When neoliberals masquerade as progressives

One wonders what goes on in the heads of politicians sometimes. Perhaps not much other than a warped sense of their purpose in life – which for some seems to be to advance themselves rather than advance societal well-being. In recent days, fiscal debates have raged on both sides of the Atlantic. In the US, there is the Trump tax cut debate. The correct progressive response would be to focus on why these cuts will not advance anybody but the rich and will do very little if anything to create new jobs. Unfortunately, prominent Democrats such as the awful Nancy Pelosi have been spouting stuff about the tax cuts increasing the federal deficit and federal debt. At a time, when the Republicans are abandoning the deficit terrorism to advance their own interests, the Democrats seems to be reinforcing the ‘deficits are bad’ narrative. Instead, they could have seized the opportunity to say to the American people – see deficits are fine but the real issue is what we do with them. Pelosi and her ilk seem incapable of adopting that quality of leadership. In the UK, the reality is dawning on the British government that the austerity harvest is anything but what they had hoped it would be. No surprises there. Austerity undermines growth which can easily increase the fiscal deficit when the goal is the opposite. But the way that reality is being handled in the progressive press is pathetic. The UK Guardian, for example, has headlines about ‘black holes’ and is giving oxygen to reports that talk about the deteriorating fiscal situation in the UK. Readers are left with nothing but neoliberalism reinforcement of the ‘deficits are bad’ myth. A shocking indictment of the progressive debate in the UK.

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Europhile Left deluded if it thinks reform process will produce functional outcomes

A recent twitter exchange with some Europhiles who believe that it is better to wait for some, as yet unspecified, incremental reform process for the Eurozone rather than precipitate exit and the restoration of currency sovereignty was summed up for me by one of the tweets from Andrew Watt. In trying to defend the abandonment of sovereignty and make a case for continuing with the so-called reform dialogue, he wrote (October 27, 2017): “Unemployment in “periphery” was v hi before €. Fell rapidly. Then rose sharply, has now fallen somewhat. So picture very mixed.” I found that a deeply offensive claim to make and responded: “It is not a mixed picture at all. Youth unemployment has never been as high. Greek unemployment was never > 12%. Now > 20% indefinitely.” I also attached a graph (see over). I think this little exchange captures the essence of the delusion among many in the Left that we document in our new book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017). The Europhiles maintain a blind faith in what they claim to be a reform process, which when carried through will reduce some of the acknowledged shortcomings (I would say disastrously terminal design flaws). They don’t put any time dimension on this ‘process’ but claim it is an on-going dialogue and we should sit tight and wait for it to deliver. Apparently waiting for ‘pigs to fly’ is a better strategy than dealing with the basic problems that this failed system has created. I think otherwise. The human disaster that the Eurozone has created impacts daily on peoples’ lives. It is entrenching long-term costs where a whole generation of Europeans has been denied the chance to work. That will reverberate for the rest of their lives and create dysfunctional outcomes no matter what ‘reforms’ are introduced. The damage is already done and remedies are desperately needed now. The so-called ‘reforms’ to date have been pathetic (think: banking union) and do not redress the flawed design. And to put a finer point on it: Germany will never allow sufficient changes to be made to render the EMU a functioning and effective federation. The Europhile Left is deluded if it thinks otherwise.

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The Weekend Quiz – October 28-29, 2017 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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When the mainstream Left gets lost down its Europhile hole

Thomas Fazi and I recently published an Op Ed in Social Europe (October 20, 2017) – Everything You Know About Neoliberalism Is Wrong, which is a precis of the main arguments in our new book Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017). It seems that our message resonates with a lot of people. And, inasmuch as it is deeply critical of the extant Left position on ‘internationalism’ who continually seem to live in terror of those amorphous financial markets just waiting for a chance to send a nation state bankrupt, it seems to have also upset some who I consider to be the ‘lost’ mainstream Left. One such critic accuses us of using a “presumptuous title” but he is seemingly unable to capture the pop culture irony that is inherent in the choice. Just a bit of fun Andrew. Since when is comedy presumptuous? But failing to grasp the subtlety of the title is just the start. Things go downhill from there.

