Greek austerity – a denial of basic human rights, penalty should be imprisonment

I have just finished reading a report published by the Transnational Institute (TNI), which is an “international research and advocacy institute committed to building a just, democratic and sustainable world”. The Report (published November 19, 2018) – Democracy Not For Sale – is harrowing, to say the least. We learn that in an advanced European nation with a glorious tradition and history an increasing number of people are being denial access to basic nutrition solely as a result of economic policy changes that have been imposed on it by outside agencies (European Commission, European Central Bank and the IMF). The Report shows how the food supply has been negatively impacted by the austerity programs; how food prices have been forced up at the same time as incomes have been forced down, and how collective and cooperative arrangements have been destroyed by privatisation and deregulation impositions. The Report concludes that the Greek State and the Eurozone Member States violated the Greek people’s right to food as a result of the austerity measures required by three Memorandums of Understanding (2010, 2012 and 2015). In other words, the austerity packages imposed on Greece contravened international human rights law. Not one person has gone to prison as a result of this deliberate and calculated violation of human rights.

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IMF Euro hitman in denial of the reality that the monetary union has become

The IMF hitman in Europe, one Poul Thomsem recently published a European Money and Finance Forum (SUERF) Policy Note (October 2018) – A Financial Union for the Euro Area – where he basically told us that any changes that the IMF will allow to occur in the Eurozone architecture will be minimal and will not stop Member States “from being forced to undertake large pro-cyclical fiscal adjustments when the next shock or major downturn hits”. The term “large pro-cyclical fiscal adjustments” means harsh fiscal austerity at the same time as the non-government sector spending in those Member States is collapsing. Fiscal policy thus reinforces the non-government spending withdrawal and worsens the outcome for employment, growth, income generation etc. Why? Because “all member countries” must “respect the Stability and Growth Pact”. End of story. Welcome to the Eurozone dystopia – the world where governments must follow rules set by technocrats which are incapable of delivering sustained prosperity for all but clearly suit the top-end-of-town. He then waxed lyrical about a whole set of neoliberal financial market reforms that the IMF is proposing which will further diminish the capacity of the Member States. But, at that point, he just starts to dream. The Member States are already deeply suspicious of the financial reforms that have been introduced to date, ineffective as they are. They are not about to cede more power to Brussels and Frankfurt any time soon.

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The Weekend Quiz – December 1-2, 2018 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! 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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Franco-German ‘agreement’ is another European dead-end

The latest ‘reform’ proposals from Europe might be taken as a sick joke if the players were not serious. On Sunday, November 18, 2018, the French President gave a speech at the traditional commemorative ceremony in the German Bundestag to mark the Volkstrauertag (National Day of Mourning), which has been part of German life since 1922 (originally to mark those who died during World War 1). His speech (Jacques Chirac was the last French president to address the Bundestag on June 27, 2000). His speech was two days after the respective finance ministers signed an ‘agreement’ to establish a “Eurozone budget”, which the French finance minister hailed as being a “major political breakthrough”. While that summation is questionable, it certainly is not a major economic breakthrough. It is a dud. As dud as all the reform proposals that have come before it. Just like the fake window dressing in Eniskillen in preparation for the G8 Summit in June 2013. Macron might have felt he was a big player on the world stage but the Germans have his measure as they have had of all French Presidents over the last several decades. The French really were the drivers of the Eurozone and they thought they were destined to restore their prominence in Europe. The Germans knew otherwise. And so it goes with the latest ‘agreement’. There is nothing in it that will save the Eurozone from crisis or restore sustained prosperity. Another European dead end.

