The Europhile Left use Jacobin response to strengthen our Brexit case

Regular readers will recall that Thomas Fazi and I published an article in the Jacobin magazine (April 29, 2018) – Why the Left Should Embrace Brexit – which considered the Brexit issue and provided an up-to-date (with the data) case against the on-going hysteria that Britain is about to fall off some massive cliff as a result of its democratically-arrived at decision to exit the neoliberal contrivance that the European Union has become. There was an hysterical response on social media to the article, which I considered in this blog post a few days later – The Europhile Left loses the plot (May 1, 2018). In recent days, two British-based academics have provided a more thoughtful response in the Jacobin magazine (May 18, 2018) – Caution on “Lexit”. Here is a response which was co-written with Thomas. As a general observation, I noted some prominent progressive voices citing their attack on us enthusiastically, one even suggesting it landed “some good punches” after taking “a while to warm up”. Well, I can assure Andrew that my face (nor Thomas’s) was the slightest bit puffy after reading the critique.

Read more

Die schwarze Null continues to haunt Europe

Last Tuesday (May 15, 2018), the new German Finance Minister Olaf Scholz stood up in the German Bundestag and delivered his first fiscal policy presentation. Not only was “die schwarze Null” (Black Zero) sustained but in his address, the new German Finance Minister made it clear that Germany would not entertain any expansion of the EU fiscal capacity (thus rejecting Emmanuel Macron’s proposals) and wanted to delay other ‘reforms’ that Germany had previously suggested they would support (beefing up the Single Resolution Fund and the creation of the European Monetary Union). For those Europhile progressives who have been hanging their hat on the hope that the takeover of the German Finance Ministry by the SPD would be the deal breaker that the Scholz’s presentation was nothing short of a disaster. He reiterated Germany would not be shifting in any major way and that Member States just had to buckle down and follow Germany’s fiscal example – surpluses as far as the eye can see. None of this was a surprise to me. It has been clear for some time that Scholz is just a continuation of Schäuble. Indeed some pointed statements from Bundestag politicians next day in their responses suggested just that.

Read more

Australian labour market remains stuck in a weak state

The Australian Bureau of Statistics released the latest – Labour Force, Australia, April 2018 – today which showed that the Australian labour market remains in a weak state even though full-time employment grew. Over the first four months of 2018, the labour market is decidedly weaker when compared to 2017. With relatively modest employment growth and rising participation, unemployment increased by 10,600 and the unemployment rate edged up to 5.6 per cent. The teenage labour market was the only bright spot although most of the employment gains were in part-time jobs. Further, underemployment fell marginally as did the broad labour underutilisation rate as a result of the bias towards full time work (also reflected in the monthly hours gain). Overall, my assessment is that the Australian labour market remains stuck in a weak state and is still a considerable distance from full employment. There is a lot of slack remaining and defies the foolish calls in recent months from those demanding reductions in the fiscal deficit.

Read more

Timor-Leste – challenges for the new government – Part 2

This is Part 2 of my mini-series analysing some of the challenges that the newly elected majority government in Timor-Leste faces. Yesterday, I documented how the IMF and World Bank had infused its ideological stance into the currency arrangements that Timor-Leste set out with as a new nation. That infusion is still apparent in the major commentary on Timor-Leste’s future options – specifically that the dollarisation should continue and that fiscal austerity should be pursued (relative to the current fiscal stance) because the nation will run out of money. What they mean is that the Petroleum Fund will eventually run out of money. There is a major difference in those statements although under the current currency arrangements they are identical. The ‘run out of money’ story is only applicable as long as the new government resists adopting its own currency. I also showed how the development process has been stalled by the austerity bias. In Part 2, I explore the currency issue directly and make the case for currency sovereignty which would require Timor-Leste to scrap the US dollar, convert the Petroleum Fund into its stock of foreign exchange reserves, and to run an independent monetary policy with flexible exchange rates, mediated with the capacity to use capital controls where appropriate. In Part 3, which will come out next Monday, I will discuss specific policy options that are required to exploit what is known as the ‘demographic dividend’ where the age-structure of the nation generates a plunging dependency ratio. To exploit that dividend, which historically delivers massive development boosts to nations, the shifting demographics have to be accompanied by high levels of employment. That should be policy priority No.1. I will also complete some Petroleum Fund scenarios to complement the policy advice.

