Post Brexit UK is seeing higher skilled labour entering from non-EU countries to support a range of services (public and other) – success
It's Wednesday and so before we get to the music segment we have time to…
There was an interesting article from Spanish political scientist (and economist) Vicente Navarro (August 4, 2016) – Is The Nation-State And Its Welfare State Dead? A Critique Of Varoufakis – which contested the former Greek finance mininster’s claims that the “nation state is dead” and so pan-international movements are required to restore democracy and provide a bulwark against global capitalism. I have a lot of sympathy for Navarro’s argument given that the topic is closely related to current book manuscript I am working on with Italian journalist Thomas Fazi on the reasons that the Left have vacated the progressive space and adopted neo-liberal economic positions that guarantee its steady demise as a political force. So in that context, the work of the former finance minister in trying to revive a Left narrative is admirable but, as Navarro notes, is misguided. DiEM25 is not likely to form a basic of a progressive manifesto for the future.
It should be said at the outset, that DiEM25 is about Europe, a continent so constrained by the flawed (neo-liberal) monetary system (the euro) that it is hard to argue for any progressive development without the abandonmnent of that monetary arrangement.
The only way the ‘nation state’ can reassert its sovereignty is for each Member State to exit that flawed monetary system. A ‘nation state’ requires control of its own currency in addition to its legislative system to assert its independence and capacity to advance the well-being of its own population.
The only way the Eurozone can generate a sovereign ‘nation state’ is if the Member States further erode their identities and agree to create a federal Europe with full currency control at the federal level in the hands of a democratically European government.
As I explained in my current book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale – that will not happen.
So those observations condition everything I say about the arguments presented by both Navarro and Varoufakis, both of who are avowed supporters of the Eurozone and of the European Project, which has been hijacked by the Brussels-Frankfurt-Washington consensus and fails democracry at the most elemental level.
Both Navarro and Varoufakis concur that there needs to be a “a European-wide mobilization to force democracy upon the institutions that govern the EU” although they are in disagreement about the path that should be taken to achieve that.
Their point of disagreement is that, in Navarro’s words, Varoufakis “believes (wrongly, I think) that the power of nation-states has practically disappeared in the EU” whereas Navarro considers it to be “an exaggeration to say that they have lost all their power.”
I consider both Varoufakis and Navarro to have valuable insights but, notwithstanding that, to be both wrong.
I agree with the former finance minister that (in Navarro’s words):
… governments and parliaments in these nation-states have been transformed into mere transmission belts of whatever is decided by the Troika and associated institutions.
In December 2015, the former finance minister articulated his view on the ‘nation state’ in an interview – Democracy, power and sovereignty in today’s Europe.
He said that:
The sovereignty of parliaments has been dissolved by the Eurozone and the Eurogroup; the capacity to fulfil one’s mandate at the level of the nation-state has been eradicated and therefore any manifestos addressed to citizens of a particular member state become theoretical exercises. Electoral mandates are by design now impossible to fulfil.
Within the Eurozone-context, that is undeniably so. But it stems from the decision by the Member States to surrender their currency issuing capacities upon joining the EMU and then, further signing up to dysfunctional fiscal rules (Stability and Growth Pact and its accompanying additions – two-pack, six-pack, fiscal compact) and allowing the central bank to be beyond democratic control.
When asked in that December 2015 interview whether “returning to a national currency … [will] … at least give more opportunity for democratic accountability?”, he replied:
… the idea that we must recoil to the nation-state in order to create a better society is to me particularly silly and implausible.
He then outlined a rather depressing vision of what would happen if the euro was abandoned including stagflation and even “a major war” – the sort of scare tactics that the Right are experts at propagating but there prognostications never actually happen.
I fundamentally disagree with his vision of a Europe without the euro as long as the neo-liberal blight is also abandoned and nations used their currency sovereignty to advance well-being of all citizens. I outlined all that in my current book (cited above).
The former finance minister’s – Democracy in Europe Movement 2025 or DiEM25 suggest there is a third way (sorry!) between “Two dreadful options” (“Retreat into the cocoon of our nation-states … Or surrender to the Brussels democracy-free zone”):
A surge of democracy … one simple, radical idea … democratise Europe …
And while Greece suffers 25 per cent unemployment into the distant future, DiEM25 is happy to wait until 2025 to achieve its aims.
