‘Progressive’ groups in Australia captured by neoliberal ideology

The Australian Council of Social Service (ACOSS), which represents income support recipients, in conjunction with Jobs Australia (a peak body for the not-for-profit job services providers) released a report last week (September 14, 2018) – Faces of Unemployment – which was a welcome return to a focus on joblessness and the need to provide more jobs, rather than the lame faux-progressive retreat to UBI advocacy that has dominated the policy debate for the last few years. However, once you start reading the analysis you realise that these supposedly ‘progressive’ organisations offer the same old neoliberal remedies to solving poverty and unemployment. They want: Compulsory, assisted job search, which is just coercion of jobless workers by Australia’s privatised job services industry that has an appalling record; 2. Wage subsidies in the private sector and Public sector wage subsidies – which never produce effective sustainable outcomes of sufficient magnitude to be called a solution; and vocational training, which is the same old ‘put workers on the training treadmill and shuffle the jobless queue’. This reinforces the theme I focus on a lot that the progressive elements in our society have become captured by the neoliberal mainstream and cannot think outside that frame. There is actually no mention or analysis of public sector job creation programs in the entire ACOSS/JA Report. Sadly, groups like ACOSS have a major public voice and the Federal government sees their advocacy as non-threatening because the type of policies they advocate are mainstream neoliberal and just more of what the Government, itself, thinks are viable. The irony (or disgrace) is that if these policies were effective then the ACOSS/JA Report would not have had to be written. Just imagine what they could have written about the “Faces of Unemployment” if a Job Guarantee program effectively wiped unemployment out. It would become a very short story of workers moving between jobs.

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Precarious private balance sheets driven by fiscal austerity is the problem

The media has been giving a lot of attention in the last week to the 10-year anniversary of the Lehman Brothers crash which occurred on September 15, 2008 and marked the realisation, after months of denial, that there was a financial crisis underway. Lots of articles have been published recently about what we have learned from this historical episode. I thought that the Rolling Stone article by Matt Taibbi (September 13, 2018) – Ten Years After the Crash, We’ve Learned Nothing – pretty much summed it up. We have learned very little. Commentators still construct the crisis as a sovereign debt problem and demand that governments reduce fiscal deficits to give them ‘space’ to defend the economy in the next crisis. They are also noting that the balance sheets of the non-government sector components – households and firms – are looking rather precarious. They also tie that in with flat wages growth and a run down in household saving. But the link between the fiscal data and the non-government borrowing data is never made. So we are moving headlong into the next crisis with very little understanding of the relationship between government and non-government. And we are increasingly relying on private sector debt buildup to fund growth as governments retreat. Everything about that is wrong.

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The Weekend Quiz – September 15-16, 2018 – 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 – employment growth improves but uncertainty remains

The Australian Bureau of Statistics released the latest – Labour Force, Australia, August 2018 – today which show that the Australian labour market showed better signs in August 2018 than in July but there are questions about the sensitivity of the results to the sample rotation used by the ABS to construct its survey. I expect the results to be revised downwards next month. With that said, employment growth was solid (dominated by full-time growth) and the participation rate rose. Taken together, unemployment rose slightly and the unemployment rate was steady. Monthly hours worked however hardly moved which is further reason to doubt the employment estimates. Overall, my assessment is that the Australian labour market remains in an uncertain state and, is still a considerable distance from full employment. There is clear room for some serious policy expansion at present.

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The divide between mainstream macro and MMT is irreconcilable – Part 3

This is Part 3 (and final) of my series responding to an iNET claim that Modern Monetary Theory (MMT) and mainstream macroeconomics were essentially at one in the way they understand the economy but differ on matters of which policy instrument (fiscal or monetary) to assign to counter stabilisation duties. In Part 1, I demonstrated how the core mainstream macroeconomic concepts bear no correspondence with the core MMT concepts, so it was surprising that someone would try to run an argument that the practical differences were really about policy assignment. In Part 2, we saw how the iNET authors created a stylised version of mainstream macroeconomics that ignored the fundamental building blocks (how they reach their conclusions about the real world), which means that they ignore important differences in the way MMT economists and mainstream macroeconomists interpret a given economic state. I will elaborate on that in this final part. Further, by reducing the body of work now known as MMT to be just ‘functional finance’, the iNET authors also, effectively, abandon any valid comparison between MMT and the mainstream, although they do not acknowledge that sleight of hand.

