Mental illness and homelessness – fiscal myopia strikes again

Yesterday, as I was going about my business in San Francisco, I passed a man lying in the gutter outside the Westfield Centre on Market Street (the swish multilevel shopping complex with some expensive label stores), who was poorly dressed, given the weather (cold) and was clearly having some sort of episodic fit. The street was packed with Sunday shoppers most of whom were well-heeled. I asked the person I was with whether we should ring 000 to get some sort of professional help for the man and he told me that it would be futile because they wouldn’t come out anyway. It was not an isolated incident. Throughout the city the extent of homelessness and the public nature of mental illness is stark. There are choruses of shouts, anguished cries, megaphoned self-dialogues emanating from almost every street corner, doorway, alleyway, train station and whatever. People who should be in care, suffering and crying out. For the richest country in the world to tolerate this degree of human rights violation is almost unimaginable. While the Australian health system is far from perfect, our mentally ill citizens are much better cared for in state facilities and are not left on the street, homeless, suffering from a variety of obvious physical and mental maladies – and basically abandoned by the system. There are some who escape the net and wander the streets of our cities, but, in general, we do not accept that the mentally ill should be left to their own devices. It tells me that any American claim to greatness is a pitiful, self deceit. This is a heartless society where citizens who are most in need of state support are the least able to access it.

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Bernie Sanders on the right track but need to address the main game

On December 23, 2015, the Democrat Presidential candidate Bernie Sanders published an Op Ed – Bernie Sanders: To Rein In Wall Street, Fix the Fed – which, correctly, in my view, concluded that Wall Street (taken to be the collective of banksters wherever they might be located) “is still out of control” and policy reform has done little to alter the “too big to fail” problem that was identified in the early days of the GFC as one bank after another lined up for government assistance. Larry Summers replied to the Op Ed in his blog – The Fed and Financial Reform – Reflections on Sen. Sanders op-Ed – challenging several of the proposals advanced by Sanders. The problem is that the progressive voice of Bernie Sanders labours under some basic misconceptions about how the monetary system operates and therefore plays into the hands of those who have created the mess. Conversely, Summers clearly understands basic elements of the monetary system but continues to advocate policies which avoid addressing the main issue – the power of the financial markets.

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Benefit tourism – another neo-liberal fallacy

One of the tools that right-wing elements use to control the public debate about government spending and to justify their attack on public deficits is migration. There are many aspects to this public manipulation that invokes raw fear, ignorance and prejudice among the population. One of the elements, which plays on job insecurity and the range of fiscal myths that characterise the neoliberal era, is the claim that so-called ‘benefit tourism’ is rife and if left unchecked will bankrupt national governments and lead to higher burdens on ‘taxpayers’. So we are often told that migrants from poorer nations move to access welfare benefits that are superior to those offered by their own nations and that these movements are parasitic in nature and do not advance the interests of the host country citizens. Last week (December 10, 2015), the Irish-based EU organisation, the European Foundation for the Improvement of Living and Working Conditions (Eurofound) released a report – Social dimension of intra-EU mobility: Impact on public services – which examines “the extent to which mobile citizens from central and eastern European Member States … take up benefits and services in nine host countries” by “mobile citizens from 10 central and eastern European Member States” (the so-called EU10 mobile citizens). The Report should be read by all those who wish to contribute to this debate or understand what the facts are. Essentially, the Report finds that mobile citizens from poorer nations have lower take-up rates of welfare support in host countries than natives. That really should be the end of the ‘benefit tourist’ assertions. But then most of these public debates are not based on evidence or logic.

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UK household spending falling yet corporate profitability at record levels

Last week (December 8, 2015), the British Office of National Statistics released its updated – Family Spending, 2015 edition – which provides a detailed breakdown of household spending for 2014. What is interesting about the release from my perspective, in addition to seeing how household spending changes in composition over time, is what it says about distributional forces in the UK and the way in which households are losing out to corporate interests under the policy directions of neo-liberal British Labour and Conservative governments. In real terms, household spending overall is a lower in 2014 than what it was at the turn-of-the-century. British households are also saving less as a percent of their disposable income than they were 10 years ago. The weight share in national income has fallen dramatically over that time. Yet, real GDP growth (that is, real national income) has risen by around 27 per cent since the turn-of-the-century. It doesn’t take a genius to work out where that real income that it the workers have lost has gone. There are several components to this story and this blog looks at some of them.

