The EU’s democratic deficit is intrinsic and unfixable without dissolution

Transparency International EU, is part of TIs “anti-corruption movement” focused on happenings in the European Union. It gets around 40 per cent of its funding from the European Commission, itself, although they claim this does not compromise their “institutional integrity and independence”. Let’s hope not! They have just released a report – Vanishing Act: The Eurogroup’s Accountability (February 5, 2019) – which confirms, in case one wasn’t already aware (looking at the Europhile Left here) that the core decision-making body in the European Union – the so-called Eurogroup – (the Finance Ministers of the Eurozone), which “exercises political control over the currency and … the Stability and Growth Pact” – is inherently shady and anti-democratic. The Report finds that the EU’s democratic deficit is intrinsic to its design and resistance to any effective reform. While the Report proposes some changes to the structure and operations of the Eurogroup it maintains the line that the growing lack of democratic oversight in key EU decision-making can be improved. I disagree. The problems are endemic. The DNA of the Eurozone architecture is neoliberal to the core. That ideology has permeated all the major EU institutions and has left the EU citizens without an effective voice in the decision-making process. To resolve that alienation, people are donning yellow vests and taking to the streets. Progressives should encourage these anti-EU protests and support those who desire to abandon these neoliberal institutions. The reformers cannot seem to grasp that the basic structure is the problem. Any steps in the right direction require that basic structure (the Single Market, SGP, etc) to be abandoned. And doing that means the whole house of cards falls down. And it cannot come quickly enough.

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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.

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Monetary policy has failed – we must reprioritise fiscal policy

Remember back in early 2009, when the then head of the European Central Bank Jean-Claude Trichet (boasted that the “euro … is a success … it helps to secure prosperity in participating states”. He was still making these claims in October 2018. At an event in honour of he and former German finance minister Theodor Waigel, organised by the Banque de France, Trichet said that “the euro is a historic success … in terms of credibility, resilience, adaptability, popular support and real growth during its first 20 years is impressive”. He particularly singled out the “delivery of price stability”. Well the latest data confirms beyond doubt that the ECB has failed to deliver on its price stability charter. Further, the descent back into recession in Italy and probably Germany in the December-quarter 2018 tells us that this reliance on monetary policy to stimulate growth while maintaining ridiculous levels of fiscal rectitude has undermined growth and unnecessarily condemned millions to unemployment and rising poverty.

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The conflicting concepts of cosmopolitan within Europe – Part 2

In the blog post earlier this week – The conflicting concepts of cosmopolitan within Europe – Part 1 (January 29, 2019) – I juxtaposed two concepts of ‘cosmopolitanism’ which appeared to be part of the early moves to achieve European integration. On the one hand, there was a Kantian-style desire to create, through cooperation between previously warring states, a peaceful and prosperous future for a ‘one’ Europe. This construct would be welcoming to outsiders, progressive, and celebrate ethnic and cultural diversity. It was a rights-based conception of citizenship and democracy, which closely aligned with the growing popularity of the social democratic polity. On the other hand, the early moves to overcome the resistance to creating a supranational entity that would increasingly compromise national sovereignty – the so-called “functionalist” approach of Jean Monnet and Robert Schuman, created a pragmatic, free market-based cosmopolitanism, which set the Member States against each other as competitors. As I demonstrated, over time, the economic cosmopolitanism channeled the burgeoning neoliberalism of the 1980s and compromised the rights-based, political cosmopolitanism, to the end that we now talk about democratic deficits as the European Commission and its unelected allies such as the IMF trample over the rights of citizens across the geographic spread of Europe. Europhile progressives hanker for the first conception of European cosmopolitanism and proffer various reform proposals, which they claim will tame the economic dimensions and restore the ‘European Project’ as a progressive force in the world. In this second part of the series I will argue that from the outset the cosmopolitanism embedded in the ‘Project’ was deeply flawed and it is no surprise that democracy is now compromised in the European Union. I argue that reform is not possible such is the extent of the failures.