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The divide between mainstream macro and MMT is irreconcilable – Part 1

My office was subject to a random power failure for most of today because some greedy developer broke power lines in our area. So I am way behind and what was to be a two-part blog series will now have to extend into Wednesday (as a three-part series). That allows me more time today to catch up on other writing commitments. The three-part series will consider a recent intervention that was posted on the iNET site (September 6, 2018) – Mainstream Macroeconomics and Modern Monetary Theory: What Really Divides Them?. At the outset, the iNET project has been very disappointing. Very little ‘new’ economic thinking comes from it – its offerings are virtually indistinguishable from the New Keynesian consensus that dominates my profession. The GFC revealed how impoverished that consensus is. It has also given space for Modern Monetary Theory (MMT) to establish itself as a credible alternative body of theory (and practice). The problem is that the iNET initiative has been captured by the mainstream. And so the Groupthink continues. The article I refer to above is very disappointing. It claims to offer a synthesis between Modern Monetary Theory (MMT) and mainstream macroeconomics by way of highlighting “what really divides” the two schools of thought. You might be surprised to know that according to these authors there is not much difference – only that mainstream economists think that monetary policy should be privileged to look after full employment and price stability and MMT economists (apparently) think fiscal policy should have that role. The authors claim that for the on-looker these minor differences are opaque in terms of outcomes (if the policies are applied properly) and suggest that there is really no reason for any debate at all. Accordingly, the New Keynesian consensus is just fine and the mainstream economists knew all the MMT stuff all along. It is an extraordinary exercise in sleight of hand engineered by constructing the comparison in terms of two ‘approaches’ that cull the main aspects of each. The real issue is why would they waste their time. Degenerative paradigms (or research programs in Imre Lakatos’ terminology) typically try to absorb challenging paradigms that, increasingly have more credibility and appeal, back into the mainstream through various dodges – ‘special case’, ‘we knew it all before’, ‘really nothing new’, etc. This is Part 1 of my response. It won’t be an easy three-part series but stick with it and I hope it gives you a lot of insights into the abysmal state of the mainstream macroeconomics profession.

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The Weekend Quiz – September 8-9, 2018 – 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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Exploring the effectiveness of social media

Regular readers will know that I have become interested in the concept of messaging and language to help in the practical goal of widening the spread of Modern Monetary Theory (MMT) knowledge and putting really powerful tools into the hands of activists who build social and political movements. There are some great efforts underway (for example, Real Progressives in the US). On October 5, 2018, I will be launching the Gower Initiative for Modern Monetary Studies and running some workshops for them in London. This is another excellent activist group setting out and prepared to climb the hill and all the mainstream economics obstacles that are in their way. The aim is to build a network of these groups around the Globe (Italy, where there is already a solid network; Spain, similar; Germany – I will be there October 13); Finland, already solid activity; Scotland, I will be there October 10; Ireland, I will be there October 3-4, and elsewhere). On this theme, some current research, which Dr Louisa Connors and myself will unveil at the The Second International Conference of Modern Monetary Theory (New York, September 28-30), is the role that social media (among other things) plays in spreading knowledge. Regular readers will know I occasionally point to what I see as the futility of twitter firestorms where some MMT activists interact with some neanderthal-economics type who can’t get Zimbabwe typed quick enough and a drawn out back-and-forth of tweets, which can sometimes go for days, with increasing numbers of twitter addresses copied into the thread. They usually end in grief. The question is whether these social media platforms are suitable given what we know about effective framing and the type of language and strategy that is necessary to make that framing persuasive.

