Nations heading south as austerity continues

On the back of a decelerating inflation rate, Italy in recession, Germany not far behind, terrible PMI in Europe, Eurostat released the latest retail sales data yesterday (February 5, 2019) – Volume of retail trade down by 1.6% in euro area. Not good news. Remember all those Europhile Left reformers telling us that now was the time to reform the EU while the ‘sun was shining’. Well, its black clouds again and they didn’t get to first base in the reform basis. Lots of hot air – none of it got near disturbing the neoliberal austerity bias. But this austerity bias is not just a feature of the currency union. Yesterday, the Australian Bureau of Statistics released two data sets – Retail Trade and Balance of International Trade – and they both tell the same story. The interesting thing was that the trade data recorded a “record trade surplus” and I heard commentators actually claiming this was a great result. Wrong. Exports declined, but more slowly than imports. And imports declined because consumer spending and business investment was weak. Not a great result at all. At some point, the austerity bias around the world has to stop. But nations are heading south again in the meanwhile. With all that gloom, the best thing to do is enjoy my regular Wednesday music spot (if you like). And if you don’t like it, then maybe, appreciate the artistry of the musicians.

Europe heading south

The Eurostat data shows that retail sales in the EU28 contracted by 1.4 per cent in December and have only grown 7.1 per cent in total since February 2008.

Retail sales in the Eurozone contracted by 1.6 per cent and have only grown by 2.3 per cent in total since February 2008. That is a massive austerity bias.

Even austerity-prone Britain has seen retail sales grow by 15 per cent since February 2008.

The following graph shows the evolution of retail sales since February 2008 for selected European aggregates.

The destruction of Greece is clear – retail sales are now 41 per cent lower than what they were in February 2008

Yesterday’s data shows that Belgian retail sales contracted 1.4 per cent (real terms) in December, German retail sales contracted 4.3 per cent, Estonia 2 per cent contraction, Spain 1.2 per cent contraction, France 0.1 per cent contraction, Latvia 1.2 per cent contraction, Lithuania -0.2, Slovenia -0.6, Slovakia -1.7 and Finland -0.3 per cent.

I am not suggesting we should evaluate well-being by retail sales growth although I would be foolish to consider such growth to be irrelevant to the advancement of well-being.

Other factors are clearly relevant including how the retail sales were funded. For example, in Britain’s case, household debt has risen sharply over the same period.

Australia heading south too

The ABS released the latest retail sales data for December 2018 yesterday (February 5, 2019) which showed that:

Australian retail turnover fell 0.4 per cent in December 2018,

One of the manifestations of the flat wages growth and the decline in consumption expenditure growth is the flat retail sales environment.

There are all sorts of anecdotal accounts of shopping strips being hollowed out in capital cities as major retails rationalise their exposure to the deteriorating situation.

Large department stores are recording poor results. Major brands (particularly clothing) are registering insolvencies.

The following graph show the quarterly monthly growth (blue bars) compared to the average monthly growth between January 2000 and December 2018 (red line).

The sharp dip in December is surprising (worrying) given this is a typically stronger month (xmas).

The November result was driven by the Black Friday promotion spree.

The celebration of the fiscal balance heading to surplus which seems to have blinded the federal government to the reality will be short-lived.

So isn’t a record trade surplus good news?

The ABS also released the latest – International Trade in Goods and Services, Australia, Dec 2018 – data yesterday (February 5, 2019) – with the headline:

Hmm, sounds like all systems go for an export-oriented nation.


The following graph tells the story.

Exports fell by less than imports is the reason the surplus rose.

The external environment tightened and exports fell by 1.6 per cent, while imports fell by a sharp 5.6 per cent as a result of harsher domestic conditions (flat wages growth, excessive household debt, savings rundown, etc).

Nothing to celebrate there.

Which is why a currency union such as the Eurozone is crazy hanging out for export-led growth, while at the same time imposing fiscal austerity on the Member States and domestic demand suppression.

According to Eurostat analysis, intra-EU exports comprise around 65 per cent of total exports from the EU (and imports represent a similar proportion).

With that much dependence, austerity that kills domestic demand and import capacity also harms the export capacity of the partner Member States.