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The conflicting concepts of cosmopolitan within Europe – Part 1

In the past week, the UK Guardian readers were confronted with the on-going scandal of wealthy British politicians and ‘peers’ receiving massive European Union subsidies under the Common Agricultural Policy (CAP). The article (January 27, 2019) – Peers and MPs receiving millions in EU farm subsidies – recounted the familiar tale –
“Dozens of MPs and peers, including some with vast inherited wealth, own or manage farms that collectively have received millions of pounds in European Union subsidies”. The story is not new and this scandal is just a reflection of the way in which the development of the European Union has contradicted the idealism that the Europhile Left associate with ‘Europe’. As an aside, it would be telling, one imagines to map the EU payments (and well-paid job holdings) with Brexit support – one would conjecture a strong negative correlation. This is a two-or-three part mini-series on the evolution of concepts of ‘cosmopolitanism’ in the European context. It is part of work I am doing for the next book Thomas Fazi and I hope to publish by the end of the year. In this blog post, I introduce the conflict that is inherent in the European Union, and the way the Europhile Left has been seduced by a concept of cosmopolitanism that bears not relevance in the reality of modern Europe.

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EU deliberately subjugates prosperity to maintain its neoliberal ideology

While the Brexit shambles wound on in London, with the Prime Minister being walloped one day by her own party, and then the next given a victory, courtesy of some Labour Party bungling (the no-confidence motion), across the Channel things have been turning markedly sour. While the Europhile Left hold Europe dear to their hearts, the reality is that their dreamworld is falling apart. This is not only because of the incompetence of its polity but also because of the deliberate strategies of the polity to privilege ideology over economic reality. But if the Europeans continue down their ideological path, there mightn’t be much to exit from for the British. Late last week (January 14, 2019), Eurostat published their latest output data – Industrial production down by 1.7% in euro area – which as the title indicates is not good. Once again, the fiscally-starved Eurozone is trailing behind a sinking EU28. Over the 12 months to November 2018, industrial production in the Eurozone fell by 3.3 per cent and by 2.2 per cent in the EU28. The declines are across all product categories – capital goods, energy, durable consumer goods, intermediate goods and non-durable consumer goods. What we understand from this is that the policy makers in the European Union deliberately choose to subjugate economic prosperity and the well-being of people (jobs, incomes, savings, etc) to maintain an adherence to an ideology that purposely redistributes real resources and incomes to the top end of the distribution and provides lucrative paths for European Commission executives to move between these ‘political’ roles into highly paid banking and related jobs. It is neoliberal central, in other words, and is beyond reform.

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Must be Brexit – UK GDP growth now outstrips major EU economies

I suppose Brexit is to blame for the fact that Britain is now growing faster than the major European economies. The latest ‘monthly’ GDP figures show that the British economy grew by 0.3 per cent in the three months to November 2018 and will probably sustain that rate of growth for the entire final quarter of 2018. This is in contradistinction to major European economies such as Germany (which will probably record a technical recession – two consecutive quarters of negative growth) with France and Italy probably following in Germany’s wake. I have made the point before that the growth trajectory of the British economy (inasmuch as there is one) is very unbalanced and reliant on households and firms maintaining expenditure by running down savings and accessing credit – which means ever increasing private debt burdens. With private credit growth weakening as the debt levels become excessive and the rundown of saving balances being finite, Britain will face recession unless the fiscal austerity is reversed. Earlier in 2018, the Guardian Brexit Watch ‘experts’ were continually pointing out that Britain’s growth rate was at the bottom of the G7 as evidence that Brexit was causing so much damage. So now European G7 nations are starting to lag behind, these commentators will have to find another ruse to pin their anti-Brexit narrative on. We also consider in this blog post some more Brexit-related arguments – pro and con – which reinforce my conclusion that a No Deal Brexit will not cause the skies to fall in.

