Early in the crisis I wrote this blog – The origins of the economic crisis – which set out some of the underlying dynamics of the neo-liberal era that had combined to establish the preconditions for the resulting collapse of the financial system. There was an interesting article in the UK Guardian on Tuesday (January 18, 2011) – The myth of ‘American exceptionalism’ implodes – by US academic Richard Wolff that bears on the themes I regularly discuss in my blog. The importance of the article is that it clearly outlines why the crisis emerged and further that the game is up – we cannot go back to where we were prior to the crisis. The reality is that a paradigm change is required and it is just a matter of which way things will go now. The signs are ominous that a conservative backlash is coming that will make the neo-liberal period look like a Sunday School picnic. But there is also scope for progressives to seize the moment. The problem is that there isn’t much going on in progressive land. The starting point should be a credible attack on the dominant macroeconomics – that is my little part of the story. Helpers needed.

Today I have had several media requests for interviews about various topics including the flood reconstruction in the eastern states of Australia and their implications for the budget aims of the Federal government (to record a surplus in 2012-13). My position seems to be alone in the debate. In the conservative pro-business publication – Business Spectator article (January 19, 2011) – A flood levy would not break Labor – we read more about the alleged budget dilemma facing the Government as a result of the devastating floods that Australia is currently enduring. To put the article in context, the author was a former advisor to past Labor government ministers – which when you read it tells you how far to the right the political “centre” has gone. While I doubt that the floods alone will undermine economic growth over the next 12 months, I certainly consider that the Australian economy requires further fiscal stimulus to keep growth going and the response to the disaster is a politically acceptable way to inject that stimulus. It is certainly not the time to be trying to raise taxes or cut spending in other areas to “pay for” the reconstruction effort.

I am currently writing a piece for the US weekly The Nation which is focusing my mind on issues relating to what a social democratic narrative should look like and in what way does it have to change from that which dominated government policy and the relationship the state had with its citizens in the Post WWII period up until the neo-liberal resurgence in the mid-1970s. It is an interesting topic and my deadline looms. Serendipitously, while I was driving back from the airport the other day I was listening to a repeat of an ABC radio program Big Ideas (thank god for our public broadcaster) which was a repeat of a lecture – What is Living and What is Dead in Social Democracy? – given by the late Tony Judt as the 2009 Remarque Lecture at New York University on October 19, 2009. The lecture nicely dovetailed into my current thoughts and challenged the “left” to wake up to themselves and revive the collective narrative and to get angry about what we have lost over the last 30 years. There are many memorable lines in this speech and the title – imagine if we treated “humiliation itself as a cost” is just one of them (more about which later).

The title of today’s blog comes from a speech given on January 12, 2011 by Richard W. Fisher, boss of the Federal Reserve Bank of Dallas – The Limits of Monetary Policy – which carried the sub-title – Monetary Policy Responsibility Cannot Substitute for Government Irresponsibility. It is a speech littered with ideological assertions parading as sensible public commentary. It will resonate with the deficit terrorists and reinforce the policy agenda that will only make the situation in the US worse not better. The ideas were echoed elsewhere in the world in the last week. Japan is considering hiking tax rates “because they want more private growth and less public net spending”. The (un)truth brigade have thus been out in force in recent days – spreading a litany of lies and falsehoods which only aim to perpetuate their irrational obsession that government economic activity is bad. I only wish they would just speak the truth.

I am travelling and engaged with commitments today and so am fitting this blog into a shorter time-span than I usually make. The floods in Australia have now become tragic (loss of many lives) but the Prime Minister still is insisting that the Federal government “will bring the budget to surplus in 2012-13, and, yes, that will entail some tough choices” even though it is being predicted that the impact on real growth of the Queensland economy virtually shutting down at present might be of the order of 1 per cent (see this account). Given the tepid economic growth that was revealed in the September quarter this would suggest that we are going back into recession territory. My advice to PM Julia in relation to her surplus aspirations – “automatic stabilisers – learn about them”. You can see the negative impact of the excessive rain over the last few months on coal exports already – see ABS data release yesterday for International Trade in Goods and Services. Anyway, I was thinking about this early today before I started attending to my commitments here (in Melbourne) and it related to something that I read in the New York Times this week. The issue is that so-called progressives often let the team down by using inappropriate constructs in the public debate. I am never absolutely sure whether they use these constructs because they don’t know better or they want some point of intersection with the mainstream debate. I usually conclude the former and there are times when you realise you know they don’t quite get it.