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Fiscal space has nothing to do with public debt ratios or the size of deficits

The Project Syndicate is held out as an independent, quality source of Op Ed discussion. When you scan through the economists that contribute you see quite a pattern and it is the anathema of ‘independent’. There is really no commentary that is independent, if you consider the term relates to schools of thought that an economist might work within. We are all bound by the ideologies and language of those millieu. So I assess the input from an institution (like Project Syndicate) in terms of the heterodoxy of its offerings. A stream of economic contributions that are effectively drawn from the same side of macroeconomics is not what I call ‘independent’. And you see that in the recurring arguments that get published. In this blog post, I discuss Jeffrey Frankel’s latest UK Guardian article (August 29, 2018) – US will lack fiscal space to respond when next recession comes – which was syndicated from Project Syndicate. Frankel thinks that the US is about to experience a major recession and that its government has run out of fiscal space because it is not running surpluses. We could summarise my conclusion in one word – nonsense. But a more civilised response follows.

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Meet Australia’s new Prime Minister

It is Wednesday and only a short blog post. I am also ailing with the flu and my head hurts. As I noted in Monday’s blog post – The conservative polity is fracturing – an opportunity for the Left (August 27, 2108) – Australia now has a new prime minister, the former Treasurer. His elevation has been celebrated as a victory for the ‘moderates’, given that his main contender, the guy who attempted the coup in the first place and succeeded in getting rid of the incumbent PM, was rather obviously extreme right in his views. Some are saying we have been saved by the fact that he didn’t succeed. But to call the new PM ‘moderate’ is to lose all sense of meaning to our language. He is a dangerous neoliberal ideologue who has inflicted untold pain on many people as he has made his way to the top.

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The conservative polity is fracturing – an opportunity for the Left

Regular readers will know that I have spent a lot of time writing about the demise of the Left political parties as they became subsumed with neoliberal economic ideology, which blurred the political landscape as the ‘centre’ moved to the Right. That topic was the focus of our current book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, September 2017). The neoliberal infestation has left these parties with declining electoral support, fractured internal organisations and cultures, and a seeming inability to abandon their flawed economic narratives. But there is a mirror image to this demise and that is playing out on the conservative side of politics. In Australia in the last week (but building for years) the far right conservative elements from within the government have brought down their own leader and our Prime Minister in a spiteful clash of ideologies between the more moderate elements in their party and the extremes out on the right. The internal tensions that drove this suicidal mission are being played out around the world. Think about the way that Trump is compromising the Republican party. Think about how Brexit is splitting Tory ranks in Britain. And so on. The problem for the conservatives is that citizens are realising that the neoliberal economic approach has failed to deliver on its promises. And that economic model is ‘owned’ by the conservatives. The adoption of neoliberal economics by social democratic parties is not part of their DNA. It is largely because their ranks have been infested by careerists who have come from the ‘elites’ and have little resonance with workers. The gaps in the policy space that these fractures have created is being occupied by extremist groups. It will be much easier for progressive parties to reclaim that space than it will be for the conservatives who are in the process of a death spiral. But to do that, the social democratic movements has to abandon every vestige of neoliberal economics – the concepts, policies and language and framing. That is the challenge.

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Public infrastructure investment must privilege public well-being over profit

One of the principle ways in which so-called progressive political parties (particularly those in the social democratic tradition) seek to differentiate themselves from conservatives is to advocate large-scale public infrastructure investment as a way of advancing public good. You can see evidence of that in most nations. Nation-building initiatives tend to be popular and also are less sensitive to the usual attacks that are made on public spending when income support and other welfare-type programs are debated. Capital worked out long ago that public spending on infrastructure provided untold benefits by way of profits and influence. In the neoliberal era, the bias towards ‘competitive tendering’ and public-private partnerships has meant that private profit tends to dictate where and what public infrastructure is built. The problem is that large-scale projects tend to become objects of capture for the top-end-of-town. Research shows that these ‘megaprojects’ typically deliver massive cost overruns and significantly lower benefits than are first estimated when decisions are being made about what large projects to fund. Further, evidence suggests that this is due to corrupt and incompetent behaviour by private project managers (representing their companies) and empire-building public officials. They lie about the costs and benefits so as to distort the decision-making processes in their favour. Any progressive government thus must be mindful of these tendencies and behaviours. A progressive policy agenda needs to be more than just outlining a whole lot of nice sounding public infrastructure projects that the government will pursue. The whole machinery of public procurement that has emerged in this neoliberal era needs to be abandoned and replaced with decision-making processes and rules that privilege the advancement of public well-being over profit.