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The mindless and myopic nature of neoliberalism

A short blog post as per my usual Wednesday behaviour these days. Fiscal austerity manifests in many ways, all of them unpleasant, destructive and unnecessary. Here is one of the more insidious ways that mindless cuts in government programs have long-term damaging impacts. In 2013, the Queensland State Government was taken over by a conservative extremist as Premier who thought it was a good idea to hack into sexual health programs targetted at indigenous communities. Over a few short years, this was just one of a huge number of social and health cuts that were made by that particular state government. More than 14,000 public service jobs were cut (a huge relative number). The State government fiscal deficit fell from a predicted $A6 billion in 2013-14 to $A2.58 billion. But like all these austerity cuts which deliver short-run reductions in public spending, the longer-term effects of the cuts lead to much higher amounts of public spending. Neoliberalism is not only mindless but myopic. I have made this point often in regard to infrastructure cuts. In the end, the government has to spend much more fixing the crisis the initial cuts create. Not a sensible strategy at all. The ‘chickens’ (manifestation) of those cuts in Queensland a few years ago are now coming home to roost. As predicted at the time, there is now a health crisis in the form of a STD epidemic moving across the north of Australia from east to west, purely because this idiot wanted to ‘save’ a few pennies. Now serious public cash is being required to put a brake on the health crisis he created. There are countless examples across the world over this neoliberal era of this same phenomena. Myopic and mindless.

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US labour market remains fairly robust

Last week’s (January 4, 2019) release by the US Bureau of Labor Statistics (BLS) of their latest labour market data – Employment Situation Summary – December 2018 – showed that total non-farm payroll employment rose by 312,000 and the unemployment rate rose by 0.2 points to 3.9 per cent on the back of a 0.2 points rise in the participation rate. The coincidence of rising employment and rising participation is usually a good sign as workers are being attracted back into the labour force by the increased job opportunities. We will see in the next few months whether that is a one-off blip or a sustained trend. If it is a sustained trend then the rise in unemployment as a consequence of the labour force growth outstripping employment growth will be temporary and sustained reductions in unemployment will then occur. While the US labour market is looking fairly robust there is still a substantial jobs deficit remaining which tells us that it remains some distance from full employment. There is room for expansion.

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The Brexit scapegoat

The UK Guardian continued its anti-Brexit bias in its article (January 4, 2019) – Brexit anxiety drags UK economy almost to standstill. Read the words which clearly mean – Brexit anxiety causes UK economy to stall. No nuance. No comparability. Just plain, unproven bias. Now, let’s be clear. The British economy has slowed considerably in the last quarter and the chaotic political behaviour among the British government is bound to be causing anxiety among voters. The British establishment is looking more comical lately than it usually does. But, as I have demonstrated previously, the trajectory of the British economy that is emerging pre-dates the Brexit referendum and has more to do with austerity biases in policy design and the state of private domestic balance sheets (accumulated debt positions) than it has to do with Brexit anxiety. Further, the data that the Guardian reports (the latest PMI results) also suggest that the Eurozone and Germany, in particular, are also recording similar declines in sentiment and activity. It is hard to blame Brexit on that.

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Some Brexit dynamics while across the Channel Europe is in denial

It is Wednesday and I am going to stick to my decision to ‘not publish a blog post’ on Wednesdays unless there is some new data (such as the quarterly release of the Australian National Accounts). I want to use this time to attend to other writing obligations. But a few snippets won’t hurt, will they? The first, looks at some extraordinary denial from the European Union bosses. The second, looks at evidence that the Brexit environment is already providing positive dynamics for British workers in low-wage areas of the labour market. And that is being presented by the Remainers as something negative! We move into 2019, just as we left 2018!

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On holidays again …

I am travelling for most of today across land and water and so have no time to write anything coherent. So it is just a music day to welcome in 2019. Happy New Year to all and lets hope a few banksters go to prison, that a few politicians join them on corruption charges, that Italy tells the European Commission to jump and leaves the Eurozone, that the Gilets in France spread throughout Europe and bring down the whole disastrous monetary union, that Britain goes out without an agreement and that the British Labour Party gets some spine, sacks its New Keynesian advisors, and demonstrates how to actually run fiscal policy, and that … you get the drift.

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Greece “neither thrived nor struggled” – the financial press alt world

It is my last blog post for the year. And we leave the year with not much gained from a progressive perspective. The mid-term elections in the US just swapped deficit-terrorist Republicans (who have been compromised by the big-spending Trump) with ridiculous PayGo Democrats, who are intent on repeating all their previous mistakes. The Brexit negotiations reveal how appallingly compromised the Tories have become and how venal the European Commission is. The British Labour Party fiscal rule shows that the next British government hasn’t yet jettisoned its Blairite past and its New Keynesian economic advisors are dogmatically taking Labour down a path it will regret. Italy has been bashed into submission by the European Commission bullies, which a week or so later, choose to turn a blind eye to France breaking the rules, because the Gilets threaten the whole show. And Germany still accumulates massive external surpluses in violation of European law and nothing happens. Happy New Year.