And how will it create this “surge”?
Well they propose a temporal staging of initiatives:
1. Immediate – “Full transparency in decision-making” of the major EU policy-making institutions (EU Council, Finance Ministers Group, ECB etc). Publication of minutes of meetings, lobbyist register, etc
2. Within 12 months: “Address the on-going economic crisis utilising existing institutions and within existing EU Treaties” – that is, within the neo-liberal straitjacket! Some democratic step forward!
3. Within 2 years: a transnational “Constitutional Assembly” to “decide on a future democratic constitution that will replace all existing European Treaties within a decade”.
4. By 2025 “Enactment of the decisions of the Constitutional Assembly”.
So not a lot upfront.
But moreover, it assumes that the historical and cultural situation in Europe would allow a sort of reformed European Parliament to become a federal institution ruling Europe in the way that the US or Australian governments rule their respective nations.
It assumes that the current ‘nations’ in Europe, with all their current and past antagonisms, cultural diversities, language differences and national identities will agree to become ‘American states’.
They haven’t to date. In all the discussions surrounding Maastricht and beyond, the crunch was that very question. One of the reasons the EMU is such a flawed arrangement is exactly because the Member States refused to surrender much other than their currencies and central banks – the crucial policy institutions.
The notion that Germany would surrender its legislative fiat to a European Parliament where Spanish or Greek representatives would have decision making power of the German provinces is, to use Varoufakis’ own words “particularly silly and implausible.”
That is the problem of the EMU – it is a half-way house. The Member States are no longer sovereign in a currency sense yet they cling to their national policy capacity. The ‘Europe-level’ is not a democratic institution and is not a legitimate ‘federal’ governemnt in the eyes of the citizens.
The worst of all worlds really.
This article by Thomas Fazi (February 9, 2016) – A Critique Of Yanis Varoufakis’ Democracy In Europe Movement (DiEM25) – goes into more detail on these sorts of issues.
Navarro’s argues that while national parliaments in the EMU “are seriously constrained by these institutions” it is:
… an exaggeration to say that they have lost all their power. And it is wrong to accept that governments and parliaments applied their austerity policies (with cuts in the welfare state), claiming they do not have any other choice.
His cites the choices made by successive Spanish governments to cut the public deficits – to prioritise spending cuts and avoid tax hikes – as examples of the discretion national parliaments have within the constraints of the EMU rules.
He also cites the current Portuguese government which “has stopped the application of the austerity policies imposed by the European Commission”.
I agree with that assessment. Even within the draconian and arbitrary rules that were established to ‘depoliticise’ the operation of the EMU, national governments have some capacity to make economic decisions – subject, of course, to the ultimate sanction of the private bond markets, given the Member States surrendered their currency-issuing capacity.
So it is a series of ifs – the nation states still have discretion – as long as they do not violate the fiscal rules and then, only if, the bond markets will still loan them euros to allow fiscal deficits to persist.
In normal times, that ‘flexibility’ might prove to be sufficient – a 3 per cent of GDP deficit may still provide significant stimulus to support growth. It is unlikely the bond markets would boycott a government that had a 3 per cent deficit but was overseeing a strongly growing economy with low unemployment.
Given the ‘flexibility’, what has stopped governments looking after their own citizens better since the crisis (in terms of creating jobs, providing more secure income support etc)?
The answer is the neo-liberal Groupthink. As we see in Britain and elsewhere, nations with their own currencies have also performed badly since the GFC struck.
George Osborne’s record is shocking in Britain. The reason was he deployed the destructive neo-liberal approach to policy making.
That ideology has multiplied the problems faced within the Eurozone and the way ahead has to include both the abandonment of the euro and the acceptance of a more progressive policy-making outlook.
As I argue in my current book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale – merely exiting the euro but maintaining the neo-liberal policy orthodoxy would likely be the disaster that those arguing against abandoning the euro predict.
Navarro would agree with that. He writes:
In reality, many of these governments (particularly the liberal and conservative ones) are achieving, through unpopular policies, what they have always wanted: reducing the power of labor and dismantling the welfare state. What we are seeing is an alliance of the powerful and dominant economic and financial establishments in each country, in support of public policies that come down from the Troika and the EU establishment and that they could not pass in their own parliaments. They are using the European institutions, which lack any democratic accountability, to obtain what they always wanted, justifying it by saying: “There are no alternatives.” It is obvious there are alternatives.