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Politicians think the public is more right-wing and conservative than it actually is

It is Wednesday and so a short blog. I am working on a number of things at present but getting the material sorted for my next book with Thomas Fazi is a priority at the moment. My snippet today though is about a study that has just come out in the American Political Science Review – Bias in Perceptions of Public Opinion among Political Elites – by two US academics. The title is indicative. They explore what they argue is a disjuncture between what the politicians think voters want and what the voters actually want. This lack of congruence is also biased towards right-wing views. So, the politicians “believed that much more of the public in their constituencies preferred conservative policies than actually did”. They trace this bias to biases in the way the politicians get their information. The takeaway is that the progressive side of the debate has to be more active in framing distinctive messages and using multiple ways and avenues to communicate those messages to the candidates seeking election and the politicians that have been elected. And it must refrain from using conservative frames which advisors think neutralise difficult concepts etc. I think this sort of research provides some hope. I will be writing more about this in the weeks to come. And after that listen to some really classic minimalism from the C19th, which you might suspect on listening is very contemporary such was the genius of the composer.

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British labour market – low unemployment hiding a deeper malaise

The British Office of National Statistics (ONS) published its latest labour market data last week (August 14, 2018) – Labour market economic commentary: August 2018. The results are illuminating because they demonstrate how we must use broad concepts to appraise labour market health rather than just focusing on the official unemployment rate. A marked characteristic of the British labour market has been the near zero rate of growth in wages (and falling real wages) for some years, despite the claims that employment has reached record levels and the unemployment rate is now at levels unseen since the early 1970s. The research question is to dig deeper into the data to see what might be driving these relationships. The conclusion I reach is that the quality of employment has fallen somewhat over the last decade or so and the capacity of workers to successfully achieve wage settlements has fallen significantly as trade union membership has gone south. I am doing more formal research on this question to narrow down all the determinants and will report when I have more to say.

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Australian labour market weakens in July 2018

The Australian Bureau of Statistics released the latest – Labour Force, Australia, July 2018 – today which show that the Australian labour market weakened in July 2018 and one is lead to think that the June 2018 improvement was an outlier after several months of poor results earlier in the year. It looks like the labour market has settled back into that weak pattern. Overall employment growth was negative but this was all down to the teenage segment, where there were substantial losses of part-time work. Unemployment fell marginally but only because the participation rate fell by 0.1 points, which meant that the labour force contracted by more than employment. Overall, my assessment is that the Australian labour market remains in an uncertain state, but is on the weak side, and, is still a considerable distance from full employment. There is room for some serious policy expansion at present.

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A twitter storm of lies …

This is my short Wednesday offering, which will be quite short considering the last two days have been (necessary) epics. My three-part series created somewhat of a social media storm, which means people are interested in the topic and I think that is healthy. Democracy is strengthened if people educate themselves and contest propositions that are abroad in the debate. But, as I noted yesterday, social media storms have a way of getting out of control and out of the realm of being complementary to a more considered educative process and interaction. What the recent Twitter storm has demonstrated is that key people are just willing to make spurious accusations (aka lies) without having taken the time to consider the depth of the literature that is available on any topic. That is not helpful to democracy. It undermines it. Anyway, in this short blog post, I consider some of the responses to my three-part series. As a footnote, I have now retitled the three-part series “MMT is just plain good economics” rather than using the quotation from the British Shadow Chancellor’s advisor who said that “MMT is just plain bad old economics”. Framing. I took the points of several commentators on this blog seriously in this regard. Thanks.

