Today I am catching up on things I read last week. Each year, there are various publications provided to high school students telling them about all the programs that are on offer at Universities. The prospective students use these publications to help them decide which program they want to pursue after high school and at which university or other higher educational establishment they might want to pursue it at. There is a lot of lobbying by institutions to get favourable reviews. But there is never a catalogue published which advises students where not to study. So today I am noting three economics departments which should be on the blacklist of any student who is considering undertaking the studies in that discipline. They are on my blacklist because of the questionable competency of at least some of their staff members. I will expand this list over time!

The policy balance continues to be wrong in the US and elsewhere. While central banks are politically “free” to change their policy settings, fiscal authorities appear to be hamstrung by some absurd politics at present. In the midst of economic pain and suffering, governments (and oppositions) are proposing policy settings which will worsen that pain. They then sell the message that more pain will deliver good outcomes to their electorates without having a clue whether that it true or not. In doing so they defy all empirical experience and rely on defunct and failed theory for their authority. It is as if “They’re just sticking a finger in the air and guessing”. The other tragedy in all of this is that the monetary policy changes that have been invoked are largely ineffective in terms of expanding aggregate demand. This is in contradistinction to fiscal policy which is very effective in expanding spending, if used properly. Of-course, this policy mayhem is just a reflection of the dominance of the neo-liberal paradigm which actively eschews effective government involvement in the economy.

The OECD is held out by policy makers and commentators as an “independent” authority on economic modelling. The journalists love to report the latest OECD paper or report as if it means something. Most of these commentators only mimic the accompanying OECD press release and bring no independent scrutiny of their own to their writing. Government officials and politicians also quote OECD findings as if they are an authority. The reality is that the OECD is an ideological unit in the neo-liberal war on public policy and full employment. They employ all sorts of so-called sophisticated models that only the cogniscenti can understand to justify outrageous claims about how policy should be conducted. In an earlier blog – The OECD is at it again! – I explained how the OECD had bullied governments around the world into abandoning full employment. Now they are providing the “authority” to justify the claims being made by the austerity proponents that cutting public deficits at a time when private spending is still very weak will be beneficial. The report I discuss in this blog is just another addition to the litany of lying, deceptive reports that the OECD publish. These reports have no authority – they are just GIGO – garbage in, garbage out!

The Toronto G-20 leaders’ meeting is being held this weekend (June 26-27, 2010) and one expects it will endorse the position taken at the recent G-20 annual Finance Ministers and Central Bank Governors Meeting in South Korea. The communiqué released from that meeting illustrates how influential the deficit terrorists have become. At the Pittsburgh meeting of the G-20 leaders in September 2009 the communiqué talked about the sufficiency and quality of jobs. Six months later they had abandoned that call and are now preaching higher unemployment and increased poverty via austerity packages imposed on fragile communities. This is in the context of dramatic increases in global poverty rates in 2009 due to income losses associated with entrenched unemployment. Then I note that the recently released 2010 World Wealth Report shows that the world’s rich got richer during the 2009 recession. The only reasonable conclusion is that something is seriously wrong in the world we have constructed.

I have been trying to maintain a theme focusing on the absurdity of our economic systems and the way in which governments allow themselves to be held to ransom by a small group of largely unproductive financial traders and the associated institutions (credit rating agencies). I was reminded of this again today when I read a report on growing murders of trade union officials and the purging of working conditions in various countries as the economic crisis worsened. When you juxtapose this sort of news – about things that really matter – with the nonsensical antics of the financial markets in Europe you realise we have totally lost any notion of priority.

It is interesting how the big neo-liberal economic organisations like the IMF and the OECD are trying to re-assert their intellectual authority on the policy debate again after being unable to provide any meaningful insights into the cause of the global crisis or its immediate remedies. They were relatively quiet in the early days of the crisis and the IMF even issued an apology, albeit a conditional one. It is clear that the policies the OECD and the IMF have promoted over the last decades have not helped those in poorer nations solve poverty and have also maintained persistently high levels of labour underutilisation across most advanced economies. It is also clear that the economic policies these agencies have been promoting for years were instrumental in creating the conditions that ultimately led to the collapse in 2007. Now they are emerging, unashamed, and touting even more destructive policy frameworks.

When I saw the headline on this article – Time to plan for post-Keynesian era – in the Financial Times yesterday (June 7, 2010) I wondered which Keynesian era we were talking about. It was written by Jeffrey Sachs who is well-known for his anti-stimulus viewpoints. The upshot of his argument, however, is that he recommends deficit reduction strategies because the bond markets will get upset otherwise. At the same time he advocates medium-term investments in green technology and education which I support but which will not be consistent with deficit reductions.

I wrote the following for the local Fairfax press and it covers my reaction to today’s NSW state budget. I had 500 words and so the arguments are not well developed. It will be largely of local interest and I am posting it here for the records.

Today I was reflecting on a book I read a few weeks ago which has been picked up by progressives and the mainstream alike as a visionary construction of the latest crisis and its remedies. It is so comprehensively wrong that I am amazed celebrated. It reinforces another theme that the mainstream conservatives are increasingly rehearsing in the media and in policy debates – governments have exhausted their options and have to take fiscal austerity measures as the only way to bring their public debt ratios under control. The point is clear – there is very little concrete argument about how the proponents of austerity see growth returning. There is a lot on cutting peoples’ living standards via prolonged unemployment, the retrenchment of pension and health entitlements etc; transferring public assets via privatisations – but not a lot on how austerity promotes growth. Further, the idea that sovereign governments have exhausted their fiscal space is just a total fallacy. They may have exhausted their political space but that is quite a different matter requiring a different solution.

Yesterday I read an article by Noam Chomsky – Rustbelt rage – which documents the decline of the American dream and extends the malaise to Chinese workers. The hypothesis is that the workers in each country signed up for what they thought was a social contract where if they worked hard they would enjoy secure retirements. Then the meltdown undermines their jobs and they are forced to live on pitiful pensions. And while they watch the top-end-of-town enjoying the benefits of billions of bailout money from government the beneficiaries of these bailouts are leading the charge to take the pensions of the workers and turn them into “financial products” (privatised social security). This raises the concept of doublethink (a term coined by George Orwell) – which “means the power of holding two contradictory beliefs in one’s mind simultaneously, and accepting both of them”. That was what interested me today (in blog terms).

I followed the attacks on pro-Israeli New York Times war monger Thomas Friedman some years ago, which centred on his support for the invasion of Iraq and his repeated prognosis that it would only take 6 months to decide the fate of the conflict. The six months never really materialised and by 2007 he was arguing, just as vehemently as he argued for war, for US disengagement because the strategy had failed. He was imbued with the WMD mania that was used by the US, Australian and UK governments to “justify” the unjustifiable despite them knowing there were no such dangers. So he is a guy who obviously knows what he is talking about! In his latest column he tries his hand at economics with a similar intellectual arrogance and lack of judgement that he brought to the Iraq issue.

I have returned from the US after participating at the Fiscal Sustainability Teach-In and Counter Conference held in Washington D.C. last week. It was a good event and has stimulated a host of follow-up blogs from the activists who promoted the event. On the way home, I read the most recent report from Citi Group (who were saved from bankruptcy by public funds – they were among the first to have their hands out) which is predicting major sovereign defaults. It was clear that Citi Group was advocating very harsh fiscal austerity measures. How often have you heard the statement that the current economic crisis is evidence that “we are living beyond our means” and that the policy austerity that has to be introduced to “pay back the debt” is an inevitable consequence of our proliflacy – both individual and national?