On the one hand, neo-liberalism reinforced with the Groupthink dynamics that blind the policy makers to alternatives.
On the other hand, a progressive vision of policy based on an understanding of the principles of Modern Monetary Theory (MMT), which empower the national government with the capacity to advance the well-being of the people as a primary policy target.
Clearly there are alternatives to the current orthodoxy.
Navarro’s point – that there is some flexibility at the nation state level – is correct – as long as the bond markets don’t close the country down as in the case of Greece.
The bond investors cannot damage a currency-issuing state. But they sure can wreak havoc for a Member State of the Eurozone. That is a defining difference between the two types of monetary systems.
Navarro also disagrees with DiEM25s endorsement of a Basic Income Guarantee (BIG) or “Universal Basic Income (UBI)” as a replacement for “the welfare state”.
Much of Varoufakis’ argument in this respect is based on flawed notions of how public expenditure programs are funded.
At the Future of Work Conference (May 5, 2016), Varoufakis told the audience that:
Basic Income is a Necessity … This social democratic, New Deal Paradigm is finished and it cannot be revived … is dead in the water … the working class can no longer insure itself … because wages have stagnated to such an extent … politics have become quite toxic … artificial intelligence will absorb all repetitive work – a massive displacement effect … overwhelm job creation effect … will reinforce the deflationary process … an even greater level of income inequality …
So one of the arguments is that the working class can no longer expect a welfare state to continue because in the words of Navarro (summarising Varoufakis’ argument):
Its funding is not sustainable because the funds to pay for it come from payroll taxes that will diminish due to the reduction in the number of workers and the decrease in their wages.
If that is a correct interpretation of the former finance minister’s position then he has clearly fallen into a neo-liberal narrative that a currency-issuing government has to ‘finance’ its spending and if a tax base shrinks then it has to cut spending.
The reality is quite different of course.
Any sovereign government is never revenue constrained because it is the monopoly issuer of the currency. Clearly, this does not apply to the Eurozone Member States individually but it still applies to the Eurozone as a whole given the ECB’s currency capacity.
A sovereign government can purchase anything that is available for sale in its own currency any time it has the political will to do so.
That applies to any idle labour.
The task as jobs decline due to robotics etc is to develop new types of employment rather than to assume that the loss of the traditional, repetitive jobs spells the end of wage labour as we have known it.
This surrender position is characteristic of the modern Left and started with the British Labour Party decision to adopt Monetarism and approach the IMF for loans (on the pretext that it could no longer ‘fund’ itself), while eschewing other alternative positions that would have utilised the obvious fact that it issued the pound and could never run short of ‘money’.
The question though extends to the logic. If governments can no longer ‘afford’ to maintain an appropriate welfare state then how can it ‘afford’ to maintain a viable Basic Income system that would provide for adequate living standards?
I don’t intend to go into the BIG debate here. I will write more about it soon.
But I have written a lot about it in the past – please read my blog – Income or employment guarantees? – for more discussion on this point.
I do not consider the advocacy of a BIG to be a progressive position. It is a deeply flawed stance and usually reflects a failure to understand the capacity of the state to expand employment if it desires.
I will also address the robotic/AI issue in a later blog. The point is that the number and type of new productive jobs that can be created in a society is only limited by our imagination, notwithstanding the shifts in employment composition that automation etc will generate.
It is a reflection of a limited imagination to predict the shortage of jobs in the future. We will have to redefine what we mean by productive effort as time passes but that debate will help to cement what I think of as a progressive position in relation to these matters.
I haven’t even got the white flag available to wave such is my outlook. The former finance minister seems to wave white flags regularly in different guises.
That surrender mentality is deeply entrenched in the Left, particularly the European Left.
Vicente Navarro has his own points of difference with the former finance minister’s depiction of “social democracy”, which he considers is a narrow version of the welfare state exemplified by the German Christian model where “the funding of the welfare state … [was based on] … labour market contributions”.
This narrow conception of the welfare state “was more a characteristic of the conservative road, rather than the social democratic one.”
It is to be distinguished from the more general welfare state model where as a right of citizenship, universal benefits were available to all.
The general model, according the Navarro, was funded “from general state revenues rather than from the labor market”. The point is that both conceptions get bogged down in unnecessary debates about how can the state afford to maintain the system.