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Britain should reject the Brexit ‘agreement’ but proceed with the exit

It is Wednesday, and only a short blog post beckons today. I have restrained myself from commenting on Theresa May’s unbelievable Brexit deal, which has the dirty paws of the European Commission all over it. Regular readers will know that if I had have been a voter in Britain in June 2016, I would have resolutely and happily voted in favour of Brexit. And if I was a British Parliamentarian now I would vote to reject the ‘deal’ and force the Brexit on British terms. I will write a little more about that in a further post. But today, I just want to pass comment on the extraordinary UK Guardian article from Phillip Inman – A leftwing UK post-Brexit is as likely as a socialist Rees-Mogg (November 24 2018) – which summarises the problem quite well. I say ‘well’ because it illustrates the progressive surrender that has allowed the neoliberal era and monstrosities like the European Union to persist. You can see it all over the place – surrender that is. The Democratic obsession with Paygo in the US. The British Labour fiscal rule in Britain. The ‘we will have a bigger surplus’ boast from the Australian Labor Party, when there is around 15 per cent underutilised productive labour. Inman’s article is encouraging the Left in Britain to lie down and surrender to the dictates of the neoliberal, corporatist machine that is the EU. It presents an impoverished vision of the future and a disgustingly vapid depiction of the possibilities that a truly progressive British Labor government could achieve once it jettisons the neoliberal frames.

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The flexibility experiment in Portugal has largely failed

Portugal has been held out by the Europhile Left as a demonstration of how progressive policies can manifest in the European Union, even with the Fiscal Compact and the Stability and Growth Pact (SGP). In 2015, after the new Socialist government took over with supply guarantees from the Left Bloc (Bloco de Esquerda) and the Portuguese Communist Party (PCP) and The Greens (Partido Ecologista “Os Verdes”), it set about challenging the austerity mindset that has blanketed the European continent in stagnation. Things improved in 2016 with increased government spending. But by 2017, the European Commission had reasserted its austerity mindset and the supposed flexibility that the Left were hoping and which Portugal had briefly embraced in 2016 was gone. And we learned that the neoliberal bias of the Eurozone and its fiscal rules dominates any progressive ambitions that a nation state might entertain. Another blow for the Europhile Left. The lesson: start looking at and supporting exit if you are truly serious about restoring a progressive policy agenda in Europe.

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Left-liberals and neoliberals really should not be in the same party

This week’s theme seems to be the about how the so-called progressive side of the economic and political debate keeps kicking ‘own goals’ (given a lot of this is happening in Britain where they play soccer) or finding creative ways to ‘face plant’ (moving to Europe where there is more snow). Over the other side of the Atlantic, as America approaches its mid-term elections, so-called progressive forces who give solace to the New Democrats, aka Neoliberal Democrats are railing against fiscal deficits and demanding that the left-liberals in the Democratic Party be pushed out and that the voters be urged to elect candidates who will impose austerity by cutting welfare and health expenditure and more. And then we have progressive think tanks pumping out stuff about banking that you would only find in a mainstream macroeconomic textbook. This is the state of play on the progressive side of politics. The demise of social democratic political movements is continuing and it is because they have become corrupted from within by neoliberals. And then we had a little demonstration in London yesterday of the way in which the British Labour Fiscal Rule will bring the Party grief. The Tories are just warming up on that one.

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Progressive political leadership is absent but required

One of the themes that has emerged in the discussions of the British Labour Party Fiscal Credibility Rule (which should be renamed the Fiscal Incredulous Rule) is when is the right time for a political party to show leadership and start educating the public on new ideas. The Modern Monetary Theory (MMT) project has been, in part, about educating people even if our ideas have been strongly resisted by the mainstream. The mainstream (New Keynesian) paradigm in economics is degenerative (meaning it has little empirical validation) and eventually it will fade into historical obscurity. For many of us that cannot come quickly enough. The defenders of the Rule argue that progressive politicians have to tread carefully or else the amorphous financial markets will turn on them and destroy their initiatives. The problem is that by kowtowing to the City or Wall Street, the progressive political forces become captured and redundant. Witness the electoral demise of social democratic parties over the last several decades. The conditions are ripe (see below) for a courageous head-on attack on these financial market elites and educate the public so that they allow elected governments to legislate for all rather than serving the interests of the elites, which has become the norm over the last several decades. The problem is that progressive political forces are also taking advice from mainstream economists who use the tools of neoliberalism. The upshot is that progressive political leadership is absent but desperately required.