Read more

Timor-Leste – challenges for the new government – Part 1

The citizens of Timor-Leste went to the polls on Saturday in an effort to elect a government. The reports last night indicate that Xanana Gusmao’s Party, in a three-party coalition Parliamentary Majority Alliance (AMP, which includes Taur Matan Ruak’s group) have toppled the incumbent Fretilin leadership. At the last election (July 2017), the Fretilin Party led by Mari Alkatiri was able to form minority government (with Democratic Party support) after a third party (KHUNTO) pulled out. A stalemate emerged. Some commentators called it a ‘constitutional crisis’, in that, the minority government could not function effectively. After some years of stable politics, Timor-Leste has been going through a period of political volatility as a new generation of politicians enter the scene and replace the older stagers who were dominant at the formation of this tiny island state in 2002. I won’t go into the politics of the election battle but both major parties promised to fast-track economic development to make some dent into a growing poverty problem. This is a country that has been enduring decades of foreign occupation and before that more than 250 years of colonial servitude. The latter (Portugal) imposed Catholicism on the people while the former (Indonesia) spat-the-dummy when they were finally forced out in 1999 and destroyed vital public and private infrastructure as they marched back across the border.

Read more

Australian fiscal statement 2018-19 – an election stunt, limited economic coherence

The Australian Treasurer brought down the 2018-19 Fiscal Statement (aka Budget) on Tuesday evening with much fanfare. The one message that dominated the cant and hypocrisy was that there will probably be an early election, maybe later this year. The Government is scandal-ridden, is enduring destructive infighting over leadership and policy direction, and has made some monumentally disastrous decisions in the current term of office (for example, denying the need for a Royal Commission into the financial sector, which they were bulldozed into finally accepting, and, which is now revealing massive corruption in our banks and insurance companies). Being so far down in the opinion polls means one thing. They use the annual ‘fiscal’ show to make themselves look good and dollop out (albeit with a lag) some scraps (tax cuts) to the masses, while reserving the huge tax cuts for the top-end-of-town. And, for the first time in as long as I can remember, I didn’t even bother to listen to the Treasurer’s speech. In fact, I could write some text generating code which would generate a ‘Budget Speech’ that was remarkably similar to the Treasurer’s speech. So why waste 30 minutes in the evening listening to it. I would prefer to be sorting socks in my sock draw!

Read more

Trade and external finance mysteries – Part 1

I have received many E-mails and direct twitter messages overnight and today following the ‘debate’ on Real Progressives yesterday, where trade issues and related financial transactions were discussed. I saw that section of the debate (after the fact) and concluded that only one of the guests knew what happened when nations exported and imported. But it appears that readers of this blog who listened to the debate were confused by what they heard. So, today, by request, I aim to clarify a few of these issues. They are in fact fairly simple to understand once you trace through the transactions carefully, so it is a surprise that basic errors were expressed in the ‘debate’. So here is the way Modern Monetary Theory (MMT) helps you understand trade transactions.

Read more

US labour market tepid – there is plenty of scope fiscal expansion

On May 4, 2018, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – April 2018 – which showed that total non-farm employment from the payroll survey rose by just 164,000 in April, which was an improvement on the very modest rise in March. The Labour Force Survey data, however, showed that employment only rose by 3 thousand) in April 2018 but was accompanied by a substantial fall in the labour force (236 thousand) which meant that total unemployment fell by 239 thousand. The unemployment rate fell to 3.93 per cent (from 4.07) but this does not signal a stronger labour market. There is still a large jobs deficit remaining. Finally, there is no evidence of a wages breakout going on. Taken together, the US labour market is showing no definite trend up or down at present and it is still some distance from being at full employment.

Read more

Education – a faux crisis, an erroneous ‘solution’ and capital wins again

One of the ways in which the neoliberal era has entrenched itself and, in this case, will perpetuate its negative legacy for years to come is to infiltrate the educational system. This has occurred in various ways over the decades as the corporate sector has sought to have more influence over what is taught and researched in universities. The benefits of this influence to capital are obvious. They create a stream of compliant recruits who have learned to jump through hoops to get delayed rewards. In the period after full employment was abandoned firms also realised they no longer had to offer training to their staff in the same way they did when vacancies outstripped available workers. As a result they have increasingly sought to impose their ‘job specific’ training requirements onto universities, who under pressure from government funding constraints have, erroneously, seen this as a way to stay afloat. So traditional liberal arts programs have come under attack – they don’t have a ‘product’ to sell – as the market paradigm has become increasingly entrenched. There has also been an attack on ‘basic’ research as the corporate sector demands universities innovate more. That is code for doing the privatising public research to advance profit. But capital still can see more rewards coming if they can further dictate curriculum and research agendas. So how to proceed. Invent a crisis. If you can claim that universities will become irrelevant in the next decade unless they do what capital desires of them then the policy debate becomes further skewed away from where it should be. That ‘crisis invention’ happened this week in Australia.

Read more

Australia’s national broadcaster puts out economic misinformation

I am using today to sketch out some ideas for my next book with Thomas Fazi as a follow up to Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017). I am also lying low from the Australian media given that it is less than a week to go before the Australian Treasurer delivers his annual fiscal statement (aka ‘The Budget’). The standard of commentary and hysteria about this event and what it means seems to be getting worse. So I have a radio blackout today and am listening to music as I work instead. But here is a snippet of what Australians are being fed – in this case from our national broadcaster who, with public money, sets out (probably in a state of ignorance) to deceive its listeners (and these days, its readers). It is shocking really to think that a public broadcaster in this day and age can render such a biased (and error-ridden) rendition of a subject matter that is so important.