This is a neo-liberal construction and neither Navarro or Varoufakis appear to be able to articulate beyond that.
The constraint against on-going welfare state provision will be determined by political will. It is not a ‘financial’ constraint at all and so all these elaborate arguments about funding sources drying up or whatever are irrelevant.
They should not form any part of a progressive policy vision.
Progressives have to address the politics of the matter and not be diverted by these spurious so-called financial/economic arguments about funding.
Navarro mentions political will but again in the context of a government that is financially constrained.
In the social democratic model, the state’s revenues are related only to the political will of the state on how much to tax capital and how much to tax labor – and this depends primarily on the power relations that exist in each nation-state.
Again – a spurious detour around the main point.
Which is – in his own words “as long as people support the welfare state, it will be funded”.
That is the point. Governments can spend what they like if they think they can get away with it politically.
Changing the political landscape requires an education process so that the citizens can learn what the fiat currency system is and what options it provides to the currency-issuing governments.
Then the politics would change dramatically because governments could no longer refuse to pursue an option that would enhance well-being, or, continue to pursue an option, which undermined well-being, on the basis that there is no money or no alternative.
The citizens would become empowered by that knowledge and reject outright governments that lied about not having enough money.
The struggle to establish a coherent progressive position continues.
This is a further part of a series I am writing as background to my next book on globalisation and the capacities of the nation-state. More instalments will come as the research process unfolds.
The series so far:
1. Friday lay day – The Stability Pact didn’t mean much anyway, did it?
2. European Left face a Dystopia of their own making
3. The Eurozone Groupthink and Denial continues …
4. Mitterrand’s turn to austerity was an ideological choice not an inevitability
5. The origins of the ‘leftist’ failure to oppose austerity
6. The European Project is dead
7. The Italian left should hang their heads in shame
8. On the trail of inflation and the fears of the same ….
9. Globalisation and currency arrangements
10. The co-option of government by transnational organisations
11. The Modigliani controversy – the break with Keynesian thinking
12. The capacity of the state and the open economy – Part 1
13. Is exchange rate depreciation inflationary?
14. Balance of payments constraints
15. Ultimately, real resource availability constrains prosperity
16. The impossibility theorem that beguiles the Left.
17. The British Monetarist infestation.
18. The Monetarism Trap snares the second Wilson Labour Government.
19. The Heath government was not Monetarist – that was left to the Labour Party.
20. Britain and the 1970s oil shocks – the failure of Monetarism.
21. The right-wing counter attack – 1971.
22. British trade unions in the early 1970s.
23. Distributional conflict and inflation – Britain in the early 1970s.
24. Rising urban inequality and segregation and the role of the state.
25. The British Labour Party path to Monetarism.
26. Britain approaches the 1976 currency crisis.
28. The Left confuses globalisation with neo-liberalism and gets lost.
29. The metamorphosis of the IMF as a neo-liberal attack dog.
30. The Wall Street-US Treasury Complex.
31. The Bacon-Eltis intervention – Britain 1976.
32. British Left reject fiscal strategy – speculation mounts, March 1976.
33. The US government view of the 1976 sterling crisis.
34. Iceland proves the nation state is alive and well.
35. The British Cabinet divides over the IMF negotiations in 1976.
36. The conspiracy to bring British Labour to heel 1976.
37. The 1976 British austerity shift – a triumph of perception over reality.
38. The British Left is usurped and IMF austerity begins 1976.
39. Why capital controls should be part of a progressive policy.
40. Brexit signals that a new policy paradigm is required including re-nationalisation.
41. Towards a progressive concept of efficiency – Part 1.
42. Towards a progressive concept of efficiency – Part 2.
43. The case for re-nationalisation – Part 2.
44. Brainbelts – only a part of a progressive future.
45. Reforming the international institutional framework – Part 1.
46. Reforming the international institutional framework – Part 2.
47. Reducing income inequality.
48. The struggle to establish a coherent progressive position continues
The blogs in these series should be considered working notes rather than self-contained topics. Ultimately, they will be edited into the final manuscript of my next book due later in 2016.
That is enough for today!
(c) Copyright 2016 William Mitchell. All Rights Reserved.