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A summary of my meeting with John McDonnell in London

It is Wednesday and I am reverting to my plan to keep my blog posts short on this day to give me more time for other things. Today, I will briefly outline what happened last Thursday when I met with Shadow British Chancellor John McDonnell in London. As I noted yesterday, I was not going to comment publicly on this meeting. I have a lot of meetings and interactions with people in ‘high’ office which remain private due to the topics discussed etc. But given that John McDonnell told an audience in London later that evening that he had met with me and that I thought the proposed fiscal rule that Labour has adopted was “fine”, I thought it only reasonable that I disclose what happened at that meeting. I did not think the rule was fine and I urged them to scrap it and stop using neoliberal constructs.

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The Weekend Quiz – October 13-14, 2018 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! 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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Reflections on the 2nd International MMT Conference – Part 1

I have very little free time today. I am now in Dublin and am travelling to Galway soon for tonight’s event (see below). Last evening I met with some Irish politicians at the Irish Parliament and had some interesting conversations. I will reflect on the interactions I have had so far in Ireland in a later blog post. But today (and next time I post) I plan to reflect briefly on my thoughts about the Second International Modern Monetary Theory which was held last weekend in New York City. Around 400 participants were in attendance, which by any mark represents tremendous progress. The feeling of the gathering was one of optimism, enthusiasm and, one might say without to much license, boundless energy. So a big stride given where we have come from. Having said that, I had mixed reactions to the different sessions and the informal conversations I had over the three-day period, which might serve as a cautionary warning not to get to far ahead of ourselves. This blog post is Part 1 of my collection of some of those thoughts. They reflect, to some extent, the closing comments I made on the last panel last Sunday.

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MMT and the external sector – redux

This blog post is written for a workshop I am participating in Germany on Saturday, October 13, 2018. The panel I am part of is focusing on external trade and currency issues. In this post, I bring together the basic arguments I will be presenting. One of the issues that is often brought up in relation to Modern Monetary Theory (MMT) relates to the foreign exchange markets and the external accounts of nations (particularly the Current Account). Even progressive-minded economists seem to reach an impasse when the question of whether a current account should be in surplus or deficit and if it is in deficit does this somehow constrains the capacity of currency-issuing governments to use its fiscal policy instruments (spending and taxation) to maintain full employment. in this post I address those issues and discuss nuances of the MMT perspective on the external sector.

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The divide between mainstream macro and MMT is irreconcilable – Part 3

This is Part 3 (and final) of my series responding to an iNET claim that Modern Monetary Theory (MMT) and mainstream macroeconomics were essentially at one in the way they understand the economy but differ on matters of which policy instrument (fiscal or monetary) to assign to counter stabilisation duties. In Part 1, I demonstrated how the core mainstream macroeconomic concepts bear no correspondence with the core MMT concepts, so it was surprising that someone would try to run an argument that the practical differences were really about policy assignment. In Part 2, we saw how the iNET authors created a stylised version of mainstream macroeconomics that ignored the fundamental building blocks (how they reach their conclusions about the real world), which means that they ignore important differences in the way MMT economists and mainstream macroeconomists interpret a given economic state. I will elaborate on that in this final part. Further, by reducing the body of work now known as MMT to be just ‘functional finance’, the iNET authors also, effectively, abandon any valid comparison between MMT and the mainstream, although they do not acknowledge that sleight of hand.

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The divide between mainstream macro and MMT is irreconcilable – Part 2

