Finland – more austerity is not the answer

Finland has been one of the Eurozone nations taking a hardline on Greek austerity and have consistently refused to support on-going bailouts of Greece. At the weekend, Finland went to the polls and tossed out the incumbent government and put in its place a centrist party that stood on a platform of a wage freeze and further spending cuts, allegedly to restore Finland’s competitive position. If that prospect wasn’t bad enough, the Centre Party will have to enter a coalition with the party that came second in the polls – the Finns Party, which is a ragbag anti-immigration group that wants Greece kicked out of the Eurozone. It is possible that Finland’s Parliament will not support any further European Union bailouts for Greece. Apparently Finn’s are buying the line that further and intensified austerity is necessary because of rising labour costs have undermined Finland’s capacity to compete in international markets as the demise of Nokia, so the narrative goes, illustrates. The last thing that Finland needs right now is more austerity.

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IMF – labour market regulations do not undermine potential growth

On the eve of the Annual Spring Meetings of the IMF and the World Bank in Washington last week, German Finance Minister Wolfgang Schäuble wrote an article in the New York Times (April 15, 2015) – Wolfgang Schäuble on German Priorities and Eurozone Myths – justifying the German stance with respect to the Eurozone crisis. He argued that the Eurozone was pursuing the correct response by placing a focus on “structural reforms”. He said that the IMF boss was in accord with this assessment and further structural reforms were necessary, including “more flexible labor markets”. He included labour market reform as part of a push for “modernization and regulatory improvements”. In denial of the basic rule of macroeconomics that ‘spending equals income’, Schäuble said that fiscal stimulus “is not part of the plan”. He might have read the complete text of the latest IMF World Economic Outlook (April 2015) – Uneven Growth: Short- and Long-Term Factors – before he sought comfort in the imprimatur of the IMF. That organisation seems to say one thing here and another there! It has become schizoid as it confronts the fact that its Groupthink sees itself as a major part of the neo-liberal free market (help the rich) putsch whereas its research economists find out that the facts don’t match the political (ideological) stance. The IMF should be defunded and recreated to serve positive purposes.

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Saturday Quiz – April 18, 2015 – 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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Friday lay day – progressives who are neo-liberal

Its my Friday lay day blog. Today I have been recording interviews about Modern Monetary Theory (MMT) , which will eventually become part of our MMT Educational Resources site on the Internet that will be linked to the MMT textbook that we are finalising in the coming months. It is actuall quite hard trying to talk to a camera. But we completed the first session today and I will put up a taste of the material when it is edited and produced. We will get better at it as we gain more experience in video production techniques. It took my mind of the policy debate going on in Australia at the moment about the best way to reduce the fiscal deficit. No commentator (other than a few like myself) have the temerity to ask: Why are we actually aiming to reduce the fiscal deficit when there is more than 15 per cent of available workers underutilised in some way or another (unemployed or underemployed). That would be like sacrilege to the kool-aid drinkers within the neo-liberal policy Groupthink. Either side of politics is just locked into a debate about the ‘best’ way to accomplish the task. You expect such cant from the conservatives. But Australia is also being let down by our so-called progressive organisations. It is a world-wide disease – the ‘left’ (which is more right than the right used to be) are infested with neo-liberal macroeconomics that they cannot see how compromised their positions have become in the public debate. The filming this morning took my mind of that dilemma.

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Australian labour market – holding steady in a weak state

Today’s release of the – Labour Force data – for March 2015 by the Australian Bureau of Statistics shows that the Australian labour market was stronger than in recent months but overall remains relatively weak. There was some modest growth in employment for the second consecutive month and better full-time employment growth. Employment growth just kept with the growth in the labour force (new entrants and a slight rise in participation) which meant that the fall in unemployment was virtually zero. The unemployment rate fell from 6.15 per cent to 6.12 per cent (1,500 persons). The teenage labour market remains in a parlous state and requires an urgent policy problem that the Federal government refuses to recognise or deal with. In general, there remains a need for more job creation stimulated by an increased federal government deficit.

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The skies above Britain predicted to fall down … again. Don’t fear!

You may not remember the prediction by the American Arthur Laffer in his Wall Street Journal Op Ed (June 11, 2009) – Get Ready for Inflation and Higher Interest Rates. As the US government deficit rose to meet the challenges of the spending collapse and the US Federal Reserve Bank’s balance sheet shot up as it built up bank reserves, he predicted “dire consequences … rapidly rising prices and much, much higher interest rates over the next four years or five years, and a concomitant deleterious impact on output and employment not unlike the late 1970s”. You may have forgotten that prediction because it was in a sea of similar nonsensical claims by mainstream economists locked in a sort of mass hysteria and only their erroneous textbooks to give them guidance. It is 2015, nearly six years after Laffer humiliated himself in that Op Ed. Inflation is low and falling generally. Interest rates remain very, very low (note his use of “much, much” to give his prediction some gravity). Gravity forces things to crash! But the doomsayers have learned very little it seems.

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Latest military expenditure data reveals the hypocrisy of austerity

Yesterday, the Stockholm International Peace Research Institute (SIPRI) released their latest data for – World Military Expenditure 1988-2014. In their – Press Release – we learn that total World military spending has fallen in the last three consecutive years although it “levelled off” in 2014. While the global trends are interesting (the shifting patterns between the big geo-blocks), I was interested in what was happening in the Eurozone in the era of austerity. I was also interesting in juxtaposing the military expenditure and social expenditure dynamics. What you learn is that Greece maintains its position as one of the largest relative spending nations on military items, spending nearly twice the proportion of its GDP compared to Germany and the Netherlands, two nations that lead the charge on imposing austerity. Further, the nations that are pushing the hardest for more austerity are those that benefit the most from Greek military expenditure. The hypocrisy is amazing.

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Unemployment makes you sick

An interesting study published in The European Journal of Public Health recently November 2014) – Length of unemployment and health related outcomes: A life course analysis – provides fairly unambiguous evidence that the changes in labour markets under neo-liberalism towards higher entrenched unemployment rates, increased casualisation of work, the lockout of graduates and the widespread deskilling of the workforce are eroding the health outcomes of the population. While most studies of the link between unemployment and health have focused on cohorts that endure continuous long-term joblessness (unbroken spells exceeding 12 months), this study is novel because it studies whether accumulated spells of shorter-term unemployment over a person’s lifetime are detrimental to their health. The reason that is relevant is because under neo-liberalism, many individuals are forced to eke out an existence in low paid jobs interspersed with spells of unemployment. The evidence in the former case (continuous) long-term unemployment is clear – unemployment makes the person sick and they get sicker the longer they are unemployment (both physically and mentally). The new study shows that long-term unemployment generated over a person’s life through a series of accumulated spells of shorter-term unemployment also is bad for public health and well-being. It means that the emphasis on austerity which causes cyclical effects to be worse (entrenched mass unemployment) is bad but also the main structural bias in growth periods towards casualised, precarious work is also bad for our health.

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Saturday Quiz – April 11, 2015 – 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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