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The Job Guarantee and contributory unemployment benefits systems

The unemployment rate in Finland is climbing steadily and in October 2015 was 9.6 per cent (seasonally adjusted) and the employment to population ratio stood at 60.1 per cent and was trending down. Finland is fast becoming the next basket case of the Eurozone. What was once a highly supportive society is steadily being turned into a austerity-ridden backwater. The latest news, however, that the Finnish government is due to debate a proposal to provide every citizen with a basic income of €800 a month has excited the progressives – unfortunately. The proposal currently being prepared by the national agency that administers the Finnish welfare system (KELA) would offer this basic allowance in lieu of all other existing benefit payments. It would be paid regardless of whether the person received income from any other source. I have been considering the Finnish welfare system over the last month or so since my visit there in October. This is in relation to a series of queries I had from activists there who were keen on the Modern Monetary Theory (MMT) Job Guarantee proposal but were wondering how it would situate itself within the existing system of unemployment benefits in Finland. This blog captures my thoughts on both of those topics.

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Friday lay day – Is MMT applicable to the Eurozone?

Its my Friday lay day and I am catching up on reading today. But one thing I have had to complete by today is the introduction to the German Translation of my friend Warren Mosler’s 2010 book – The Seven Deadly Innocent Frauds of Economic Policy. The publisher wanted an introduction for the German readership that helped them relate the discussion in the book to the reality in Europe – given that the Economic and Monetary Union is a perverted hybrid of a fixed exchange rate/fiat currency system that works for no-one really. So you may be interested in reading my introduction. Then a dose of the master guitarist completes my Friday blog.

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Friday lay day – a mini-Job Guarantee proves beneficial in the US

Its my Friday lay day blog and I am working on various projects today so I will cut this blog relatively short. Two things came up this week that I thought were interesting but only require a noting by way of blog entry. The first was a report about a mini-Job Guarantee type program in the New Mexico city of Albuquerque, which is demonstrating that public job creation programs can change peoples’ lives for the better when there is no hope and no other opportunities. The second story I read that was interesting was the Wolf Street Report (October 24, 2015) – Barcelona Threatens to Print Parallel Currency, Madrid Seethes – which discussed the plan by “Barcelona’s left-wing city council plans to roll out a cash-less local currency that has the potential to become the largest of its kind in the world”. The austerity-mavens in Madrid and their puppet masters in Brussels will be having conniptions at the prospect.

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Rising income and wealth inequality – 1% owns more than bottom 99%

This week is – Anti Poverty Week 2015 – in Australia and there are many events and happenings on to mark the time and to highlight the issue of poverty. I will be appearing on a panel on Wednesday afternoon in Newcastle (see below). I was thinking about what I might say in my short presentation next week as I read a report in the UK Guardian (October 17, 2015) – Wealth therapy tackles woes of the rich: ‘It’s really isolating to have lots of money’ – that appealed for sympathy from the rest of us for the top-end-of-town, who have to undergo psychological counselling because they are stressed out being wealthy. Apparently, they also have to engage in “stealth wealth” which means they “are hiding their wealth because they are concerned about negative judgment”. I immediately felt bad for them. Oh, the pain the top 1 per cent feel owning around 50 per cent of all the assets in the world! What a shocking plight they face. In the context of this week’s focus on Anti-Poverty, I couldn’t quite rouse the sympathy the story was seeking to elicit. Sorry!

