Australian workers enjoy modest real wage rises

Last Wednesday (May 15, 2019), the Australian Bureau of Statistics (ABS) released the latest- Wage Price Index, Australia – (March-quarter 2019). Private sector wages growth was 0.5 per cent in the March-quarter which remains a very low rate of growth. Over the year to March 2019, overall wages growth was 2.3 per cent and with the annual inflation rate running at 1.3 per cent, workers were able to enjoy some real wages growth. However, over the longer period, real wages growth is still running well behind the growth in labour productivity, which has allowed profits to secure a substantially increased share of national income.

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Some lessons from the political campaigning literature

At the event in Edinburgh recently, I was asked a question about polling. The question was along the lines of: if the Scottish people had overwhelmingly voted in the June 2016 referendum to Remain in the EU (62 per cent of the 67.2 per cent of eligible voters who voted) then why should the activists seeking independence not endorse joining the EU. Apart from the obvious reasons relating to the concept ‘independence’ and wanting to avoid membership of a neoliberal cabal, I replied by noting that if we conducted a poll about whether people thought taxes funded government spending, then we would find a much larger percentage agreeing with that proposition that the proportion that voted to remain in the 2016 Referendum. I then asked the audience: Would you consider that outcome legitimate or a symptom of a lack of education? The point is obvious. Polls play on ignorance as much as anything. The question of campaigning and polls also came up during the recent Australian federal election, where despite millions being spent on targetted advertising and activism, the results turned out very different to those expected and in most cases the dollars spent were largely ineffective (although note below). Further, there is a growing number of Modern Monetary Theory (MMT) groups forming around the world aiming to self-educate and push the public debate away from the mainstream economic narrative. The question that arises in each of these instances is how to actually push a new paradigm, a new way of thinking about concepts that permeate the very basis of our daily existence and have been ingrained in our perception in a particular way that this new way contests. That is no easy task. I have been doing some research and will report on the results in a series of blog posts starting today.

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The Weekend Quiz – May 25-26, 2019 – answers and discussion

Here are the answers with discussion for this Weekend’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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Australia and Scotland and the need to escape neoliberalism

Today’s blog post considers the Australian election and some issues that arose from my recent trip to Scotland – all of which bear on the progress of our work in the public debate. In Australia, we have just held a federal election and it was expected (and certainly the polls and bookies expected) that the Labor Party would win easily after 6 shocking years of conservative rule. Those 6 years have been marked by scandal, three leaders (Prime Ministers), massive internal divisions within the government, on-going climate change denial and a slowing economy. But Labor was thrashed in the election and I offer a few reasons why I think that happened. For Scotland, as they debate independence in the lead up to another referendum (as yet unscheduled) they have been struggling with the choice of currency issue and whether the new independent nation should join the EU. After initially thinking they would stick with the British currency for some time, the debate has swung heavily in favour of introducing their own currency as soon as is possible after the independence is achieved. Clearly, I have favoured that option for several years. But the overwhelming thinking is that the new nation should join the EU. That is a choice that I think would bring grief. And given the fact that the rUK will retain “continuing nation” status, a newly independent Scotland would be under significant pressure to use the euro. In other words, the currency choice and EU membership trends at present are incompatible. During my visit there I urged the activists to ditch their pretensions for EU membership and become truly independent.

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Australian labour market – weakness prevails

The Australian Bureau of Statistics released the latest data today – Labour Force, Australia, April 2019 – which reveals a weaker labour market with negative full-time employment growth. With rising unemployment and underemployment, the total labour underutilisation rate (unemployment plus underemployment) increased by 0.4 points to 13.7 per cent. That is a deplorable situation. There were a total of 1,855.1 thousand workers either unemployed or underemployed. The other disturbing outcome was that full-time teenage employment also fell. My overall assessment is the current situation can best be characterised as in a weak state. The Australian labour market remains a considerable distance from full employment. There is clear room for some serious policy expansion at present. In the current federal election campaign there is only talk of bigger fiscal surpluses.

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US Congress hypocrites lose the plot

The way in which Modern Monetary Theory (MMT) has become politicised and misrepresented is quite something. The critics have all fallen into the same pattern. They rehearse a few statements that they claim represents what MMT is about, and, which they know will shock people who read and/or listen to them, into concluding that the proponents of MMT understandings are crazy. A whole host of wannabees are now jumping on the bandwagon. And last week, 5 Republican Senators in the US Congress tabled a bill which claims it is “the duty of the Senate to condemn Modern Monetary Theory and recognizing that the implementation of Modern Monetary Theory would lead to higher deficits and higher inflation”. For a start, these goons haven’t even cottoned on to the fact that one cannot implement Modern Monetary Theory (MMT) – they are surrounded by it, every day of their lives. But then if they had got that far, they would have also realised that the rest of their arguments in the draft legislation is equally ridiculous. We are making progress though – and the more they come out of the woodwork the better. So far not a blow has stuck.

