The arms race again – Part 2

This is the second part of my thoughts on the current acceleration in military spending around the world. The first part – The arms race again – Part 1 (June 11, 2025) – focused on background and discussed the concept of ‘military Keynesianism’. In this Part 2, I am focusing more specifically on the recent proposals by the European Commission to increase military spending and compromise its social spending. The motivation came from an invitation I received from the Chair of the Finance Committee in the Irish Parliament to make a submission to inform a – Scrutiny process of EU legislative proposals – specifically to discuss proposals put forward by the European Council to increase spending on defence. The two-part blog post series will form the basis of my submission which will go to the Joint Committee on Finance, Public Expenditure, Public Service Reform and Digitalisation on Friday. In this Part, I focus specifically on the European dilemma.

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The arms race again – Part 1

The Chair of the Finance Committee in the Irish Parliament invited me to make a submission to inform a – Scrutiny process of EU legislative proposals – specifically to discuss proposals put forward by the European Council to increase spending on defence. This blog post and the next (tomorrow) will form the basis of my submission which will go to the Joint Committee on Finance, Public Expenditure, Public Service Reform and Digitalisation on Friday. The matter has relevance for all countries at the moment, given the increased appetite for ramping up military spending. Some have termed this a shift back to what has been called – Military Keynesianism – where governments respond to various perceived and perhaps imaginary new security threats by increasing defence spending. However, I caution against using that term in this context. During the immediate Post World War 2 period with the almost immediate onset of the – Cold War – nations used military spending as a growth strategy and the term military Keynesianism might have been apposite. These nation-building times also saw an expansion of the public sector, which supported expanding welfare states and an array of protections for workers (occupational safety, holiday and sick pay, etc). However, in the current neoliberal era, the increased appetite for extra military spending is being cast as a trade-off, where cuts to social and environmental protection spending and overseas aid are seen as the way to create fiscal space to allow the defence plans to be fulfilled. That trade-off is even more apparent in the context of the European Union, given that the vast majority of Member States no longer have their own currency and the funds available at the EU-level are limited. We will discuss that issue and more in this two-part series.

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Australia is not America – elections after Trump

Last week, the – 2025 Canadian federal election – was held and the Liberal Party won for the fourth consecutive time securing 169 seats (in the 343-seat House of Commons), just short of a majority. They also won the popular vote (43.7 per cent of the vote – up 11.1 per cent), which was the first time they had achieved that since 2015. The Opposition Conservative Party leader lost his own seat in the election. On January 7, 2025, national polling saw support for the Conservatives of around 47 per cent and support for the government around 20 per cent. By the time the poll came, that had shifted dramatically in favour of the government. In between, came Trump. The UK Guardian analysis (March 19, 2025) – Canada’s Liberals on course for political resurrection amid trade war, polls show – said the shift “has little precedent in Canadian history, reflecting the outsized role played by an unpredictable US president”. To some extent, the craziness of the US political situation at present also impacted on the – 2025 Australian federal election – which was held on Saturday (May 3, 2025). The incumbent government, which was well down in the opinion polls before Trump took power, won in a landslide achieving the highest two-party preferred outcome in Australia’s electoral history. The parallels with the Canadian outcome are strong despite the different voting systems in both countries. Moreover, the conservative Liberal-National Coalition in Australia, the dominant party in the Post-WW2 era has been reduced to being little more than a far Right populist party. Similar to the Canadian situation, the Opposition leader also lost his seat, which was the first time that has ever happened in Australia. So Trump is undermining the very movements he is trying to promote. But what is very clear is that Australia is nothing like the US, despite some commonalities (language – sort of!).

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Does rising income inequality explain the rising support for right-wing political movements?

We know that after the Second World War, as nations embraced their major national policy statements (White Papers in many countries) to build their societies after the disruption of the War and the Great Depression, income inequality fell significantly. Since the 1970s, the post WW2 trend has been somewhat reversed in many (but not all) nations. The rising income inequality is particularly apparent in the Anglo advanced economies, with the US leading the way. In other nations, the trend is mixed, which suggests the link between rising income inequality and the rising support for right-wing political movements is less obvious than some commentators are suggesting. In fact, there is credible research that suggests the swing to right-wing political parties is not coming from the most precarious workers who appear to remain loyal to Leftist ideas. It is the next segment of workers up who have not yet been ravaged by globalisation but sense they are about to be who seem to have swung to the Right. In this blog post, I discuss some of these ideas and the research that is accompanying them.

