Australian national broadcaster gives ignorance the national stage

Our national broadcaster, the ABC, has a regular panel program called Q&A as part of its TV offerings where a panel of so-called experts are assembled each Monday night to wax lyrical about some particular and contentious topic. The ABC claims it provides a balanced coverage, which is required as part of its legal charter as the public broadcaster, yet on economic issues it clearly fails in this regard. Even the so-called progressive voices it ever puts on have broadly neo-liberal economic views regarding government fiscal capacities etc. Last Monday, the ABC breached its responsibilities even further by giving centre stage on economic matters to a person who clearly has no understanding of the issues she was holding out expertise in. I didn’t watch the program but the transcript reveals that the conversation was a violation of any intellectual standards. The ABC has descended into the gutter of tabloid journalism. What a shame!

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Ending food price speculation – Part 1

We are currently finalising the manuscript of my latest book (with co-author, Italian journalist Thomas Fazi) which traces the way the Left fell prey to what we call the globalisation myth and formed the view that the state has become powerless (or severely constrained) in the face of the transnational movements of goods and services and capital flows. We argue that while social democratic politicians frequently opine that national economic policy must be acceptable to the global financial markets and, as a result, champion right-wing policies that compromise the well-being of their citizens, the reality is that currency-issuing governments retain the capacity to ensure there is full employment and can advance the material well-being of their citizens. In Part 3 of the book, which we are now completing, we aim to present a ‘Progressive Manifesto’ to guide policy design and policy choices for progressive governments. We also hope that the ‘Manifesto’ will empower community groups by demonstrating that the TINA mantra, where these alleged goals of the amorphous global financial markets are prioritised over real goals like full employment, renewable energy and revitalised manufacturing sectors is bereft and a range of policy options, now taboo in this neo-liberal world are available. A chapter in Part 3 will concentrate on financial market reforms (what to do with banks etc) and one topic in that context relates to the area of food speculation. We argue that food speculation causes havoc in poor nations and a progressive stance should make it illegal. The enforcement would be through the new institutional framework I outlined previously. In today’s blog I discuss the arguments advanced to justify our position.

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The US labour market is nowhere near full employment

The president of the Federal Reserve Bank of San Francisco, John C. Williams pronounced in a recent speech (September 6, 2016) – Whither Inflation Targeting? – that “We’re at full employment”, meaning US economy that is. He must have access to different data than the US Bureau of Labor Statistics (BLS) publishes, because the official data tells a very different story once you understand what it is you have to look for in the statistics presented. Last week, the US Bureau of Labor Statistics released the September 2016 – Employment Situation – which showed that total non-farm employment rose by only 156,000 and the unemployment rate remained “little changed” at 5 per cent. The Federal Reserve President’s surmise raises the question as to whether the US has returned to where it was before the GFC. Despite his optimism, the evidence refutes the claim that the US is near full employment. It also suggests that the situation is more likely to worsen than to improve.

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Reforming the international institutional framework – Part 4

This is the fourth and final part of the discussion relating to reforming the international institutional framework. In brief, the argument is that there are several essential functions that a multilateral institutional framework has to serve that need to be incorporated within any new structure. It is clear that an agency to channel development aid remains essential. Further, it is important to create an agency that will provide liquidity to nations who are unable to access essential imported resources (such as food) without invoking exchange rate crises. While these functions seem to align with the current World Bank and the IMF, a progressive approach to service delivery in these areas would not resemble the operational procedures currently in place.

