The British Tax Credits system is a sign of New Labour failure

In 2012, the British government, which had for the first two years of its last term, realised that it was going to drive the economy back into deep recession if it maintained its fiscal austerity plans. It had spent the previous two years telling everyone how it had to cut into the fiscal deficit to save Britain but by 2012 the data was telling the government that their view of the world did not accord with reality. As a consequence they curtailed the austerity onslaught and allowed the deficit to grow and support growth. The result was that Britain avoided a triple-dip recession and the nation demonstrated to its EU partners across the Channel how stupid and reckless the Eurozone’s fiscal austerity was. But ideology often comes back to the fore when the emergency is over. Now with continued, albeit weak growth and a renewed electoral mandate, courtesy of the pitiful British Labour Party, the Tories are once again talking tough and in the Spring 2015 ‘Budget’, the austerity returned with vengeance. The focal point at present of that austerity is the impending parliamentary vote on cutting the benefits to low income families in Britain via the Tax Credits system. The attempt to force harsh austerity onto the poor in Britain is vile in its conception. But the Tax Credits system in the first place is the result of weak-kneed decisions by New Labour to avoid forcing British employers to pay a decent minimum wage which would have eliminated ‘working poverty’. Now the chickens are coming hometo roost. And as usual, when austerity is introduced it is the poor that suffer. A disgrace all around really.

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Saturday Quiz – October 24, 2015 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. 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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Neo-liberal myths constrain our understanding of poverty

I was on a panel last night discussing the causes of poverty in Australia. The panel was rather diverse with housing, welfare and other representatives. There was a crowd of around 400 I believe. The format was difficult given that the panel of six was assembled in line at a table so could not see each other easily. But the real problem was that the facilitator, a national journalist, who had the role of asking questions to the panellists, chose to assert the standard neo-liberal macroeconomic myths in response to statements I made with respect to the causes and solutions to poverty. I was confronted with as-if facts such as “they have to get the money from somewhere before they can spend” in response to questions about public debt eventually becoming too large and foreigners funding our national (currency-issuing) government. I thought a facilitator was not meant to have an agenda but in this case holding out these neo-liberal myths perpetuated the standard agenda which guarantees that poverty will continue to worsen. There is a lot of work to be done before people will identify these neo-liberal myths as non-knowledge and readily understand that national, currency-issuing governments such as in Australia have no financial constraints and they spend out of ‘thin air’. Once that knowledge is accepted a whole new world opens up that allows us to see the path to reducing poverty and inequality.

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Public R&D austerity spending cuts undermine our grandchildren’s future

Growth in material living standards, which is just one measure of overall (average) prosperity and contestable at that, depends on productivity growth. How national income is distributed, real wages growth in relation to productivity growth, and the employment rates also impact on how this average is reflected in the fortunes of individuals. Strong productivity growth is only a necessary condition for improved material living standards. In this period of fiscal austerity with suppressed overall growth rates and labour market deregulation that undermines working conditions and reduces the incentives to invest in best-practice technology labour productivity is falling – as will living standards in the coming years. The world is locked into an idiotic race-to-the-bottom. It is a curious period really. The hypocrisy of governments, aided and abetted by the right-wing think tanks, who claim they are cutting into public spending to reduce the drain on living standards of our children and grandchildren, is clear to see. What they are really doing is undermining the future prosperity of the next several generations at the same time that they push millions into unemployment and poverty now. Why are we so stupid that we tolerate this nonsense?

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The Eurozone Groupthink and Denial continues …

I have been going back through my snippets library looking at what economists and politicians said back earlier in the crisis and comparing the predictions with reality to try to understand better why Europe is lagging behind. I have been compiling national profiles for various nations lately to ensure I remain cogniscant of the detailed developments that have been occurring. It takes some organisation. I have been concentrating by interest on Finland, Spain and Portugal lately. It astounds me when I read or hear that the Eurozone has been a success because the currency is stable. Even that last statement is false given the monetary union is fighting deflation at present with recessed output levels and entrenched mass unemployment. The current statements coming out of European leaders accord almost directly with the same sort of things they were saying in 2010 as the region was plunging deep into recession. It seems that they have learned nothing. Some of the past leaders have retired with handsome pensions and will not be held to account for their policy incompetence. Others remain in office and their public statements demonstrate that they cannot see beyond the blindness of the Groupthink that defines the patterned behaviour of the elite European policy-making institutions.

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Rising income and wealth inequality – 1% owns more than bottom 99%

This week is – Anti Poverty Week 2015 – in Australia and there are many events and happenings on to mark the time and to highlight the issue of poverty. I will be appearing on a panel on Wednesday afternoon in Newcastle (see below). I was thinking about what I might say in my short presentation next week as I read a report in the UK Guardian (October 17, 2015) – Wealth therapy tackles woes of the rich: ‘It’s really isolating to have lots of money’ – that appealed for sympathy from the rest of us for the top-end-of-town, who have to undergo psychological counselling because they are stressed out being wealthy. Apparently, they also have to engage in “stealth wealth” which means they “are hiding their wealth because they are concerned about negative judgment”. I immediately felt bad for them. Oh, the pain the top 1 per cent feel owning around 50 per cent of all the assets in the world! What a shocking plight they face. In the context of this week’s focus on Anti-Poverty, I couldn’t quite rouse the sympathy the story was seeking to elicit. Sorry!

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Saturday Quiz – October 17, 2015 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. 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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