The day the Australian media failed the public, again

For those who don’t know about cricket, it is good to get a high score in each of the innings. Just like baseball. An innings score of 350 runs in Cricket would be respectable. So imagine the headlines – Big problem, team only scores 130 runs in final innings! The whole cricket world then gets itself in a lather about this with experts blabbing on national TV about only 130 runs. As an after thought, the news bulletin also announced – “and team pulls off a thrilling victory”. Imagine, some bean counter expert coming out in the middle of a game of football and telling the teams that the game is being called off because the budget for goals had been exhausted. The two points – context with respect to meaning and aims and where does the unit of account come from – have been sadly lost in the current economic debate. Even journalists who know better have done a great disservice to the Australian public today by choosing to present an uncritical version of a report that is at best incompetent but also much worse than that. This morning Australians have been bombarded via TV, radio and the printed media with economists, appearing seriously self-important but, at the end of it all, all they are doing is making stuff up and are probably too stupid to know otherwise.

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Tibet and higher education funding in Australia

Regular readers will know that I consider promotion of the humanities and social sciences in a university systems to be of paramount importance in preserving an informed citizenry, which is a precondition for democracy. These areas of our education system have been under constant attack by the neo-liberal bean counters in government education bureaucracies and management positions within universities. While I regularly write about the impacts of poor fiscal management, in particular, in the current context – fiscal austerity – on unemployment and low income workers, one of the other casualties of neo-liberalism has been a university systems. The damage to our university systems go well beyond the squeeze of funding and a user pays mentality that I’ve written about in the past. Last night, on our national broadcaster’s prime evening current affairs programme – 7.30 – we were confronted with a classic example of how compromised our universities have become in Australia. The – 14th Dalai Lama – was banned from visiting a campus. Why? Guess!

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Elementary misuse of spreadsheet data leaves millions unemployed

Remember, earlier this year, when the IMF admitted they had made errors in their modelling of expenditure multipliers. They had been tramping into countries with their jackboots telling all and sundry that fiscal austerity would promote growth because their multiplier estimates told them so. Millions of job losses later, they came clean. It turns out that when they revised their multiplier estimates exactly the opposite was the case. Now they acknowledge that spending multipliers are in range of 1.5 1.75, meaning that increasing government spending adds at least 150 cents in the dollar spent extra to the economy. Now, the darlings of the austerity cultists – Rogoff and Reinhart – has been exposed for poor research standards – to wit, errors in spreadsheet coding. Meanwhile, Cyprus is being driven into oblivion. Who is ever going to take responsibility for these travesties?

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British labour market – bad and getting worse

The angst in Britain about the form of the funeral for the Witch goes on. I liked the suggestion of filmmaker Ken Loach who suggested the whole affair be privatised and outsourced with competitive tenders determining the outcome. Hypocrisy rules though and the Conservative government will spend a pretty penny on the effort as a means of presenting her legacy in some good light. They won’t succeed because people know! With the latest British labour force data due out tomorrow, I was interested to read an interesting forensic study of recent labour market trends in Britain. The official line from the Government is that things are improving and “see, our policies are allowing those who want to work hard to achieve their aspirations”. The paper, which I discuss in this blog, tells us that those narratives are not even remotely true. Despite the official summary labour force statistics, once one digs more deeply into the data the trends are bad and getting worse.

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Australian government logic – destroy the future to save it

The Australian government announced its new agenda for public education yesterday. It announced that it would spend an addition $A14.5 billion, overwhelmingly in the public schooling system, over the next six years. A major Report released last year showed that the last few decades of neo-liberal cuts to public education have undermined the quality of outcomes. Australia now trails behind nearly every advanced nation in this respect. The Report called for a massive injection of funds into the public schooling system. So we should applaud the Government announcement. The problem is that it thinks it still has a major fiscal problem (deficit currently around 3.2 per cent of GDP). As a consequence it thinks it has to cut spending elsewhere to fund the public school initiative. This is a wrong logic for two reasons. First, real GDP growth is falling and unemployment is rising fast which indicates that we need more aggregate demand not less (or the same). Second, it has chosen to get the cash to help restore the credibility of the public schooling system from the higher education system. Destroy the future to save it sort of logic. Another mindless demonstration of its fiscal ignorance.

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Fiscal austerity undermines welfare now and then things get ugly in the future

The latest – EU Employment and Social Situation: Quarterly Review was released yesterday (March 26, 2013). The Press Release – summarises the main results. I will look into the full document in more detail another day. Today (March 27, 2013), the Australian Productivity Commission released a major study – Trends in the Distribution of Income in Australia – which provides a fairly detailed analysis of the “composition of the income distribution”. The connection is that fiscal austerity not only causes unnecessary damage now to the prosperity of the nations afflicted with these incompetent leaders, but it also undermines the future growth path of the nation. One of the many ways in which growth potential is being undermined is through the impact of unemployment and falling participation rates has on income inequality. The latter impact also negates key propositions that mainstream economists teach their students every day that there is a negative trade-off between efficiency and equity. So policies that promote more equitable income distributions are alleged to undermine economic growth. The evidence is exactly the opposite.

