A dose of truth is required in Europe

I was going to write about the True Finns today to report some research I am doing at present aimed at exposing how the “left” political parties have ceded legitimate progressive issues to fringe parties who then meld reasonably sensible economic issues with offensive social and cultural stances to create a popular but highly toxic political force. The True Finns who gained 19 odd per cent of the vote in the April 2011 national election exemplify this trend. The Euro crisis is accelerating the growth of the popularist political forces in Europe who are anti-Euro (pro-nationalist) and who will not (I suspect) tolerate the Euro elites impinging on national affairs and imposing a decade or more of enforced austerity. There are political movements/parties all over Europe now (for example, Vlaams Belang, Le Pen, Lega Nord etc) which fit this mould. It would be far better for the mainstream progressive parties around Europe to take the initiative and retake control of the policy debate on what should be bread-and-butter issues for the left. Sadly, these mainstream left parties have become totally co-opted by the neo-liberal agenda and speak the same economic voice as the conservatives. The problem then is that the public debate is distorted by untruths which further reinforce the malaise. A dose of truth is required in Europe.

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UK labour market – when “stabilising” means outright deterioration

The British Office of National Statistics released their Labour Market Statistics for December 2011 yesterday and it showed that employment continues to collapse in the UK and unemployment rises. I was at the airport this morning and heard a commentator invoke the words of Albert Einstein. They are very apt in this current economic climate – “The significant problems we face cannot be solved at the same level of thinking we were at when we created them”. The British Employment Minister gets empirical evidence that the Government’s economic strategy is causing massive damage to the economy (who would have thought) and told us that the collapse in employment and vacancies, the rise in unemployment and the record levels of youth unemployment are signs that the “labour market is stabilising”. The UK nor Europe nor anywhere will get out of this mess using the sort of thinking that created the crisis in the first place. Until we work that out and attack this political evil millions are heading for poverty.

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When markets fail

A repeating narrative during this crisis is that fiscal austerity is required in order to satisfy the “markets”, that amorphous collective of bond traders, gamblers, speculators, crooks and whatever else. The regular threats coming from the ratings agencies (those crooks who lied to investors in order to make profits via cosy deals with the originators of the “assets”) reinforce the idea that markets are the “regulators” of good judgement. Economics students are taught that one of the imperatives of government is to deregulate in order to allow the market signals to be clear and strong so we can act in accordance with the “markets” judgement of prudence. It is a paradigm built on a myth. Markets fail and easily become corrupted and arenas where criminals dominate. The signals they send are also deeply flawed and should not be acted upon. One of the lessons of this crisis is that our agents – the governments we elect – have to make markets work for us not the other way around. When markets fail to establish benchmarks that we do not consider to be in our best interests then it is time to reform them.

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It became necessary to destroy Europe to save it

The message to be drawn from this blog is that the dithering Euro bosses have done it again. Amidst all the bluster about stability and moving forward together all they have done last week (at the EU Summit) was further undermine the prospects of their region. The new rules that have seemingly been agreed upon will not be achievable and will generate even more financial instability as growth deteriorates further. In early 1968, amidst all the lunacy of the Vietnam War, an American general told a New Zealand reporter that the US decision to bomb a town full of civilians into oblivion was based on the logic that “It became necessary to destroy the town to save it”. Last week’s (December 9, 2011) – Statement by the Euro area Heads of State or Government – invokes that sort of logic except in this case the brutality is of a different degree and style. Neither action was justified in the circumstances that the decision-makers faced.

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Tightening the SGP rules would deepen the crisis

This week, the European Union Summit should see the leadership take the monetary union further into the mire and further away from an effective solution to their woes. The German Chancellor has vowed to create a new fiscal union across the Eurozone. She announced this plan to the German Parliament and declared she would push for a change to the treaty that established the common currency. Let me state at the outset – the plan as the press are reporting it – will not work. It is just the latest in a long line of Euro “solutions” that has fallen on its face soon after being announced as the way forward for the EMU. It won’t work because it doesn’t address the problem and will make changes that will make the actual problem worse. Europe is suffering a lack of aggregate demand and needs to address that head on by increasing public spending. Further constraining the capacity of governments to spend will make the situation worse.