This Post Has 21 Comments
“…….. requires an education process so that the citizens can learn what the fiat currency is and what options it provides to the currency issuing governments”. …….. “The citizens would become empowered ……. and reject outright governments that lied about not having enough money”.
These educated citizens might alternatively lose confidence in what they might perceive as magic pudding ‘money’ managed by a seemingly unconstrained and potentially self serving corrupt government.
Citizens, educated in MMT or not, know there has to be some constraint on what governments can pay themselves and their supporters. Currently we are perhaps overly sensitised to budget deficts. It will surely be dangerous to promote desensitisation before setting up the appropriate new constraints. Constraints based on output gap and inflation are in my view as yet far too fragile to replace budget deficits.
“We will have to redefine what we mean by productive effort as time passes but that debate will help to cement what I think of as a progressive position in relation to these matters.”
The debate hides the underlying philosophy. It’s pretty clear that they are spinning a line because they believe something that they don’t think it is prudent to share. In discussion with political theorists and philosophers its pretty clear there is an underlying assumption that they share but don’t actually want to highlight.
AFAICT that boils down to what can only be described as a sense of extreme individualism. That an individual has the right to do what they want and should have the means to do it. Which is pretty much the same underlying philosophy as those who support the ‘flat world’ view of global capitalism.
The difference is that the global capitalists realise that for an individual to be able to do as they please they have to be able to suppress anybody who gets in their way.
The international socialists refuse to acknowledge the fallacy of composition. In reality individuals can only do what they want to do as long as it doesn’t stop somebody else doing the same. Once you get to those conflict zones, you have to have a social method of negotiating the conflict of desires.
The essence of the basic income ideas is the same globalisation idea, which is to take those at the bottom end of the income distribution and essentially pay them off. Then forget about them.
It’s all really about a individualist networked upper middle class creating an aristocratic lifestyle for themselves.
“Citizens, educated in MMT or not, know there has to be some constraint on what governments can pay themselves and their supporters”
There is. It’s called the ballot box.
The constraint on the government of the people, are the people. That’s what democracy is.
There is no other morally or philosophically valid constraint within a system that calls itself democratic.
Varofaukis is the perfect example of the intelligentsia “left” con man, the man is clueless and delusional. Expect them to be surpassed from the far-right and fail, yet again, at doing anything useful.
Is idiots like them that allowed people like Mussolini to get to power, and we are watching this slow-motion disgrace spectacle again.
Hopefully the rising progressive parties in Europe will see the light before is too late… as it stands now only UK with Corbyn has a chance of truly recovering from neoliberalism, if the left does not gets their shit together fast we will have a dire situation when the next crisis unfolds. Getting their shit together means making people like YV irrelevant.
“There is. It’s called the ballot box.”
It’s an insufficient form of control though, there needs to be stronger institutions and popular controls to dislodge a reckless government. Even in a couple years any idiot in power with major control of a parliament can do an unlimited amount of damage.
I don’t think a public admission of MMT will be possible until we have, somehow, a stronger form of democracy (what we have now resemble more oligarchies than democracies). And even so there is a HUGE cognitive dissonance the public has to see over (“why I waste my life working for something that can be printed at will and has no real value”, people forms all sort of convoluted theories to avoid the cognitive dissonance deep inside to come around this question that comes apparent to them when you talk them from an MMT point of view, that’s why you usually get knee-jerk reactions and reactionary virulent answers like “funny money!” or “there is no free lunch!”, and talking them over the details -like real constraints- won’t change their mind). Consider most people are not system and analytical thinkers, you will need a lot of good PR and social memes to get this accepted.
“Constraints based on output gap and inflation are in my view as yet far too fragile to replace budget deficits.”
I would like to see Bill take over this “inflation” concept one day. Is a total crackpot monetarist theory IMO.
There is no “inflation” because there is no even distribution of price changes (same for deflation).
Different cohorts experience different rates of inflation versus their income and spending habits. The current measurement of inflation is totally politicised, with either under-weighted or over-weighted measurements, usually governments giving in to their enablers and voters ignoring asset appreciation when it favours their voters (ie. housing).