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US cars don’t sell in Japan because they are inferior and ill-suited to the market

It’s obviously becoming difficult to keep track of where the US government policy is on any particular day. Last week, it was ‘Liberation Day’, which included tariffs being imposed on remote penguin colonies in the back of nowhere, then Musk labelling the Trump’s trade adviser ‘dumber than a sack of bricks’, then tariffs on Chinese goods rising to 124 per cent (which will make then uncompetitive), then the ‘pause’ on reciprocal tariffs beyond the 10 per cent level … what will be next. These shifts and decisions are not exactly benign and the US Administration is displaying the sort of incompetence, capriciousness, flippancy – whatever you want to call it – that hardly befits the largest economic nation in the globe which has its tentacles spread far and wide. I was particularly interested though in the now infamous ‘Rose Garden Liberation Day’ speech Trump made last week (April 2, 2025) where he made claims about Japan, which were used to justify the imposition of 24 per cent tariffs on that nation. According to the President, Japan is among a host of countries that have “looted, pillaged, raped and plundered” the US. His evidence? None is available. The reality is that US cars don’t sell in Japan because they are inferior and ill-suited to the market. We explore that theme in this blog post.

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Tariffs and more – Part 1

This week, Australia learned that old geopolitical relationships and so-called ‘free trade’ treaties mean little when it comes to US policy. The obsequious way our political class fawns after the US has been a constant sickening element of our national identity for as long as I can recall. When I was a child, we were told by our Prime Minister that Australia was “all the way with LBJ”, a foreign policy that took out nation, against all reason, into the Vietnam War. Now, the US President is demonstrating why a reliance on the US as a ‘good citizen’ of the world is a poor strategy for an advanced nation to adopt. The other interesting aspect of what is going on is that the world is once again entering an experiment that will provide knowledge about the impacts of ripping up free trade agreements and increasing barriers to entry. Theorising is one thing but now we have a practical experiment underway. This is Part 1 of a series on the current debate about tariffs.

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Britain can easily increase military expenditure while increasing ODA to honour its international obligations

It is hard to keep track of the major shifts in world politics that are going on at the moment. I am in the camp that saw the extraordinary confrontation between Trump/Vance and Zelensky as demonstrating how embarrassing the US leadership has become. I am not a Zelensky supporter by any means but the behaviour of the US leadership was beyond the pale as it has been since January. I am no expert on geopolitical matters but it seems obvious to me that the US is now opening the door further for China to become the dominant nation in the world as the US sinks further into the hole and obsesses about who should thank them. And the latest shifts are once again going to demonstrate how dysfunctional the EU architecture has become. If it is rise to the post NATO challenge then its obsession with fiscal rules will have to end and they will have to work harder to create a true federation. I am skeptical. The shifts are also once again demonstrating that mainstream economic thinking is dangerous, something I can claim expertise to discuss. The recent decision by the US Administration to hack into the USAid office is probably not the definitive example of this point because it is more about being bloody minded than ‘saving’ money. It will just further open the door for China though. However, the decision by the UK Labour government to reduce Overseas Development Assistance (ODA) to (according to Starmer/Reeves logic) ‘pay’ for a rather dramatic increase in military expenditure is a classic example of how policy goes astray when mainstream economic thinking in general, and the British fiscal rules, specifically are used to guide policy.

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Economics as politics and philosophy rather than some independent science

Last week, I wrote about – The decline of economics education at our universities (February 6, 2025). This decline has coincided and been driven by an attempt by economists to separate the discipline from its roots as part of the political debate, which includes philosophical views about humanity and nature. In her 1962 book – Economic Philosophy – Joan Robinson wrote that economics “would never have been developed except in the hope of throwing light upon questions of policy. But policy means nothing unless there is an authority to carry it out, and authorities are national” (p.117). Which places government and its capacities at the centre of the venture. Trying to sterilise the ideology and politics from the discipline, which is effectively what the New Keynesian era has tried to do, fails. The most obvious failure has been the promotion of the myth of central bank independence. A recent article in the UK Guardian (February 9, 2025) – You may not like Trump, but his power grab for the economic levers is right. Liberals, take note – is interesting because it represents a break in the tradition of economics journalism that has been sucked into the ‘independence’ myth by the economics profession.

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Germany’s sectoral decline and its obsession with fiscal austerity

I am currently researching statistical and textual material as part of my plan to produce an updated version of my 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015) – to take into account the pandemic, Brexit and other major changes that impact on Europe’s position in the world economy and the internal shifts within Europe itself that will make it even more difficult for the Member State nations to maintain their material living standards. My publisher (Edward Elgar) is keen to push this project on. As part of this work I have been examining changes since 2015 across various European states. Today, I discuss the decline in Germany’s fortunes that has arisen as a result of a combination of circumstances: an obsession with fiscal austerity; the suppression of domestic spending capacity; the unrelenting promotion of the so-called ‘export-reliant, manufacturing-heavy economic model’; the election of Donald Trump; and the maturing of the Chinese economy. German politicians, particularly, have become so caught up in the ‘Schwarze Null’ ideology that they have failed to anticipate the medium- and longer-term consequences of their actions. These consequences were all laid out in my 2015 book but policy makers have generally ignored any criticisms of the ‘German model’. Now the chickens are coming home to roost. Fast. And it spells bad times for Europe.