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When you’ve got friends like this – Part 8

I noted a proposal overnight from so-called progressive American economist Dean Baker on Al Jazeera (November 28, 2011) – Time for the Fed to take over in Europe – which suggests that the US Federal Reserve Banks should insulate the US economy from the bumbling leadership crisis and “step in if the European Central Bank fails to deal with the debt crisis”. The proposal is that the US central bank should fund EMU nation deficits. This is another one of cases when friendly fire shoots the progressive movement in the foot. You can read the previous editions When you’ve got friends like this to see what the problem is. The simple point that far from protecting the US economy this proposal would likely cause a collapse in the currency and an inflationary surge that would divert attention of the US government away from creating employment, undermine the real standard of living of workers, and provide new ammunition for those who want to implement damaging austerity. For all that, the US government would only put the EMU nations into a holding pattern anyway.

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Austerity begets austerity

It is Friday and in Newcastle today it feels like Winter is back although I am aware that complaining about 19 degrees centigrade is somewhat disingenuous to the Northern Hemisphere and temperate region dwellers. But still we complain – more than one person today has said “isn’t it freezing”. So I have been bunkered down reading a lot. Which isn’t that much different to any other day real – hail, rain or shine. The European laboratory is dominating the daily news though and providing us with scripts that no professional playwright could conceive. This week we have seen the European Commission release its latest gee-whiz (you-beaut) plan to save Europe from itself and like all the previous announcements lots of speeches and photos were taken but the substance is missing. The only development that these plans seem to be leading to is a suppression of national democracy. That is my assessment of the EC’s latest proposal. From an economic perspective it maintains the rule – austerity begets austerity.

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The hypocrisy of the Euro cabal is staggering

As they say in the classics – “some of my best friends are” … and in my case I might have added German. The Euro crisis – that is, the crisis that has arisen because the creation of the Euro stripped member nations of their capacity to defend their economies against negative private spending episodes – is being worsened because of the incredible resistance by Germany and the Troika (EU, ECB, IMF). The Brussels-Frankfurt consensus – which claimed the creation of the Eurozone would engender stability and growth is shattered – irretrievably humiliated one might venture to say – yet the cabal that hides behind that “consensus” maintains power and influence. The hypocrisy that the cabal engage in is staggering. Their narrative is almost totally dislocated from the reality. They regularly disregard their own rules to favour the vested interests that keep them in power. And meanwhile, they are overseeing a collapse of all the ideals they claimed their system was designed to achieve.

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It is a disagreement about facts not ideology

In the wake of the decision by students at Harvard University to boycott an introductory economics lecture conducted by textbook writer Greg Mankiw, I thought this New York Times article (November 5, 2011) – Wanted: Worldly Philosophers – was interesting. It provides a much more reasoned assessment of what the issues might be than the response presented in the Harvard Crimson (the student daily) – Stay in School (November 3, 2011). The latter was signed “The Crimson Staff” and a link took us to an outlined photo of a “male” and the filename was entitled – noface_131x131.jpg. So no-one was even game to own up to the viewpoint. The male photo also suggests some inherent bias. I agree with the Crimson – walkouts should not be about ideology. But they are justified if a lecturer is offering material that is patently false and attempting to hold it out as the way the economy operates. That is why I would encourage students to walk out of mainstream macroeconomics lectures right around the globe. It is a disagreement about facts not ideology.

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Qantas should be nationalised (again)

At Melbourne airport last night the Qantas jets looked resplendent with their red flying kangaroo and the “Spirit of Australia” logos. I chuckled to myself about the sheer audacity of an airline that continues to promote itself as if it is our “national carrier” yet is systematically trying to undermine aspects of our culture that we value highly. It is dangerous territory to try to define a national identity. But in Australia we continually emphasise fairness as a hallmark of our national aspiration. Yet, reality is often different to our romantic perceptions and imagery. This blog is an extended version of an Op Ed I wrote for the Fairfax media today on the Qantas dispute, which has gained some attention abroad and been the topic of choice in Australia over the last week. The reality is that the gung-ho union-hating management of the airline are now engaged in a death battle with the union movement and aim to destroy working conditions once and for all and turn the airline into a cheap, low quality outfit principally flying out of Asia while still trading on the fact that we consider it to be (as a historical artifact) an Australian icon. The only way forward for Qantas is for the Australian government to nationalise it and get it flying in the national interest.

