in November 2014 and was accompanied with other plans to fix the banking system and improve productivity growth. The plan has been an abysmal failure like most of the initiatives that come from the neo-liberal Groupthink machine known as the European Commission.

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Spanish government discretionary fiscal deficit rises and real GDP growth returns

I am off to Spain in a few weeks to undertake a lecture tour associated with the publication of a Spanish translation of my current book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (see details below if you are interested). I noted by way of passing in a blog last week that a recent article in Spain’s highest-circulation newspaper El País (March 31, 2016) – Public deficit for 2015 comes in at 5.2%, exceeding gloomiest forecasts. The latest data shows that the Spanish government is in breach of Eurozone fiscal rules and is growing strongly as a result. Those who claim that Spain demonstrates how fiscal austerity can promote growth should examine the data more closely. The reality is that as growth has returned (albeit now moderating again), the discretionary fiscal deficit (that component of the final deficit that reflects the policy choices of government) has increased. Government consumption and investment spending has supported the return to growth, which had collapsed under the burdens of fiscal austerity between 2010 and 2013. Spain demonstrates how responsible counter-cyclical fiscal policy works.

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Rising urban inequality and segregation and the role of the state

Last week, 61.1 per cent of Dutch voters who turned out (the turnout was above the legal threshold to make the vote legal) voted against the referendum proposal to ratify a ‘preferential trade’ agreement between the European Union and Ukraine. It means that the Dutch government cannot, from a political perspective, ratify the EU initiative. It is the second time in its history that the Dutch have rejected a referendum about the EU – the last time was in 2005 when the EU Constitutional Treaty was soundly rejected. Then, the EU elites just ignored the democratic intent and bundled the initiative up into the Treaty of Lisbon and went about business as usual. Democracy is only useful to the EU elites if it ratifies their own self-interest. The same will happen this time. Merkel and Hollande have already said (in as many words) that they will disregard the Dutch outcome. The interpretations of last week’s voting outcome are now coming ‘fast and furious’ and the denialists are out in force – ‘oh, it doesn’t mean what it appears’ etc, and so the EU will just go about business as usual, as it always does, and that ‘culture’ is one of the reasons the whole European Project (now dominated by the common currency) is now proving to be an abject failure. It is a dysfunctional dystopia! Then citizens are watching the unfolding story from The Panama Papers, which only serve to confirm how top-level corruption, hypocrisy etc is rife and there is one (no) rule for them and another, harsher, binding rule for the rest of us. And, recent research findings suggest that our social settlements, where we live, bring up families, develop our aspirations and behaviours, are riven with rising inequality and increased segregation. Juxtapose that with the facts coming out about the urban backgrounds of young Belgians who achieve their aspirations by blowing themselves up and taking as many of us with them. The souls typically come from highly segregated urban enclaves in our cities with joblessness and poverty a daily burden. All of the above has been created by a neo-liberalism that works for the elites and aims to extract as much real income out of the system for the few as possible with as little democratic oversight as possible.

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IMF groupthink and sociopaths

It is easy to get distracted by other important events in the last week by the enormity of the information that has been released in the so-called – The Panama Papers – which document around 40 years of secretive banking deals, tax dodging, criminal money laundering and political corruption. The information shows that “major banks are big drivers behind the creation of hard-to-trace companies” in tax havens and once again demonstrates the urgency of root-and-branch banking reform to wipe out their ‘non-banking’ businesses. The revelations from that leak (‘hack’) will continue for some time given the size of the data. But the world keeps turning and the IMF keeps informing us, either through their own voluntary statements or through information that they clearly don’t want us to know about, which gets leaked, just what a rotten institution it has become. Read on and feel sad.

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Finland’s problem is exactly the euro!

I have noticed a creeping trend in the European press over the last 18 months or so claiming that Finland’s economic malaise, which continues to deteriorate, is nothing to do with the euro. The latest effort in this campaign of denial suggests that the real problem is the “the Finnish welfare state and society”. My view is as follows and it couldn’t be any clearer – whatever structural problems there are in the Finnish economy (following the decline of Nokia and the impending decline of its paper industry due to changing patterns with respect to newspaper consumption), Finland’s decline into the status of a Eurozone basket case along with Greece is all down to the euro and the ridiculous fiscal rules that prevent its government from countering a sharp decline in both the export revenue and private capital formation. Without the limitations imposed by euro membership, Finland would be in a position to stimulate its own economy just as it did during the bleak years of its recession in the early 1990s. Certainly, it would not be a sufficient condition just to exit the euro zone. The neo-liberal infestation that interprets the fiscal rules in the harshest manner (that is, denying even the minimal flexibility that is possible within the Stability and Growth Pact) an additional layer of the problem. But if Finland was to restore its own currency then at the political level the neo-liberal politicians would not be able to shift blame onto the Eurozone rules when they deliberately pushed up unemployment through unnecessary fiscal cuts. Then it would be more obvious that the political leadership was responsible which would bring the destructive neo-liberal tendencies into relief.

