I am travelling today and then have commitments at the other end. So very little time to write. But I did read some interesting papers over the weekend which bear on the question of whether fiscal policy in the US was effective or not. The neo-liberals (mainstream macroeconomists) claim that fiscal policy is not effective. The extremists among them invoke – Ricardian Equivalence – which claims that private households and firms fear that the rising deficits will require higher tax rates and so they save more now – which means that for every dollar of new government spending there is a dollar less of private spending – so no effect. All the evidence contradicts the extreme view. There is also mounting evidence that the recent fiscal interventions have been very effective. A study I read yesterday went a step further and analysis the impact of targetting low income groups. They found that type of public spending was very expansionary. Their results support my contention that a Job Guarantee would be a very effective (and cheap) fiscal solution (as a first step) to a private spending collapse. But for all the naysayers – sorry, the evidence is mounting that fiscal policy saved the world.

I have said it before that when the facts get in the way of mainstream economic theory – which is just about always – the professors (my peers) tell their students that the facts are wrong. They have a pathological obsession with hanging on to their theories. Apart from the arrogance that accompanies this I have never really been able to work it out. As a tenured professor I could overnight become an adherent of the Austrian School or whatever and my job wouldn’t be threatened. A tradesperson who loses his/her skills has a problem. But academic life is different. We can explore new ideas any time we choose and take time to develop the news skills commensurate with these ideas. That, in part, is what research is all about. So it is more about their unwillingness to let go of what are essentially religious beliefs that leads the mainstream economists to constantly pump out rubbish and lie when they are found out (by the facts). The overwhelming fact is that the push for austerity is not based on any evidence-based understanding of how the system works. It is driven by stylised economic models that bear no relation to the real world and fail when confronted with data from the real world. As the clock ticks by – tick tock tick tock – the evidence mounts that nations that introduce austerity fare poorly.

Back in warm and sunny Newcastle. It is quite amazing how strident the attack on government deficits has become. There is very little recognition of the scale of the economic disaster that still plagues our economies. Even relatively unscathed economies like Australia is carrying 12.5 per cent labour underutilisation rates. That is bad enough. The majority of nations are in much worse shape. The scale of this disaster is so great that you might wonder who is going to be made to pay – given that the crisis was brought on by human folly. Why are those responsible being brought to account? The reality is that the criminals who led us into this disaster have done very well out of the bailout packages that they now oppose. You would have to indict the majority of my profession to achieve justice. So we might want a “national reconciliation” process to allow us to move on and forgive those that caused this. The problem is that the perpetrators are not humble in their failing. Far from it – they are now leading the charge attacking budget deficits using the same economic theories that caused the crisis. How the hell does anyone think these characters have anything to say any more? They were wrong before … so what’s changed?

I got of a plane this afternoon and learned about the devastation in Christchurch. I am feeling for my NZ colleagues today. I suppose some conservative idiots will claim the NZ government doesn’t have the money to do what is necessary to provide some relief. There is also strife in the Middle East as poverty and unemployment finally combine with a sense that governments in nations in that region are working against people rather than for them. In the UK and the US the governments are no longer working in the best interests of their citizens and public displays of anger are emerging (for example, Wisconsin). While the agenda of the oppressive regimes in the Middle East has always been clear the narratives of the conservatives in the advanced nations has always been hidden by a web of lies often supported by well-paid economists who urge us to accept austerity and deregulation because it will make us all wealthier. They tell us that the textbooks show that. The crisis has demonstrated to all that the textbooks are incapable of saying anything useful about the way the monetary system operates and the policy choices that a government running a fiat currency system has available to them. But as the conservatives are regaining control of the political processes after being shocked into silence in the early days of the crisis, it is clear they are overstepping themselves. They are continually claiming there is a fiscal crisis. But the reality is that their agenda – to crush unions and redistribute real income to capital – is becoming more transparent. That should be exposed by progressives and popular rebellions encouraged.

I have been travelling the last two days and have disrupted work patterns. But I did manage to read a few things in between other things today which made my hair stand on end and suggest that the austerity debate has moved ground. So desperately lacking is the real evidence which might support the economic claims the conservatives have been using to justify their manic desire to savage public spending when there is 10 per cent unemployment (and worse) – that the deficit terrorists are now appealing to morality – that public deficits and debt are immoral. It makes you wonder why these characters just don’t become stand-up comedians. But given how dangerous they are as a result of their positions in government it is clearly not a laughing matter. I would seek to try these characters for crimes against humanity when it becomes obvious to everyone how wrongful their actions are. It is interesting though – the descent into “moral” arguments means that you can conclude that even the conservatives know that the bevy of economic arguments that they use to justify their damaging policies are nonsense. But there is a new emerging problem. As I write today the entrenched unemployment that the deficit terrorists are now acknowledging they will cause to worsen is giving rise to employers discriminating against the most disadvantaged workers that are seeking work. What this tells us is that the employers have too much power.