Another fictional characterisation of MMT finishes in total confusion

I am travelling across Europe today and so am just writing this in between various commitments. I will soon be back home in Australia and have received a lot of E-mails about the way the Australian media has been treating the recent upsurge in attention about Modern Monetary Theory (MMT). The short description is appalling – one-sided, no balance and hardly about MMT at all, despite dismissing our work as garbage. So par for the course really. While most of the articles have just been syndicated hashes of the foreign criticisms that have been published elsewhere from Krugman, Rogoff, Summers and others. But there was one article by a local journalist who tried to predict which side of history would end up looking good in all this and chose, wrongly I think, to throw his cap in with the New Keynesians. More alarmingly though is that this local effort clearly followed the international trend by setting out a fiction and then tearing into that fiction claiming to his readers that this was about MMT. He missed the mark and ended up totally confusing himself. So par for the course.

Read more

The NAIRU/Output gap scam reprise

It is Wednesday and despite being on the other side of the Planet than usual (in Helsinki at present) I am still not intending to write a detailed blog post today. I am quite busy here – teaching MMT to graduate students and other things. But I wanted to follow up on a few details I didn’t have time to write about yesterday concerning the role that NAIRU estimates play in maintaining the ideological dominance of neoliberalism. And some more details about the Textbook launch in London on Friday, and then some beautiful music, as is my practice (these days) on Wednesdays. As you will see, my ‘short’ blog post didn’t quite turn out that way. Such is the tendency of an inveterate writer.

Read more

The NAIRU/Output gap scam

There is a campaign on the Internet calling itself CANOO (the Campaign against nonsense output gaps) which one Robin Brooks, economist at the Institute of International Finance and former Goldman Sachs and IMF employee, is pursuing. You cannot easily access his written memos on this because the IIF forces you to pay for them. However, there is nothing novel about his claims and the points he is making are well-known. However, they are points that are worthwhile repeating at loud volume because the implications of the ‘nonsense’ are devastating to the well-being of workers, particularly those most vulnerable to precarious work and unemployment. So while the CANOO is just dredging up old issues I am very glad that it is. The concept of biased estimates of output gaps and so-called ‘full employment unemployment rates’ goes to the heart of the way the neoliberal economists, who dominate policy making units in government and places like the IMF, the OECD and the European Commission, create technical smokescreens to justify their dirty work. The more people find out about the basis of the scam the better. I have been working on this issue (estimating, writing and publishing) since the late 1970s as a graduate student. So welcome Robin Brooks, and make a lot of noise.

Read more

German growth strategy falters – exposes deep flaws in the EU architecture

Last week (February 14, 2019), Eurostat released its latest national accounts estimates – GDP up by 0.2% and employment up by 0.3% in the euro area – which confirmed that EU growth rates have declined significantly over the course of 2018. Moreover, the December-quarter data confirmed Italy is in official recession and Germany recorded zero growth (thereby avoiding the ‘technical recession’ category after contracting by 0.2 per cent in the September-quarter). Export expenditure accounts for nearly 50 per cent of Germany’s GDP – a massive proportion. It has adopted a growth strategy based on impoverishing its own residents through flat wages growth and a sustained proportion of low-paid, precarious jobs and setting its sail on sucking out expenditure from other nations (in the form of their imports). This has been particularly damaging to the Eurozone partners but also exposes Germany to the fluctuations in world export markets. Those markets are softening for various reasons (economic and political) and, as a result, German growth has hit the wall. The solution is simple – stimulate domestic demand, push for higher wages for workers, outlaw Minijobs, and start fixing the massively degraded public infrastructure that the austerity bent has starved. Likelihood of the German government adopting that sort of responsible policy. Zero to very low. There is the problem of the Eurozone from another angle. The main economy cannot play the game properly.

Read more

The EU is neoliberal to its core and captured by corporate interests

The aptly named – Corporate Europe Observatory (CEO) – “is a research and campaign group working to expose and challenge the privileged access and influence enjoyed by corporations and their lobby groups in EU policy making”. It is relentless in exposing the corporate scams that result in European Union laws being biased towards corporations at the expense of the well-being of the broader population. The research results they publish are diametrically opposed to the claims by the Europhile Left, especially those from Britain, that posit that the EU is the exemplar of global organisation, defending workers’ rights and all manner of good things, and with just a few reforms here and there is the hope for a progressive future. CEO’s most recent report (February 6, 2019) – Captured states: when EU governments are a channel for corporate interests – allow us to see how the EU machinery has turned the Member States into a “channel for corporate interests” – “middlemen for corporate interests”. My position is that CEO has it right and the Europhiles a dreaming.