You can’t base policy on such a poor tool, how does inflation tell you where to spend and not. If your ‘inflation’ comes from, for example, oil dependence from MENA you need to actually increase spending on research and development for energy, not reduce government spending overall because there is some ‘inflation’. If you don’t have (significant) inflation there is no natural law saying you should target a “2% target” (comes from the same place that the 3% deficit limit the eurozone made up) if household balance sheets are strong and don’t have much debt (ideally prices should fall over time, not increase, but because we have a broken monetary and financial system that relies on bank credit too much we need this inflation) there should be no need to increase inflation. If the burden of housing eats up most of the income governments should target ‘deflation’, not inflation, particularly on those sectors.
It’s all crackpot theory to justify both economists ignorance and laziness, if not corruption.
So the job in Spain is to convince people like Vicenç Navarro and Juan Torres, who are progressives but, either have not been exposed to MMT or do not understand it, that the state is not financially constrained. They have been advisors to Podemos in the past, but unfortunately the leadership of Podemos is now relying on extremely conventional economists who are mostly in favor of the Euro (think Syriza bis). But I think that Navarro and Torres are inteligent and should be approached by MMTers.
IDG, there is such a mechanism such as you indicate for getting rid of government personnel in the US. With respect to the presidency, it is impeachment. It is difficult to implement but it has been done in the past. Some republican from New Hampshire interviewed by Channel 4 News contended that Trump could be impeached soon after being elected president, though he didn’t use this particular terminology. According to the Constitution, impeachment is supposed to be invoked only for High Crimes and Misdemeanors, which is usually taken to mean a crime of some sort against the state, a kind of treason. This chap envisaged it being invoked because he viewed Trump as being mentally unbalanced, a “nutcase”, based substantially, I gathered, on Trump’s insinuation that Clinton could be assassinated by Article 2 fanatics (the article in the Constitution that supports individuals being armed) and by her ability to appoint Supreme Court justices that Trump would hate. It is the most outrageous quasi-comment he has made yet. I say quasi-comment because he didn’t use the term “assassination”.
I haven’t yet seen anyone in either the UK or European political arena who is this emotionally or cognitively disordered. However, the possibility that someone like Trump could get elected shows the limitations of the ballot box. A telling incident in this context is that many years ago, the most brilliant logician of the 20th century, Kurt Goedel, after studying the Constitution thoroughly for his citizenship hearing, argued that the document could not prevent the rise of a dictator. At the time, no one wanted to know. We could use his insight now.
The establishment of true democracy must come before any sensible MMT based economic approach can prevail. The decision by the nation states of old Europe to form the current monetary and economic union does not appear to have occurred without some very undemocratic interference, of the type that does seem to be ongoing: http://www.telegraph.co.uk/news/worldnews/europe/1356047/Euro-federalists-financed-by-US-spy-chiefs.html
Let’s not fool ourselves here. Varoufakis dislikes the nation state because he’s from a poor country in which the rule of law barely operates. In most European country the rule of law is fairly firmly established. I’m sorry to say it, because my sympathies are always with the Greek people (and with Varoufakis’ efforts), but the rest of us cannot sit around twiddling our thumbs because the Greek state is rotten and possibly unworkable. If we do the far right will topple the whole project for us. That’s the real choice. The left needs to sh*t or get off the pot.
I have never been clear what Varoufakis’s position is with respect to taxation and government spending for a monopoly currency issuing givernment with a flexible exchange rate, like the UK. Most of his comments on this topic with which I am familiar deal with the Eurozone, which is a different kettle of fish entirely. If his position is as Bill says Navarro says it is, then he completely misunderstands the nature of the relationship. How could this be, as he is reputed to be one of the foremost macroeconomists in the world? He certainly isn’t neoclassically or neoliberally inclined.
Very succinctly said, Phil, about the left. Don’t hold anything back.
“Changing the political landscape requires an education process so that the citizens can learn what the fiat currency system is and what options it provides to the currency-issuing governments.”
Of course even if this was widely known among the public, there are vast numbers of people who simply do not like poorer people getting any help or support at all. They would still resent someone else getting something that they are not getting.
It used to be a widely held view 300 years ago, that people with disabilities didn’t deserve help because they had “done something to offend God”. Of course, this was just the excuse used at the time, and has been replaced by “offending the Market” – another excuse.
Some people are just not very nice – but then democracy is not perfect either.
I read that Danny Blanchflower, Corbyn’s former ‘adviser’ who resigned from the role and has been ridiculing Corbyn has said that ‘Corbyn will be eaten by the bond market.’
Perhaps it is good that he resigned if that is his level of understanding.