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Indexed bank reserve support schemes will not expand credit

On the Wikipedia page for economist Ricardo Reis we learn he was “Influenced by: Greg Mankiw”, which basically should tell you everything. Everything that is that would lead to the conclusion that his macroeconomics is plain wrong. Yet his connections in the profession are strong and has prestigious academic appointments, is ensconced in senior editorial positions on influential economics journals, advises central banks in the US and has regular Op Ed space in a leading Portuguese newspaper (his homenation). These facts tell you what is wrong with my profession. That someone can write articles that are just so off the mark yet have significant influence in the profession and be held out in the public debate as to be someone who is worth listening to and being reported on. I have received many E-mails in the last few days about the proposal offered by Reis at Jackson Hole last week. Many readers are still confused and actually thought the proposal had credibility. Let me be clear – bank lending is not influenced by the reserve positions of the banks. Without credit-worthy borrowers lining up to access loans, the banks could have all the reserves in the world and the central bank could invoke any number of nifty ‘indexing’ or other support payment schemes on those reserves, and the banks would still not lend. And with those credit-worthy borrowers lining up to access loans, the banks will always lend irrespective of their current reserve position or the nifty support schemes the central bank might dream up. Core Modern Monetary Theory (MMT) 101!

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Australian Treasurer embarrasses himself

The Australian Treasurer gave his first major statement in Sydney last week (August 25, 2016) since being barely re-elected in July. The speech – Staying the course – strengthening our resilience in uncertain economic times – was before an invited gathering of the business world who sat their listening to total nonsense from a man who disgraces the role he holds. Australians have always lagged behind developments in the rest of the world in many ways. It used to be blamed on the ‘tyranny of the distance’ (geography) but that excuse can no longer be used in this digital age. You realise how far behind the times our Treasurer is when you read articles such as this one in Foreign Policy (August 26, 2016) – The Stimulus Our Economy Needs. In that article, we read that “Now, the idea that governments, with or without the help of central banks, should spend substantial resources on creating jobs, both directly and through private sector incentives, is widely accepted among economists across the political spectrum”. Sound advice but lost on the Australian Treasurer. Bad luck for us. He is an embarrassment.

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Modern Monetary Theory – what is new about it? – Part 2 (long)

In yesterday’s Part 1 of this two-part blog – Modern Monetary Theory – what is new about it? – I introduced the idea that a major new contribution of Modern Monetary Theory (MMT) to economic theory was in its treatment of inflation and the Phillips curve. This is part of a keynote presentation I will be giving at the International Post Keynesian Conference – which will be held at the University of Missouri – Kansas City between September 15-18, 2016. The keynote presentation is scheduled for Friday, September 16 at 17:00. The topic of my keynote presentation will ‘What is new about MMT?’ and will challenge several critics from both the neo-liberal mainstream and from within the Post Keynesian family that, indeed, there is nothing new about MMT – they knew it all along! I contest that when they say this they are lying and doing so to cover up the inadequacies of their own failed analytical frameworks whether they be mainstream or Post Keynesian.

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Modern Monetary Theory – what is new about it?

In a few weeks I am off to the US to present a keynote talk at the – International Post Keynesian Conference – which will be held at the University of Missouri – Kansas City between September 15-18, 2016. I will also be giving some additional talks in Kansas City during that week if you are around and interested. The keynote presentation is scheduled for Friday, September 16 at 17:00. The topic of my keynote presentation will ‘What is new about MMT?’ and will challenge several critics from both the neo-liberal mainstream and from within the Post Keynesian family that, indeed, there is nothing new about MMT – they knew it all along! Well the truth of it is that these characters clearly didn’t previously know or understand a lot of key insights that MMT now offers. No matter how hard they try to reinvent what they knew, the facts are obvious. MMT makes some novel contributions to our knowledge base and shows why a lot of so-called mainstream macroeconomic theory that parades as ‘knowledge’ is, in fact, non-knowledge. This blog and the second-part will provide some notes on the paper I am writing (with my colleague Martin Watts) on this topic.