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More Brexit nonsense from the pro-European dreamers

What editorial control does the UK Guardian exercise on Op Ed pieces? Seemingly none if you read this article (December 24, 2018) – What Labour can learn about Brexit from California: think twice – written by some well-to-do American postgraduate working for DiEM25 in Athens. But when Thomas Fazi and I sought space to discuss our book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017) – or when I have sought space to provide some balance to the usual neoliberal, pro-Europe bias, the result has been no response (yay or nay). We never received a response to our solicitation. Even if we ignore the obvious imbalance in experience and qualifications (track record) of the respective ‘authors’, it seems that the UK Guardian only wants a particular view to be published even if the quality of that view would make the piece unpublishable in any respectable outlet. Go figure. Anyway, I now have read the worst article for 2018. And, I thought that the Remain debate had reached the depths of idiocy but there is obviously scope for more if this Guardian attempt at commentary is anything to go by. And I know the Guardian journalists read this blog – so why not allow Thomas and I to formally respond to all this Remain nonsense?

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When two original MMT developers get together to discuss their work

Last week, Warren Mosler and I had one of our regular catchups and we discussed at length the state of play in Modern Monetary Theory (MMT). We are quite protective of it. We mused about how we started out on this Project and where it has gone. As old stagers do when they get together. We also reflected and compared notes on what the state of MMT is now, given the increasing visibility of the ideas in the mainstream media all around the world and the proliferation of social media activists who have chosen to identify and promote our ideas. There were aspects of that development that we identified as being of concern for us and other aspects which we considered to be a cause for optimism (celebration is too strong a word). We thought it would be a good idea to take a breath and document what we considered to be the essence of MMT – as a sort of checklist for people who want a fairly precise account of the body of work. I agreed to write this document after input from Warren. So, this is what we mean by MMT. What follows is my account of our conversation expanded to add meaning where required.

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British data confirms strong FDI continues despite Brexit chaos

Wednesday and a shorter blog post so that I have a little more time to do other things. I don’t know what topic attracts the most hate E-mails that I receive on an almost daily basis: my position on the Eurozone, my position on the EU generally, my position on Brexit, my position of surrender monkey social democrats (parties and people), or my work on Modern Monetary Theory (MMT). I guess I could count and build up a frequency distribution but I just prefer to delete them these days – the first few words give the game away. Save your time. This week, I have had a torrent of such E-mails telling me more or less “see, you claimed Brexit would be good, but it is a disaster”. Last time I checked Brexit hasn’t happened yet. All that we are witnessing is a conservative government of considerable incompetence in disarray after being bullied by the neoliberal, corporatists in Brussels into a ridiculous ‘agreement’ that changed hardly anything. But there were some interesting data releases in the last few weeks that bear on the Brexit question. I have been looking into them.

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Australian workers losing out under neoliberalism

The current conflict in France, while multidimensional, is a reflection that the neoliberal austerity system is not working for ordinary people. All sorts of cross currents feed in to this discontent, some of which (for example, distaste for foreigners/migrants) are clearly not to be encouraged. Most of the claims of the Gilets Jaunes are about the alienation, exclusion and poverty that they feel living in the neoliberal, corporatist EU world. A lot of so-called progressives are out there claiming this is a right-wing ruse advancing climate denial and anti-migrant sentiment. But I consider that to be a typical elite response to any EU discontent to avoid discussion of exit and the paint the critics as being stupid and/or racist. A replay of the Brexit accusations from the Remainers. But the writing is on the wall for the Eurozone countries. People will only tolerate being put down and oppressed for so long. And all is not well elsewhere. Even when a nation has its own currency and has the capacity to avoid the sort of stagnation that many European nations are now wallowing in, the universality of the neoliberal austerity bias is making life hard for not only the low-income cohorts, but, increasingly for the lower tiers of the ‘middle class’ (defined in income terms). Australian workers are feeling that pinch in the land of plenty.

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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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