It is a public holiday in NSW today – Labour Day – which originates from the “eight hour day movement, which advocated eight hours for work, eight hours for recreation, and eight hours for rest”. History will tell you that on April 21, 1856, the stonemasons and building workers on building sites around Melbourne, Australia (my home town) laid down their tools and marched to Parliament House to call for an 8-hour day. They were successful and were the “first organized workers in the world to achieve an eight hour day with no loss of pay”. Similar action saw the spread of the 8-hour day to the other states. Now Australia is in the farcical situation where 600 thousand workers cannot get any hours of work, 750 thousand cannot get enough, and millions are coerced by employer-friendly industrial relations legislation into working more hours than they desire just to keep their jobs. In recognition of the holiday I will write less than usual! The issue surrhttps://billmitchell.org/blog/?p=16325&preview=trueounding wages and conditions of work are crucial to understanding why the world entered the crisis and why it is persisting. At present policy makers, in response to the disaster that beset them in 2007-08, are skating around the edges of reform and are refusing to recognise that they will have to engage in a wholesale abandonment of neo-liberal policies before sustainable recovery will be possible. There is no more stark demonstration of this reality than in the area of wages.

When the Liberal Democrats went into coalition with the British Tories I was surprised how readily and brazenly their leadership was prepared to compromise the underlying principles of the party for power. While the Party Constitution claims they stand for – “a fair, free and open society” balancing “the fundamental values of liberty, equality and community, and in which no-one shall be enslaved by poverty, ignorance or conformity” and “that the role of the state is to enable all citizens to attain these ideals, to contribute fully to their communities and to take part in the decisions which affect their lives” it is clear that they have become partners in a policy regime that is the anathema of those ideals. By entering the coalition they have allowed a pernicious regime to be inflicted on the British people – one which is driving unemployment up and incomes down. The Liberal Democrats are having their Annual Conference this weekend in Birmingham and it is clear if the utterances of some of their members are anything to go by that the Party is struggling with their identity. The Deputy Leader for example said (September 17, 2011) that the job of the Liberal Democrats was “to rein in the ruthless Tories”. The reality is that it is the government that is ruthless and the Liberal Democrats are part of that government and give it the air it needs. I was unfortunate to listen to a BBC interview today with Liberal Democrats leader Nick Clegg and it left me with the impression that there is little to distinguish the coalition partners on the main economic issues. Both parties are infested with neo-liberalism and both fail to understand basic macroeconomics – that spending creates income.

I have noted in recent weeks how the deficit terrorists have started to suggest that Ireland, which led the world into enforced fiscal austerity, is now demonstrating how such a policy can spawn growth. I don’t know what planet these commentators live on but when you examine the most recently available data and understand what it is saying you would not conclude that Ireland is emerging as a picture of health. What I learn from the daily data that is coming out from that part of the world is that fiscal austerity is ensuring that Britain is tracking Ireland down the drain.

I know it is fashionable these days, particularly on the left to claim that class is dead – that its not about class any more – that left-right is dead – etc. But there was an interesting Bloomberg article (August 29, 2011) – Give Karl Marx a Chance to Save the World Economy – by one George Magnus, who is listed as a senior economic adviser at UBS Investment Bank. Confused? Why would a banker invoke the thoughts of the long-dead and usually vilified (by bankers) philosopher? For me it is always a normal part of thinking to go back to Marx because his dissection of capitalism – the sources of profits and the importance of seeing beyond the superficial exchange relations and thus understanding class relations embedded in production – has not, in my view, been bettered. And now a banker is suggesting that need to read Karl Marx.

Paul Krugman (August 20, 2011) was bemoaning the loss of intellectual values in the current debate when he referred to this Wall Street Journal article (August 19, 2011) – Why Americans Hate Economics. On face value I concluded that the WSJ had stumbled onto something – that the mainstream economics profession was not worth its salt. I was wrong though. The WSJ author was making a case that we should return to the economics that dominated the world prior to the Great Depression. The problem is that it is this way of thinking that represents the dominant paradigm today. It is the paradigm which has caused all the problems. It is this mainstream paradigm that people hate. The WSJ author is very confused. But then Paul Krugman’s response is hardly meritorious. So this is why the World hates economics – by which we mean mainstream New Keynesian macroeconomics.

There has been a lot of “opinion” expressed over the last few days about the causes of the British riots. If I had a meter to assess the ideological biases given breath in the press over this issue to date it would be swinging out there in the right-wing of opinion – “cultural problem”, “lawless lazy youth fed by the welfare state”, “criminality”, “intolerable monsters” all words I have read or heard in the media recently. Anyway who has my view is labelled a “left-wing cynic” who want to “makes excuses for thugs”. Opinion is after all just that so it is always of benefit to temper it with research evidence. Anyway, the short conclusion – supported by the research evidence – is that I blame the British government for the riots.

I did some research today on the outstanding US public debt – not because I think it is particularly important but because a journalist asked me yesterday during an interview – how much of the total US Treasury Debt is held by the US government – I said off the top of my head about 42 per cent which was a quick calculation based on work I did about 12 months ago and a rapid adding up off what I remembered from the monthly reports since then with a quick division thrown in. It turns out after I have updated the databases I keep that my “guesstimate” was not misleading (as at March 2011). The journalist then said – “so lets get this straight, the US government owes itself money equivalent to 42 per cent of its total outstanding liabilities?” Answer: yes. He then responded: “to fix the debt problem why wouldn’t they just write it off?”. Answer: I don’t see a US public debt problem. But because you do, then the answer is that for the most part they could just write it off as long as their were some additional legislative changes (for example, they would have to finance the operations of the US Federal Reserve in a different manner). So who owns the US debt?

In the last few days I have read more misinformation and downright lies from financial and economic commentators in the media than I have for the last year. The decision by the irrelevant S&P to get some attention for their corporate profit-making activities by downgrading US government debt has sparked a frenzy of nonsensical “analysis” which is as ridiculous as was the S&P decision. The fact is that the S&P decision is irrelevant as long as the US government makes it so. The danger is that the Government will think there is something to be addressed and the US economy will suffer as a result. As long as the US government realises who calls the shots the S&P decision will be irrelevant.