Read more

The Europhile Left loses the plot

Regular readers will know that I have delved into social psychology in the last decade or so as a way of educating myself on why ideas survive when their logical consistency is lacking and their empirical content is zero. I have gained a good understanding of this phenomenon by exploring the literature on patterned group behaviour and the work by Irving Janis in the early 1970s on Groupthink. While I usually demonstrate instances of this destructive group behaviour on the part of the Right, it is also clear that that the Europhile Left is riddled with the problem. To the point of not even valuing debate anymore. At the weekend (April 29, 2018), the excellent Jacobin magazine published an Op Ed piece by myself and Thomas Fazi – Why the Left Should Embrace Brexit – which considered the Brexit issue and provided an up-to-date (with the data) case against the on-going hysteria that Britain is about to fall off some massive cliff as a result of its democratically-arrived at decision to exit the neoliberal contrivance that the European Union has become. The article was rather moderate in fact and considered the on-going failure of the apocalyptic arguments that have been introduced against Brexit, both before and after the Referendum. But the social media response (negative) has been at elevated levels of hysteria. Inane claims. Groupthink in action. And it is why the progressive cause is such a push over by the organised Right.

Read more

The World Bank should be defunded

Australia is currently being shocked on a daily basis with the revelations in our Royal Commission on Banking, which show that our financial services sector (banks, insurance companies, financial planning, etc) is deeply corrupt, with criminal behaviour clearly rife. Hopefully, many of the top executives and board members of these firms will be prosecuted and do time. Another ‘bank’ that has totally lost any sense of moral compass, not to mention effectiveness, is the World Bank. Its behaviour over the years has been scandalous. Earlier this year we learned that its so-called ‘Doing Business’ strategy deliberately manipulated its reporting to undermine a democratically elected government (Chile). And, last week (April 26, 2018), the World Bank released the Working Draft of its upcoming – World Development Report 2019: The Changing Nature of Work – where it attempted to pressure governments into widespread labour market deregulation, which if carried through would further disadvantage workers and further redistribute national income towards profits. The World Bank has outlived its purpose. It is now a seriously dangerous international institution and progressive governments should set about defunding it.

Read more

The Weekend Quiz – April 28-29, 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.

Read more

Forget European reform – the Germans have anyway

For readers who follow my Twitter account, you will be aware that occasionally I have have brief interchanges with various Europhiles who have an abiding faith in the capacity of the Eurozone to reform itself along progressive lines to make it resilient against economic cycles and capable of advancing the prosperity of all the citizens who share the currency. They were particularly incensed when my latest book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World with Thomas Fazi was published in September last year. Our argument has always been that Germany is Germany and as such there is little hope that the basic flaws in the EMU will be resolved any time soon. Well in the last week, the Europhile bubble has been well and truly pricked by the decision of new German finance minister Scholz to retain the hard-line order-liberal Ludget Schuknecht as the chief economist in the Finance Ministry. Signal: nothing is going to change in the EMU that matters.

Read more

Australian labour market – weakens further in March 2018

The Australian Bureau of Statistics released the latest – Labour Force, Australia, March 2018 – today which showed that the Australian labour market has weakened further in the first three months of 2018 and is decidely weaker when compared to 2017. Employment growth was virtually zero (4,900 net increase) in March 2018 and participation fell, suppressing the otherwise inevitable rise in unemployment, which would have accompanied the weak employment growth. Unemployment fell slightly but only because the participation rate fell. Had the participation rate been constant across the months, the unemployment rate would have been 5.7 per cent rather than the official rate for March 2017 of 5.5 per cent. Further, underemployment rose marginally as did the broad labour underutilisation rate, which stands at 14.3 per cent (nearly 1.9 million workers are either without work or do not have sufficient hours of work. The teenage labour market was slightly improved. Overall, my assessment is that the Australian labour market has weakened again in March and remains a considerable distance from full employment. There is a lot of slack remaining and defies the foolish calls in recent days from those demanding reductions in the fiscal deficit.

