Real wages falling and Treasury continues to deceive

There is growing pressure on Australia’s wage setting tribunals to scrap penalty and overtime rates, allegedly because they damage employment and firms are just busting to put more workers on as long as wages drop. I have had a long association with these tribunals as an expert witness and I cannot recall the employers’ representatives ever agreeing that the time is right for wage rises. If their submissions are to be taken on their word then there would never be any wage increases. The facts are that real wages continue to fall in Australia – more rapidly in the private sector than the public. The Australian Bureau of Statistics published the latest – Wage Price Index, Australia – for the June quarter yesterday (August 13, 2014) and the data shows that hourly wage inflation is running at 2.4 per cent per annum, which is well below the current inflation rate. Real wages growth is also well below the growth in hourly productivity, which means that the Australian distribution system is still redistributing real national income to profits. And all the while employment growth is flat or negative. Meanwhile, our cigar-smoking Treasurer sees it as his role to berate the poor for being poor and distorting the public data to hide the fact that the May fiscal statement (aka budget) significantly cuts the real standard of living for low income earners and leaves the top income earners relatively unscathed. But all of this is in the name of fiscal austerity (aka madness).

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MMT is not conservative thought

Last night I sent the final manuscript of my Euro book to the publisher and felt somewhat downcast – that always happens after an intensive piece of work is finished. But this morning, I woke up free of that and focusing on the next task in the list. The list is always bubbling away and one juggles multiple projects at the same time, with more or less intensity. Curiosity demands that. But at some point more effort goes into one to complete it and the others wait in the queue for their turn. My next major deadline is an Modern Monetary Theory (MMT) compilation commissioned by my publisher Edward Elgar. The compilation will be my version of the roots of MMT and the development of its major ideas and influences. I have to write an overview piece explaining why I selected the literature and how it fits into the intellectual MMT tradition. It will obviously be an eclectic exercise and there is no certainty that my other original developers of what is now more broadly known as MMT will agree with my compilation or emphasis. I plan to start with Theories of Surplus Value – for reasons I explained in this blog – We need to read Karl Marx. I also do not plan to eulogise John Maynard Keynes, even though many of my colleagues think he is the most important link in the chain. It is here that I have to walk the fine line between technical detail and a broader reflection on how values intersect with what we might call the facts.

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A rogue nation is needed to exit the Eurozone

I plan to send my final manuscript for my Eurozone book to the publishers tonight. I have some final checks to make on the 390 pages. I hope it will be published in both English and Italian later in the year. Obviously I will promote it here once it is ready. The book contends that the Eurozone is structurally biased towards stagnation because of the neo-liberal rules that constrain national governments from dealing with large spending collapses with appropriately scaled fiscal responses. The crisis in now into its 6th year and there is little sign that the stagnation is over. Indeed, the latest data would suggest that some of its largest economies are going backwards still. Italy has just announced it is back in recession and factory orders to Germany have plunged. I have been saying it for years but repetition is no sin – they should dismantle the currency union in an orderly manner and allow the national governments to return to growth in their own way. The nations are incapable of doing that collectively given the neo-liberal Groupthink that has them in a vice. So, a rogue nation is needed to break out of the straitjacket and provide a blueprint for the others. Italy should be that nation. In many ways it has panache and flair – it is time to show it in this specific way.

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Saturday Quiz – August 9, 2014 – answers and discussion

Here are the answers with discussion for yesterday’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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When the left became lost – Part 1

I read a book a long time ago (1994) called “The Principle of Duty: An Essay on the Foundations of Civic Order”. I note it was republished in 2009. The book by David Selbourne – who is a British philosopher and these days writes regularly for the British Magazine New Statesman. His latest article (July 24, 2014) – How the left was lost: the need to relearn what true progress means – reprises the argument made in his book. He has been making the argument for a long time, which, in itself is not a bad thing if it a reflection of a good idea being ignored. At the time I read the book the Dark Age of neo-liberalism that we are within was forming but its internal contradictions had not yet manifested fully. But the left had certainly lost direction by then, getting caught up in a Post Modernist haze with career politicians and their union buddies abandoning progressive principles and, instead, adopting neo-liberal economic stances to prove that they were ‘responsible’. The aim – to get power. That was the end game. Selbourne’s book and current article captures a lot of that but, I think, also misses some vital parts of the story.

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Information is dangerous for neo-liberals

On Friday, I reported that a senior psychologist working in the off-shore detention centres was alarmed at the growing mental health problems of children of refugee-seeking parents who are detained with their families in these hell-hole prisons that Federal Government has set up in PNG and elsewhere. I noted the doctor had admitted to a National Inquiry that he was told by the Department of Immigration to take out some of the damaging research evidence covering the incidence of mental illness in the off-shore refugee prisons. Here is a followup of how systematic the government is in using its power to repress the release of information that might alter the public perception of its competence and desirability.