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Brainbelts – only a part of a progressive future

Last week, the US Republican Party held an extraordinary convention in Cleveland, an old rustbelt manufacturing town. I say extraordinary because I guess you have to be American to understand how grown adults can systematically humiliate themselves for several days with the rest of the world looking on wondering WTF was going on! Anyway, just down the road from Cleveland is Akron, Ohio, which is being held out as a model for the new era of prosperity in advanced nations. I caution against believing that hypothesis. It was proposed in a book I have just finished – The Smartest Places on Earth – written by two Dutch writers (published 2016). It carried the subtitle “Why Rustbelts are the Emerging Hotspots of Global Innovation”. I do not recommend anyone purchase it even though it is getting rave reviews around the place. I see it as a sort of replay of the 1990s ‘New Regionalism’ mania that emerged as part of the Third Way movement, which the now discredited Tony Blair promoted as the entrepreneurial solution to turn regions into sub-national export centres to replace the ‘nation state’, that had been (according to the narrative) rendered powerless and irrelevant by globalisation. The book introduces the notion of the “Brainbelt”, which the authors claim are revitalising the “former rustbelt areas” and “bringing new competitiveness to the United States and Europe” – a sort of counter-strategy to foil the jobs lost to the low-cost nations such as China and the Asian economies in general. The problem is that the growth strategy seems to leave the worker behind!

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Towards a progressive concept of efficiency – Part 1

Before I present the second part of my discussion about the relevance of re-nationalisation to what I would call a truly progressive policy agenda, we have to take a step backward. I note after the first part – Brexit signals that a new policy paradigm is required including re-nationalisation – there were a few comments posted (and many more E-mails received – apparently readers are happier berating me personally rather than putting their ideas out in the public domain) that I was advocating a return to the ‘bad’ old days of nationalisation where cronyism, inefficiency and trade union bastardry were the norm. The obvious next point was – how can I claim that is progressive and part of the future. In this two part blog (the second part will come tomorrow), I offer a framework for assessing these claims. Today’s blog foscuses on the neo-liberal vision of efficiency and reveals how narrow and biased towards private profit it is. In Part 2 (tomorrow) I will present the progressive vision and how it conditions the way we think of efficiency. Once we break out of the neo-liberal constructs and refocus our attention on Society rather than the individual then the way we appraise policy options also changes – it becomes enriched with new possibilities and understandings. We enter the progressive world and leave behind the austerity nightmare that neo-liberalism has created. We are then able to see how our old conceptions of nationalised industries or public sector job creation are tainted with these neo-liberal biases. And we are then able to see how policy initiatives that invoke scorn from the conservatives and many so-called modern progressives (obsessed with post modern constructs) have a vital role to play in a truly progressive manifesto. I split the discussion into two parts because the blogs are too long as they are.

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Brexit signals that a new policy paradigm is required including re-nationalisation

With the new British Prime Minister now indicating that she will push ahead with Brexit and free the nation from the undemocratic imposts of the increasingly dysfunctional European Union, a view that is apparently ‘poisonous’ to some so-called progressive writers, several pro-Remain economists or economic commentators have realised that the game is up for neo-liberalism in Britain. There have been several articles recently arguing (after bitching about the loss of the Remain vote and repeating the catastrophe mantra) that a new economic paradigm is now called for in Britain, based on its new found sovereignty (after it finally exits). It could, by the way, exit through an Act of Parliament without all the Article 50 palaver if it wanted to. That is just a smokescreen. This idea of a new paradigm being required is exactly what Thomas Fazi and I are working on as part of our current book project which is nearing completion. Today, I consider briefly our view that nationalisation has to return as a key industry policy plank for any aspiring progressive political party.

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US labour market – some improvement but still soft

Last week (June 8, 2016), the US Bureau of Labor Statistics published the latest – Employment Situation – June 2016 – and the data shows that “Total nonfarm payroll employment increased by 287,000 in June, and the unemployment rate rose to 4.9 percent” on the back of rising labour force participation. The Household Survey measure showed that employment grew in net terms by 67 thousand (0.04 per cent), which presents a more modest picture than the media reports, that focus on the payroll data, are portraying. Clearly, the 287,000 net jobs added according to the payroll data is a lot better than the 11,000 added according to the same measure in May 2016 (which was revised downwards from 38,000). Further, hours and earnings data suggests a fairly moderate labour market outlook rather than any boom conditions. Broad measures of labour underutilisation also indicate a worsening situation. Underemployment (persons employed part time for economic reasons), which had risen sharply in May (by 468,000) fell by 587 thousand in June, which along with the rising participation rate (a fall in the discouraged workers by 36 thousand), suggests a better state of affairs that was anticipated in May. It remains to be seen whether this renewed jobs growth reduces the bias towards low-pay jobs – which I most recently examined in this blog US jobs recovery biased towards low-pay jobs continues.