Music for today ….

I received an E-mail overnight from a MMT activist who is up against it when talking to his Marxist mates, who pull the usual stuff about the Job Guarantee and related government policy interventions – it is a palliative and just propping up capitalism and delaying the revolution.

I replied to him that for years now when I have spoken about the Job Guarantee proposals and interventions like that to a “Marxist” or “Left” audience I would be pillaried for offering ‘palliatives’ to capitalism.

How dare I claim to be progressive yet use the state to further prop up capitalism and forestall the revolution.

This type of reaction was usually elicited from audiences that were usually best described as being well-educated, middle class cohort with stable and well-paid jobs (often academics).

For them, it might seem okay to sit around cafes on a Saturday morning plotting the revolution as they sipped their latte and ate almond croissants with jam.

For me, the human costs of unemployment and poverty are NOW and need addressing even if this delays their precious revolution by a few days.

This little reflection motivated me to put on one of my favourite albums – the 1995 album by the American music collective – Brooklyn Funk EssentialsCool And Steady And Easy – and it is called The Revolution Was Postponed Because of Rain.

It is a great album overall and this song is typical of the acid-jazz poetry that BFE is renowned for.

It is about Black American activism in the face of mass consumerism and the way in which individualism undermines collective, revolutionary zeal.

But it could easily be about all the left-wing progressive coffee shop plots, where left-wingers with protected jobs and stable salaries discuss tactics relating to overthrowing the capitalist system in between sipping their cafe latte.

As these characters order another croissant and stir the cream at the top of their coffee, they wheel abuse with some disdain to those who would dare to forestall the revolution.

I often think about this song when that sort of criticism arises.

The lyrics are as follows:

The underlying
and trigger mechanism causes
were all in place when
some nee-gro or the other got hungry
had to stop at the McDonald’s
had to get on the line
with the new trainee cashier
“uhh, where’s the button for the fries?”
so we missed the bus…

Then the leader couldn’t find his keys
didn’t want some poor ass moving
his brand new 20″ and VCR
out his living room on the shoulders.
It was too late when the locksmith came

Then our demo expert Willie Blew got arrested
came out with his head hanging under his hoody
“Didn’t know they started doing that
for jumping the turnstiles,” he said.
“How many times must we tell you –
Don’t.. get.. caught.”
We voted against shootin’ him on the spot
In the winter we were all depressed
so we leaned our guns against the sofas
and listened instead to Tim Tim Tiree
singing about his dysfunctions:

Cool and steady and easy
It makes them like it

“Sometimes I wonder if ah’ll ever be free
free of the sins of my brutish daddee
Like the cheating, the stealing, the drinking, and the beating”. . .

The weatherman said the 17th would be sunshine
and it wouldn’t be too hot –
Tim Tim Tiree doesn’t like sweatin’
but that night the weatherman came on crying
saying he didn’t control the weather
that God was real
that he’s lucky He, God, didn’t strike him, the weatherman, with lightning
for taking the credit sometimes
and that he, the weatherman, was in no way responsible
for the hurricane coming
and that we, the viewers, should
pray Jesus into our hearts
before it was too late.

Superbowl Sunday was out
all the women wanted
to see the game
and the men were pissed
at their insensitivity

The 20th was supposed to be a definite
we looked for some Bastille to storm
didn’t find any
settled on the armory instead
before they moved the homeless in…
“We’ll bum-rush it anyway,” I said
“It smells like a collection
of a thousand farts in there,” they said
So we waited for the approval of the city
contract to build a Bastille
which set the revolution back five years.

Cool and steady and easy
It makes them like it

Peace wanted to start the revolution on Tuesday
She was in a pissed-off mood
her tax return didn’t come in time for the rent
But they showed the We Are the World video
on cable that evening
and we all held hands
and cried to stop from laughing
and our anger subsided
Looking back, it could’ve been a plot
but there are more substantive plots to expose
than the We Are the World conspiracy

Now we wait for the rain to stop
All forces on the alert
some in Brooklyn basements
packed in between booming speakers
listening to Shabba Ranks and Arrested Development
bogling and doing the east coast stomp
gargling with Bacardi and Brown Cow
breaking that monotony with slow movements –
slow, hip-grinding movements
with the men breathing in the women’s ears to
Earth Wind & Fire’s Reasons
and wondering what the weather will be like
next weekend.

