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.
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.
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.
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.
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.
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.
I got on a plane on Monday and flew many hours. I was in search of the public debt overhang. I read and read many articles during my journey to the other side of the planet (where these overhangs are apparently sighted on a daily basis). But in the cold (very) early (very) hours of today, I concluded my mission was a failure. The rumours of a public debt overhang, whatever that might be, remain just that – the mumbling gossip that passes for truth once the public start spreading it. In the world of facts, such an overhang eludes specification. In January 2013, at the annual American Economic Association meeting (January 4-6, 2013) in San Diego, there was a panel session with a number of allegedly “leading” economists. Their deliberations were apparently public endorsement of the claim that government debt had reached a dangerous overhang and would undermine growth prospects for the future. The policy options were limited and all involved harsh fiscal austerity – or in IMF speak “growth friendly fiscal consolidation” (which is my nomination for the joke phrase of 2013). The problem was that a few months later the IMF released a major update (October WEO) where they appeared to deny the presence of a “tipping point” – some dangerous threshold that public debt should not exceed (R&R-style). So here is how it all unfolded …
Today our research centre – Centre of Full Employment and Equity – which is known as CofFEE, released the second version of our – Employment Vulnerability Index – which is an indicator that identifies the localities (medium-sized areas) in Australia that are most vulnerable to job losses when economic activity declines. The Australian labour market has not recovered the ground it lost in the downturn associated with the Global Financial Crisis. After showing signs of recovery as a result of the fiscal stimulus in 2009-10, the fiscal austerity that the Federal government imposed as it obsessively pursued a budget surplus has caused us to lose all the gains that were made. The Government failed in its quest because it overestimated the strength of private spending (which is still very flat) and its deficit was too low anyway when it started its austerity push. The new Federal government is finding out that all its tough talk before the September election about delivering bigger surpluses than its predecessors is just hot air and the slowing economy is pushing the deficit higher not lower. In this environment, the labour market is precariously balanced and likely to continue to deteriorate. The EVI provides a guide to where the on-going job losses are likely to be across the urban and regional space.
The Council of Australian Governments (COAG) Reform Council, which is part of the federal-state government machinery released a report this week – Education in Australia 2012: Five years of performance (2 mgbs) – under the terms specified in the National Education Agreement that was signed in January 2009. The agreement was a major piece of policy in the term of the previous Labor government and aimed to ensure that “all Australian school students acquire the knowledge and skills to participate effectively in society and employment in a globalised economy”. The Report considers the progress of the policy frameworks to see “whether these outcomes have improved over the five years since the agreement was developed”. Some of the key findings are very disturbing and demand immediate policy action.
At the weekend I watched Ken Loach’s latest film (documentary) – The Spirit of ’45 – which was a classic – interesting and disturbing. After watching it I cannot understand how anybody could not achieve a score somewhere well into the south-west quadrant of the – Political Compass. It emphasised how societal values have changed and undermined the collective will that emerged in the early Post World War 2 period which garnered the political process into delivering structures that would never again see the mass unemployment and hardship that the Great Depression created. It was a hopeful period and politicians reflected that hope and acted as a mediating force in the underlying class conflict between workers and capital. The film traces how that “spirit” has broken down and what is required to once again make economies work for people rather than subjugating the needs of people to the economy – which really means allowing a small proportion of people to extract the benefits arising from the hard work of the rest of us. The film influenced today’s blog.
So the American conservatives wimped out again after a month or so of mindless bluster and hot air. The only problem is that their posturing, in itself, causes damage to the economy. It’s interesting that the conservative economists keep harping on about their belief that the existence of a budget deficit causes uncertainty among private firms who are then reluctant to invest because they fear higher tax rates to pay back the deficit. While this flawed narrative is not theoretically robust, defies history, and is empirically bereft, uncertainty is a problem for firms and the ridiculous behaviour of the American conservatives in the Congress in recent times has dramatically increased it. The world is moving now into a second phase of the retrenchment of the state. The first phase required the neo-liberals to redefine the crisis, which was clearly an issue of excessive private debt, as crisis of sovereign debt. They have been successful in achieving this step. Our ignorance and obsequiousness has allowed this mindless narrative to dominate the public debate. The second phase is now well underway way where the victims of the austerity become the focus of attention for the Conservative politicians. The unemployed are vilified as lazy and welfare cheats (their benefits are targeted – for example, in Ireland now); single mothers are accused of strategic pregnancies; and the old furphy – benefit migration – is wheeled out into the public debate to engender an increasing resentment of the presence of ethnic minorities who is simply trying to do what all of us want – to improve the lives of their families and themselves. All of these campaigns are designed to divide and conquer the populace, segment this into conflictual factions (“them and us” mentality), and justify further unwarranted cuts to government spending.