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Fiscal policy is a potent instrument for productivity growth

Sometimes we have to take a longer look at things to see the present in perspective. Greece has been a living experiment for the neo-liberal Groupthink machine that is the Troika. We rarely experiment on humans on any sort of large-scale if there is the likelihood of adverse result. That would breach any notion of human ethics. It is a pity that we relax those standards when dealing with other animals, but that is another story again, which I will leave silent here. The Nazis certainly conducted large-scale experiments on humans and we vilified them for it. The Troika is conducting different types of experiments on the citizens of Greece, which defy reason, and which also have had devastating effects. But still the mantra continues from the babbling mouths of the political leadership in Europe and its technocratic squawk squad (SS) embedded in the European Commission bureaucracy, the ECB, the IMF and various so-called ‘think tanks’ that continually pump out pro-Euro propaganda disguised as research – more structural reform, more fiscal austerity. Apparently, this scorched earth approach is the only alternative and will deliver higher productivity, increased international competitiveness and underpin a return to prosperity. Greece is on the front line of this approach. I never believed it would work because it defies economic reason. Economic reason that is not blighted by the neo-liberal Groupthink. It hasn’t worked. And now, the IMF, or at least segments within the IMF, are admitting that and producing research that supports the opposite case – the Modern Monetary Theory (MMT) case – that expansive “fiscal policy is a potent instrument for productivity growth through innovation”. Correct!

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Chaos in Europe and the flawed monetary system

I spend a fair bit of time in various airports each month and hate the onerous security checks, which at times seem petty in the extreme. It always amused (not the right word) me that a passenger could just walk straight on with a bag full of duty free whisky which would make a lethal weapon if smashed, yet characters like me with pins in my legs (old bike crashes) have to nearly strip each time we have to fly. Now I suppose they will have security screening outside the terminal entrance just to enter. The authorities would have been better ensuring that their youth had access to employment rather than allowing them to wallow in unemployment and the resulting social exclusion. It is too simplistic to attribute the growing dangers in Europe and elsewhere to concentrations of high unemployment. But if a society deliberately denies a particular generation of the chance to gain employment and, instead, vilifies them as lazy, wanton individuals then it is easy to see why those characters will conclude that society has nothing to offer. In Europe where these manifestations are becoming increasingly obvious, the flawed monetary system is at the heart of the problem. It has failed categorically and the fall out of that failure is multi-dimensional.

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Finland would be better off outside the Eurozone

Towards the end of last year, I wrote a blog – Finland should exit the euro. I had been undertaking some detailed research on the plight of this relatively small Eurozone nation for a number of reasons. First, it had recently undergone a major industrial decline as Nokia/Microsoft missed market trends and went from world leader to irrelevance. Second, Finland was a vocal proponent of the view that Greece should be pillaried into oblivion by the Troika – to ‘take their medicine’ (more crippling austerity). Third, the data trends were unambiguously pointing to Finland descending into the Eurozone ‘basket case’ category itself as its own conservative government imposed harsh fiscal austerity on the tiny, beleagured nation. Two things are clearer than ever about the Eurozone. First, it is a dysfunctional mess and efforts to reform it so far have only made matters worse. Second, any single nation (and all together) would be unambigously better off exiting the mess and restoring their own currency sovereignty and letting their exchange rate take up some of the adjustment. The following text covers an article that I have written for a Finnish Report coming out in May 2016 to be published by the Left Forum Finland, which is a coalition formed by the political party Left Alliance, the People’s Educational Association (KSL) and the Yrjö Sirola Foundation.

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If I was in Britain I would not want to be in the EU

The foundations of national sovereignty are the currency-issuing capacity of the national government. The foundations of a democracy include the ability of the citizens of that currency zone (the ‘national government’) to choose the political representatives at regular intervals who will make decisions on their behalf. A direct chain of responsibility between the elected officials to the voters is thus established and the citizens can take action accordingly if they feel they are being disadvantaged by the legislative outcomes. The anathema of this sort of direct responsibility and accountability is the European Union, which is cabal ruled by unelected officials (in the conventional sense) who are not held accountable for their decisions, no matter how poor they turn out to be. The history of the Eurozone is one of policy failure with millions of people rendered unemployed, in poverty, or otherwise disadvantaged by the destructive decisions made by successive European Commission administrations. There was a good reason why the French president Charles de Gaulle resisted the development of supranational power blocks in Brussels and elsewhere (for example, in Frankfurt under the Eurozone). His preference for Inter-Governmental relations, where large common issues such as climate change, migration, rule of law, etc could be decided upon by representatives of each Member State government, without surrendering national sovereignty, was sound. Given all of that, the United Kingdom should exit the dysfunctional European Union immediately and only negotiate with other states on a government to government basis.

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