Read more

On the path to MMT becoming mainstream

Over the last few years, it is clear that Modern Monetary Theory (MMT) is achieving a higher profile and the attacks are starting to come thick and fast. I see these attacks as being a positive development because it demonstrates that recognition has been achieved and a threat to mainstream ideas is now perceived by those who desire to hang on to the status quo. Hostility and attack is a stage in the process of a new set of ideas becoming accepted, ultimately. Clearly, some new interventions never receive acceptance because they are proven to be flawed in one way or another. But I doubt the body of work that is now known as MMT will be discarded quite so easily given my assessment that is is coherent, logically consistent and grounded in a strong evidence base. As part of this evolution there are now lots of what I call ‘sort of’ contributions coming from mainstream commentators. One of the ways in which mainstreamers save face is to claim they ‘knew it all along’ and that the existing body of practice can easily accommodate what might be considered ‘nuances’ or ‘special cases’. We are seeing that more now, with the more progressive mainstream economists claiming there is nothing ‘new’ about MMT that it is just what they knew anyway. Even though that approach is disingenuous it is part of the evolution towards acceptance. People have positions to protect. These ‘sort of’ contributions demonstrate a sort of half-way mentality – a growing awareness of MMT but with a deep resistance to its implications. A good example is the UK Guardian’s editorial (April 15, 2018) – The Guardian view on QE: the economy needs more than a magic money tree.

Read more

The facts suggest Britain is not as reliant on EU as the Remain camp claim

I have been doing some analysis of British and European Trade patterns over the Post World War 2 period. They reveal some very interesting insights that are seemingly lost in the on-going war by Europhiles against Brexit. One of the recurring themes in the Brexit debate is the so-called importance of membership of the European Union to on-going prosperity of Britain through trade. What the data reveals is that British exports growth did not accelerate with accession to the EU in 1973 and after the introduction of the ‘Single Market’, British exports to the EU started to level off and then decline rather sharply. In other words, Britain has been diversifying its exports and is less reliant on the EU than it was say in the early 1990s. The data also shows that the creation of the Single Market hasn’t even boosted intra-EU or intra-Eurozone trade. Additionally, and laterally, the data suggests that the introduction of the euro has not expanded intra-EMU trade. The claims by the Euro-elites that it would were a major part of their justification for pushing through to the common currency. I consider this sort of evidence has been largely ignored by those in the Remain camp, who prefer to base their assertions on the highly questionable ‘forecasts’ coming from neoliberal-inspired ‘models’, which have so far demonstrated an appalling record of accordance with the facts. The data I have shown here doesn’t provide an open and shut case for Brexit. But it does show that the importance of EU membership to Britain’s prosperity is probably overstated and that Britain will prosper if its own policy settings are appropriate.

Read more

The distinguished economists just embarrass themselves

People are allowed to change their opinions or assessments in the light of new evidence. Diametric changes of position are fine and one should not be pilloried for making such a shift in outlook. Quite the contrary. But when the passage of time reveals that a person just recites the same litany despite being continually at odds with the evidence, then that person’s view should be disregarded, notwithstanding the old saying that a defunct clock is correct twice in each 24 hours. The US Congressional Budget Office (CBO) released its latest – The Budget and Economic Outlook: 2018 to 2028 (April 9, 2018) – and various commentators and media outlets have gone into conniptions over it. The economists that have responded – and they come with affiliations from both sides of US politics (although it is hard to differentiate separate ‘sides’ in the US anymore such is the demise of the Democrat Party) – have significantly embarrassed themselves. Their hysteria is not matched with the facts and they have been guilty of invoking these hysterical responses year-in, year-out for many years. A crack in a record, goes click, click, click, click and repeats ad infinitum. Sort of like the nonsensical arguments about US fiscal deficits that have appeared in the US press this last week.

Read more

US Democratic Party should be dissolved

Tomorrow, I will consider the furore that has arisen in the last few days after the US Congressional Budget Office released its latest forecasts, which showed the US deficit will rise, and, because they still insist in matching the deficit with bond-issuance to feed the corporate welfare machine, public debt will also expand. With an on-going jobs gap and depressed labour force participation rate, the rising deficit if properly targetted would be desirable. The rising public debt is a negative but only as a result of its unnecessary corporate welfare dimension rather than any concerns about capacity to pay etc. But today, given it is Wednesday and a ‘blog light’ day for me now I have only one related observation to make, which will contextualise tomorrow’s more detailed discussion. For today though I am mostly engaged in revising the final manuscript of our new, upcoming Modern Monetary Theory (MMT) textbook after receiving edits from the publishers, Macmillan.

Read more

US labour market weaker in March 2018

On April 6, 2018, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – March 2018 – which showed that total non-farm employment from the payroll survey rose by just 103,000 in March – or “edged up” to use the BLS words. The Labour Force Survey data, however, showed that employment fell (37 thousand) in March 2018 but was accompanied by an even larger fall in the labour force (158 thousand) which meant that total unemployment fell by 121 thousand. The weaker labour market means that underutilisation outside of the official labour force will have risen (‘hidden unemployment’). There is still a large jobs deficit remaining and the bias towards low paid work intensified in the first three months of 2018. Finally, there is no evidence of a wages breakout going on. Taken together, the US labour market is showing no definite trend up or down at present and it is still some distance from being at full employment.

Read more
Back To Top