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Travelling today …

I am in transit for most of today on my way to Scotland for the first of the presentations in my current speaking tour. You can find details of all the activity during this tour on my – Events page. The blog will resurface on Thursday. But don’t despair – overleaf is a movie, some audio and some great guitar playing to while away the hours. Or there are plenty of past blog posts to re-read and think about.

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Some MMT considerations for an independent Scotland – Part 2

This is the second and final part of my series on Scotland as I prepare for a visit to Edinburgh and Glasgow this week. You can see the details from my – Events Page – and I urge interested readers to support the events that are run by activists. I will be talking about issues pertaining to the monetary arrangements that might accompany a move to Scottish independence. I have noted in the past that this is a controversial issue in itself that is also made more divisive because it has become intertwined with the vexed issue of EU membership. In Part 2 I provide a detailed critique of the so-called ‘six tests’ that the Scottish Growth Commission put forward as being determining factors as to when Scotland could move off the pound. I find the tests to be just neoliberal artifacts designed to keep Scotland on the pound indefinitely and thus curb any real independence. I also consider issues such as EU membership. And I provide some historical details of the way a monetary union might dissolve.

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The austerity attack on British local government – Part 2

I have been doing research on local government funding in the UK recently as part of preparation for a workshop I am presenting in London on Sunday, May 12, 2019. The workshop – Local Government Funding: Challenging the Status Quo – is primarily designed to tackle this issue from an Modern Monetary Theory (MMT) perspective. My brief is to speak about the way in which flawed understandings of the capacities of currency-issuing governments, combined with a vicious, ideological attack on working people from a government fully invested in neoliberal transfers to the elites, have ravaged the capacity of local government in the UK to deliver essential public services. See the Events Page for more details. It is a public event and I hope people support it. In – The austerity attack on British local government – Part 1 (April 30, 2019) – I examined the way in which the central government austerity had impacted on the major service areas in Britain and considered some of the motivations that have been driving this agenda. In this Part, I am examining the way in which these cuts have been distributed at the local government level. How their grants have been cut and how they have been forced to rely on their own income bases to maintain a semblance of service delivery. I also consider the shifting composition of service delivery in the face of these cuts from broader areas that define a sophisticated society to the raw essentials of human social care. I clearly cannot provide a complete account of what has been going on in two blog posts and that is not my purpose anyway. For example, I am not considering the controversial Universal Credit scheme and the way housing benefits, previously paid by councils have been rolled into that scheme. So bear that in mind when reading. Any reasonable person observing what has been going on in Britain would conclude that this period of Tory government has been a disaster for the well-being of citizens and regions.

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Marxists getting all tied up on MMT

Its Wednesday and so only a discursive type blog post (that is, very little actual research to report). I have been thinking about the so-called Marxist-inspired critiques of Modern Monetary Theory (MMT) and just the other day another one popped up in the form of the long article by Paul Mason. One of the things that I have noted about these critiques is that they deploy the same sort of attack against MMT that mainstream economics has traditionally deployed against Marxist economics. One would think they would at least be consistent. It won’t take me all that long to explain that.

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Strong US growth disguises worrying trends

Last Friday (April 26, 2019), the US Bureau of Economic Analysis published their latest national accounts data (advance estimate) – Gross Domestic Product, First Quarter 2019 (Advance Estimate) – which tells us that the annualised real GDP growth rate of 3.2 per cent surprised most commentators (for its strength). As this is only the “Advance estimate” (based on incomplete data) there is every likelihood that the figure will be revised when the “second estimate” is published on May 30, 2019. Underlying the strong headline figure, however, are shifting expenditure patterns in the US. Household consumption growth is declining and the contribution to growth was down from 1.7 points in December 2018 to 0.82 points. The personal saving rate rose from 6.8 per cent of disposable income to 7 per cent as households tightened up in the face of record levels of debt and sluggish wages growth. The investment rose and Gross private domestic investment also contributed 0.92 points to growth, up from 0.66 points. However, that contribution was driven mostly by a rise in inventories, which can signal two things – either unsold goods due to firms overestimating domestic demand or stock-building in expectation of stronger future spending. I suspect it is the first of these explanations. Further, net exports were a strong contributor (1.03 points) after undermining growth in the December-quarter 2018. Real disposable personal income increased 2.4 per cent (down from 4.3 per cent in December). Overall, and notwithstanding the strong growth, the problems for the US growth prospects are two-fold: (a) What will be the contraction in consumption expenditure growth with slow wages growth and elevated personal debt levels? Most of the consumption growth is coming because more people are getting jobs even though wages growth is flat. (b) Can net exports growth defy Trump’s trade policy? We will wait and see.