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Australian government now engaged in psychological torture of its citizens

This year marks the 50th anniversary of the US legislation – Economic Opportunity Act – introduced by Democrat president Lyndon B. Johnson. The law created the so-called local Community Action Agencies, which were directly regulated by the US Federal government. The aims of that legislation were relatively straightforward – “eliminate poverty, expand educational opportunities, increase the safety net for the poor and unemployed, and tend to health and financial needs of the elderly”. The legislation came out of the President’s – State of the Union Address – delivered on January 1964, where he made the famous statement “This administration today, here and now, declares unconditional war on poverty in America. I urge this Congress and all Americans to join with me in that effort”. The Economic Opportunity Act became known as the – War on Poverty. Times have changed. 50 years later, federal administrations around the World have declared a new type of War! The War on Poverty has become the War on the Poor. In Australia, this has manifested in recent weeks as an outright attack on the victims of mass unemployment – the unemployed. The Australian government has introduced what I have described in a number of press interviews with the national media as advanced psychological torture.

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Britain has not recovered the losses caused by the GFC

As a followup to Monday’s blog – UK growth not all that it seems – there was an additional issue that is worth exploring about the ONS data publication, given that the financial and economics commentators seem to mislead their readers, through ignorance or choice. Representative of the issue was the statement in last Friday’s UK Guardian article (July 25, 2014) –
Fresh boost for George Osborne as economy recovers banking crisis losses – which built on that title with the opening line “Britain’s economy has finally recovered the losses caused by the financial crisis, passing its pre-recession peak in the second quarter of the year …”. This conclusion was reiterated by many other commentators in different publications as a source of celebration. The only problem with it is that it plain wrong and to suggest that Britain has now made up the losses is deeply misleading.

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Italy should lead the way out of the euro-zone

One of the major demands that the Germans made on its partners leading into Maastricht in 1991 was the need for a politically independent central bank that was focused on price stability alone. This was claimed to be essential because it would stop politicians imposing so-called short-termism onto monetary policy (read: caring about people who might be unemployed or otherwise in need of fiscal assistance), which would compromise the inflation fighting process. These unaccountable, unelected central bank boards were then free to do what they wanted and demonstrated a willingness to use unemployment as a policy tool rather than a policy target to ensure economies were as close to deflating as possible, irrespective of what that meant for economic and employment growth. It is, of-course a farce to think that a central bank can be independent anyway either in a political sense or an economic sense. But the neo-liberal hype about independence was to ensure governments could absolve themselves of the public ignominy of rising unemployment and the political costs that went with that, and, instead, blame the central bankers. The bankers had no political constituency to manage or groom and could hide behind the ever-present paranoia about hyperinflation to ‘justify’ their policy approach. But the central bankers are ‘independent’ only when it suits them. Or should we say ‘independence’ is a one-way street. If the politicians dare to comment on monetary policies there is a hue and cry. But central bankers feel they can provide advice to the democratically elected governments whenever they choose and the media hardly blinks. Hypocrisy has no bounds.

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New economics – not much will change at the current rate

My upcoming book about Europe is tentatively called ‘European Groupthink: denial on a grand scale’. I have covered the concept of Groupthink before but I have been thinking about this in relation to the economics curriculum, given our textbook is entering its final stages of completion. When I was at the iNET conference in Toronto in early April, there was much to-do about the so-called ‘exciting’ new developments in economics curricula being sponsored by iNET at their Oxford University centre (CORE). Forgive me for being the ‘wet blanket’ but the more I spoke to people at the conference the more I realised that the neo-liberals were reinventing themselves as ‘progressive’ or ‘heterodox’ and hi-jacking the reform process. I mentioned this to one of the iNET Board members who I shared a flight with back to San Francisco. He seemed taken aback. My expectation is that very little of substance will change in this new approach to economics. It will dispense with the most evil aspects of the current dominant framework but will remain sufficiently engaged with it that we will not see a truly progressive teaching approach emerge that can deal with evidence and real world facts. People are scared to break out of the ‘group’.

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Saturday Quiz – June 21, 2014 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. 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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German economics minister “austerity policies have failed”

There was a report in the papers this morning about a horrific beating in one of the poorest migrant areas north of Paris. The article – Roma teen attacked: the images that will shock France was really a repeat of a story in the UK Telegraph. I don’t want to go into the details because I don’t know them. But what is apparent in modern day Europe is the increasing breakdown of social stability and an emerging law of the jungle driven by unemployment, poverty and the inevitable social exclusion. I do not accept that migrants have to poor just because they start with nothing and cannot speak the local language with proficiency if at all. What is clear is that austerity is undermining the social fabric of Europe and this shocking incident is just one of many manifestations of that. And it will get worse.

