90,000 jobs for 42 billion is a bad strategy …

Yesterday the Government announced its latest fiscal response to the rapidly worsening economic situation. They will spend $42 billion (mostly in 2009 and into 2010 to shore up aggregate demand. They estimate this will underwrite 90,000 jobs in the economy. That is not new jobs but existing jobs. They also estimate that the unemployment rate will rise to 7 per cent over the coming year which is around 300,000 people extra who will be without work. That will take unemployment towards 850,000 and underemployment will certainly rise in lock-step (already around 600,000) so you see the scale of the deterioration.

However, while I think the package is a step in the right direction, the Government has failed to really target jobs. If the Government had have introduced a Job Guarantee and paid the workers the current national minimum wage (with holiday pay etc) it could have hired 557,000 full-time equivalent workers for around $8.3 billion per year. Where does this figure come from?

Read more

Job Guarantee success in Argentina

In the New York times article (December 26, 2004), from Larry Rohter – Argentina’s Economic Rally Defies Forecasts – it is reported that the Argentinian economy has made a surprising comeback. Rohter writes “When the Argentine economy collapsed in December 2001, doomsday predictions abounded. Unless it adopted orthodox economic policies and quickly cut a deal with its foreign creditors, hyperinflation would surely follow, the peso would become worthless, investment and foreign reserves would vanish and any prospect of growth would be strangled. But three years after Argentina declared a record debt default of more than $100 billion, the largest in history, the apocalypse has not arrived. Instead, the economy has grown by 8 percent for two consecutive years, exports have zoomed, the currency is stable, investors are gradually returning and unemployment has eased from record highs – all without a debt settlement or the standard measures required by the International Monetary Fund for its approval.”

Read more

IMF now claiming that Japan has to inflict austerity when the government’s current policy settings a maintaining stability

It was only a matter of time I suppose but the IMF is now focusing its nonsensical ‘growth friendly austerity’ mantra on Japan. In a recent interview, the former Portuguese Finance Minister now in charge of the IMF’s so-called ‘Fiscal Affairs Department’, Vitor Gaspar claimed that Japan is now in a precarious position and must start to impose austerity. Recall last week that I concluded that – The IMF has outlived its usefulness – by about 50 years (April 15, 2024). The current interventions from senior officials such as Gaspar only serve to reinforce that assessment. The problem is that they are still able to command a platform and a significant number of people in policy making circles actually believe what they say. It would be a much better world if the IMF and its toxic ideology and praxis just disappeared off the face of the Earth. Then we could send all the highly educated officials to thought reassignment camps to allow their considerable intellectual capacity to search for cures to cancer or whatever.

Read more

Signs of weakening in the Australian labour market

Today (April 18, 2024), the Australian Bureau of Statistics released the latest – Labour Force, Australia – for March 2024, which shows that the labour market is weakening with employment falling and unemployment rising now that more normal patterns in behaviour after the holiday period disruption have returned. The good news is that full-time employment continued to rise but was more than offset by the loss of part-time work. The stronger full-time outcome meant that underemployment fell marginally. The rise in unemployment would have been worse had not the participation rate fell. The drop in both employment and participation is a signal of weakening. There is still 10.3 per cent of the available and willing working age population who are being wasted in one way or another – either unemployed or underemployed and that proportion is increasing. Australia is not near full employment despite the claims by the mainstream commentators and it is hard to characterise this as a ‘tight’ labour market.

Read more

The IMF has outlived its usefulness – by about 50 years

The IMF and the World Bank are in Washington this week for their 6 monthly meetings and the IMF are already bullying policy makers around the world with their rhetoric that continues the scaremongering about inflation. The IMF boss has told central bankers to resist pressure to drop interest rates, even though it is clear the world economy (minus the US) is slowing quickly. It is a case of the IMF repeating the errors it has made in the past. There is a plethora of evidence that shows the IMF forecasts are systematically biased – which means they keep making the same mistakes – and those mistakes are traced to the underlying deficiencies of the mainstream macroeconomic framework that they deploy. For example, when estimating the impacts of fiscal austerity they always underestimate the negative output and unemployment effects, because that framework typically claims fiscal policy is ineffective and its impacts will be offset by shifts in private sector behaviour (so-called Ricardian effects). That structure reflects the ‘free market’ ideology of the organisation and the mainstream economic theory. The problem is if the theory fails to explain reality then it is likely that the predictions will be systematically biased and poor. The problem is that the forecasts lead to policy shifts (for example, the austerity imposed on Greece) which damage human well-being when they turn out to be wrong.