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The Case of the Missing Report – Part 1

This blog post is a long time in gestation and I could have written in 2009 which is the relevant year of the events that I will document in this two-part series. My conversations with government officials during my working trip to the Philippines last week highlighted several things, including their sheer terror of IMF intervention and the ratings agency. I will write separately about that in a later post. But the IMF watches these types of nations like a hawk and is ready to pounce to enforce their authority at the slightest departure from the neoliberal macroeconomic policy line. As long as these types of nations concede to the IMF bullying they have very little hope of developing towards being advanced states. And IMF bullying is what this blog post is about. This is Part 1 of a two-part story that might be summarised as the ‘Case of the Missing Report’. I will solve the mystery in Part 2, which will be published on Thursday of this week.

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ECB research shows that interest rate hikes push up rents and damage low-income families

I have been arguing throughout this latest inflationary episode that the central bank rate hikes were actually introducing inflationary pressures through a number of channels, the most notable one in the Australian context being the rental component in the Consumer Price Index. The RBA has categorically denied this perversity in their policy approach, and, instead, claimed the rapidly escalating rental inflation was the result of a tight rental market, end of story. Well the rental market is tight, mostly due to the massive cutbacks in government investment in social housing over the last few decades. But the rental hikes followed the RBA rate hikes and the simple reason is that landlords when in a tight market will always pass on the costs of their investment mortgages to the tenants. They weren’t doing that before the rate hikes. A recent ECB research report – How tightening mortgage credit raises rents and increases inequality in the housing market (published January 16, 2025) – provides some robust evidence which supports my argument. That is what this blog post is about.

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Fake news is not just the practise of the Right

The daily nonsense that economics journalists pump out in search of sales for their newspapers is nothing new and one would think I would be inured to it by now. But I still am amazed how the same old lies are peddled when the empirical world runs counter to the narratives. I know that the research in psychology has found that people save time by using ‘mental shortcuts’ in order to understand the world around them. Propositions that we ride with are rarely scrutinised in depth to test their veracity. Rules of thumb are commonly deployed to navigate the external world. And we are highly influenced by the concept of the ‘expert’ who has a PhD or something and talks a language we don’t really understand but attribute an authority to it. In the field of economics these tendencies are endemic. We are told, for example, that the Ivy league universities in the US or that Oxbridge in the UK, are where the elite of knowledge accumulation resides. So an economist from Harvard carries weight, whereas another economist from some state college somewhere is ignored. And once we start believing something, confirmation bias sets in and we ignore the empirical world and perspectives that differ from our own. The consequences of this capacity to believe things that are simply untrue his one of the reasons our human civilisation is failing and major catastrophes like the LA fires are increasingly being faced.

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The Japanese government is investing heavily in high productivity sectors and revitalising regions in the process

Last week I noted in my review of the Australian government’s Mid-Year Economic and Financial Outlook (MYEFO) – Australian government announces a small shift in the fiscal deficit and it was if the sky was falling in (December 19., 2024) – that the forward estimates were suggesting the federal government’s fiscal deficit would be 1 per cent of GDP in 2024-25, rising to 1.6 per cent in 2025-26 before falling back to 1 per cent in 2027-28. The average fiscal outcome since 1970-71 has been a deficit of 1 per cent of GDP. I noted that the media went crazy when these estimates were released – ‘deficits as long as the eye can see’ sort of headlines emerged. It was fascinating to see how far divorced from reality the understandings in Australia are of these matters. Meanwhile, the RBA keeps claiming that productivity is the problem and the reason they are maintaining ridiculously high interest rates even though inflation has fallen back to low levels. My advice to all these characters is to take a little trip to Hokkaido (Japan) and see what nation building is all about. The Japanese government has already invested ¥3.9 trillion for semiconductor industry development since 2021 (that is, 0.7 per cent of GDP) and the Ishiba government recently announced a further ¥10 trillion (1.7 per cent of GDP). Meanwhile, the overall deficit is around 4.5 per cent of GDP and no-one really blinks an eyelid. The Japanese government is investing heavily in high productivity sectors and revitalising regions in the process.

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The assessment that Greece has been an ‘astonishing success’ beggars belief

Today, I consider the Greek situation, the decision by the UK Chancellor to further deregulate the financial services sector and then to calm everyone down or not, some music. The Financial Times published an article (December 12, 2024) – The astonishing success of Eurozone bailouts – which basically redefines the meaning of English words like ‘success’. Apparently, Greece is now a successful economy and that success is due to the Troika bailouts in 2015 and the imposition of harsh austerity. The data, unfortunately, doesn’t support that assessment. Yes, there is economic growth, albeit from a very low base. But other indicators reveal a parlous state of affairs. At least, this blog post finishes on a high note. Please note there will be no post tomorrow (Wednesday) as I am travelling all day. I will resume on Thursday.

