Here are the answers with discussion for the Weekend 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.
Welcome to The Weekend Quiz, which used to be known as the Saturday Quiz! The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.
I have been continuing the research for my next book (hopefully to be finished by May 2016) on the way in which the neo-liberals convinced policy makers including those in progressive social democratic political parties that the globalisation of finance and capital flows meant that the currency-issuing state was no longer capable of maintaining full employment through appropriate use of fiscal policies. The tenet we are entertaining is that the state never went away, it was just co-opted by capital to serve its interests. This will be a two-part blog and centres on a critical period in economic history in the mid-1970s, which marked the break with the full employment system which had moderated the excesses of capitalism. This was the period when the neo-liberal period dawned, and which steadily, opened the way for these excesses to reemerge, in all their indecent indulgence and destruction. It is also the period in which a series of economic myths crystallised into the mainstream narrative we know today, which opposes government deficits and allows unemployment to remain elevated at excessive levels. It is really important to understand what went on then because we are living with the legacy of the falsehoods introduced during this period.
Sometimes one reads a press article that is so obviously misleading that it is hard to know where to start with it. But perhaps the conclusion is the best place to start sometimes. Such is the case of a Bloomberg article (January 15, 2016) – What #ResistCapitalism Gets Wrong – written by American academic Noah Smith. Basically, the article attempts to attribute all of the post-Second World War prosperity to the “free market economy”, which he says is “a term many use synonymously with ‘capitalism'”. By the end of the article we learn that in fact that prosperity does not come from ‘free market’ liberalisation and that strong governments are essential for growth and reductions in inequality. The “boring old mixed economy” where, in Noah Smith’s words “government really is instrumental in creating growth”. Start with the conclusion and read backwards is my advice in this case.
I read an interesting article that was published on December 18, 2015 by the Center for Global Development, which is one those centrist-type research and advocacy organisations that lean moderately to the right on economic matters. The article – Europe’s Refugee Crisis Hides a Bigger Problem – discusses what it considers to be “three population related crises”, two of which at the forefront of public attention (because they are moving fast) – the “refugee crisis” and the “terrorism crisis”. The third is “Europe’s slow moving and in inexorable ageing crisis”, which is largely being ignored in the public debate. The article provides a basis to link the three crises together – in the sense that “Europe actually needs millions of migrants a year to mitigate its ageing crisis”. While I have some sympathy with the article, there are many omissions that reflect the bias of the author. Two major issues – mass unemployment and productivity growth are ignored completely. The emphasis in the article is on whether the public sector can afford not to bring in more people to offset the ageing of the EU28 population. That emphasis discloses the bias of the author and diminishes the strength of the article.
The elites are gathering for another junket aka the World Economic Forum, in the frosty, but salubrious surrounds of Davos this week (January 20-23, 2016). The Monday morning temperature there is forecast to be -22°C. According to the Forum’s homePage – Searching for the 21st century dream at Davos – the delegates are going to be reimagining life under the theme “Mastering the Fourth Industrial Revolution”, which is spin for eating a lot of gourmet food, drinking a lot of expensive wine, and, denying the presence of the very large elephant in the conference venue. I suppose it is easy for them to live in denial when the sort of policy regimes they have influenced have categorically failed and will continue to do so with the result that millions remain unemployed and poverty rates are rising. Apparently, the elites have to “‘defetish’ … dialogues about future technologies” and the “onset of a new era of ‘limits’ is a chance we must not miss to imagine and engineer the futures we want”. Here is some gratuitous advice to the elites – forget the robots; forget worrying about the so-called “inflection point … where social, economic and political crises meet rapid technological change, where progress feels like disruption, not promise”; and, instead, more fully understand why this obsession with “a new era of ‘limits'” (by which they mean fiscal limits on governments) has sidetracked any hope of progress and deliberately disrupted people’s lives in a way that dwarf the impacts of technological change.
Here are the answers with discussion for The Weekend 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.
Welcome to The Weekend Quiz, which used to be known as the Saturday Quiz! The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.
Today’s release of the – Labour Force data – for December 2015 by the Australian Bureau of Statistics show a labour market in retreat. Total employment growth was a negative (barely) and labour force participation fell marginally. While total unemployment declined, it was only due to the fact that the labour force shrank by more than employment contracted, which means that actual unemployment was substituted for hidden unemployment. The data continues to strain credibility with some quite bizarre monthly shifts. The cautious position is to look at the trend over the last several months and that suggests that the labour market has improved marginally. However, the teenage labour market remains very weak with no discernible upwards trend revealing itself yet. If the forecasted decline in private investment occurs over the next 12 months, then this modest improvement in the labour market over the last six months will not persist.
Today, some more analysis of the debate about globalisation and the capacities of the nation-state. We consider the debates in the early 1970s about the power of transnational corporations and the claims that they undermined the capacity of the nation-state to further the interests of the population. On the one hand, the free-market liberals claimed that the emergence of the transnational corporation was a move towards increased global efficiency and the nation-state, which served narrower interests, would be swept aside, along with its regulative structures, by this trend. Global welfare (and solutions to international poverty) would be maximised by the demolition of national borders by transnational capitalism. This view considered the nation-state to be ‘dispensable’ – that it only served narrow interests and the global organisation of production no longer required national governments to operate in this way. The Marxist position was, understandably, at odds with this view. It considered the nation-state to be indispensable to the growing needs of international capital. This was in the sense that governments could provide essential stability to reduce the risk of transnational operations. My position is more in line with the latter view although it clearly recognises the relevance (and power) of the national governments in which they choose to operate. Further, these transnational corporations are typically very large firms within the nations they operate. it is hard to differentiate the political clout that being large exerted from the influence of being global. Certainly, the early literature was not clear on that issue.