Read more

Book review: Fiat Socialism by Carlos García Hernández

When I was in London recently, I caught up with my good friend Carlos García Hernández, who is a Spanish radical and has a book publishing business – Lola Books – in Berlin, which publishes in English, German, Spanish and Italian. He gave me a copy of his own recently published book (2023) – Fiat Socialism – to read on the way home. It carries the sub-title ‘Achieving the goals of socialism through modern monetary theory’. I promised him that I would write some comments about it once I had taken it all in, even though I had read and sent him comments on earlier drafts. So today that is what I am going to do. At the outset, it is an important book because it addresses many of the misconceptions that Marxists and socialist-leaning people have regularly demonstrated about Modern Monetary Theory (MMT). I am in accord with much of the content but depart critically from his endorsement of nuclear energy as a solution to the climate crisis.

Read more

From the archives – my early statements on the need for degrowth and the resistance they received from progressives

As part of a another current project, which I will have more to say about soon, I was trawling through early Internet archives of the Post Keynesian Thought (PKT) listserv archives and was reminded that I began my degrowth journey many years ago. Going back in time and coming across things that one has written is an interesting experience. In this case, I reflected on my changing narrative style, my naivety in places, and the continuity of my thinking over the course of my academic career. The following discussion is the product of my archival research for another project of the Post Keynesian Thought (PKT) discussion list archives. It has been an interesting exercise and brought back interactions, personalities and the like that I have forgotten about. Many on that list have since died (sadly). But what is established is that 30 or more years ago there was widespread resistance still within the progressive economics community to the idea that the destruction of the planet would require major systemic change. This resistance bears on the debates now between the dominant ‘green growth’ group who think capitalism aided by global financial capital can achieve the changes necessary to meet the climate challenge and the degrowth camp who want fundamental system and behavioural change. My writings in 1995 placed me firmly in the latter cohort.

Read more

Rinse and repeat – Truss chaos – the new benchmark

For years, those who want selective access to government spending benefits (like the military-industrial complex and other parasitic sectors), while claiming the government cannot afford to provide adequate income support to the most disadvantaged citizens have used various ruses to give an air of authority or legitimacy to their claims. So in the UK, the lie in 1976 by the then Labour government that it was going to have to borrow from the IMF to stay solvent has been regularly wheeled out. In Europe, it was the ‘tournant de la rigueur’ (austerity turn) introduced by the French government of François Mitterrand in 1983 that effectively cancelled the commitment to the progressive – Programme commun – that is often cited as a demonstration of the limited capacity of governments to resist the global power of the financial markets. The fact that it was progressive governments that instigated these events made it more emphatic – the Left essentially swallowed the fictions introduced by the Right and the corporate elites that governments were now powerless against the power of the financial markets. The macroeconomic contest was essentially ceded to the conservatives and it has been that way since. There is now a new ruse that the elites are using that the progressives are also spreading – the Liz Truss Ruse. This apparently tells us that governments must appease the financial markets or face currency destruction and rising bond yields. Like its predecessors, there is no validity to the claims. But the Left is so bereft that it cannot see through the smoke and mirrors. And that is why the world is in the parlous state that it is – the contest of ideas is non-existent. It is a case of rinse and repeat – except all is happening is lies and posturing is being recycled.

Read more

Inflation excluding volatile items is now falling back to around 2 per cent in Australia – despite the efforts of the RBA

Today (March 27, 2024), the Australian Bureau of Statistics (ABS) released the latest – Monthly Consumer Price Index Indicator – for February 2024, which showed that the annual inflation rate steadied at 3.4 per cent. Today’s figures are the closest we have to what is actually going on at the moment and show many of the factors that drove the sudden burst in inflation are now abating and the current factors that are significant are more to do with abuse of market power than overspending or excessive wage demands. Significantly, if we look at the All Groups CPI excluding volatile items (which are items that fluctuate up and down regularly due to natural disasters, sudden events like OPEC price hikes, etc) then the monthly inflation rate was zero and the annualised rate over the last six months is 2.5 per cent – which is in the middle of the RBA’s inflation targetting range. If we take the annualised rate of that series, over the last three months, then the inflation rate is 2 per cent, at the bottom of the RBA’s range. The general conclusion is that the global factors that were responsible for the inflation pressures are abating fairly quickly as the world adapts to Covid, Ukraine and OPEC profit gouging. This inflation was never about overspending.