And while we are still funking, here is a double BFE treat from the same album. This is one of my all time favourite tracks (it is a long list, I know).

Take the L Train (To Brooklyn)

Lawyer needed

I am part of a local community group that is trying to stop or modify a massive overdevelopment in our local area.

The development process in NSW is stacked heavily in favour of the property developers and local councils often do not defend local community interests but favour prioritise development.

The Newcastle City Council is particularly bad in this respect and regularly trample over the rights of the citizens.

We need some expert advice on planning rules etc from someone who is familiar with NSW planning laws and Land and Environment Court processes.

The community group has no funds.

The urgency is that a huge DA is on show now and we have until next Wednesday to comment.

If you can help please contact me. It would be appreciated.

Call for financial assistance to make the MMT University project a reality

I am in the process of setting up a 501(c)(3) organisation under US law, which will serve as a funding vehicle for the MMT Education project – MMT University – that I hope to launch early-to-mid 2019.

For equity reasons, I plan to offer all the tuition and material (bar the texts) for free to ensure everyone can participate irrespective of personal financial circumstance.

Even if I was to charge some fees the project would need additional financial support to ensure it will be sustainable.

So to make it work I am currently seeking sponsors for this venture.

The 501(c)(3) funding structure means you can contribute to the not-for-profit organisation (which will be at arm’s length to the not-for-profit educational venture) in the knowledge that your support will not be publicly known.

Alternatively, if you wish to have your support for the venture publicly acknowledged there will information presented on the Home Page of the MMT University to acknowledge that funding.

To ensure the project has longevity I am hoping to obtain some long-term support proposals.

At present, I estimate I will need about AUD 150k per year.

Note that most of these funds will support an administrative support staff (1 person fractional), data charges, and video editing and design staff (as needed).

I will personally take no payment for the work I am putting into the project nor will other key Modern Monetary Theory (MMT) academics, who have agreed to help in the educational program.

So I cannot do this without sufficient support. My research group does not have the financial capacity to support this venture.

I also do not wish to place advertisements on my blog posts.

You will be contributing to a progressive venture.

Please E-mail me if you can help.

I have some funding pledges already but I am not near the target yet.

Thanks to all who have so far offered support.

But the venture cannot go ahead if I cannot make it financially sustainable.

That is enough for today!

(c) Copyright 2019 William Mitchell. All Rights Reserved.

This Post Has 17 Comments

  1. Finally the canary in the mine has caught the attention of these clueless masters of the universe, that the global debt deflation brought on by the fucking global fiscal austerity going on for the last 40 years has killed demand stone cold dead, that the 1 percent cannot spend as much as the 99 percent who have maxed out their credit card now to sustain economic activities. Bwaaahaaahaaahaha

  2. I find your comments on Marxist critics interesting, as I am about to read the three-part contribution from Michael Roberts. For the moment I will quote his very last comment:

    “In this way, MMT acts as a backstop to capitalism – the state is the employer of last resort but not the main employer. It aims to compensate (patch up) the failures of capitalist production, not replace it.”

    That is exactly the sort of statement that you mention today.

    As far as my reading of MMT goes, I understand that it is ideologically neutral – i.e. it can be used by the Right as well as the Left. Beyond this context, I further understand that you, and Thomas Fazi, have detailed a thoroughly left-wing, anti-capitalist programme.

    So, as yet without reading him in detail, I cannot understand Roberts (and other Marxist) complaints, when MMT is clearly framed as not about progressing left-wing revolution. I believe that you have a solid grounding in Marxism and a great sympathy for it. So, I anticipate being unimpressed with Robert’s critique of MMT – even whilst what he says may be true: but irrelevant.

  3. Dear Wilfrid Whattam,

    I wasted about 5 minutes skimming through the blog you mentioned. It looks like a true intellectual masterpiece to me, where a new kind of post-modern dialectical reasoning also called “a straw man” is used with devastating consequences. The author first quotes Bill Mitchell stating that workers on Job Guarantee jobs will be paid living (minimum) wages and then starts ranting about these workers being paid less than a living wage.