This is Part 2 of a three-part response to an iNET article (September 6, 2018) – Mainstream Macroeconomics and Modern Monetary Theory: What Really Divides Them?. In Part 1, I considered what we might take to the core body of mainstream macroeconomics and used the best-selling textbook from Gregory Mankiw as the representation. The material in that textbook is presented to students around the world as the current state of mainstream economic theory. While professional papers and policy papers might express the concepts more technically (formally), it is hard to claim that Mankiw’s representation is not representative of what current mainstream macroeconomics is about. Part 1 showed that there is little correspondence between the core propositions represented by Modern Monetary Theory (MMT) and the mainstream. Yet, the iNET authors want to claim that the differences between the two approaches to macroeconomics only really come down to a difference in “assignment of policy instruments” – jargon for MMT prefers fiscal policy while the mainstream prefers monetary policy as the primary counter-stabilising tool. Given the lack of conceptual and theoretical correspondence demonstrated in Part 1, it would seem surprising that there is really only just this difference in policy preference dividing MMT from the mainstream. If that was the case, then what is all the fuss about? Clearly, I consider the iNET article presents a sleight of hand and that the differences are, in fact, significant. So, in Part 2, I am tracing how the iNET authors came to their conclusion and what I think is problematic about it. This discussion will spill over into Part 3.

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The divide between mainstream macro and MMT is irreconcilable – Part 1

My office was subject to a random power failure for most of today because some greedy developer broke power lines in our area. So I am way behind and what was to be a two-part blog series will now have to extend into Wednesday (as a three-part series). That allows me more time today to catch up on other writing commitments. The three-part series will consider a recent intervention that was posted on the iNET site (September 6, 2018) – Mainstream Macroeconomics and Modern Monetary Theory: What Really Divides Them?. At the outset, the iNET project has been very disappointing. Very little ‘new’ economic thinking comes from it – its offerings are virtually indistinguishable from the New Keynesian consensus that dominates my profession. The GFC revealed how impoverished that consensus is. It has also given space for Modern Monetary Theory (MMT) to establish itself as a credible alternative body of theory (and practice). The problem is that the iNET initiative has been captured by the mainstream. And so the Groupthink continues. The article I refer to above is very disappointing. It claims to offer a synthesis between Modern Monetary Theory (MMT) and mainstream macroeconomics by way of highlighting “what really divides” the two schools of thought. You might be surprised to know that according to these authors there is not much difference – only that mainstream economists think that monetary policy should be privileged to look after full employment and price stability and MMT economists (apparently) think fiscal policy should have that role. The authors claim that for the on-looker these minor differences are opaque in terms of outcomes (if the policies are applied properly) and suggest that there is really no reason for any debate at all. Accordingly, the New Keynesian consensus is just fine and the mainstream economists knew all the MMT stuff all along. It is an extraordinary exercise in sleight of hand engineered by constructing the comparison in terms of two ‘approaches’ that cull the main aspects of each. The real issue is why would they waste their time. Degenerative paradigms (or research programs in Imre Lakatos’ terminology) typically try to absorb challenging paradigms that, increasingly have more credibility and appeal, back into the mainstream through various dodges – ‘special case’, ‘we knew it all before’, ‘really nothing new’, etc. This is Part 1 of my response. It won’t be an easy three-part series but stick with it and I hope it gives you a lot of insights into the abysmal state of the mainstream macroeconomics profession.

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The Weekend Quiz – September 8-9, 2018 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! 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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Reclaiming our sense of collective and community – Part 1

My home town (where I was born and still spend a lot of time) is Melbourne, Victoria. It is a glorious place, at least the inner suburbs within about 3-4 kms of the city centre where I hang out mostly. It recently ‘lost’ its top place in the Economist Intelligence Unit’s Global Liveability Index (most pleasant place to live) to Vienna (Source). One wag thought it might have been because the Economist got confused between Australia and Austria. Economists are easily confused! But the reason I mentioned this is because it is symptomatic of how neoliberalism has reconstructed our realities and degraded our sense of community. The ‘competitive’ narrative, even though firms go all out to use power and deception to fix and rig markets in their favour, now dominates our perception. While I identify with Melbourne and would think a significant part of my identity is linked to that identification, the neoliberal narrative with its distinctive language, aims to reconstruct the community and communities of Melbourne, not as social and cultural artifacts, but as ‘products’ competing with other cities of the world for supremacy. I was thinking about this as I scope out the structure of the next book that Thomas Fazi and I will publish next year as a follow-up to our current book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017). Thomas and I have advanced our ideas and we will, in part, be focusing on how communities and the nation state work together to advance progressive outcomes. In our first book together, we set out how nation states can operate from a technical perspective and what they should do to provide for a progressive future. In the next book, we will dig deeper into the ways people and their communities have to re-empower themselves. Language, construction, vocabulary, and framing are all significant in this regard.