Read more

Growing evidence that Covid has incapacitated a huge number of workers with little policy response forthcoming

Regular readers will know I have been assessing the evolving data concerning the longer-run impacts of Covid on the labour force. As time passes and infections continue, our immediate awareness of the severity of the pandemic has dulled, largely because governments no longer publish regular data on infection rates, hospitalisations and deaths. So the day-to-day, week-to-week tracking of the impacts are lost and it is as if there is no problem left to deal with. But data from national statistical agencies and organisations such as the US Census Bureau tell a different story and I am amazed that public policy has not responded to the messages – mostly obviously that in an era where populations are ageing and the number of workers shrinking, we are overseeing a massive attrition rate of those workers who are being forced into disability status from Covid. It represents a massive policy failure and a major demonstration of social ignorance.

Read more

Australian labour market – unemployment drops sharply – good news

Today (March 21, 2024), the Australian Bureau of Statistics released the latest – Labour Force, Australia – for February 2024, which shows that the weakening we observed over the holiday period has reversed and was probably due to variations in flow behaviour over the break that has become evident since the pandemic. As I noted in the January analysis, the changing holiday behaviour that has become evident (many people now working zero hours in January) makes it difficult to be definitive about the February result, which is excellent. Employment growth was strong as those zero-hour workers resumed work and the net job creation easily outstripped the rising participation rate. The drop in unemployment is a boost as is the drop in underemployment. However, there is still 10.3 per cent of the available and willing working age population who are being wasted in one way or another – either unemployed or underemployed and that proportion is increasing. Australia is not near full employment despite the claims by the mainstream commentators and it is hard to characterise this as a ‘tight’ labour market. The return to a 3.7 per cent unemployment – the level that was very stable in the period since mid-to-late 2022 makes a mockery of economists who think that interest rate hikes would always push up unemployment. And with unemployment and inflation falling, the current unemployment rate cannot be below some NAIRU, which also makes a mockery of the the RBA’s stated research and policy logic. The reality is that inflation has fallen as the supply factors abate and the interest rate hikes were totally unnecessary.

Read more

Claims that mainstream economics is changing radically are far-fetched

I have received several E-mails over the last few weeks that suggest that the economics discipline is finally changing course to redress the major flaws in the curricula that is taught around the world and that perhaps Modern Monetary Theory (MMT) can take some credit for some of that. There has been a tendency for some time for those who are attracted to MMT to become somewhat celebratory, even to the point of declaring ‘victory’. This tendency is not limited to the MMT public who comment on social media and the like. My response is that we are probably further away from seeing fundamental change in the economics profession than perhaps where we were some years ago – after the GFC and in the early years of the pandemic (which continues). My answer reflects the incontestable fact that the make up of faculties within our higher education systems has not changed much, if at all, and the dominant publishing and grant awarding bodies still reflect that mainstream dominance. There is still a lot of work to be done and a lot of ‘funerals’ to attend (à la Max Planck).

Read more

Keynes was wrong because he failed to consider class conflict

I was asked during an interview the other day from Paris whether I was a Post Keynesian. I replied not at all and explained that I have never felt that my ideas fit into that category although in a facile sense we are all post keynesian in a temporal sense. Most progressive economists would answer yes if confronted with that question, even most of the economists involved in advancing Modern Monetary Theory (MMT). My point of departure is that while there was a lot of important analytical material in Keynes’ writing that is worth preserving and integrating into, say, MMT, where Keynes went astray was his antipathy to the insights provided by Karl Marx. In particular, I consider that Keynes seriously misunderstood what the dynamics of the class conflict were within a capitalist mode of production. Keynes made major errors in his predictions that one can directly attribute to this blinkered approach to capitalism. I was reminded of this when I read an Op Ed in the Japan Times this week (March 10, 2024) – The economic future of our overworked grandchildren. This blinkered approach, which has fed into the modern Post Keynesian literature – which examines capitalism as if it is an ahistorical, neutral system of production and distribution – is a major reason that I do not associate my work with that school of thought.

Read more

Not trusting our political class is no reason to avoid introducing progressive policies

There is a consistent undercurrent against Modern Monetary Theory (MMT) that centres on whether we can trust governments. I watched the recent Netflix documentary over the weekend – American Conspiracy: The Octopus Murders – which reinforces the notion I have had for decades that there is a dark layer of elites – government, corporations, old money, criminals – that is relentlessly working to expand their wealth and maintain their power. Most of us never come in contact with it. They leave us alone and allow us to go about our lives, pursuing opportunities and doing the best we can for ourselves, our families and our friends. But occasionally some of us come into contact with the layer and then all hell breaks loose. The documentary started with a journalist being killed because he had started penetrating an elaborate conspiracy which began with the US Department of Justice stealing software from a company and then multiplied into money laundering scams (Iran contra), murder of various people who got in the way, and went right up to Ronald Reagan, George Bush and other senior politicians. It was a sobering reminder. I will write more about this topic in the upcoming book we are working on (with Dr L. Connors) but I was reading some articles over the weekend (thanks to Sidarth, initially) about the way the MGNREGA in India, which is a public job guarantee-type scheme has been corrupted as the ideology of the government shifted and it bears on this question of trust.