    ‘Bill Mitchell is a leading MMT economist from Australia and has campaigned tirelessly for the government job guarantee. He describes it as “an open-ended public employment program that offers a job at a living (minimum) wage to anyone who wants to work but cannot find employment”‘

    ‘Guaranteeing a job for all sounds great. But apparently, it will not be a job paying a ‘living wage’ (a wage that people can live on). No, it will only be a ‘minimum wage’ to make sure that it is not “in competition with the market-sector wage structure.” In other words, the likes of Amazon or WalMart, or small retail and leisure businesses, will still be able to go paying their workers very low wages (at or near the minimum) without interference by any Job Guarantee, because such jobs will be paying less.’

    Let me quote Karl Marx. Responding to the critique of his contribution to the French Workers’ Party programme apparently not being revolutionary enough, he wrote “what is certain is that I myself am not a Marxist”. (see “The Programme of the Parti Ouvrier” in the Marxist’s Archive).

  4. Dear Adam K (at 2019/02/06 at 6:06 pm)

    And it is obvious that our ‘Marxist’ friend hasn’t read much at all of my work yet feels that he is expert in it to offer rebuttal.

    I have written many times – in refereed academic papers, books, book chapters, Op Eds and blog posts – that if the current private sector minimum wage is considered to low then the government would simply set the Job Guarantee wage above it and drive those low-wage firms out of business.

    Further, I have written extensively about the fact that the JG wage would be accompanied by strong social wage components – child care, transport allowances, superannuation contributions, holiday pay, sickness benefits, training allowances etc.

    Try finding that in Amazon or Walmart.

    At the very least one should make sure that one has covered the literature before claiming expertise sufficient to offer criticism.

    best wishes

  5. Oh how “on the money” is Bill’s description of blow back from would-be anti-capitalist revolutionaries. And yes, most of them, it seems, are rather comfortably situated in the evil system they seek to overthrow. As Bill indicates, what these critics miss is the potential for a JG program, for example, to force higher employment standards in the private sector, sort of similar to what a public option in Obamacare could have accomplished in the dysfunctional health insurance system in the states. Even more than the great Marx, I think that another 19th Century socialist thinker, Edward Bellamy, had a handle on the process by which socialism will come to replace capitalism. While the final change culminates in a largely nonviolent revolution, it first gradually builds momentum in an evolutionary fashion as public programs and services up the ante, in terms of meeting essential human needs, on the measly, economically immiserating, and environmentally destructive offerings of the neoliberal marketplace. But the only way to initiate this process of the public sector showing up and then ultimately replacing the private sector, the only way for momentum to build toward a socialist revolution, is for MMT to become widely understood and accepted to the point where it inevitably seeps into actual governmental planning and decision-making. MMT is not the revolutionary fire itself (being politically neutral), but it is the essential match with which that fire as envisioned by Bellamy (slowly growing from public sector success), and differentiated from Marx (suddenly arising after public sector collapse), can first be lit.

  6. Newton Finn,


    The way I see it MMT is the clearest explanation of the rules of the money system.

    The banksters mostly understand these rules and play the game cynically but effectively. Hence the current supremacy of finance capital.

    The revolutionary left and the centrist/moderate “progressives” have been hodwinked in two slightly different ways as to the actual rules of the game…

    1) moderate “progressives” believe there is no alternative but to play by the neoliberal banksters’ warped retelling of the rules,

    2) the revolutionary left thinks there’s only one alternative to neoliberalism – the glorious revolution,

    …hence the division and ineffectiveness of the left.

  7. Ikonoclast,

    Thanks for the link. It’s a nice, plain English explanation of the power game being played out across our economies.

  8. Adam Sawyer:the revolutionary left thinks there’s only one alternative to neoliberalism – the glorious revolution,

    The “revolutionary left” – most of it in the West – wouldn’t know a revolution if one bit them on the ass. It’s a pretty sure bet that come the revolution, they will be denouncing it. Their contortions and gyrations are so absurd that many ended up opposing third world revolutions in the 60s and supporting imperialism.