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We starve the state and public infrastructure development at our peril

Australia is at the end of a long federal election campaign (albeit not as long as the US) and the vote is on Saturday (July 2). Both major parties – the conservatives (who call themselves liberal but oppose many freedoms) and the Labor Party (who are conservatives in drag these days) – have gone to pains to convince the voters that they will get the fiscal balance back into surplus by 2021. The Labor Party, which was meant to be the political voice of the workers has proposed something like $A71 billion in spending cuts and tax hikes (or scrapping tax cuts promised by the conservatives). But both are content to leave more than 15 per cent of the labour force lying idle and to oversee rising inequality, rising poverty and social alienation, in a nation that is arguable in the top three wealthy nations of the world. Moreover, the obsession with pursuing fiscal surpluses is taking a heavy toll on public infrastructure and social and community assets in Australia. The latest data shows that there is a massive shortfall in expenditure on these assets and that more than 11 per cent of these essential assets are in a poor to very poor condition, which means that the assets are incapable of serving their function including supporting economic growth. As well there is increasing evidence that shows the transformative nature of public investment in innovation and education. We starve the state and public infrastructure development at our peril. That should inform a progressive agenda if nothing else does.

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Why the Leave victory is a great outcome

The class struggle is back! Who would have thought. After years of being told by the likes of John Major and then Tony Blair that “the class war is over” (Blair) and the we now all live in “the classless society” (Major) the working class has fought back, albeit under the motivation of the looney, populist Right rather than a progressive left, who remain a voice for capital. Remember when we were told that the Left-Right continuum was irrelevant now in this global world where nation states had given way to grand communities (like the EU) and that, in this new post-modern world, we could all be entrepreneurs (meaning we sell our labour to a capitalist!). And now we know that class never went away. It might have been hi-jacked by the Right but it is there – and it is powerful. Planet Earth to British Labour – do something about it or wither away and make way for a progressive new organised working class movement.

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Full employment = mass idle labour – detaching language from meaning

In the Golden Egg by Donna Leon, which I was reading on a flight over the weekend, there was a discussion about language and meaning. The detective in question was musing about how crimes are described and concluded that when we “detach language from meaning … The world is yours”. The worst crimes become anaesthetised. In my professional domain (economics), this detachment is rife and leads to poor policy choices. One such example, which is close to the focus of my own research work over the years has been the way in which the mainstream economists have revised the concept of full employment. We now read that Australia, for example, is at “full employment” when its official unemployment rate is 5.7 per cent (1.7 per cent above its previous low in February 2008), underemployment is 8.4 per cent, and the participation rate is still a full 1 percentage below its November 2010 peak (meaning some 190 thousand workers have dropped out of the labour force). By any stretch, the total labour underutilisation rate (that is, idle but willing labour) is in excess of 16 per cent. But to some smug journalists who cannot even get their facts straight, that is ‘full employment’. Mainstream economics – detaching language from meaning and misleading a nation as a result.

