Since when did the BIS become the Neo-liberal Ministry of Misinformation?

One despairs when a sober institution gets ahead of itself, usually because they make hiring mistakes, and start to think they know stuff. This is an organisation that is steeped in statistical analysis and should have a very good idea of empirical regularities. They know that interest rates have been “essentially zero” in Japan since the 1990s and they know that what hasn’t happened as a consequence. They know that central banks have been “expanding their balance sheets” (now “collectively at … three times their pre-crisis level”) and what hasn’t happened as a consequence (inflation). But as the neo-liberal paradigm has concentrated its control of the policy debate, this organisation has morphed from playing a useful role as a coordinator of central banking into a propaganda unit pumping out misinformation and outright lies and distorting the public debate. Welcome to the Bank of International Settlements, which is now firmly ensconced with the likes of the IMF, the OECD, the ECB, the EU, the World Bank, and others as being part of the problem the World economy faces.

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British Labour – light years away from 1945 on another planet

The problem of living in Darwin some of the time is that the normal day to day travel that one engages in while pursuing professional life becomes very onerous. It is a four hour flight to any of the capital cities (whereas most were around 1 hour or so from Newcastle). Further, the flight schedules are crazy because Darwin Airport has no curfew (because there is no residential areas nearby) and so you catch planes to and from, say Melbourne at 1.45 in the morning, fly all night, then have to hit the ground running to meet work commitments. This part of Darwin life is very austere. Talking about austerity – in a much more significant way, however – I read that Mr Ed Miliband, thinks he is the 2013 version of Clement Atlee and he can do great and radical “Labour” things in Britain while pursuing a neo-liberal economic austerity program. My immediate reaction was who does he think he is kidding. Sadly, the British Opposition leader seems to think his party can defy basic accounting – that is, reinvent the rules of addition and subtraction – as he tries to present himself as a small target but one imbued with traditional British Labour Party values. The point of this blog is to explain why this neo-liberal bluster is so anti-1945 Labour, without dwelling too much on history. My personal austerity (flying overnight last night) has impinged on my time to wax lyrical today!

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Labour costs are not driving Australia’s competitiveness

Australia is caught in a bizarre warp at the moment. We have a national election in September and the incumbent Labor Party is heading for obliteration with the Party conducting an internal power struggle that defies description. The Prime Minister is deeply unpopular and is being poorly advised (as evidenced by the sequence of strategic disasters). The politician she deposed as PM is popular with the people but hated internally and he also proved to be a policy disaster. The current PM should step down to limit the electoral damage that will be wrought on the Party in September (that is, save some seats) but she won’t and the other character won’t challenge because he is behaving as the wrecking ball – bitter, revengeful and, most significantly without sufficient support (just). Its a tragic comedy of epic proportions. The Opposition is gliding into power without coherent policies and will reinstate the agenda it pursued when last in power (1996-2007), which means attacks on welfare and unions and handouts to the rich. Anticipating the change are the employer groups which are increasingly claiming they are being disadvantaged by excessive wage outcomes in Australia. Same old. It doesn’t help when the media produce headlines such as “Labour cost growth hits business hard”, which are not sustained by any coherent analysis that follows. It is a bizarre time.

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Saturday Quiz – June 22, 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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Case Study – British IMF loan 1976 – Part 3

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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It is hard to defend the 1 per cent by claiming their contribution added value

Writer of popular textbooks on macroeconomic myths, N. Gregory Mankiw has just put out a paper – Defending the One Percent – which is due for publication in the Journal of Economic Perspectives. The paper presents a narrative about the shift in the US personal income distribution (sharply towards higher inequality) since the 1970s in terms of rewards forthcoming to exceptionally skilled entrepreneurs who have exploited technological developments to provide commensurate added value (welfare) to all of us. As a result, rewards reflect contributions and so why is that a problem? In other words, the “left” (as he calls the critics of the rising inequality) are wrong and are in denial of reality. That view is unsustainable when the evidence is combined with a broad understanding of the research literature. Ability explains the tiniest proportion of the movements in income distribution. Social power and class, ignored by the mainstream economics approach, provides a more reliable starting point to understanding the rising inequality.

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Britain continues to look like a failed state

Last week, the UK Department of Work and Pensions released a swathe of new – statistics – on poverty rates in Britain. While the Department tried as hard as it could to present the data in a misleading way and lied the facts, once analysed properly, are chilling indeed for a nation that pretends to be advanced and lectures Europe on its own misanthropic policy positions. I am sometimes asked when making public presentations how I judge the success or otherwise of public policy. I respond with a simple rule of thumb. The benchmark is not how rich the policy framework makes society in general but how rich it makes the poor! The conduct of governments in many nations over the last 20 years has not typified what a sophisticated and rich society should be doing to enhance the prospects of the weakest among us. The policies of the British government in recent years are the antithesis of sound public policy. In that sense, I judge Britain to be a failed state.

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Real wage cuts do not stimulate employment

In last week’s blog – Massive real wage cuts will not improve growth prospects – I considered the mounting evidence that austerity is leading to massive cuts in real wages for workers in Britain without commensurate gains in employment being evident. I have been doing some detailed work on the movements in employment and real wages in Britain over the last decade or so and today some of the more accessible work is presented. You will soon see that the mainstream view that cutting real wages is good for the economy is as absurd as the argument that a fiscal contraction expansion is the path to prosperity. Both policy options are the path to entrenched unemployment and increased poverty rates – exactly the outcome that has befallen the British population as a result of their moronic government policy stance.

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Full employment is still low unemployment and zero underemployment

You won’t see much debate or coverage of the desirability of making full employment the central goal of economic policy these days. The politicians, infested with neo-liberalism, do not admit they have abandoned full employment as a policy goal. Instead, they lie and wheel out various flawed analyses that try to make out that full employment now occurs at much higher rates of labour underutilisation in the past. Norway tells us that that proposition is a lie. In Australia, the government still tries to suggest that a state where more than 14 per cent of available labour is idle in one way or another represents close to full employment and a justification for fiscal austerity. We believe them because we have been seduced by the lies and our educational systems have downplayed critical scrutiny. But until we cut through the swathe of lies and misinformation we won’t get back to the bountiful state of full employment where not only workers enjoy higher incomes but dignity becomes a priority. Whatever else the liars say, full employment is still a state of very low unemployment and zero underemployment.

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