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The Looters and Moochers are apparently back in Australia

Last week (June 11, 2014), the Australian Treasurer gave a speech at the right-wing Sydney Institute entitled – A Budget For Opportunity. The Treasurer was attempting to spin the impossible – that the May Fiscal Statement was fair (equitable) in that all Australians would be contributing to the deficit reduction. That is patently false. It is clear that the largest burden arising from the fiscal reduction will be borne by those with least income, including those reliant on public income support to scratch out the barest of existences. But in trying to make this impossible case, Hockey also invoked the classic divide and conquer strategy that conservatives use to segment and coopt certain sections of the population into agreeing with policy changes that will not only undermine their own prosperity but devastate the prosperity of other ‘segments’ who they manage to vilify. And while that is going on, the high income earners and wealthy, who are more likely to support the conservative political parties sit back sipping on their gins laughing their smug heads off. What a world it is.

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Teenage employment decline in Australia reaching catastrophic proportions

Regular readers will know that for some years we have been documenting the parlous state of the youth labour market in Australia. In an environment where fiscal cuts are being justified as looking after the future as the population ages, the most glaring thing that will undermine our future prosperity is the lack of attention policy makers are giving to the youth unemployment problem. The media has only just started to register that our ‘future’ workers are growing into adults having never worked nor gained the requisite experience to deliver high productivity outcomes. The personal future of this cohort is bleak. Recently, the Brotherhood of St. Laurence as (finally) launched a national campaign My Chance, Our Future to “draw attention to the crisis of youth unemployment in Australia”. Better late than never I suppose but what took them so long.

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Changes to unemployment benefit entitlements – the work of sociopaths

The new conservative Australian government is scaling new heights in their attack on the most disadvantaged. The May Fiscal Statement was littered with nasty cuts, which reduce spending by trivial amounts at the macroeconomic level but which will have devastating effects to the recipients of the income support. Today I briefly look at the changes in the unemployment benefit regime that have been foreshadowed. Let us hope the Senate blocks them for good.

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17 inch-long pigeon spikes – out of sight, out of mind

I was happy this morning and then I thought about the spikes that I had read about last week. Those 17-inch spikes didn’t improve my mood. They are symbols of how successful the neo-liberal period has been in dissolving the sense of collective will in our societies. We have been indoctrinated by the capitalists, their servant politicians, and the think tanks and co-opted media to believe that we are all in this for what we can get whereas in the full employment period after World War II we were all in it together. Now we think someone who is unemployed or homeless is in that state because of their own failing whereas we used to understand it was because their were not enough jobs and an individual was powerless to alter that overall lack of spending in the economy. It needed strong government intervention to resolve the issue. Now we consider the homeless are to be treated like pigeons!

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Ricardian agents (if there are any) steer clear of Australia

Today is a public holiday in Australia where we go to the football or do other things all in the name of the Queen’s Birthday – the Queen of England that is. It remains an expression of our colonial yoke and our lack of confidence as a nation, which continues to harm us, none more than our indigenous population. Anyway, the workers get to have a day off, which can’t be a bad thing. One of the more amazing frauds that the population is exposed to from our political leaders is the claim that if you impose fiscal austerity growth will spring forth as consumers and firms start spending again because they don’t have to save up to pay for higher taxes in the future. It is a crazy theory without an evidential standing. More evidence from Australia since the release of the Government’s May Fiscal Statement (aka Budget) is very conclusive that consumers and firms do not like announcements of major fiscal cutbacks.

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Australian national accounts – a fragile state

Yesterday’s Australian Bureau of Statistics – Australian National Accounts – for the March-quarter 2014, shows that real GDP growth was 1.1 per cent, up from 0.8 per cent in the December-quarter 2013. The annualised growth rate of 3.2 per cent is an improvement on the 2.8 per cent from last quarter and is close to the trend rate between 2000 and 2008 of 3.3 per cent. Growth is being driven almost exclusively by Net exports with some help from household consumption and private investment, although the last two components are fairly subdued. The question is whether the boom in net exports in the Mining secotr in the March-quarter 2014 can be maintained. The signs are that it will taper somewhat in the second-quarter results given that the terms of trade are falling significantly and the export volumes that have been driven by strong growth in China are likely to decline as the Chinese economy slows. Overall, the data paints a fairly fragile picture for the Australian economy with not much sign of activity in the non-Mining sectors.

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Options for Europe – Part 98

The title is my current working title for a book I am finalising over the next few months on the Eurozone. If all goes well (and it should) it will be published in both Italian and English by very well-known publishers. The publication date for the Italian edition is tentatively late April to early May 2014.

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Options for Europe – Part 94

The title is my current working title for a book I am finalising over the next few months on the Eurozone. If all goes well (and it should) it will be published in both Italian and English by very well-known publishers. The publication date for the Italian edition is tentatively late April to early May 2014.

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