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Unemployment and Inflation – Part 10

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text during 2013 (to be ready in draft form for second semester teaching). Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.

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Australian labour underutilisation rate is at least 13.4 per cent

The Australian Bureau of Statistics released their latest – Persons Not in the Labour Force, Australia – release for September 2012 last week (March 7, 2013). This is an annual publication and provides a detailed breakdown of the demographics of those not in the labour force and the reasons for that status. In particular interest to me is the information the data provides on discouraged and marginal workers. The data allows us to reconstruct the labour force data, under certain assumptions, to generate a very broad indicator of labour underutilisation in Australia, which includes official unemployment, underemployment, and hidden unemployment. What this indicator reveals is that Australia is enduring massive wastage of labour and statements by the Federal Treasurer and other Ministers that we are close to full employment should be treated with the contempt they deserve. That is the subject of this blog.

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Unemployment and inflation – Part 4

Today I have had a major report to complete on “efficiency dividends” in government budgets (for a union), have a lot of travel ahead, and also want to progress my macroeconomics. Report complete except for summary, which I will finish on the plane tonight. So until then I am progressing the Modern Monetary Theory (MMT) text-book, which I am writing in liaison with my colleague and friend, Randy Wray. We are trying to get it completed for use in second-semester 2013 and so I am spending more time on it to meet that expectation. Today, I continue to develop the material on unemployment and inflation. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.

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I wonder what the hell I have been writing all these years

I have spent almost the entire time I have been in academic life – from the time I was a fourth-year student, onto Masters, then PhD and subsequently as an teaching and research academic – studying, writing, publishing, and teaching about the Phillips curve and the link between labour markets and inflation. I have published many articles on how full employment was abandoned and how it can be restored taking care to consider how an economy that approaches high pressure might cope with the increasing nominal demands on real output. I have advanced various policy options to resolve the problem of incompatible nominal demands on such output and provided the pro and con of each. I have published some very detailed papers on those questions and my recent book – Full Employment abandoned – went into all the tedious detail of how inflation occurs and what can be done about it. But, apparently, Modern Monetary Theory (MMT) ignores “the dilemmas posed by Phillips curve analysis” as one of its many alleged sins. I wonder what the hell I have been writing all these years

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Sport and doping – the spreading tentacles of capital

I ride a bike a lot. I raced a bike in European competition for many years. I also started the www-site – cyclingnews.com – which is now the largest of its type in the world. I started it as a way of bringing back news from Europe to my bike racing friends back in Australia who were starved of results and information about cycling. In the 1990s, I was regularly in contact with Lance Armstrong and spent time with him riding and recording his 1998 World Championship campaign in Maastricht. I knew team managers of some of the big teams and lots and lots of riders and other insiders. I know a lot about the insides of the sport – the bellissimo sport – the drug-riddled sport. One and the same. I also have a theoretical framework for analysing the practices in the sport that I think delivers understandings that go beyond the way the mainstream media react when some athlete tests positive to some substance that happens to be on one side of a very arbitrary and inconsistent line which demarcates legal and non-legal. Theses issues are dominating national news in Australia at present after the – Australiam Crime Commission – released the first of its reports on how drug and crime infested Australian sport is. It comes as no surprise.

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Keynes and the Classics Part 9

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text during 2013 (to be ready in draft form for second semester teaching). Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.

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Not even remotely correct

There has been a bit of fun in the last week, with the IMF accusing our previous conservative government (10 increasing surpluses out of 11 years in power – 1996-2007) of being the only period of profligate fiscal policy over the last 50 years. That is hysterical really because the government in question held themselves out as the exemplars of fiscal prudence and responsibility. They were, in fact, one of the most irresponsible managers of macroeconomic policy in our history, but not for the reasons that the IMF would identify. All this shows how far fetched the research that the IMF is spending millions of public dollars (donated by member governments) has become. One week they are admitting how wrong their forecasts are with millions losing their jobs as a result and the next week they are handing out medals for fiscal prudence and backhanders for wasteful spending. I was going to analyse the underlying IMF paper today because it is illustrative of why the IMF keeps making these fundamental errors. But I was sidetracked and got lost in some data and some other things. So the IMF tomorrow (maybe) and today a little walk through some trends which confirm why the IMF has a problem recruiting good economists. It all starts with their miseducation in our universities. The point is a casual look at the data shows that the mainstream of my profession hasn’t been even remotely correct in its statements over the last 4-5 years.

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Keynes and the Classics – Part 4

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text during 2013. Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.