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The concept of degrowth remains underspecified – reform or revolution?

I have done quite a number of podcast interviews with various hosts over the last few weeks and the discussions often turn to issues relating to the environment and what Modern Monetary Theory (MMT) has to say about those issues. Inevitably, the discussions then meandered into debates about what is possible given that we humans are estimated to be using 1.7 times the regenerative capacity of our biosphere at present. At some unknown point, but sometime, that overuse will have to come to an end as the biosphere asserts its capacity constraints in one way or another. The question that seems to interest people now is whether the existing mode of production (Capitalism) is at all compatible with reducing that ratio. My answer is always the same. Those progressives who promote the notion of ‘green growth’, which is embedded in ‘green new deal’ proposals or their ilk, seem to think that we can make the shift away from fossil fuels and reduce the claim on the biosphere within a growth paradigm while retaining the Capitalist ownership relations. For me, a system where the logic is ever accumulation of capital via the creation and expropriation of surplus value and realisation of that value as profit, is incompatible with being able to live within the limits imposed by the biosphere. If we are to have any long-term future as a race, then we will have to embrace a degrowth strategy and radically alter the way we allocate resources and our patterns of production and consumption. In a sense, Marx’s long discredited notion of the – Tendency of the rate of profit to fall – as an intrinsic feature of Capitalism, which he believed would eventually bring the system asunder, is likely to be realised as the environmental constraints impinge on the accumulation system. Simply put, the logic of Capitalism requires growth and degrowth is the anathema of that logic.

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Austerity cultist Kenneth Rogoff continues to bore us with his broken record

One would reasonably think that if someone had been exposed in the past for pumping out a discredited academic paper after being at the forefront of the destructive austerity push during the Global Financial Crisis, then some circumspection might be in order. Apparently not. In 2010, Carmen Reinhart and Kenneth Rogoff published a paper in one of the leading mainstream academic journals – Growth in a Time of Debt – which became one of the most cited academic papers at the time. At the time, they even registered a WWW domain for themselves (now defunct) to promote the paper and tell us all how many journalists, media programs etc have been citing their work. While one can understand the self-promotion by Rogoff and Reinhart, it seems that none of these media outlets or journalists did much checking. It turned out that they had based their results on research that had grossly mishandled the data – deliberately or inadvertently – and that a correct use of the available data found that that nations who have public debt to GDP ratios that cross the alleged 90 per cent threshold experienced average real GDP growth of 2.2 per cent rather than -0.1 per cent as was published by Rogoff and Reinhart in their original paper. So all their boasting about finding robust “debt intolerance limits” arising from “sharply rising interest rates” – and then “painful fiscal adjustments” and “outright default” were not sustainable. Humility might have been the order of the day. But not for Rogoff. He regularly keeps popping up making predictions of doom based on faulty mainstream logic.

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The dislocation between the PMC and the rest of the working class – Part 2

I mentioned last week in this blog post – The dislocation between the PMC and the rest of the working class – Part 1 (November 11, 2024) – that I had been reading the 2021 book – Virtue Hoarders: The Case Against the Professional Managerial Class (published by Minneapolis: University of Minnesota Press) – written by US cultural theorist – Catherine Liu It is now an open access document. It provides a brutal critique of the professional-managerial class, which she thinks has become so associated with the aspirations of the capital class’ that it has lost any progressive force in society. Here is Part 2 of that discussion.

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Both main candidates were unelectable but one was more in tune with the nation than the other

So from January 20, 2025, Donald Trump will inherit the on-going genocide that the US government has been party to in the Middle East. He will then have no cover and will be judged accordingly. What follows are a few thoughts that I had when I watched the unfolding disaster for the Democrats and the amazing victory that Trump has recorded. It was obviously a Hobson’s Choice facing the US voters (from an outside perspective), which also tells us something about the way the US society has evolved. Both candidates were in my view unelectable. But the voters didn’t agree with me. And, one candidate was much smarter that the other and better understood the plight the American voters are in after several decades of neoliberalism. Spare the thought.

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The EU is in terminal decline

Some Wednesday snippets. First, I juxtapose the political machinations that the EU President is engaged in to consolidate and expand her power within the European Commission with the reality that Member State governments are becoming dysfunction because social instability and political extremism are rife. Then I reflect on my experience as Chancellor of Britain – a great success I should say, although I was told I had broken all the rules. It tells one how stupid the rules are. Then, finally, some music to enjoy.

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