    They’ve been behaving this way for decades. Since the 1920s in Britain & Germany & elsewhere. The True Revolutionary Strategy is always: Play Dead. Do Nothing. The most active thing allowable is whining and begging the neoliberals and capitalists. Because doing Anything (which becomes up to and including a real Revolution) will not Make Things Worse – which is necessary to Make Things Better.

    Really, with enemies like these, how could neoliberals not win? The saddest thing of all is that so many of them mean well. And do have genuine knowledge and insight that they could impart to those of us living on Earth, not their planet Latte-Croissant. As valuable a Marxist economist as Hilferding could behave that way nearly a century ago. But all that knowledge and insight is thrown away by their fanatical belief in the perfect revolutionary plan of Play Dead.

  9. There are probably evolutionary (evo-psych) reasons for how we have behaved under the rule of neoliberal capitalism. This is not to say that these reasons are fully determining of our behavior. Our behaviors are complex and possibilities exist for us to behave in other ways. Otherwise, hopes for change would be forlorn except for change entirely forced on us by collapsing ecosystems and other exogenous crises.

    Simplistically, there are the fight, flight or freeze responses to dangers and stressors. “Play dead – Do nothing” is clearly the freeze response. We might also call it the “hunker down” response. People hunker down in the known: a mediocre, low-paying job which they (have to) cling to for dear life, plus family life and a mortgaged home. While they have these things and life is tolerable, they tolerate the system. They are often too busy and too exhausted to spare mental time and energy to analyze the political economy system, especially id they are not well educated and also if they seek escapism in entertainment, alcohol and drugs. It’s no accident that distractions and mind numbing chemicals are so popular under late stage capitalism.

    Change does not have to be entirely forced on us but an increase in exogenous stressors will encourage change. When environments deteriorate and food and fuels (two very important consumption items) become very expensive, rebellion and revolution become more likely. Also, education, formal and informal including “the university of life”, will open people’s minds more to the real nature of our problems and possibilities. Thus, the combination is important. Rising privation and injustice increases the potential for rebellion and revolution. Education lowers the threshold where privations and injustices induce rebellion and revolution. This is partly because education better enables people to see where inimical processes are leading us and to act preemptively. Education also enables the development better science-based, reality-based, fact-based theories and plans for action.

  10. bill,

    I wonder if activist group GetUp might be able to help run a campaign or assist with with the sort of legal advice your community group requires?

  11. “Exports fell by less than imports … Nothing to celebrate there.”
    But maybe there are grounds for cautious optimism?

    Regarding the decline in imports, this could be due to lower prices for imports, or greater efficiency and competitiveness in import substitute industries, or less consumer credit. Presumably such developments should be should be welcomed.

    Regarding exports, according to previous posts on this blog, “exports are a cost”. If so, their decline should be welcomed!
    [Note however, that the latter argument regarding exports is myopic because it ignores possible future benefits from more exports today, namely a stronger exchange rate and/or higher foreign exchange reserves].

  12. Kingsley Lewis,

    “Exports are a cost” means each export of a physical thing incurs an opportunity cost. I.e that thing or the time, effort and resources that went I go creating it could have been used for some other purpose or the exporters could have just relaxed.

    “Exports are a cost” doesn’t mean that no-one should export or that no combination of exports and imports is ever any good. The net or aggregate effect of all a nation’s exports, all its imports and how these affect the productivity of the domestic economy, the environment at home (and globally), quality of life for different groups, national security etc etc – is very complex.

    When thinking through all that complexity it is helpful to bear in mind that each export incurs a real opportunity cost and each import is a real gain. This helps because we see that exports aren’t an end in themselves. Because they’re a real cost you actually have to be sure the foreign currency you accumulate (and the exchange rate impacts) are used for purposes that eventually return greater value to the exporting nation than the cost of incurred in the initial act of export.

    Usually the payback for the cost of exporting is the ability to import goods that the domestic economy wants and needs. Hence imports are a real benefit. Nevertheless, if the benefits of certain imports are too low they may not pay the nation back for the impact of the required exports and the impact on the domestic economy of not developing the ability to produce these imported goods themselves.

