I read an article in the Financial Times earlier this week (September 23, 2023) -…
I am away most of this week and have limited time for blogs and I am also concentrating on the Modern Monetary Theory (MMT) book I am working on that will be published later in 2015. I also do not want to use the blog space exclusively for that book writing like I did for a portion of this year when I wrote the book on the Eurozone (which will come out in May 2015). I can also say that an Italian version of the book is now going to be a reality and we hope to get it out as soon as possible in 2015 – more later on that topic – it tells a story in itself about the Italian left! So for the rest of the week we will be in Blog Light’ territory although only marginally. Today – a sad story of how progressives seem to lose their way. I would have thought the first progressive imperative would be to counter the neo-liberal myths about economics in order to liberate a range of other social and environment initiatives that will improve society and the world in general from the yoke of neo-liberal lies about fiscal deficits and the way the monetary system operates. I was wrong. After considering the material for this blog, I think I will file it under my – Friend’s like this … – series.
On December 28, 2014 – Truthout – who describes itself as an organisation “dedicated to providing independent news and commentary on a daily basis” and believes (rather modestly! not) that that they “we will spur the revolution in consciousness and inspire the direct action that is necessary to save the planet and humanity” released their – Top 10 Progressive Policies We’d Love to See Enacted in 2015 (but Probably Won’t Be).
It tells you what the problem with jettisoning is! Apparently, out of the “top 10 progressive policies” we cannot advocate getting rid of unemployment. At best, and at Number 8 on the list, is the aspiration that the US government extends the unemployment insurance, which will apparently:
Bringing back extended unemployment payments could make the difference for those who are trying to get a real job, not just a job.
How, exactly does paying unemployment benefits for longer help workers get a real job when there is a shortage of jobs.
Granted, taking unemployment benefits away from those without a job undermines spending, which clearly ensures a situation marked by deficient demand is exacerbated.
But when there is mass unemployment, the problem goes well beyond whether unemployment benefits have a finite life or not.
How about the government actually becoming an employer again of a scale necessary to ensure their is no unemployment above that necessary to allow people to transit between jobs?
That might be too progressive it seems for the 2015-style (neo-liberal) progressives.
But then I would have thought the first progressive imperative would be to counter the neo-liberal myths about economics in order to liberate a range of other social and environment initiatives that will improve society and the world in general from the yoke of neo-liberal lies about fiscal deficits and the way the monetary system operates.
The day after (December 29, 2014) Truthout had another go, this time with the articulation of their – New Year’s Resolutions: Ten Ways to Combat Upward Redistribution of Income.
Out of 10 resolution, only Number 10 deals with employment. But then it does so in an almost comical way.
But before we get to that point we have to labour (excuse the pun) through several non-employment proposals.
For example, at NBumber 8, we learn that the “most obvious cause of the lack of demand … [is] … the country’s large trade deficit”, which Truthout wants to eliminate.
What! … undermine the capacity of US citizens to enjoy the hard work of other nations in producing goods and services that they are willing to ship to America in return for bits of papers (financial claims).
Exports, which Truthout wants to encourage as the growth saviour – which puts them in bed with the leading international scammers the IMF, are a cost to the US.
Imports are a gain.
And why isn’t it progressive to argue that if the US is enjoying an import’s party, then why should it not be the responsibility of the government via a larger deficit to expand public employment, improve public services, rejuvenate decayed urban systems, and provide better public infrastructure to offset the spending gap left by the private sector behaviour?
How is it that the current account deficit is the “most obvious cause of the lack of demand”? In the case of a sovereign, currency-issuing country such as the US, the first culprit to finger when there is a shortage of demand, after you allow for the fact that the private sector makes spending and saving decisions according to private motivations that do not necessarily generate the best outcomes for society in general, is the currency-issuing government.
They are the ones that issue that currency and can spend it into existence whenever they choose as should do so as long as there are idle resources – which means there are goods and services (including labour) for sale in that currency that currently have zero bid in the private markets.
That surely is a starting point for a progressive position.
Then at Number 9 we learn that the US should cut the working week and introduce job sharing to reduce replicate “Germany’s economic miracle”. Is this the same Germany that spans longitude between France and Poland?
I wonder if the workers in Germany that have been forced increasingly into mini-jobs and forced to take real wage freezes and cuts for a decade or more would call the current state in that nation, an “economic miracle”?
Apparently, the workers should be allowed to cut back hours and would be “compensated for their lost wages through the unemployment insurance system”.
Is this really a joke or something. Since when has it been a progressive position to advocate cutting workers hours and incomes and then paying them the dole for the lost wages?