In the opening sequence of the HBO series, Newsroom, the anchor is participating in a public forum at an East coast US university (in Boston). During the Q&A, he is asked by a student (“a sorority girl”) in the audience, who is suitably bright-eyed and full of American blather, “Is America the greatest country in the world?” He initially blusters but the convener of the forum pushes him for a “human moment” and what follows is 3 classic minutes of TV, starting with “its not the greatest country in the World, Professor, that’s my answer” and concluding with “So when you ask what makes us the greatest country in the World, I don’t know what the fuck you are talking about. Yosemite?”. He then said among other things that “We used to be …”, “we stood up for what was right”, “we waged wars on poverty, not poor people”, “we aspired to intelligence, we didn’t belittle it” and more. The latest shenanigans in the US Congress where the GOP representatives have become a mindless rabble is certainly testimony to the sort of things the mythical Newsroom anchor was talking about in the series. The Sydney Morning Herald article (October 16, 2013) – US shutdown stalemate enters realm of the absurd – reports on how the GOP reps do not “agree either on tactics or strategy” and Boehner announced to the press that there had been “no decisions about what exactly we will do”. This is one day before the lunatic right-fringe of their party is intent on causing mayhem. My prediction – some ridiculous deal will be done and the US government will not default. We will see. But today I am providing a little glimpse into examination processes by using what might have been a first-year answer to an examination question to highlight some important points. I hope you enjoy the little window into life at a university.
There was an interesting Working Paper issued by the ILO – Is aggregate demand wage-led or profit-led? – last year, which finally received some coverage in the mainstream economics press this week. The Financial Times article (October 13, 2013) – Capital gobbles labour’s share, but victory is empty – considered the ILO research in some detail. That lag is interesting in itself given that it was obvious many years ago that the trends reported in the ILO paper and the FT article were part of the larger story – that is, the preconditions – for the global financial crisis. If you look back through the Modern Monetary Theory (MMT) literature, dating back to the 1990s, you will see regular reference to the dangers in allowing real wages to lag behind productivity growth. It seems that the mainstream financial press is only now starting to understand the implications of one of the characteristic neo-liberal trends, which was engendered by a ruthless attack on trade unions by co-opted governments, persistent mass unemployment and underemployment, and increased opportunities by firms to off-shore production to low-wage nations. Better late than never I guess.
I have been watching in my spare time (yes) the 2010 first season of the HBO series – The Newsroom – which could be about events in US this week, so persistent has been the moronic behaviour that nations’ polity. There is growing evidence that the US Republicans are now an extremist party with a substantially tenuous grip on reality. They clearly do not understand that an economic depression is likely to follow their refusal to prevent the US Treasury to continue spending according to the current laws that the US Congress passed and which, together with the tax code, determine the current deficit. They clearly do not understand how deficits arise and the function they serve. The US might hold themselves out to be the world leaders in a range of areas but this debate is revealing how stupid the government representatives have become.
In the last week, Australians have been reminded yet again of the corruption that exists in the ranks of the corporate sector. Over the last few years we have been following the – unfolding evidence – of illegal practices (including bribery, UN-sanction busting) by companies (Note Printing Australia and Securency), which are owned by our central bank (RBA). Now, we have learned that one of our largest constructions companies appears to be corrupt to the core. They have been accused of “paying kickbacks to Iraqi officials in return for receiving lucrative contracts from the Iraqi regime” (Source). There are a myriad of examples of corporate fraud around the world (I just thought of Enron – “Burn, baby, burn. That’s a beautiful thing”). And then there was the global financial crisis with the cocktail of out-of-control investment banks, ratings agencies and whoever else with very long cheating snouts getting as much as they could for themselves, laws or no laws. And now we learn that a significant proportion of government procurement contracts in Europe are subject to corrupt behaviour. While, this tells me that the processes of government oversight need reworking in significant ways. But, further, it tells me that the root cause of the corruption is not the fact that governments are too big or spend too much money. Rather, an unfettered capitalism will pursue an agenda of greed and corruption and the idea that self-regulating markets (devoid of public oversight) are the best way to organise economic activity is a myth. The “market” is rife with corruption and inefficiency.