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The Weekend Quiz – April 27-28, 2019 – answers and discussion

Here are the answers with discussion for this Weekend’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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Eurozone horror story continues

Eurostat released the latest fiscal data for 2018 on Tuesday (April 23, 2019) which showed that – Euro area government deficit at 0.5% and EU28 at 0.6% of GDP – apparently a cause for celebration if you can believe the news reports that have accompanied the data release. The problem is that these numbers are meaningless without a context. And a relevant context is how well the monetary system is accommodating the advancement of material well-being among the citizens of Europe. On that ‘functional’ criterion, the horror story, more or less continues. Data relating to the real world (as opposed to the world of fiscal numbers on bits of paper) tell us that the damage from the GFC interacting with a dysfunctional monetary system design still lingers and the 19 Member States are still highly vulnerable to the next crisis. The austerity mindset remains and these fiscal outcomes indicate a failure of policy. Nothing to celebrate at all.

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Ridiculous MMT critiques distorting Scottish independence debate

In a few weeks I am off to Britain again to participate in a series of events. Two of these events will be in Scotland where we (Warren and I) will discuss, as outsiders, issues pertaining to the monetary arrangements that might accompany a move to Scottish independence. It is a controversial issue in itself, but, unfortunately, is also intertwined with the vexed issue of EU membership. And the complication then becomes that progressives, who might otherwise be attracted to the Modern Monetary Theory (MMT) way of understanding the monetary system, also exhibit the standard misconstrued Europhile view that the EU, neoliberal though it is, can be reformed and that an independent Scotland should be part of that mess. And, in doing so, they then take problematic positions on the currency question. So a sort of ‘nest of vipers’ sort of situation, from the Aesop’s fable – The Farmer and the Viper. As in the Fable, the Europhiles embrace of the EU will always pay them back in grief. Anyway, while I am always cautious discussing the pro and con of situations where I have no direct material stake and a less than full understanding of specific cultural and historical influences that are at work, the Scottish question is interesting and demonstrates many of points that nations should be cogniscant of when discussing monetary sovereignty. And besides I have to get up in Edinburgh and Glasgow in a few weeks so as a researcher I am trained to be prepared and seek the best understanding that I can of the complexity of the situation. I will be writing a few posts on the Scottish issue as I prepare for that speaking tour.

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The Weekend Quiz – April 20-21, 2019 – answers and discussion

Here are the answers with discussion for this Weekend’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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Australian labour market stronger month but the underutilisation rate rises

The Australian Bureau of Statistics released the latest data today – Labour Force, Australia, March 2019 – which reveals a stronger labour market with notable growth in full-time employment. The unemployment rate rose by 0.1 points to 5.0 per cent, but, only because the participation rate rose by 0.1 points. However, there is still underlying weakness in the labour market with underemployment rising by 0.1 points to 8.2 per cent and the total labour underutilisation rate (unemployment plus underemployment) rising by 0.2 points to 13.2 per cent. There were a total of 1,782.8 thousand workers either unemployed or underemployed. The other disturbing outcome was that, despite the stronger overall employment growth, the teenage labour market deteriorated further (particularly full-time work). My overall assessment is the current situation can best be characterised as in a moderate state. The Australian labour market remains a considerable distance from full employment. There is clear room for some serious policy expansion at present. In the current federal election campaign there is only talk of bigger fiscal surpluses.

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When the MMT critics jump the shark

I was sent two papers by Thomas Palley the other day. I have known him for decades. He continually disappoints. He has become one of those self-styled Post Keynesians who are trying to destroy the credibility of Modern Monetary Theory (MMT) for reasons that are not entirely clear although I know things I won’t write here. He thinks that if he drops a reference to Michał Kalecki, the Polish Marxist economist, into a paper, it qualifies one as being Post Keynesian. But, the reality is that his work (what limited academic work that he has published) sits squarely in the Neoclassical IS-LM synthesis tradition, which is not Post Keynesian nor heterodox at all. It is the antithesis of Post Keynesian. So I have never understood how he wants to appear Post Keynesian. Anyway whatever the answer to that little puzzle is, he definitely has a set on MMT and regularly recycles the same sorts of attacks, which, continue to have the same problems. In other words, he does not seem to (or does not want to) learn. He also accuses those who respond of dishonesty – playing the pure is me card – although his own work on MMT fails, in part, because he deliberately (or not) refuses to acknowledge the extant MMT literature, which addresses the issues he claims are missing in the MMT approach. Go figure!

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The Weekend Quiz – April 13-14, 2019 – answers and discussion

Here are the answers with discussion for this Weekend’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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US labour market steadies in March 2019

Last week’s (April 5, 2019) release by the US Bureau of Labor Statistics (BLS) of their latest labour market data – Employment Situation Summary – March 2019 – is still being affected by the variability in the sampling and benchmarking changes made by the BLS. However, working through those impacts, one concludes that the US labour market is still adding jobs, albeit at a slower pace than last year. The unemployment rate remains low (at 3.81 per cent) and the participation rate has come off a bit, indicating a slowdown in underway, although month-to-month variability should not be taken as a trend. It is also clear that there is still a substantial jobs deficit remaining and considerable scope for increased participation.

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The Weekend Quiz – April 6-7, 2019 – answers and discussion

Here are the answers with discussion for this Weekend’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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