External economy considerations – Part 6

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 publish the text sometime in 2013. Our (very incomplete) textbook homepage – Modern Monetary Theory and Practice – has draft chapters and contents etc in varying states of completion. Comments are always welcome. Note also that the text I post here is not intended to be a blog-style narrative but constitutes the drafting work I am doing – that is, the material posted will not represent the complete text. Further it will change as the drafting process evolves.

Read more

If you can have full employment killing Germans …

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.

Read more

Poverty rates rise in the UK as low income households bear austerity burden

Over the weekend, I was reading the new report from the British Social Mobility and Child Poverty Commission – State of the Nation 2013: social mobility and child poverty in Great Britain – which has just been presented to the British Parliament (October, 2013). The conclusions from the Report are not good. They find that the “falls in poverty seen over the last 15 years may be be reversing” and that “(a)bsolute poverty is rising”. The UK will likely miss its “2020 target to end child poverty”. The other shocking statistic is that poverty rates among those who work are rising and “(t)wo in three poor children are now in families where someone works”. There are now “5 million adults and children in working poor households” in Britain. This puts the skiver/bludger/welfare criminal narrative that the neo-liberals in Britain have been running into a different light. It cannot be said that workers are skivers – they get up in the morning (or sometime) and sacrifice the best part of their lives working for some capitalist or another. They are increasingly getting paid such that they cannot live above the poverty line. That is a failed state if ever there was one.

Read more

Close the borders – gangs of benefit cheats are coming!

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.

Read more

Environmental Sustainability and Economic Growth

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 publish the text sometime early in 2014. 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.

Read more

UK workfare plans just show how mean-spirited and ignorant we are

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!

Read more

More public infrastructure means higher taxes – False, go to bottom of the class

Metaphors! They are more than a fancy way of emphasising some point – that is, their power goes beyond meagre linguistic construction. The research suggests they are part of our deep mental or neural capacity, which we draw on to sort out facts and ideas. They are conceptual devices intrinsically linked to the way we think abstractly. Metaphorical language reinforces our ideology (worldview) and so it is no surprise that political parties have become very interested in framing their messages using simple and common metaphors which resonate with the way we feel about things. George Lakoff, a cognitive linguist, considers we do not make our political choices on the basis of rational dissection of competing facts and arguments but rather respond to central (or grand) metaphors with reinforce our worldview. We thus consider facts or argument within that framework of thought. I am doing a bit of work in this area as a way of understanding why central Modern Monetary Theory (MMT) propositions (which are so patently obvious and have strong explanatory capacity) evade acceptance among people, even those who express liberal perspectives (in this context meaning – are open to new ideas).

Read more

Saturday Quiz – August 31, 2013 – 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.

Read more

Fiscal space is a real, not a financial concept

Japanese economist Richard Koo recently (July 9, 2013) published his latest report on the world economy – Japan, US, and Europe face different issues – which updates some of the latest data available from the economies listed in the title. I am sorry that I cannot link to the Report as it is a subscription service (thanks to Antoine for my copy). I discussed some of Richard Koo’s ideas and how they sat with Modern Monetary Theory (MMT) concepts in this 2009 blog – Balance sheet recessions and democracy. While the basic concept of a balance sheet recession is important to grasp and the policy prescriptions that flow from it clearly point to the need for more fiscal stimulus, once you dig a little deeper into Koo’s conceptual framework you realise that he is very mainstream – more insightful than the average mainstream economist, who typically fails to even grasp the reality of the current situation, but mainstream nonetheless. And that means there are some things in his theoretical framework that are plain wrong when applied to a modern monetary economy

Read more

Violence, suffering and denial

I wrote about the way the recent neo-liberal narrative in the UK, that constructs the unemployed as gaming the income support system and about how they need to be weeded out by harsher activity tests etc, is a theme Australians will be familiar with in this blog – The victims become the perpetrators – the neo-liberal smokescreen. The discussion touched on the way we abstract from the human suffering that accompanies mass unemployment and how the dominant paradigm seeks to construct the unemployed as an “Other” different to ourselves and accountable for their own state. Unemployment is not seen as a violent act deliberately perpetrated by us (through the agency we give our governments – the “mandate”) but rather as a chosen outcome, a rational end of an informed choice. Perhaps not one we would take ourselves but rational nonetheless and therefore of no further concern. I have been reading some relatively oblique philosophical literature lately centred on conceptions of ethics and the way historical temporality forces us to take a moral perspective whether we like it or not – that is, denial of past action is a particular moral perspective. It bears on some work I am doing in remote Indigenous communities in the Northern Territory at the moment as well as broader debates that exist in society. Here are some notes and thoughts that arise from this sort of reading and reflection.

Read more

Austerity fails – its in the numbers

The latest Eurostat public finance data for Europe on July 22, 2013 – Euro area government debt up to 92.2% of GDP demonstrates the failure of the Euro policy agenda on its own terms. It is clear the indecency of the policy elites is reflected in the way they use nomenclature. Massive rises in unemployment and poverty is called modernisation or labour market reform. The argument bifurcates at that point. How can you argue with someone who thinks like that? But we all know what a financial ratio is. They are without nuance. A public debt ratio is what it is. And when the leaders say they are doing everything they can to reduce them and the cost all this “modernisation” is a price worth paying to reduce the public debt ratios we can conclude that they are failing if the debt ratios continually rise as they impose harsher austerity (sorry, increase the degree of modernisation). That is what the hard numbers are shouting. And that means that someone in Europe should just blow the whistle and call time is up and get rid of the whole swathe of policy leaders.