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MMT is just plain good economics – Part 2

I am surprised at the hostility that Part 1 in this series created. I have received a lot of E-mails about it, many of which contained just a few words, the most recurring being Turkey! One character obviously needed to improve his/her spelling given that they thought it was appropriate to write along the lines that I should just ‘F*ck off to Terkey’. Apparently Turkey has become the new poster child to ‘prove’ Modern Monetary Theory (MMT) wrong. Good try! I also note the Twitterverse has been alight with attention seekers berating me for daring to comment on the sort of advice British Labour is receiving. Well here is Part 2. And because you all liked it so much, the series has been extended into a three-part series because there is a lot of detail to work through. Today, I revisit the fiscal rule issue, which is a necessary step in refuting the claim that MMT policy prescriptions (whatever they might be) will drive the British pound into worthless oblivion. And, you know what? If you don’t like what I write and make available publicly without charge, then you have an easy option – don’t read it. How easy is that? Today, I confirm that despite attempts by some to reconstruct Labour’s Fiscal Rule as being the exemplar of progressive policy making, its roots are core neoclassical economics (which in popular parlance makes it neoliberal) and it creates a dependence on an ever increasing accumulation of private debt to sustain growth. Far from solving a non-existent ‘deficit-bias’ it creates a private debt bias. Not something a Labour government or any progressive government should aspire to.

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The Weekend Quiz – August 11-12, 2018 – 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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MMT is just plain good economics – Part 1

On August 6, 2018, British tax expert Richard Murphy who is becoming increasingly sympathetic to the principles of Modern Monetary Theory (MMT) published a blog post, which recorded an exchange with one James Meadway, who is the economics advisor to the Shadow Chancellor John McDonnell in Britain. The exchange took place on the social media page of a Labour Party insider who has long advocated a Land Tax, which McDonnell is on the public record as saying will “raise the funds we need” to help local government. He called it a “radical solution” (Source). An aside, but not an irrelevant one. It reflects the mindset of the inner economics camp in the British Labour Party, a mindset that is essentially in lockstep with the neoliberal narrative about fiscal policy. Anyway, his chief advisor evidently openly attacked MMT as “just plain old bad economics” and called it a “regression in left economic thinking” which would ultimately render the currency “entirely worthless” if applied. He also mused that any application of MMT would be “catastrophic” for Britain. Apparently, only the US can apply MMT principles. Well, the exchange was illustrative. First, the advisor, and which I guess means the person being advised, do not really understand what MMT is. Second, the Labour Party are claiming to be a “radical and transformative” force in British politics, yet hang on basic neoliberal myths about the monetary system, which is at the core of government policy implementation. Astounding really. This is Part 1 of a two-part series on this topic, most of it will be summarising past analysis. The focus here is on conceptual issues. Part 2 will focus more specifically on Balance of Payments issues.

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Framing matters – the unemployed and the farmers

At present, Europe is sweltering in both relative and absolute terms as the harsh summer ensues. In Australia, we are in drought after an unseasonably warm and dry Autumn. Drought is no stranger to Australia but the frequency and circumstances of the current period coupled with what is going on around Europe (including the cold spell I was caught up in Finland in February while the North Pole struggled with heat) tells us that weather patterns are changing. There is now credible research pointing in that direction. But the drought in Australia is demonstrating another thing – the hypocrisy of the way we deal with unemployment and the unemployed vis-a-vis other groups in society that we endow with higher privilege, especially in this neoliberal era. Australia is experiencing a serious drought and Federal and State governments are tripping over each other to offer very large support packages to farmers and their communities to tide them over while their income dries up (excuse the pun). There appears to be no limit to the support these governments are announcing. The Prime Minister is wandering around rural Australia promising this and that to help farmers make ends meet. Whenever I see these special assistance packages being handed out to the rural sector, which is politically well-organised, I reflect on the plight of the unemployed. With unemployment at elevated levels in Australia, the decision to hand out economic largesse to the farmers reeks of inconsistency. The unemployed have diminishing chances of getting a job at present and the income support provided by government is well below the poverty line. That poverty gap is increasing and the Government refuses to increase the benefit claiming fiscal incapacity. The comparison of the vastly different way the government treats farmers relative to unemployed highlights, once again, that the way we construct a problem significantly affects the way we seek to solve it. The neo-liberal era has intensified these inconsistencies which have undermined the capacity of public policy to achieve its purpose – to improve the welfare of all citizens. The research question is: Why do we tolerate such inconsistent ways of thinking about policy problems and their solutions?

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