Simonsky, it isn’t only Blanchflower at “fault” here. McDonnell must shoulder some of the responsibility in the breakdown of the functioning of Labour’s econ advisory committee.
Simonsky, further to my previous comment, the advisory committee met only twice and had the wrong people on it, like Wren-Lewis who is a New Keynesian and Piketty whose argument in Capital is neoclassical in character, however good his data. For instance, Piketty argues that government spending can be enhanced via taxation of the rich While he notes that this would be good for re-distributive purposes, and while such taxation may be helpful in France which is in the Eurozone, it is irrelevant for the US, where he lived for many years, and the UK for underwriting government spending. No such underwriting in nations with their kind of economic systems is needed, as we both know. McDonnell, however, appears unable to grasp this point, at least up to now. Corbyn doesn’t appear to have grasped this point either, but presumably that is McDonnell’s job, which he appears to me to be signally failing to do.
Simonsky, I haven’t noticed Blanchflower ridiculing Corbyn. Do you have a reference for this?
Here’s Blanchflower in the Guardian (2nd August):
‘Corbyn doesn’t seem to care about being a leader of an opposition party. He seems more interested in addressing crowds of supporters around the country. It doesn’t seem to matter to him – although it should – that three-quarters of his MPs, who doubt his leadership qualities, rightly passed an overwhelming vote of no confidence against him. He should have quit. He doesn’t have enough MPs who support him to be able to form a complete shadow cabinet. Incidentally, if there were even the slightest prospect that he could become prime minister, the bond and equity markets would eat him for lunch.’
The rest can be read here: http://www.theguardian.com/commentisfree/2016/aug/02/i-advised-jeremy-corbyn-economics-team-learn-fast–no-credible-plan-labour-leadership
BTW Bill do you know these people:
MMT based political party in Australia.
Simonsky, I read the same thing but did not interpret it in the way you did. The comment about the bond and equity markets is irrelevant; Blanchflower is mentioning it only to underline what he thinks is Corbyn’s electoral liability, which as you know is not an isolated view. The only reason that such comments would have any relevance is that Corbyn’s macroeconomics is inadequate. This can be seen from his 10 point manifesto. While it is a good manifesto and makes it difficult for May to counter it, it shows an inadequate understanding of macroeconomic principles, and this is not because no one has tried to “educate” him, and McDonnell. McDonnell seems to be hopeless in this regard.
Even highly educated people seem to find even the most elementary principles of MMT almost impossible to grasp. I have a geneticist friend who can not get his head around the idea that the government has an unlimited supply of money. He continually asks me where the money is coming from. And I have lost track of the number of times I have explained this to him. One of the things he seems to be unable to get is the idea of a monopoly currency issuer and the implications that accompany this.
Quote: “Simonsky says:
Friday, August 12, 2016 at 3:58
I read that Danny Blanchflower, Corbyn’s former ‘adviser’ who resigned from the role and has been ridiculing Corbyn has said that ‘Corbyn will be eaten by the bond market.’
Perhaps it is good that he resigned if that is his level of understanding.”
@Simonsky: It’s an easy mistake to make (I’ve done it myself), but in the interests of accuracy, I should point out that it’s David Blanchflower that you mean. Danny Blanchflower was a well-known UK footballer (of Northern Irish origin) in the 1950s and 1960s, and later a football manager.
In this lecture Varoufakis say “that China is becoming the new Greece, in a sense that it has an unsustainable currency, an unsustainable debt which it has to keep increasing so that China remains stable. That’s Greece before 2008” according to Varoufakis.
I can’t make serious analysis of Chinas position. But it has its own sovereign currency (albeit pegged), a huge pile of USD, a positive NIIP and so on. I suppose China can address a “to large” private sector debt if it wants.
It is moving rapidly up the R&D chain, investing to have top notch universities and so on. It invests on a global scale to build “silk road” infrastructure, it plans to build transcontinental railway in Africa and so on. And it’s armed with quality nukes.
China is the new Greece, come on.
I am afraid, Bill, that this piece is one of your worst in terms of debating in good faith, and maintaining basic standards of critique and debate. There are just so many obvious, glaringly so, patently unfair statements, inferences, and downright prevarications (the level of cheap innuendo is tabloid-press level) that I am not really sure how you managed to convince your conscience to actually publish, let alone compose this.