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The sham of ECB independence

One of the major claims the founders of the EMU made was that by creating an independent ECB – by which they meant ‘independent’ of the influence from the Member States or other EU bodies (such as the Eurogroup) – they were laying the foundations of financial stability and disciplining the fiscal policy of the Member States. This so-called independence was embodied in the – Treaty on the Functioning of the European Union – where Article 123 prevents the ECB from giving “overdraft facilities or any other type of credit facility” to the Member State governments (and other EU bodies); Article 124 prohibits any Member State government (and other EU bodies) from having “privileged access” to the financial institutions; and Article 125 prohibits the ECB from assuming any liabilities or “commitments” of the Member State governments (etc) – the famous ‘no bailout’ clause. But a recent report from the Corporate Europe Observatory (CEO) – Open doors for forces of finance – (published October 3, 2017) – suggests that the ECB feigns independence and is in fact captive of the largest profit-seeking financial institutions that sit on its advisory groups. In other words, the ECB has become a vehicle to advance private return and avoid regulative imposts when the TFEU outlines an entirely different role for the bank.

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Three recent interviews – transcripts and video

Today, I have translated two interviews I did while I was in Europe recently. The original interviews were in Spanish. The first interview was with Andrés Villena Oliver for CTXT and was published in the Spanish newspaper Público. It was conducted at Ecooo in Madrid on September 28, 2017. The the second interview was with journalist Marta Luengo Garcés from the progressive newspaper El Salto Diaro. It was conducted at the Principe Pio Hotel in Madrid on September 29, 2017. You can get a feel for the concerns of the progressive journalists in Spain by the type of questions they asked me. I have also included the video of an interview I did yesterday (October 16, 2017) with Steve Grumbine of the Real Progressives. That should keep readers more than busy until tomorrow.

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Wolfgang Schäuble is gone but his disastrous legacy will continue

History is often made by single, very powerful individuals acting on their own mission according to their own calling. Many of these individuals are seemingly immune to the reality around them and try to recreate their own reality – sometimes succeeding to advance the well-being of those around them and beyond, but, usually, they just leave the main stage after creating havoc. I could name names. But only one name is relevant for today’s blog – Wolfgang Schäuble, the former CDU German Minister for Finance. Schäuble resigned that role after the recent German elections and is now being feted by the mainstream press as some sort of visionary who kept the Eurozone together through his disciplined thinking and his resistance to populist ideas that would have broken the discipline imposed on Member States by the European Finance Ministers. History tells us differently. He has overseen a disastrous period in European history where its major step towards political and economic integration in the 1990s has delivered dysfunctional and divergent outcomes for the Member States. Some countries (Greece) has been ruined by the policies he championed while others are in serious trouble. Further, despite him claiming the monetary union has been successful, the fact is that the Eurozone is still together only because the ECB has been effectively violating the no bailout articles of the Treaty of Lisbon via its various quantitative easing programs since May 2010. Should it stayed within the ‘law’ of the union, then several nations would have been forced into insolvency between 2010 and 2012. The problem is that while Schäuble is now gone from the political stage, his disastrous legacy will continue.

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Contrasting narratives about the outcomes of the euro

I have presented to a diversity of participants at the various events we have attended in the US, UK and Europe over the last 2 weeks. One way of expressing this diversity is in terms of the type of audience. At many events, the audience has been comprised of people who would see themselves as activists on the progressive side of politics. Some have been students, others, members of Leftist political parties, local business people, and community organisations. They uniformly express concern over the state of Europe, and the Eurozone in particular. They express concern about unemployment, underemployment, precarious work, poor wages growth, welfare cuts, infrastructure degradation, and other uncertainties relating to the state of politics. I sense that some of the participants were pro-Europe and pro-euro, but, there was an overwhelming feeling that the monetary union had failed and would be difficult to retrieve. On the other hand, I have addressed events where politicians, central bankers, private bankers, finance ministry officials and the like have been the main participants. Here the message changed significantly. I heard politicians, firmly wedded to the European ideal, talk about how the Eurozone had brought unlimited benefits to the Member States and how solidarity among states and citizens enhanced by European Commission leadership was taking Europe to a new, higher level. Hello! Earth calling! It was quite an eye-opener to see how much denial there is among those who have done well from the system.

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A former UK Chancellor attempts to save face and just becomes confused

On May 6, 1997, just 4 days after coming to office in what was to become Tony Blair’s retrogressive regime, the then British Labour Chancellor Gordon Brown announced that Labour would legislate the so-called independence of the Bank of England. The BBC claimed this was the “most radical shake-up in the bank’s 300-year history”, which gave “the bank freedom to control monetary policy”. Gordon Brown’s legacy to the British people, of course, is in his famous ‘light touch’ regulation, which he boasted about in the lead up to the GFC but went silent about soon after. But he has come out of the woodwork recently to reflect on his decision to set up the Monetary Policy Committee (MPC) within the Bank of England and abandon the practice where the Chancellor and the Governor of the Bank would meet on a monthly basis to determine interest rates. He claims that decision kept Britain out of the euro and was a great success. But then in the same speech he railed against the ‘political’ intrusion of the MPC into broader fiscal policy debates and its failure to conduct monetary policy correctly during the GFC. A very confused narrative. The point is that central banks can never be independent of treasury departments and the claims to the contrary were just part of the depoliticisation of policy that accompanied neoliberalism. Brown is also wrong that setting up a separate MPC kept the nation out of the euro. Britain realised the euro would be a disaster long before 1997.