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Capitalists shooting their own feet – destroy trust and layer management

There was a wonderful article – The Origin of Job Structures in the Steel Industry – written by Katherine Stone and published in 1973. It was part of an overall research program that several economists and related disciplines were pursuing as part of the radical economics that was being developed at Harvard and Amherst in the early 1970s. One of the major strands of this research was to understand labour market segmentation and how labour market structure, job hierarchies, wage incentive systems and more are used by the employers (as agents of capital) to maintain control over the workforce and extract as much surplus value (and hopefully profits) as they can. It challenged much of the extant literature which had claimed that factory production and later organisational changes within firms were technology-driven and therefore more efficient. The Harvard radicals found that to be unsustainable given the evidence. They also eschewed the progressive idea that solving poverty was just about eliminating bad, low pay jobs, an idea which had currency in that era. They showed that the bad jobs were functional in terms of the class struggle within capitalism and gave the firms a buffer which allowed them to cope with fluctuating demand for their products. It also allowed them to maintain a relatively stable, high paid segment (primary labour market) which served management and was kept docile via hierarchical incentives etc. I was reminded of this literature when I read a recent paper from Dutch-based researchers on the way firms have evolved in the neo-liberal era of precarious work. Much is made of the supposed efficiency gains of a more flexible labour market. How it spurs innovation and productivity through increased competition and allows firms to be more nimble. The entire ‘structural reforms’ agenda of the IMF, the OECD, the European Commission and many national governments is predicated on these myths. The Dutch research shows the irony of these manic neo-liberals.

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Jeremy Corbyn is breaking down the neo-liberal Groupthink

It has been an interesting period watching the various ruses that conservatives are bringing to bear to attack Jeremy Corbyn and, somewhat unrelated, try to justify why the US Federal Reserve Bank should be raising interest rates. I will deal with the latter issue another day. Apparently, the grass roots rise of Jeremy Corbyn to leadership of the British Labour Party is actually a demonstration of the “rise of groupthink” in British politics and “threatens Britain’s membership of the EU – and the United Kingdom itself”. Indeed, more Corbynsteria as the terminology goes. This quietly-spoken British man seems to have a lot to answer for after having the audacity to intervene in the cosy little neo-liberal world of British party politics (Tory and New Labour). But the part that interested me was that the author – who is employed by the lofty sounding but usually disappointing, British-based Centre for European Reform (which gets funding because it is a mouthpiece for pro-European integration) – considers Corbyn has been the beneficiary of a new found groupthink. It beggars belief really.

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Governments do not need the savings of the rich, nor their taxes!

In Chapter 24 of The General Theory of Employment, Interest and Money, Concluding Notes on the Social Philosophy towards which the General Theory might Lead, John Maynard Keynes confronted the issue of the “arbitrary and inequitable distribution of wealth and incomes” in capitalist economies. The argument he advances in that Chapter of his 1936 book contains guidelines for the progressive left that some just cannot seem to grasp. In short, governments (as our agents) do not need the savings of the rich to ensure that society prospers. There was another interesting contribution in 1946 from the American statistician and economist – Beardsley Ruml – who wrote that “Taxes for Revenue are Obsolete”. The progressive left would be advised to study his work and stop building political policy platforms on the claim that governments needs to make the rich pay their fair share of taxes so that adequate public services and infrastructure can be provided. The incomes and taxes paid by the rich are largely irrelevant to the capacity of a national, currency-issuing government to provide first-class public services and infrastructure. It is time to re-frame the debate and the way in which progressive political forces state their policy aspirations. This bears on the current interesting struggle in Britain for the leadership of their Labour Party.

