Ageing, Social Security, and the Intergenerational Debate – Part 2

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to publish the text sometime early in 2014. Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.

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Australian Labour Force – bad and getting worse

Today’s release of the – Labour Force data – for August 2013 by the Australian Bureau of Statistics tells me two things. First, it presents the case for why we had to change our federal government last weekend. The Labor Party had abandoned their responsibility for keeping unemployment low. Their obsession with achieving a budget surplus (they failed) deliberately undermined employment growth and has led to tens of thousands of Australians losing their jobs. Second, the new conservative government is going to have to shed its own ideological obsession with cutting deficits if it is to create an environment of robust employment growth and reduce unemployment. Its deregulation mantras will just make matters worse. I am not confident. We had the three evils in August – contracting employment, rising unemployment and a contracting labour force (via a further fall in the participation rate). Employment growth has negative now been negative for the last three months (a recession!) and in August both full-time employment and part-time employment contracting. Total employment is now lower than it was 6 months ago. Unemployment is rising towards 6 per cent as the weak employment growth fails to keep pace with the underlying population growth. Hidden unemployment also rose as more people gave up looking for work in an environment where job opportunities are shrinking rapidly. The broad labour underutilisation data from the ABS for the August quarter (released today) show sharp rises in both unemployment and underemployment. The broad rate of labour wastage is now 13.7 per cent. Add to this the impacts of the falling participation rate and the figure would be above 15 per cent. This data signals an urgent need for fiscal stimulus to reverse the negative trend. Unfortunately, with both sides of politics are locked into an austerity mindset the situation is likely to deteriorate further.

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Ageing, Social Security, and the Intergenerational Debate – Part 1

Today, I am writing material for our textbook, given that we are pushing to get it finished before the end of the year and there is one macroeconomics class already using the trial draft version. In that context, we are having to keep feeding material to the lecturers and students to keep up with their schedule. So that is why I am departing from my usual practice of Friday textbook writing. I have also had a disrupted day, having earlier presented a workshop on professional ethics and responsibilities to a group of postgraduate students. And besides, today is September 11 and so it is our duty to honour the victims of the Pinochet coup in Chile, which occurred on that Tuesday morning in 1973. At least 60,000 people perished under the oppression of the right-wing junta that illegally seized control of that democratic nation with US support.

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Age of firm rather than size matters for job creation in the US

Today, among other things, I have been analysing the fantastic dataset produced by the US Census bureau – Business Dynamics Statistics – which allows us to understand in much more detail, the underlying drivers of employment growth in the US by age and size of firm across sectors. I have done a lot of work on this topic in the past and this sort of dataset is a gold mine. It allows us, for example, to examine the veracity of the oft-repeated claims by conservative politicians and lobbyists that small business is the employment engine of the modern economies and all sorts of concessions and deregulation (mostly directed at underlying job security, wages and conditions for workers) are required to allow small business to do its work. The simple conclusion of today’s data analysis is that the age of the firm is more important in understanding net job creation in the US than the size of the firm. Here are some tentative results that may or may not be of interest.

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The intergenerational consequences of austerity will be massive

There was an interesting article in the Washington Post over the weekend (September 7, 2013) – Why Keynes wouldn’t have too rosy a view of our economic future – written by – Mike Konczal. It broaches the topic of self-adjustment in capitalist monetary economies and the divide within the economics profession with respect to that topic. It also introduces the issue that the long-run trajectory of the economy is dependent on the short-run path taken (the so-called hysteresis hypothesis), which is largely ignored by those who advocated fiscal austerity. What is typically denied is that the costs of fiscal austerity are more than a temporary increase in unemployment and lost income. The intergenerational consequences and the impact on the capacity of the economy are likely to be massive.

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Saturday Quiz – September 7, 2013 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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The IS-LM Framework – Part 7

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text during 2013 (to be ready in draft form for second semester teaching). Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.

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Bullshit jobs – the essence of capitalist control and realisation

Today, I was (perhaps) going to discuss the Federal coalition’s so-called budget costings, which they have released this afternoon a day and a half before the federal election is held. The major policy proposals are not costed and the whole exercise makes a mockery of their claims to transparency. The Coalition hired three so-called experts to validate the “costings” (after the debacle in the last election when their were major mistakes in the arithmetic revealed) and those characters should be ashamed of themselves for giving their imprimatur to such a shoddy process. Even from the pittance of information they have released it is clear they do not understand the macroeconomic reality and will damage overall growth. So that is all I intend to say about that matter. But in the last few days I have done a few media interviews (radio) on an article that appeared in the local Fairfax press, but was originally published in the Strike! Magazine as – On the Phenomenon of Bullshit Jobs by LSE anthropologist, David Graeber. The title in the local article had changed to “nonsense jobs” – a sign of the conservatism of our press. The interviews I did were interesting because the article brings together a number of strands that further expose the weakness of the economic theory taught to students in most universities. That is much more interesting to write about here than the tawdry realities of Australian politics at present which can be described as indecent ignorance.

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Australian National Accounts – gloomy but not yet disastrous

Today’s Australian Bureau of Statistics – Australian National Accounts – for the June-quarter 2013, shows that real GDP growth was 0.6 per cent, up slightly from the revised 0.5 per cent for the March-quarter 2013 (previously published at 0.6 per cent). The annualised growth rate of 2.6 per cent is now well below the trend rate between 2000 and 2008 and there is now a 4.3 per cent gap between actual growth and trend. This will widen in coming quarters and it is the reason the unemployment rate is rising. Overall, the data paints a fairly gloomy overall picture for the Australian economy. Gloomy without being disastrous. However, if the new federal government (after Saturday) start hacking into public spending to flex their conservative muscles then the outlook will shift very quickly from gloomy to disastrous and we will follow Europe down the sink hole.

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