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Mainstream macroeconomics credibility went out the window years ago

The Vice President of the European Central Bank, Vítor Constâncio, gave the opening speech – Developing models for policy analysis in central banks – at the Annual Research Conference, Frankfurt am Main, on September 25, 2017. Last time I heard Constâncio speak in person, in Florence 2015, he was in typical Europhile central bank denial. He thought the Eurozone was fine, a great success given the low inflation, inferring that the ECB’s conduct had something to do with that. He didn’t talk about the millions of people that had deliberately been rendered jobless because of the austerity obsession of the Troika, of which his institution was an integral part. Things might be changing a bit as the evidence mounts that the mainstream approach to macroeconomics and monetary theory is moribund, at best. But the changes are really just more of the same. There is no willingness to admit that the whole framework is without merit. The mainstream profession is lost in my view and clutching at anything they can to stay credible. But credibility went out the window years ago.

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Addressing claims that global financial markets are all powerful

The United Nations Trade and Development Report 2017 was published last week and carried the sub-title “Beyond Austerity: Towards a Global New Deal”. It is amazing that 9 years after the crisis emerged we are still discussing austerity and its on-going damaging consequences. Effectively the crisis interrupted the neoliberal agenda to increase the incomes shares of the elites at the expense of the workers, with growth being a secondary consideration if at all. Austerity was the means by which the elites could resume this push and used all sorts of depoliticised arguments to make it look as though there was really no choice. They have been spectacularly successful in their quest. More shame to the rest of us who have stood by and blithely accepted the agenda and, to make matters worse, become mouthpieces of the myths that the neoliberals have constructed to give ‘authority’ to their savage attacks on public purpose. So social democratic politicians lead the austerity charge. Citizens stand around in pubs and cafes mouthing neoliberal nonsense about fiscal deficits etc without the slightest evidence that they know what they are talking about. UNCTAD report on all this in the latest Report. It is a sorry tale and requires a massive return of collective action and as they say – a “global New Deal”.

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Travelling all day today …

I am travelling all of today to the US for the MMT Conference in Kansas City which begins on Thursday. I hope to see some of you at the conference which will be a major development in our program of work and advocacy. From there I am onto London for the British Labour Party Conference presentation (Monday) and the book launch of my latest book (with Thomas Fazi) Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Tuesday – see below for free ticket access). For details of all the events associated with my speaking tour in the next fortnight see below.

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When relations within government were sensible – the US-Fed Accord – Part 1

I have all that much time today to write this up and it is going to be one of those multi-part blogs given the depth of the historical literature I am digging into. So this is Part 1. The topic centres on an agreement between the US Federal Reserve System (the central bank federation in the US) and the US Treasury to peg the interest rate on government bonds in 1942. What the agreement demonstrated is that a central bank can always control yields on government bonds, which includes keeping them at zero (or even negative in the current case of Japan). What it demonstrates is that private bonds markets, no matter how much they might huff and puff about their own importance or at least the conservatives who are ‘fan boys’ of the bond markets), the government always rules because of its currency monopoly

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Jean-Claude Juncker in denial and somewhat delusional

Last week (September 13, 2017), the President of the European Commission, Jean-Claude Juncker, presented his State of the Union Address 2017 in Strasbourg before the European Parliament. My only query arising from the speech was which Member State has left, given that the President began his speech by thanking “the 27 leaders of our Member States” (joke). He opened by saying how unity among the Member States had “showed that Europe can deliver for its citizens when and where it matters”. I wonder which Planet he was referring to. I thought Europe was on the Mother Earth and it certainly hasn’t been delivering for its citizens, if the usual measures are considered. Juncker’s speech just continues what I considered to be ‘Groupthink and Denial on a Grand Scale’, which was the subtitle of my 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale. It is amazing that the denial continues after 10 years and that guys like Juncker can still command an audience and a salary.