    “Imports are real benefits and exports are real costs” is like a definition of terms in a logical argument or the setting of variables in an equation. It allows you to work out what the aggregate benefit of different courses of action are. By contrast the mercantilist logic of “current account surpluses are always good” is overly simplistic and can lead to excessive exporting (e.g. Germany) which tends to be harmful for the exporter, their importers and often the environment too.

    Really I think it is you that is being myopic in assuming that knowing how the individual parts fit together necessarily means that you can’t appreciate the bigger picture of the whole.

  13. @ Adam Sawyer

    Without doubting for a moment that Bill himself knows what he’s talking about, so far I’ve just had to accept on trust that the “imports are a real benefit/exports a real cost” mantra is true.
    But I’ve never understood why.

    Until now. I’d like to thank you for offering the clearest and simplest exposition I’ve yet read of that (seeming) contradiction.

  14. Bill, I have been faced with the same situation many times over in 40 odd years. My reaction is I admire their zeal for change but not their lack of real- politik and their arm-chair theorising. Many of these Marxists have never lived in working class Housing Commission/Department suburbs or worked in dead-end jobs. Working people need help now, not waiting for ideal conditions to launch a glorious revolution of the proletariat, that’s the same as waiting for Godot.

  15. @Adam Sawyer

    “exports aren’t an end in themselves. Because they’re a real cost you actually have to be sure the foreign currency you accumulate (and the exchange rate impacts) are used for purposes that eventually return greater value to the exporting nation than the cost of incurred in the initial act of export.”

    Sorry for the late response but I thought your explanation of the purpose of exports and imports was very good HOWEVER when we look at China is the above apparent truth valid in their case?

    China has a huge ongoing trade surplus with the US and with the rest of the world and has accumulated over US$3 trillion in foreign exchange reserves so China hasn’t even used much of its export revenue for ANY USEFUL PURPOSE. Yet their exporting industries did receive Yuan for their exports, profits were made, industries and technological capabilities were developed, millions gained better employment and infrastructure and in fact a whole nation was developed.

    Then we look at the US where whole regions have had much of their industries off shored, millions became unemployed or underemployed and the lives of those at the bottom of the food chain have deteriorated badly. Most consumers do however have access to cheaper stuff even if they can no longer afford to buy much of it. There are even now geopolitical implications for the US as the US manufacturing sector declines or stagnates in the main and China is set to overtake the US in GDP and even technologically in many areas such as electronics and nuclear and renewable energy for example.

    What has happened? Why this paradox?

    Is the Chinese government actually using its central bank to fund its export industries using Yen issuance? Could the Chinese government just as easily have used that currency issuance for different purposes such as creating even more modern infrastructure, a larger local consumer economy, a massive military or a welfare state for example? China does and will need to import on a fairly large scale so they certainly did need to develop a substantial export sector but surely such a huge export sector is a mistake from a citizens welfare point of view but it does make sense from a geostrategic or world domination point of view as it definitely does put the US and other nations like Australia in a weaker situation?

    How has China prevented a large appreciation in the Yuan with such huge foreign exchange reserves?

    An understanding of MMT tells us that the US could have used US dollar issuance to find something useful to do for all those idle rust belt workers, assist with the establishment of more beneficial new industries and offer free retraining and relocation or even to subsidise productivity improvements or to provide ongoing subsidies for some of those now abandoned industries so that some could compete with Chinese or Mexican imports? Or just slap on a tariff and give a handout to consumers to compensate?

    I suppose with all nations optimally applying the insights provided by MMT, there would be no unemployment so the loss of local industries arising from international trade would not be such a tragedy for retrenched workers and regions, then it becomes an issue of what industry areas are deemed worth keeping from other perspectives such as national security, the potential for worthy spin-off industries, having a diverse economy which helps with innovation and other social benefits such as providing worthy sought after employment?

    Does it all condense to this: Governments can choose the rate of employment, the rate of interest, the rate of inflation, the level and quality of government provided services and their national economic/industrial/structure? Unfortunately citizens don’t have effective control of their governments, section of capital do. Fuck!

  16. Not Yen, Yuan in my previous comment. Looks like I killed another comment storm? 🙁

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