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Corbyn should stop saying he will eliminate the deficit

The New Labour group are clearly getting desperate in Britain and Blair himself has come out again to vilify Jeremy Corbyn and predict a Labour annihilation at the next general election. Clearly Blair and his cronies haven’t understood that their time in the sun is over. They recreated the Labour Party into a Tory mirror image on key issues and the grass roots of the Party is now reclaiming the lost ground. The UK Guardian article (August 12, 2015) – Syriza’s Greece: the canary in the cage for Corbyn’s Britain? – illustrates how stuck in the neo-liberal mud the British economic debate has become. It tries to claim that Corbyn is a throwback to the past and the policies that old Labour tried in the 1970s failed and would fail again. Clearly, the writer and most of the commentators which resonate the same message haven’t really understood the difference between a currency-issuing government and one bound by a mania for fixed exchange rates and fiscal surpluses. Increasingly, the attempts by Corbyn’s support base to appear to be ‘fiscally responsible’ tells me that he will not succeed in altering the debate if he continues to promote ideas that equate fiscal responsibility with deficit elimination. Fiscal responsibility is equated with achieving full employment with price stability – and in the current climate that would require a fiscal deficit some percent of GDP larger than what it is at present. Corbyn’s camp should be talking about that rather than deficit elimination, which is a ridiculous policy target to aspire to.

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US labour market weakening

The Federal Reserve Bank of America has been publishing a new indicator – the Labor Market Conditions Index (LMCI) – which is derived from a statistical analysis of 19 individual labour market measures since October 2014. It is now being watched by those who want to be the first to predict a rise in US official interest rates. If the latest data from the LMCI is a guide to potential interest rate movements then they won’t be rising any time soon. I updated my gross flows database today and also the job openings and quits database. The gross flows analysis suggests that while there has been improvement in the US labour market in the last year, in recent months that improvement is slowing.

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Correcting political ignorance and misperceptions

Apparently, voters hate fiscal deficits, associate them with squander and want them to be cut, so that nations can live within their means. Any attempt to run foul of that essential wisdom will come to grief. So all you ‘left’ types – yes, those in the British Labour Party that means you – forget your little grass roots rebellion and confirm to the austerity norm. The UK Guardian article (August 4, 2015) – Anti-austerity message will not win over UK voters, poll shows – reports on a poll conducted internally by the British Labour Party that allegedly “shows Britain’s voters do not back an anti-austerity message but instead believe the country must live within its means and make cutting the deficit its top priority.” If you believe that you would believe anything.

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Australian coal sector being undermined by responsible Chinese policy

Earlier this week, the US National Oceanic and Atmospheric Administration published its – Global Summary Information – June 2015 – which reported that in the period January to June 2015, the globally-averaged land and sea surface temperatures were the highest for those months since the data was first collected in 1880 (135 years). I am not a climate change expert but the array of data that I have looked at from a statistical perspective tells me that what the experts are saying with respect to global warming and climate change is probably correct – it is happening and it is happening relatively quickly. The conservative Australian government remains in denial of the global trends with respect to climate change. It is introduced various policies that have made us a national disgrace – such as, abandoning the mining and cut taxes introduced by the previous government, defunding a research institute set up to provide information about climate change, and instructing a public ‘Green Bank’ to not fund wind or solar projects. This week, the government has been castigated by a British Tory MP, who said that its approach to climate change was not that of a ‘conservative government’ and bordered on delusion. But the most important piece of data this week has been the latest figures from China that show that dramatic restructuring away from coal consumption is rapidly taking place which will undermine the viability of the Australian coal sector in the coming decade. So the ‘market’ is going to force change in Australia when it would be much better for government to plan an orderly transition away from coal.

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Friday lay day – Surrendering to the Recession Cult

Its my Friday lay day blog and I have been working on various things today. But for this little blog I am still trying to work out an impression of what is going on in Greece and the Brussels. There is little uncertainty on the Troika side although the various elements of that position are still nuanced. The sheer antagonism of the Baltic States towards Greece is a newly revealed element which is interesting. If their logic prevails then it really is a race to the bottom unless the nation is Germany. Representing the desired benchmark by massive mediocrity if not near disaster (as in Latvia, Lithuania etc) seems to be the new normal in EU debates. Spare the thought. The Baltics should be joining Greece in a solidarity pact to oppose austerity and seek fundamental changes to the EU Treaties instead of siding with the Troika’s death wish for Greece. But there is quite a bit of uncertainty in trying to guage the Greek position. One is led to the most obvious, simple and consistent interpretations of that position – that Syriza is a fractured coalition and those currently in positions of authority (Prime Minister etc) are surrender monkeys who have miscalculated dramatically. But that would tell us that they are so acting with such venality towards their people as to be almost an unbelievable narrative. Looking deeper into the plot doesn’t provide anything consistent, just dead ends and speculation. We are close to finding out though.