Read more

The ultimate boondoggle courtesy of slack government policy

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.

Read more

Australia’s “change” of government inherits old destructive narratives

Australia recently acquired a new (old) Prime Minister and a new Treasurer (Chris Bowen) as a result of the on-going machinations within the Australian Labor Party. It seems to have done the trick – at least at present – with the two-party preferred vote split 50-50 now instead of 42-58 in favour of the moribund conservatives who were steaming into office, it seemed, with no credibility at all – just a generalised dislike for the previous PM and her cabinet. Within two days, however, of taking his post, the new Treasurer agreed that it was the Government’s policy to drive unemployment up by maintaining its totally inappropriate (and failed) strategy to achieve a budget surplus. This was in the same week as more disastrous labour market data has been released. It seems that our “change” of government has just taken on all the old destructive narratives of the “former” regime. One neo-liberal Treasurer walks out and a clone walks in.

Read more

Latest Australian vacancy data – its all down to deficient demand

The continuing obsession among policy makers combines fiscal austerity and deregulation (particularly of labour markets) as the hope for prosperity. I know these are just catch cries that aim to obfuscate the underlying intent which is to redistribute real income away from workers. But even that conspiracy theory has certain problems when you realise that business doesn’t necessarily do very well in general when economies are locked in a recessive mire. The structural reform argument goes that growth can be engendered by deregulating the labour market to remove inefficiencies that create bottlenecks for growth even when fiscal austerity is slashing aggregate demand and killing growth. The 1994 OECD Jobs Study the provides the framework for this policy approach. The only problem is that it failed even before the crisis emerged. But with policymakers intent on slashing aggregate demand, which they know will kill growth, they have to offer something that they can pretend will generate growth. The structural reform agenda has zero credibility in the same way that fiscal austerity has zero credibility. The latest vacancy data from Australia continues to provide an evidential basis for rejecting both conservative agendas.

Read more

Britain continues to look like a failed state

Last week, the UK Department of Work and Pensions released a swathe of new – statistics – on poverty rates in Britain. While the Department tried as hard as it could to present the data in a misleading way and lied the facts, once analysed properly, are chilling indeed for a nation that pretends to be advanced and lectures Europe on its own misanthropic policy positions. I am sometimes asked when making public presentations how I judge the success or otherwise of public policy. I respond with a simple rule of thumb. The benchmark is not how rich the policy framework makes society in general but how rich it makes the poor! The conduct of governments in many nations over the last 20 years has not typified what a sophisticated and rich society should be doing to enhance the prospects of the weakest among us. The policies of the British government in recent years are the antithesis of sound public policy. In that sense, I judge Britain to be a failed state.

Read more

Full employment is still low unemployment and zero underemployment

You won’t see much debate or coverage of the desirability of making full employment the central goal of economic policy these days. The politicians, infested with neo-liberalism, do not admit they have abandoned full employment as a policy goal. Instead, they lie and wheel out various flawed analyses that try to make out that full employment now occurs at much higher rates of labour underutilisation in the past. Norway tells us that that proposition is a lie. In Australia, the government still tries to suggest that a state where more than 14 per cent of available labour is idle in one way or another represents close to full employment and a justification for fiscal austerity. We believe them because we have been seduced by the lies and our educational systems have downplayed critical scrutiny. But until we cut through the swathe of lies and misinformation we won’t get back to the bountiful state of full employment where not only workers enjoy higher incomes but dignity becomes a priority. Whatever else the liars say, full employment is still a state of very low unemployment and zero underemployment.

Read more

No joy for Australia’s low paid workers

The Fair Work Commission, the Federal body entrusted with the task of determining Australia’s minimum wage handed down its – 2012-13 decision – today. The news was not good for more than 1.5 million workers (out of some 11.6 million) who are reliant on award wages in Australia (that is, low-paid workers). These workers are typically found in the retail sector, personal care services, hospitality, cleaning services and unskilled labouring. They already earn a pittance and endure poor working conditions. The FWC gave the lowest paid workers an extra $15.80 per week (a rise of just over 2.6 per cent), which will at best maintain the current real minimum wage but denies this cohort access to the fairly robust national productivity growth that has occurred over the last two years. The decision also widens the gap between the low paid workers and other wage and salary recipients. The real story though is that today’s minimum wage outcome is another casualty of the fiscal austerity that the Federal Government has imposed on the nation which is destroying jobs and impacting disproportionately on low-paid workers. The FWC cited rising unemployment as a reason for its mean pay rise.

Read more

Buffer stocks and price stability – Part 5

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.

Read more

So infested with neo-liberalism that they cannot add up anymore

We will start with a quiz question today. Its a very hard question so you will have to think long and hard to get the right answer. If you were the government and had the choice of spending $A114,975 per annum (or $A315 per day) to derive zero benefit and cause significant harm to both society and individuals or spending $A63,074 per annum (or $A173 per day) to derive significant benefit with virtually zero harm being caused which option would you take? While the dollar figures are calibrated for the Australian situation, neo-liberal governments around the world have been able to convince us that the first option is superior. There is no logic to it but reflects the extension of the logic that individuals are responsible for themselves and there is no such thing as a macroeconomic or systemic constraint on individual choice and behaviour. It is that folly that is causing all the strife at present and will ultimately bring the system down.

Read more

Buffer stocks and price stability – 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 (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.

Read more
Back To Top