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A twitter storm of lies …

This is my short Wednesday offering, which will be quite short considering the last two days have been (necessary) epics. My three-part series created somewhat of a social media storm, which means people are interested in the topic and I think that is healthy. Democracy is strengthened if people educate themselves and contest propositions that are abroad in the debate. But, as I noted yesterday, social media storms have a way of getting out of control and out of the realm of being complementary to a more considered educative process and interaction. What the recent Twitter storm has demonstrated is that key people are just willing to make spurious accusations (aka lies) without having taken the time to consider the depth of the literature that is available on any topic. That is not helpful to democracy. It undermines it. Anyway, in this short blog post, I consider some of the responses to my three-part series. As a footnote, I have now retitled the three-part series “MMT is just plain good economics” rather than using the quotation from the British Shadow Chancellor’s advisor who said that “MMT is just plain bad old economics”. Framing. I took the points of several commentators on this blog seriously in this regard. Thanks.

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MMT is just plain good economics – Part 2

I am surprised at the hostility that Part 1 in this series created. I have received a lot of E-mails about it, many of which contained just a few words, the most recurring being Turkey! One character obviously needed to improve his/her spelling given that they thought it was appropriate to write along the lines that I should just ‘F*ck off to Terkey’. Apparently Turkey has become the new poster child to ‘prove’ Modern Monetary Theory (MMT) wrong. Good try! I also note the Twitterverse has been alight with attention seekers berating me for daring to comment on the sort of advice British Labour is receiving. Well here is Part 2. And because you all liked it so much, the series has been extended into a three-part series because there is a lot of detail to work through. Today, I revisit the fiscal rule issue, which is a necessary step in refuting the claim that MMT policy prescriptions (whatever they might be) will drive the British pound into worthless oblivion. And, you know what? If you don’t like what I write and make available publicly without charge, then you have an easy option – don’t read it. How easy is that? Today, I confirm that despite attempts by some to reconstruct Labour’s Fiscal Rule as being the exemplar of progressive policy making, its roots are core neoclassical economics (which in popular parlance makes it neoliberal) and it creates a dependence on an ever increasing accumulation of private debt to sustain growth. Far from solving a non-existent ‘deficit-bias’ it creates a private debt bias. Not something a Labour government or any progressive government should aspire to.

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MMT is just plain good economics – Part 1

On August 6, 2018, British tax expert Richard Murphy who is becoming increasingly sympathetic to the principles of Modern Monetary Theory (MMT) published a blog post, which recorded an exchange with one James Meadway, who is the economics advisor to the Shadow Chancellor John McDonnell in Britain. The exchange took place on the social media page of a Labour Party insider who has long advocated a Land Tax, which McDonnell is on the public record as saying will “raise the funds we need” to help local government. He called it a “radical solution” (Source). An aside, but not an irrelevant one. It reflects the mindset of the inner economics camp in the British Labour Party, a mindset that is essentially in lockstep with the neoliberal narrative about fiscal policy. Anyway, his chief advisor evidently openly attacked MMT as “just plain old bad economics” and called it a “regression in left economic thinking” which would ultimately render the currency “entirely worthless” if applied. He also mused that any application of MMT would be “catastrophic” for Britain. Apparently, only the US can apply MMT principles. Well, the exchange was illustrative. First, the advisor, and which I guess means the person being advised, do not really understand what MMT is. Second, the Labour Party are claiming to be a “radical and transformative” force in British politics, yet hang on basic neoliberal myths about the monetary system, which is at the core of government policy implementation. Astounding really. This is Part 1 of a two-part series on this topic, most of it will be summarising past analysis. The focus here is on conceptual issues. Part 2 will focus more specifically on Balance of Payments issues.

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