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When you’ve got friends like this – Part 7 – aka we need Plan C

The UK Observer Editorial yesterday (October 30, 2011) – The economy: we need Plan B and we need it now – was focuses on a so-called Plan B that has surfaced as the progressive democratic alternative to the now failed Plan A which the British government has been ideologically ramming down the throats of its citizens since it was elected in May 2010. Plan B was put together by the UK Compass Organisation and apparently (in the words of that organisation) represents where “where is the left on the economy”. My reaction is that if that is what goes for “left” these days then what do we call “right”. If this is what goes for progressive economic analysis then what happened to progressive. Today’s blog thus continues my theme – When you’ve got friends like this – and constitutes Part 7 of that sequence. The main thing I find problematic about these “progressive agendas” seem to be falling for the myth that the financial markets are now the de facto governments of our nations which becomes a self-reinforcing perspective and will only deepen the malaise facing the world. The essence is if Plan A has failed and Plan B is as outlined by Compass then the world desperately needs Plan C.

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The skill shortage ruse is re-appearing

I had a meeting today with well-known personnel management professional who is keen to fund some research on skills development. It is a topic that my research group has concentrated on for many years now. It is an interesting topic because it bridges the technical and the political. There is a pattern emerging, as it always does when we have recession, which seeks to deflect attention to what is really going in favour of promoting “faux” issues. The “skills shortage” claim by business lobby groups and peak bodies is one of the perennial examples of the way the elites deny that the system is failing to produce enough jobs and helps them deflect the blame onto individuals – the victims – the unemployed. The ruse is used then to pressure governments into further undermining the rights of workers and conditions of work (and reducing welfare benefits) which serve the interests of the elites. So the constraints on growth become constructed in terms of the laziness of the unemployed workers to invest in themselves. This narrative then diverts our attention from the real causes of stagnation and unemployment – not enough spending and not enough jobs. We fall for it every time.

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What if economists were personally liable for their advice

Economists have a strange way of writing up briefing documents. There is an advanced capacity to dehumanise economic advice and ignore the most important economic and social problems (unemployment and poverty) in favour of promoting non-issues (like public debt ratios). It reminds me sometimes of how the Nazis who were brutal in the extreme in the execution of their ideology sat around getting portraits of themselves taken with their loving families etc. The training of economists creates an advanced state of separation from human issues and an absence of empathy. Such is the case in a October 21, 2011 document – Greece: Debt Sustainability Analysis – which is labelled STRICTLY CONFIDENTIAL by its authors and was intended as input to the upcoming meeting of the Eurozone leaders – which is in fact the EU/ECB/IMF – aka and hereafter referred to as the “Troika”. As I read the document – in all its luridly obscene detail – I wondered what if economists were personally liable for their advice? The jails would be full of bankrupted economists. I am sure that the Troika economists would plead “only following orders” but then we have heard that before too.

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You do not increase spending by cutting it

Last weekend, on the eve of the G-20 meeting in Paris over the weekend, the Australian Treasurer was talking tough and giving ultimatums to our Northern friends – telling them that the “time for half measures is over. The time for action is here. So people will be looking for a comprehensive plan on October 23”. Of-course, in the Communiqué of Finance Ministers and Central Bank Governors of the G20 from the Paris meeting you don’t get any sense of urgency. Not once do they mention the word “unemployment”. The problem is that the world leaders remain in denial and still want us to believe that you can have “growth-friendly” cuts in spending. To increase spending you do not cut it.

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An understanding of MMT can energise the progressive fight back.