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Treasurer wants policy to be driven by models that can’t beat a random walk

On Monday (January 7, 2012) – The culpability lies elsewhere … always! – I wrote about the unacceptably large forecasting errors from the IMF derived from models that informed their input into bailout packages etc, which in turn set the fiscal austerity agenda and as resulted in millions becoming unemployed. I was interviewed about this today by the ABC National Radio program – the World Today – and told the journalist that if errors of this size occurred in medicine, the practitioner would be jailed for professional negligence. A summarised transcript from the World Today programme is available here – Eurozone jobless rate hits record high. A few snippets from a 10 minute interview! I did another interview today about a paper that came out recently from the RBA, which largely admitted its forecasting record was inferior to what we might have gained from assuming a random walk (unemployment) or simple historical averages (real GDP growth). You have to see this incompetence not in terms of some technical boffins waxing lyrical in a research paper about a range of technical measures of their errors but rather, in terms of the damage that the policy that has been informed by these errors. Today we received more evidence of that damage in the form of the ABS publication – Job Vacancies, Australia (November 2011). The evidence is clear. Our economy is faltering because policy settings have been wrong. They have been wrong because the policy setting paradigm is wrong and this has led to the use of models which deliver predictions that cannot be sustained given the underlying dynamics of the monetary system that this ideology chooses to ignore.

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Modern Monetary Theory and environmental sustainability – Part 1

There is regular commentary here that seeks to argue that Modern Monetary Theory (MMT) is flawed, bereft or worse because apparently it avoids any discussion of the natural environment. This apparently arises from the inherent conclusion in MMT that growth in aggregate demand (and real GDP) is required to maintain high levels of employment, which are considered both economically and socially desirable. This is the first part of a two-part blog on this topic. We will see that MMT is highly sympathetic to the challenges posed by anthropogenic global warming (a catch-all term) and central policy indications that follow from an understanding of MMT (for example, the superiority of employment buffer stocks) lead to an understanding of how MMT is a green paradigm as opposed to mainstream (neo-liberal) economics and much of Post Keynesian thinking, the latter which relies on generalised expansion as the solution to entrenched unemployment. We conclude that those who seek to dismiss MMT because it doesn’t satisfy their particular pet solution to climate change issues have probably not read some of the earlier MMT literature nor understood fully what is required to develop and disseminate a new way of thinking about the economy. Further, MMT is not a theory about everything! What we will see is that when MMT advocates economic growth it does so with a very different view of what that economic growth might be comprised of and driven.

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The unemployed cannot save

I have written before about the obscene way the Australian Federal Government is treating the people who have been forced to live for extended periods on unemployment benefits as a result of the Government’s refusal to create enough jobs. The current dole payment is well below the poverty line in Australian and the Government has refused to lift it saying it would undermine the incentive for the recipients to seek work. The problem is, of-course, that there isn’t anywhere nearly enough jobs or hours of work being generated in the economy and at least 12.5 percent of workers are unemployed or underemployed and that proportion will rise in the coming year as a result of the Government obsessive pursuit of a budget surplus. But in Australia, not only does the government deliberately create unemployment but it then forces the victims of that failed policy strategy into humiliating schemes of income management, which the evidence now confirms is nothing more than another layer of managing the unemployed rather than advancing living standards.

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Macroeconomic constraints render individual action powerless

When recessions become prolonged and long-term unemployment rises, the conservative denial machinery always scapegoats the most disadvantaged by recommending cuts to welfare to make people more desperate. This is dressed up in terms that attempt to make this sort of policy sound reasonable – like we should all be adventurous and entrepreneurial. The facts are that mass unemployment represents a macroeconomic failure that can be addressed by expansionary fiscal and/or monetary policy. It has nothing to do with the provision of the miserly amounts that are given to the unemployed via income support arrangements. Cutting those benefits will not cure involuntary unemployment. In all likelihood, cutting benefits will make the aggregate demand shortfall that caused the unemployment to worsen. The result is that the cuts will only make the lives of the unemployed more desperate than they already are. It is time that the conservatives learned about macroeconomic constraints.

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Saturday Quiz – November 24, 2012 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Timor-Leste – beyond the IMF/World Bank yoke

I am hosting a workshop in Darwin today, the first CofFEE event since we established a branch of our research group here at the University in October 2012. The topic is the Economic Prospects for Timor-Leste and the discussion is oriented to broaden the economic narrative beyond the rigid and growth-restricting fiscal rules that the IMF and the World Bank have pushed onto the Timor-Leste government. The aim of my work generally is to develop more inclusive and equitable approaches to economic development, which emphasise full employment, poverty reduction and environmental sustainability. A complete understanding of Modern Monetary Theory (MMT) allows one to see the agenda of the multilateral organisations in a clear light. So while Timor-Leste has a major struggle ahead to achieve its strategic goals of becoming a middle-income nation by 2030, it would be advised to scrap its present currency arrangements and use its massive oil wealth to introduce unconditional and universal job guarantees as the starting point for a more coherent and inclusive development path.

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