Read more

Australia’s growth rate declines further and danger of recession increases on the back of the policy squeeze

Today (March 6, 2024), the Australian Bureau of Statistics released the latest – Australian National Accounts: National Income, Expenditure and Product, December 2023 – which shows that the Australian economy grew by just 0.2 per cent in the December-quarter 2023 and by 1.5 per cent over the 12 months (down from 2.1 per cent). If we extend the September result out over the year then GDP will grow by 0.8 per cent, well below the rate required to keep unemployment from rising. GDP per capita fell for the third consecutive quarter and was 1 per cent down over the year. This is a rough measure of how far material living standards have declined but if we factor the unequal distribution of income, which is getting worse, then the last 12 months have been very harsh for the bottom end of the distribution. Households cut back further on consumption expenditure growth. Moreover, there is now a very real possibility that Australia will enter recession in the coming year unless there is a change of policy direction. Both fiscal and monetary policy are squeezing household expenditure and the contribution of direct government spending, while positive, will not be sufficient to fill the expanding non-government spending gap. At the current growth rate, unemployment will rise. And that will be a deliberate act from our policy makers.

Read more

E.P. Thompson and why class remains an important organising framework

I have been travelling for most of today so I have to keep this post short. Well shorter than usual. Edward Palmer Thompson – who died at the age of 69 in 1993, was a British writer who wrote the exceptional book – The Making of the English Working Class – which was a very long social history published in 1963, and considered essential reading for young leftists at the time. I read it in the early 1970s as part of my rites of passage into Leftist intellectual thought and while I prefer books that are less than 800 pages (-:, I found it absorbing. I was reminded of it when I recently read a UK Observer article (February 4, 2024) – What a legendary historian tells us about the contempt for today’s working class – by Kenan Malik.

Read more

Using the appropriate cost-of-living index (not CPI) reveal latest wage increases still trail inflation in Australia

Today (February 21, 2023), the Australian Bureau of Statistics released the latest – Wage Price Index, Australia – for the December-quarter 2023, which shows that the aggregate wage index rose by 4.2 per cent over the 12 months (up 0.2 points). In relation to the December-quarter CPI change (4.1 per cent), this result suggests that real wages grew modestly for the first time in 11 quarters. However, if we use the more appropriate Employee Selected Living Cost Index as our measure of the change in purchasing power then the December-quarter result of 6.9 per cent means that real wages fell by 2.7 per cent. Even the ABS notes the SLCI is a more accurate measure of cost-of-living increases for specific groups of interest in the economy. However, most commentators will focus on the nominal wages growth relative to CPI movements, which in my view provides a misleading estimate of the situation workers are in. Further, while productivity growth is weak, the movement in real wages is still such that real unit labour costs are still declining, which is equivalent to an ongoing attrition of the wages share in national income. So corporations are failing to invest the massive profits they have been earning and are also taking advantage of the current situation to push up profit mark-ups. A system that then forces tens of thousands of workers out of employment to deal with that problem is void of any decency or rationale. That is modern day Australia.

Read more

The Smith Family manga – Episode 12 – the Season 1 finale – is now available

Episode 12 – the finale for Season 1 in our new Manga series – The Smith Family and their Adventures with Money – is now available. We will let everyone calm down from the excitement for a little while to give us time to write and draw Season 2, which will begin on May 24, 2024.

In the meantime, have a bit of fun with it and circulate it to those who you think will benefit …

Read more

Australia labour market – weakening under the brunt of poor policy, 10.7 per cent underutilisation rate

Today (February 15, 2024), the Australian Bureau of Statistics released the latest – Labour Force, Australia – for January 2024, which confirms a weakening in the labour market. The signs of a slowdown were appearing in late 2023 and the January figures probably confirm that trend, although the changing holiday behaviour makes it difficult to be definitive. We will know more next month when the holiday period effects wash out. Employment growth was unable to even keep pace with the underlying population growth, which is why unemployment rose with participation constant. The best indicators that the labour market is weakening are the fall in the employment-to-population rate since November 2023 (down 0.5 points) and the sharp decline over the last few months in hours worked. It also appears that the slowdown is impacting teenagers disproportionately. There are now 10.7 per cent of the available and willing working age population who are being wasted in one way or another – either unemployed or underemployed and that proportion is increasing. Australia is not near full employment despite the claims by the mainstream commentators and it is hard to characterise this as a ‘tight’ labour market.

Read more
Back To Top