I did an interview in August with the Harvard International Review (published by Harvard University). It was finally published yesterday (October 16, 2011) – Debt, Deficits, and Modern Monetary Theory. I consider the principles that are outlined in that interview to provide a sound organising framework for progressive movements aiming to make changes to the current failed systems. I think Modern Monetary Theory (MMT) does provide insights to the general population that are not only obscured by the mainstream media but which if they are broadly understand will empower the 99% to demand governments redefine their roles with respect to the non-government sector. Part of that re-negotiation has to be to reduce unemployment and redistribute national income more equally. We will also be better placed to have a sensible discussion about the human footprint on the planet. The three goals – full employment, reduced inequality and environmental harmony – should be central to the current civic protests (such as OWS). But we also have understand that government has to be involved in the pursuit and maintenance of those goals. The problem is not government but the politicians we elect and the coalition between them and the corporate elites. An understanding of MMT can energise the progressive fight back.

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Australia – a very tepid labour market

The Australian Bureau of Statistics (ABS) published the Labour Force data for September 2011. It shows that a labour market that has arrested the decline evident in the previous two months but is barely keeping pace with underlying population growth and shedding working hours. The data is not bad but it is certainly not good and points to a weak economy overall. The best I can say about today’s data release is that the labour market is now not accelerating in reverse gear. How long that remains is anyone’s guess in these uncertain times where governments have largely abandoned any plans to provide fiscal support to help the economies grow. Overall, the Australian labour market is very tepid at present with a downward bias.

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A Way Forward

Sometimes, not often, I read some economic analysis that is sound. In the constant barrage of mainstream economics telling us that budget deficits are causing the crisis to linger; that interest rates are about to rise sharply because there is too much public debt; that inflation is about to go hyper because bank reserves have risen; that taxes will soon sky-rocket to pay back the debt; and all the rest of the lies that students are forced by lecturers around the world to rote learn, to find a well-reasoned piece of analysis is very refreshing. My attack dog propensities subside and I am able to think about what is being written – seeing where I agree and disagree and even learn some things. Such was my experience this morning when I read a new Report from the US-based The Way Forward Moving From the Post-Bubble, Post-Bust Economy to Renewed Growth and Competitiveness. It will not be a case of common sense prevailing because the forces against this type of clear thinking are many and powerful. But it is evidence that views that are not incompatible with Modern Monetary Theory (MMT) are being developed and thrown into the public debate. In this case, the authors also have some public profile. The ideas in this Report would provide a Way Forward.

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Redistribution of national income to wages is essential

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.

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There was once a country named Greece

Sometimes good things come out of bad – not often but sometimes.Yesterday was an example. I merrily set off for my bit over an hour flight from Newcastle to Melbourne with meetings organised in the late afternoon. Weather fine and warm. Upon approaching Melbourne airport we were informed that there were severe storms and after circling for an hour were diverted to Canberra – half-way back to Newcastle to refuel. After an hour doing we renewed our attempt to land in Melbourne and about 45 minutes later we succeeded. Phone calls made meetings rescheduled no problems. Except the airport was in chaos and we were stranded for 3 hours on the tarmac waiting for a gate. So 8 hours after leaving Newcastle – about 21:30 we leave the plane very frustrated and tired. See ABC News report. During the extended “flight” I read a detective novel. So what is good about that? Answer: being stuck in the plane I didn’t have the opportunity to read the WSJ, the FT, IMF papers, World Bank reports – in fact, I managed to avoid reading any financial or economic material. I ate dinner at around midnight – relaxed! But I lie. I did actually read the French financial paper La Tribune which carried the story – Les détails du plan secret allemand pour sauver la Grèce – which translates to “the details of a secret German plan to save Greece”. The headline grabbed me before sleep. As the zzzz’s started to overtake me I concluded that the Eurozone will be one less nation soon – there was once a country named Greece.

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Playing Ball is not a better way

On Monday, September 26, 2011 the British Shadow Chancellor gave a speech (his first major speech in that role) to the Labour Party Conference in Liverpool. The Full Transcript of the Speech is courtesy of the New Statesman. Balls ended his speech by saying “There is a better way” and I agree – the current macroeconomic policy settings in the UK are destructive and will be regretted. The problem is that Balls’ path to prosperity is not that better way which means the British people are in the same boat as a lot of electorates – caught between the devil and the deep blue sea. Playing Ball is not a better way.

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