The Governor of the RBA appeared before the House of Representatives Standing Committee on Economics yesterday (December 18, 2013). He told the Committee that the economic growth that we experienced leading up to the crisis in 2008 was unlikely to be repeated but his assessment was largely ideological in nature – in the sense that he implicitly eschewed a fundamental re-appraisal of the policy structures in the economy and the way in which national income is distributed. He thus rejected (tacitly) a return to fiscal activism claiming the public “debt dynamic” militated against that. He admitted the limits of monetary policy as an expansionary force. And he implicitly ignored the fact that the on-going failure of real wages to keep track of productivity growth meant that if household consumption expenditure was to grow it would see a return to increasing private debt to unsustainable levels, as occurred in the decade leading up to the crisis. He acknowledged that households were much more cautious now given the heavy debt levels they were carrying but didn’t acknowledge that this meant that the fiscal surpluses of that era were also unsustainable and that deficits were needed to offset the drain from the external deficits and the cautiousness of the private domestic sector. The journalists thus published all the wrong headlines and stories and the public is none the wiser. We remain locked into a neo-liberal option set that will deliver sub-trend growth and rising unemployment. The Governor even had the audacity to say that the unemployment rate (at 5.8 per cent) was low by historical standards, which in itself is false (depending on where history starts) and ignores the fact that our broad labour wastage exceeds 15 per cent of the willing labour force at present.

In 1944, Swedish economist Gunnar Myrdal published his famous 1,500 page work – An American Dilemma: The Negro Problem and Modern Democracy, which documented the conflict in American society driven by what he called the “American Creed”, which is about the “ideals of equality and liberty” and the obvious “moral lag in the development of the nation”, which at the time was referred to as “the Negro problem”. More recently, a book by American academic Nancy DiTomaso – The American Non-Dilemma – challenges the earlier notion and argues that whites in America are able to exploit racial inequality without doing “bad things” to blacks. Both works are interesting, but the more recent work fits with my current research because it introduces a new conflict, albeit unwittingly, that centres on whether you reap the seeds you sow.

There was an UK Guardian article today (September 23, 2013) – The American dream has become a burden for most – which argues that the narratives about the American dream are becoming increasingly recognised as a “delusional myth”. The discussion is relevant for a number of growing research agendas that attempt to construct a new understanding of what has been happening over the neo-liberal period (say, the last 3 decades), how the financial crisis occurred, why it is persisting, who underpins the well-funded campaign against budget deficits as a means of reducing unemployment and redistributing national income towards the bottom of the distribution, and how we might go about reforming/restructuring a global financial order that clearly does not work in the interests of all (make that almost everybody!). One such research agenda is emerging from the field of network analysis and some of the results to date provide a chilling picture of who controls the world financial markets and the governments and central banks that seek to regulate these markets. Essentially, if we want to engage in serious reform we have to unseat the power of some 161 individuals.

Today, I was (perhaps) going to discuss the Federal coalition’s so-called budget costings, which they have released this afternoon a day and a half before the federal election is held. The major policy proposals are not costed and the whole exercise makes a mockery of their claims to transparency. The Coalition hired three so-called experts to validate the “costings” (after the debacle in the last election when their were major mistakes in the arithmetic revealed) and those characters should be ashamed of themselves for giving their imprimatur to such a shoddy process. Even from the pittance of information they have released it is clear they do not understand the macroeconomic reality and will damage overall growth. So that is all I intend to say about that matter. But in the last few days I have done a few media interviews (radio) on an article that appeared in the local Fairfax press, but was originally published in the Strike! Magazine as – On the Phenomenon of Bullshit Jobs by LSE anthropologist, David Graeber. The title in the local article had changed to “nonsense jobs” – a sign of the conservatism of our press. The interviews I did were interesting because the article brings together a number of strands that further expose the weakness of the economic theory taught to students in most universities. That is much more interesting to write about here than the tawdry realities of Australian politics at present which can be described as indecent ignorance.

Writer of popular textbooks on macroeconomic myths, N. Gregory Mankiw has just put out a paper – Defending the One Percent – which is due for publication in the Journal of Economic Perspectives. The paper presents a narrative about the shift in the US personal income distribution (sharply towards higher inequality) since the 1970s in terms of rewards forthcoming to exceptionally skilled entrepreneurs who have exploited technological developments to provide commensurate added value (welfare) to all of us. As a result, rewards reflect contributions and so why is that a problem? In other words, the “left” (as he calls the critics of the rising inequality) are wrong and are in denial of reality. That view is unsustainable when the evidence is combined with a broad understanding of the research literature. Ability explains the tiniest proportion of the movements in income distribution. Social power and class, ignored by the mainstream economics approach, provides a more reliable starting point to understanding the rising inequality.

I was sent a copy of a survey report – Grand Old Party for A Brand New Generation – which was produced by the so-called College Republican National Committee, which is a conservative university-based organisation in the US aiming to recruit people into the GOP. What emerges is that a lot of opinions are expressed but once you consider them in detail the only possible conclusion is that American college students (inasmuch as this is a representative sample) are hopelessly mis-educated on these matters – like the rest of the population. The level of internal inconsistency with respect to positions taken on macroeconomic policies that is demonstrated in the survey results is quite stunning. But don’t blame the students, their teachers and political leaders let them down too. The economic debate around the world is so infested with neo-liberal myths that it is hard for any alternative viewpoints to get oxygen. Yet the data keeps rejecting the mainstream views, which, it seems, only serves to solidify them further. We are all caught in a morass of mis-education – and our societies are drowning as a consequence. Nero fiddled. We do something else. Civilisations do not last forever.