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Europe’s US imported nightmare

I note the US have been rather quietly urging the EU to resolve the so-called ‘Greek crisis’, which I really think is a euro-crisis, even though its current epicentre is in Greece. What the Americans are doing beyond the purview of the public gaze is anyone’s guess but we can be sure it is interventionist, self-interested and probably not helpful to the well-being of ordinary Europeans including Greeks. The US influence over Europe has, in fact, culminated in the crisis, even if that realisation is not understood by many. I have just finished reading a book by the French journalist/publisher and politician – Jean-Jacques Servan-Schreiber – who died in 2006. The book – Le Défi Américain (The American Challenge) was very popular when it was published in 1967. It initially was a major hit in France and later was translated widely. It helped me understand how the US intellectual tradition has at critical times in Europe’s modern history been so definitive.

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Parents are advance secret agents for the class society

Dutch economist Jan Pen wrote in his 1971 book – Income Distribution – that “Parents are advanced secret agents of the class society”, which told us emphatically that it was crucial that public policy target disadvantaged children in low-income neighbourhoods at an early age if we were going to change the patterns of social and income mobility. The message from Pen was that the damage was done by the time the child reached their teenage years. While the later stages of Capitalism has found new ways to reinforce the elites which support the continuation of its exploitation and surplus labour appropriation (for example, deregulation, suppression of trade unions, real wage suppression, fiscal austerity), it remains that class differentials, which have always restricted upward mobility and ensured income inequality and access to political influence persist, are still well defined and functional. This was highlighted in a new report published by the the American Economic Policy Institute (EPI) – Early Education Gaps by Social Class and Race Start U.S. Children Out on Unequal Footing (June 17, 2015). Not much has changed it seems for decades.

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Friday lay day – Job Guarantee becomes a mainstream preference

Its my Friday lay day blog. So a rather short blog but with a research trail that can occupy the reader for hours if they pursue all the links. It seems that the mainstream American is rather progressive. Who would have thought given that public opinion is being continually drowned out by the deafening shrieking from the conservative think tanks and their media bully boys. In March 2013, a research paper from Northwestern and Princeton academics – Democracy and the Policy Preferences of Wealthy Americans – demonstrated the vastly different policy preferences held by high income Americans (in this case the top 1 per cent of the income distribution) relative to the general public. The research was motivated by the observation that the “wealthy exert more political influence than the less affluent do” and so if their preferences were not representative of American society in general then that would be “troubling for democratic policy making”. The authors find that the high income earners in the US are not only very active politically but hold ultra conservative views “concerning taxation, economic regulation, and especially social welfare programs” that are not remotely shared by the general public. The results might surprise people.

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Germany’s serial breaches of Eurozone rules

Last week (May 5, 2015), the European Commission’s Directorate-General for Economic an Financial Affairs (ECFIN) published the – Spring 2015 European Economic Forecast – which provide a picture of what they think will happen over the next two years across 180 variables. To the extent that the forecasts reflect past trends (given the inertia in economic time series outside major cyclical events), they provide a clear picture of what is wrong with the Eurozone. The salient feature of the Forecasts is that the European Commission expects Germany to increase its already astronomical Current Account surpluses to peak at 7.9 per cent of GDP in 2015 and falling only to 7.7 per cent in 2017. The Commission has in place a set of rules that require nations to restrict external surpluses to not exceed 6 per cent of GDP. Germany repeatedly fails to abide by those rules, yet lectures the rest of its Eurozone partners about their failures to meet the targets, crazy as they are. The unwillingness of the European Commission to enforce their own rules in relation to Germany is one of the telling failures of the whole Eurozone experiment.

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