Would it not be better to ensure there are enough jobs overall at decent wages to satisfy the desires for work hours of the workers?
Is that too progressive for the 2015-style (neo-liberal) progressives?
Finally, at Number 10 on the list, the proposal is for some progressives to be “watching the Fed’s actions” which:
… should make it harder for the Fed to take steps to deliberately throw people out of work and reduce workers’ bargaining power.
The way they think the central bank would make it harder for people to gain employment is for the bank to raise interest rates.
Of course, this proposal – the only one that really addresses the need for increased employment – is a non-proposal. First, monetary policy is not the problem. Fiscal policy is a much more effective way to alter the employment prospects of the workforce and can be targetted to improve the employment of specific demographic, skill and geographically-located groups.
Monetary policy cannot do that and it is still not clear that rising interest rates within normal ranges destroy jobs independent of fiscal policy changes.
A progressive position should be to encourage higher employment via direct public sector job creation and more deficit spending in areas that benefit society overall and also generate employment.
But, moreover, there also has to be a fundamental shift in the wage bargaining environment and government support for workers to ensure that they can enjoy real wage rises commensurate with productivity and start gaining a greater share in the national income produced.
That has to be a central plank in any progressive manifesto. Employment growth alone will not provide the basis for a redistribution of national income back towards wages.
The reason that the top-end-of-town is getting increasingly higher shares of national income is twofold: (a) real wages generally are lagging behind productivity growth; and (b) the wage distribution itself is becoming more unequal.
Both need to be addressed at an elemental level. Strong public employment can help. But also public interventions into private wage setting has to also occur to redress the shift in the balance of power towards capital over the last three decades.
Reading all this stuff is very frustrating. It also dovetails into a Fairfax article this week (December 28, 2014) – Joe Hockey’s budget woes overshadow all else in 2014 – written by a researcher at the right wing Australian organisation – the Institute of Public Affairs. The writer Chris Berg, appears to have history and political science qualifications (B.A) but has become a frontline attack dog for the IPA again any form of government regulation and government interference with the so-called ‘free market’.
It is, of course, a ‘market’ we never observe in the real world, but that is another matter altogether.
His principle argument is that:
Neither side of politics really has any idea how to lift the economy out of its decline.
To which we can really agree.
As he notes, this period will be defined by the dominant obsession with the public “budget”.
He says that “Economic policy dominates everything” but doesn’t make the next point that the aims of policy are expressed in terms of the need to achieve certain ‘budget’ parameters deemed desirable with an almost total disregard for anything else.
It is that homogeneity that is responsible for both sides of politics being lost with respect to dealing with an economy in decline.
While so-called progressives tinker around the edges and carp about CEO pay and the Federal Reserves possible interest rate rises, the mainstream political parties obsess about being out of fiscal surplus.
But, in fact, all these positions reflect the same mania – the neo-liberal myths about the way the monetary system operates and the promotion of voluntary constraints on public net spending.
Chris Berg claims that the May 2014 fiscal statement (aka ‘The Budget’):
… exposed how the political class does not have a directed vision for the future of Australia.
It showed that neither side of politics really has any idea of how to lift the economy out of its slow but steady decline. Neither side has any real idea of what Australia ought to look like in 10, 20 or 30 years.
It is true that the major political parties articulate an economic strategy that seems to be homogenous because they are both “constrained by the policy ideas available and the advice they receive.”
That is about all the article wants to say. The last line suggests that:
The real question for 2015 is whether the government’s advisers have any new ideas to boost economic growth.
It is clear how the government can boost economic growth. The solution has been known since the 1930s – spending equals income. This is not rocket science.
If non-government sector is not sufficient to generate the growth that the government desires in order to eliminate unemployment and provide a wages environment where workers can enjoy growing real living standards then there is only one sector left which can fix the problem.
We know that. It is clear. We also know how it can fix the problem.
The ideological debate should be about the form that the necessary increase in net public spending should take – not that it is essential.
At that point the progressives should be leading the charge in articulating employment guarantee schemes, better school, hospitals, public transport system, renewable energy infrastructure research and development and a plethora of other things that we could think of.
But sadly that space is empty – instead there are discussions of how we can work better within the fiscal constraints – to improve things.
Just as the Greece left wing movement thinks they can solve the massive problems that that nation faces within balanced fiscal environment while staying within the Eurozone, the progressives elsewhere still cannot get their heads around the fact that the underlying orthodoxy against fiscal deficits has to be countered.
The Greek left-wing seems to think it is a radical position to argue for fiscal balance rather than fiscal surpluses. There is a long way to go.
That is enough for today!
(c) Copyright 2014 Bill Mitchell. All Rights Reserved.