I read an article in the Financial Times earlier this week (September 23, 2023) -…
It is Wednesday and I am travelling a lot today with limited opportunity to write. I am reading a lot though. Highly significant political debates with far reaching effects on the well-being of citizens once policies are implemented are conducted on a daily basis in our national Parliaments and in the media with little correspondence to reality. This is the norm for debates on macroeconomics, which dominate political news every day. There is this fictional world that has been created to keep citizens in check. When the painful policies the neoliberals haul out inflict pain, the solution is to blame something erroneous, attack it, which then just causes more pain. This is the norm these days when it comes to macroeconomic policy. And for the rest of us we suffer in the real world but reason in this fictional world, which is why it persists.
The fiscal surplus – god-like
The Fairfax press carried this story (October 20, 2019) – Treasurer rejects stimulus push, defends reform plan – which bears on the discussion as to why the Federal government is not relenting on fiscal policy when the economy is slowing dramatically, household debt is at record highs and household consumption spending growth is declining, business investment is languishing and Australia typically runs an external deficit.
Drain, drain, drain.
The Government has decided in this context that the best way forward is to concentrate on “industrial relations as a key target” and the Treasurer has said now is “‘not the time to panic’ over the tumbling growth”.
The so-called “three-phase reform plan” which includes industrial relations is fancy code for making it hard for workers to gain wage rises, making it hard for them to keep their jobs in the face of employer caprice, making it harder for trade unions to do their legitimate job of protecting workers’ interests, and making it easier for employers to be capricious.
The Treasurer told the media that:
We’re talking about competition, infrastructure, deregulation, industrial relations, tax
All par for the course for the conservatives.
All more of the same.
All certain to make matters worse for the things that the citizens actually care about.
The Treasurer has just come back from Washington with his “structural reform” zeal. Obviously, infested with IMF logic – the sort of logic that has delivered such shockingly bad outcomes to date, since they adopted this tack.
This is in the context of central bank governors and even mainstream economists now admitting that the period of monetary policy dominance is over and that the way forward to arrest the stagnation that is choking material well-being is to engage with fiscal stimulus.
As I have said repeatedly, pushing monetary policy to its current rather gymnastic limits – with massive build up of central bank balance sheets, negative interest rates as far as the eye can see, and excess bank reserves as high as the sky – has not delivered on the promises made.
The New Keynesian macroeconomists might think that the ‘policy assignment’ in favour of monetary policy is preferred. But it has failed and the consequences have been elevated levels of unemployment and underemployment, rising inequality, real estate booms that crash and all the rest of it.
It was never a good plan to rely on monetary policy.
But now, for Australia, fiscal policy has to return to the front line and we need stimulus badly if we value material well-being.
The current Australian government has elevated the concept of a fiscal surplus to that of a talisman – an object thought to have magical powers.
It has convinced the Australian population that this is the only object worth pursuing irrespective of how damaging it is to material well-being (as GDP growth slows and labour underutilisation hovers around 14 per cent at least).
Then to explain the material pain the population is enduring, the Government then wheels out arguments that what is holding us back are rigid industrial relations practices which need further deregulation.
Whip our backs, and when that hurts, whip some more.
This is the fictional world we live in now when it comes to macroeconomic debates.
It is obvious that total spending growth is inadequate relative to the productive capacity of the economy.
It is obvious there are 1.8 million people who are available and willing to work who are either unemployed or underemployed.
It is obvious that wages growth is flat to the point that real wages growth is negative.
It is obvious that inflation is low and consistently below the lower bound of the RBA’s target range.
It is obvious that households, burdened with record levels of debt and flat wages growth cannot keep their spending growth going using their credit cards.
It is thus obvious that we need a fiscal intervention to stabilise growth and provide income earning opportunities for households to reduce their debt levels.
But we are so indoctrinated to believe in the god-like features of the fiscal surplus, that the Government thinks is just about within its grasp this fiscal year, that as a voting population, we elect governments and support political parties who openly mismanage their fiscal capacity to inflict pain on us.
As for the Opposition – bereft.
The Shadow Treasurer tells the press that the Government should be “more proactive in kickstarting growth ‘without jeopardising the surplus’.
This is the same sort of weasel talk that the IMF use when they talk about “growth friendly fiscal consolidation” – which is just a plain denial of the causal processes that generate income growth and material prosperity.
Jazz to work with …
I had previously indicated that in the 1970s I lived in a big house in Melbourne – the ‘Pink House’ – which was full of musicians and other left-wing types.
Mixed in with all the classical piano playing, put together funk bands, classical guitar studies, were regular sessions of Jack Teagarden style jazz.
Jack Teagarden was the earliest and best innovator in jazz trombone who also sang and fronted a fantastic New Orleans jazz band.
He died at the age of 58 in 1964 in very lonely circumstances.
I was watching a movie the other day (TV series) and Jack was playing in the background. So I dug out an album from my collection and took a trip back in time. I hadn’t heard it for some years in fact.
This track was put out on a massive collected works (released by Avid in 2004) – Jack Teagarden – Father Of Jazz Trombone – a 3-CD 72 track compilation, which is well worth getting if you want the definitive works.
This is why I love the pre-Bebop swing era of Jazz.
The original of this track was recorded on Decca in 1939.
That is enough for today!
(c) Copyright 2019 William Mitchell. All Rights Reserved.