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The US labour market continues to weaken

Last week (June 3, 2016), the US Bureau of Labor Statistics published the latest – Employment Situation – May 2015 – and the data shows that “nonfarm payroll employment changed little (+38,000)” in May, while the “unemployment rate declined by 0.3 percentage point to 4.7 percent”. The lack of net job creation has been described as a ‘bombshell’ and commentators are claiming it will put an end to any interest rate rise ambitions that the US Federal Reserve Bank might have harboured for this month. Additional poor indications came from the falling participation rate, which fell by 0.2 percentage points and “has declined by 0.4 percentage points over the past two months”. In other words, given the parlous employment growth, the unemployment rate would have been much higher had the supply contraction not occurred. Broad measures of labour underutilisation also indicate a worsening situation. Underemployment (persons employed part time for economic reasons) rose sharply by 468,000 in May. In the recovery, there was a bias towards low-pay jobs – see blog US jobs recovery biased towards low-pay jobs – now there is a dearth of new jobs being created.

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Austerity is killing off the hopes of our youth

Sometimes, it is almost as if I have to pinch myself to establish that what I am reading is not a dream. A few reports lately have had that effect, not the least being the latest IMF report – Debt Sustainability Analysis (DSA) for Greece, which is forecasting unemployment will remain above 10 per cent for several decades to come. The latest Eurostat data on gross labour flows also paints a dire picture for a nation that has been deliberately ruined by neo-liberal ideology. And, the latest Eurobarometer studying Europe’s youth in 2016 tells us clearly how the next generation of adults feel about all this – they feel marginalised from social and economic life. The Troika and its corporate pals are doing a great job killing off the prospects for Europe’s children and their grandchildren, and further on – their grandchildren’s children. People in a few hundred years will reflect back on this period of history as being a dark age where power hungry maniacs dominated the people before the latter revolted and mayhem ensued.

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The Weekend Quiz – May 21-22, 2016 – 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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Spanish El Pacto – A Syriza Reprise!

I am now back in Australia after a very interesting 2-week visit to Spain. There were several ‘private’ events in that time, and I gave 7 public lectures over 5 days, with travel and meetings in between. It was a hectic week once the public events began, criss-crossing the rather large (by European standards) nation. I learned a lot about grass roots political movements (how they easily splinter as personalities get in the way) and about the state of European politics. I learned little about European economic policy – it is as ridiculous and damaging as ever, yet the ideologues, in the ‘pay’ of the financial and corporate elites, keep claiming everything is on track for recovery. Not! I heard about the ‘ghost’ airport, the unused Formula 1 race track, and saw the massive Arts and Sciences Complex in Valencia, all of which epitomise the excesses in the early years of the Eurozone and the unbridled capacity of Spanish politicians for corruption (the Wiki page doesn’t tell you that several corrupt pollies are already in prison over this project with more to come – see HERE and HERE and ). In the last week, a major development occurred with the signing of the so-called ‘El Pacto’ – Cambiar España: 50 pasos para gobernar juntos – which is an historic agreement between the leaders of Podemos and the United Left (IU) coalition and constitutes the manifesto to ‘Change Spain in 50 steps’ if they win government at the upcoming national election on June 29, 2016. If they don’t win government it will probably squeeze the Socialist party (PSOE) into extinction (which would be good). But ‘El Pacto’ is a dangerous document for the progressive side of politics. This blog explains why. Short summary: Syriza reprise!

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A return to full employment in Australia will require significantly higher deficits

Last week, the Australian Labor Party (the federal opposition) released a new policy platform, which it hopes will give it some electoral leverage in the upcoming federal election. The Party announced that they would be attacking poverty and inequality by restoring full employment. The UK Guardian political editor opined in her article on Friday (March 18, 2016) – A shift in political thinking is giving Labor a sense of purpose – that the announcement by Labor was a policy breakthrough and a recognition that the neo-liberal claims about free markets etc, that emerged in the 1980s, are no longer a viable basis on which to base policy. I agree. I also agree that a currency-issuing government should always pursue full employment. But the reality is that this pledge from the ALP is going to be as hollow as all the other value statements it makes in an attempt to convince the electorate that it is a progressive party looking out for the workers and the disadvantaged. A lot of jobs have to be created to restore true full employment, which will require significantly larger fiscal deficits. Meanwhile, the ALP is claiming it will return the fiscal balance to surplus.

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