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Paradigm shift – not from the CORE Econ Project – as mainstream as you will get

Next Friday (September 22, 2017), I will be presenting at a panel on developments associated with the proposed MMT University and our new MMT Macroeconomics textbook, which will be published by Macmillan in April 2018. The panel will present during the First International MMT Conference, to be held in Kansas City. In part, my contribution will be to discuss the general pedagogical concerns that we (Randy Wray, Martin Watts and myself) had as we wrote the textbook over what turned out to be several years. We were confronted with the situation that we want our textbook to be used as widely as possible in the first and second years of a typical undergraduate program, but also didn’t want to fall into the trap of compromising what we considered to be a unified body of theory based upon Modern Monetary Theory (MMMT) for what other colleagues (particularly, mainstream academics) would claim to be necessary material to prepare a student for the labour market. We now have what we believe is a very strong two-year sequence in macroeconomics, firmly founded on MMT principles, with a good balance between discursive narrative, historical context, empirical challenge, and formal (mathematical) reasoning. When one compares it to other post-GFC developments in the pedagogy of macroeconomics, some of which have received the headlines in the past week, I think the curriculum embodied in our text is progressive, consistent, and doesn’t fall into the typical neoliberal default regarding governments and the monetary system.

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The role of literary fiction in perpetuating neo-liberal economic myths – Part 1

A few weeks ago I wrote a blog – Reflections on a visit to New Zealand – which began by summarising some research I am working on which will be presented (with Dr Louisa Connors) at the upcoming MMT conference in Kansas City. This specific paper will be examining the role that fictional literature plays in framing false economic concepts and, thus, promoting neo-liberal biases among the readership, even when the plot of the narrative is ostensibly about something other than economics. We show that fiction is a powerful tool for spreading ideological propaganda, often in a very subliminal or subtle way. The lesson we draw from this work is that to further advance Modern Monetary Theory (MMT) ideas, authors, who introduce economic concepts into their writing, should construct their narratives consistent with the MMT principles. This will help to counter the misconceptions that arise in literary fiction when authors engage with flawed neo-liberal arguments about the monetary system. This blog is in two parts and today is Part 1. Part 2 will come another day (soon).

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ECB is running out of debt to buy – more smoke and mirrors needed

There was a Bloomberg report yesterday (September 6, 2017) – Draghi’s Claim of QE Flexibility Is Attracting Doubters – that made me laugh. The sort of laugh that comes when you just realise there is parallel language spoken out there that makes no sense and reinforces stupidity with stupidity. Much like most of mainstream economics commentary. The journalist was trying to argue that times is up for the ECB’s Quantitative Easing strategy because they are running out of debt to buy. Whew! That sounds like a catastrophe. The point is that the elephant in the room is ignored. The ECB is already massively violating the Treaty of Lisbon constraints on funding government deficits. It is time they realised that without that ‘quasi fiscal support’ (given the ECB is effectively the only functioning federal fiscal authority by default in the Eurozone), the system will collapse under the weight of austerity. Leadership demands they take the next step and allow the ECB to openly fund deficits using Overt Monetary Financing (OMF). But the lack of leadership tells us they will not take this obvious step. The grinding nature of Eurozone economic history will continue as a result – and then the next crisis will hit.

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Progressives should move on from a reliance on ‘Robin Hood’ taxes

There was an article in the International Politics and Society journal (August 27, 2017) – Robin Hood had the right idea – which continues to demonstrate, how in my view, the Left has gone down a deadend path with respect to financial market reform and re-establishing a credible progressive agenda. The sub-title of the article ‘Why the left needs to deliver on the financial transaction tax’ indicates that the author, Stephany Griffith-Jones, who has long advocated positions I am sympathetic to (particularly with respect to development economics), thinks a financial tax is a viable strategy for the Left to push. The problem is that none of these ‘Robin Hood solutions’ are viable and are based on faulty understandings of the way monetary systems operate.

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Reclaiming the State

On June 3, 1951, the Socialist International association was formed in London. It is still going. It is “a worldwide association of political parties, most of which seek to establish democratic socialism”. Its roots date back to the C19th (to the First International formed in 1864) when it was considered beneficial to unite national working class movements into a global force to overthrow Capitalism. Internal bickering among various factions led to various dissolutions and reformations over the last 150 odd years. In 2013, the membership split when the German SPD decided to set up an competing group, the Progressive Alliance, which saw a host of so-called social democratic parties (including the Australian Labor Party) join and desert the SI. Both bodies are dogged by internecine conflict and members who have fallen for the neo-liberal macroeconomic myths. More recently, DIEM25 has emerged to pursue a Pan-European vision of Left-wing politics. The more recent dynamics of these movements deny power of the nation state in a globalised economy and global financial flows. They are all failing because of this denial.

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