The UK Chancellor George Osborne told the delegates at the 2013 Conservative National Conference in Manchester yesterday that he was ending the culture of getting “something for nothing”. In his – Speech – the Chancellor claimed that “no one will get something for nothing” from now on, in reference to the “Help to Work” program, dubbed a new approach, that would see “(f)or the first time, all long term unemployed people who are capable of work will be required to do something in return for their benefits, and to help them find work”. We should immediately challenge the claim that the unemployed are doing nothing. An appreciation of the function that unemployment buffers plays in the capitalist system would tell one that the people who are forced to be in that buffer are certainly very active and protect the rest of us from the damaging consequences of poorly crafted macroeconomic policy. But beyond that, the evidence is clear – workfare schemes are not effective ways to provide pathways to more permanent employment. They are poorly disguised compliance programs designed to let the most disadvantaged workers in our society know that we resent their existence and, like the usurer in the Merchant of Venice, we want our “pound of flesh” in return for the pittance we provide by means of income support. These programs shine a dirty light on how mean-spirited and ignorant we are – in believing that mass unemployment is anything other than a systemic failure of the economy, in the face of deficient aggregate spending, to produce enough jobs and working hours. They are the means by which we indulge in our neo-liberal delusions – until, of-course, the times comes for you or I to face the sack next!
I have very little time today given other commitments. In recent months the Australian labour market has deteriorated quite noticeably and the Government has been forced to revise its estimates of the unemployment rate up to 6.25 per cent from 5.75 per cent in 2014. It is currently at 5.7 per cent and rising and before the GFC it reached a low-point value of 4 per cent. Underemployment is also rising as is hidden unemployment as the participation rate falls due to lack of employment opportunities. Further, in the last 6 months around 84 per cent of the net jobs created have been part-time. For the first time in several federal elections, unemployment and the paucity of job openings has become an election issue. Today, I used the little free time I had available to update my gross flows database to see if we could discern these trends as changing transition probabilities. In this blog I analyse the flows between full-time and part-time employment as well as movements between non-participation and employment to finish off the story. This blog is thus just an exploration of the data and an exercise to keep my databases current and for me to know what they are saying. The empirical side of my working life!
Workers, particularly low-paid ones, are regularly sent up in comedy or satire. The 1959 British movie – I’m All Right Jack – was an acidic attack on the British trade union movement although it also parodied the stuffy upper-class British industrialists as well. In 2003, a British author Magnus Mills published the book – The Scheme for Full Employment – which is a satirical attempt to deride Keynesian full employment policies. Boondoggling and leaf-raking is the term that invokes the ultimate put down by the conservatives who laud the virtues of the private sector and accuse the public sector of creating waste and sloth every time someone proposes that the government introduce a large-scale job creation program to alleviate the dreadful damage that mass unemployment causes. Well the New York Times investigative team has discovered the ultimate boondoggle that has been made possible because of slack government policy. And, it involves our friends in the financial markets – those so-called productive, entrepreneurial free marketeers.
The other day – in this blog – The British agenda to bring workers to their knees is well advanced – I considered the recent British Trades Union Congress (TUC) report (July 12, 2013) – The UK’s Low Pay Recovery – which shows that “eighty per cent of net job creation since June 2010 has taken place in industries where the average wage is less than £7.95 an hour”. The Report also showed that the middle-pay jobs were being shed and the bifurcation in the British labour market between an increasing number of (self-employed) low-paid jobs with precarious working conditions and future and the high pay jobs, which seemingly avoided much of the negative impacts of the recession, has intensified. The middle in Britain is being hollowed out and replaced by an increasing number of low paid workers. In Australia, 84 per cent of jobs created in the last 6 months have been part-time and underemployment has risen since February 2008 (the low-point in the last cycle) from 666.3 thousand (5.9 per cent) to 908.6 thousand (7.4 per cent). The question I look at in this blog, is the wage impacts of these employment trends in Australia. Are we also seeing the same hollowing out as is clearly occurring in Britain. Of those 84 per cent of jobs, what proportion are low-paid, medium-paid and high-paid. Clearly, if most of them are at the bottom end of the wage distribution then the raw figure of 84 per cent sits on top of an increasing disaster for the prosperity of working families.
Earlier this week I looked at the latest vacancy data for Australia released by the Australian Bureau of Statistics – Latest Australian vacancy data – its all down to deficient demand. I also took the time to update my data for the US Bureau of Labor Statistics – US JOLTS database, which provides detailed information about job openings and quit rates. The results for the US are similar to those found in Australia. But the data is apposite given the decision by the State of North Carolina to cut unemployment benefits – thinking that this act of cruelty will somehow reduce their appalling unemployment rate. It won’t.