Read more

The EU’s democratic deficit is intrinsic and unfixable without dissolution

Transparency International EU, is part of TIs “anti-corruption movement” focused on happenings in the European Union. It gets around 40 per cent of its funding from the European Commission, itself, although they claim this does not compromise their “institutional integrity and independence”. Let’s hope not! They have just released a report – Vanishing Act: The Eurogroup’s Accountability (February 5, 2019) – which confirms, in case one wasn’t already aware (looking at the Europhile Left here) that the core decision-making body in the European Union – the so-called Eurogroup – (the Finance Ministers of the Eurozone), which “exercises political control over the currency and … the Stability and Growth Pact” – is inherently shady and anti-democratic. The Report finds that the EU’s democratic deficit is intrinsic to its design and resistance to any effective reform. While the Report proposes some changes to the structure and operations of the Eurogroup it maintains the line that the growing lack of democratic oversight in key EU decision-making can be improved. I disagree. The problems are endemic. The DNA of the Eurozone architecture is neoliberal to the core. That ideology has permeated all the major EU institutions and has left the EU citizens without an effective voice in the decision-making process. To resolve that alienation, people are donning yellow vests and taking to the streets. Progressives should encourage these anti-EU protests and support those who desire to abandon these neoliberal institutions. The reformers cannot seem to grasp that the basic structure is the problem. Any steps in the right direction require that basic structure (the Single Market, SGP, etc) to be abandoned. And doing that means the whole house of cards falls down. And it cannot come quickly enough.

Read more

The conflicting concepts of cosmopolitan within Europe – Part 1

In the past week, the UK Guardian readers were confronted with the on-going scandal of wealthy British politicians and ‘peers’ receiving massive European Union subsidies under the Common Agricultural Policy (CAP). The article (January 27, 2019) – Peers and MPs receiving millions in EU farm subsidies – recounted the familiar tale –
“Dozens of MPs and peers, including some with vast inherited wealth, own or manage farms that collectively have received millions of pounds in European Union subsidies”. The story is not new and this scandal is just a reflection of the way in which the development of the European Union has contradicted the idealism that the Europhile Left associate with ‘Europe’. As an aside, it would be telling, one imagines to map the EU payments (and well-paid job holdings) with Brexit support – one would conjecture a strong negative correlation. This is a two-or-three part mini-series on the evolution of concepts of ‘cosmopolitanism’ in the European context. It is part of work I am doing for the next book Thomas Fazi and I hope to publish by the end of the year. In this blog post, I introduce the conflict that is inherent in the European Union, and the way the Europhile Left has been seduced by a concept of cosmopolitanism that bears not relevance in the reality of modern Europe.

Read more

EU deliberately subjugates prosperity to maintain its neoliberal ideology

While the Brexit shambles wound on in London, with the Prime Minister being walloped one day by her own party, and then the next given a victory, courtesy of some Labour Party bungling (the no-confidence motion), across the Channel things have been turning markedly sour. While the Europhile Left hold Europe dear to their hearts, the reality is that their dreamworld is falling apart. This is not only because of the incompetence of its polity but also because of the deliberate strategies of the polity to privilege ideology over economic reality. But if the Europeans continue down their ideological path, there mightn’t be much to exit from for the British. Late last week (January 14, 2019), Eurostat published their latest output data – Industrial production down by 1.7% in euro area – which as the title indicates is not good. Once again, the fiscally-starved Eurozone is trailing behind a sinking EU28. Over the 12 months to November 2018, industrial production in the Eurozone fell by 3.3 per cent and by 2.2 per cent in the EU28. The declines are across all product categories – capital goods, energy, durable consumer goods, intermediate goods and non-durable consumer goods. What we understand from this is that the policy makers in the European Union deliberately choose to subjugate economic prosperity and the well-being of people (jobs, incomes, savings, etc) to maintain an adherence to an ideology that purposely redistributes real resources and incomes to the top end of the distribution and provides lucrative paths for European Commission executives to move between these ‘political’ roles into highly paid banking and related jobs. It is neoliberal central, in other words, and is beyond reform.

Read more

Must be Brexit – UK GDP growth now outstrips major EU economies

I suppose Brexit is to blame for the fact that Britain is now growing faster than the major European economies. The latest ‘monthly’ GDP figures show that the British economy grew by 0.3 per cent in the three months to November 2018 and will probably sustain that rate of growth for the entire final quarter of 2018. This is in contradistinction to major European economies such as Germany (which will probably record a technical recession – two consecutive quarters of negative growth) with France and Italy probably following in Germany’s wake. I have made the point before that the growth trajectory of the British economy (inasmuch as there is one) is very unbalanced and reliant on households and firms maintaining expenditure by running down savings and accessing credit – which means ever increasing private debt burdens. With private credit growth weakening as the debt levels become excessive and the rundown of saving balances being finite, Britain will face recession unless the fiscal austerity is reversed. Earlier in 2018, the Guardian Brexit Watch ‘experts’ were continually pointing out that Britain’s growth rate was at the bottom of the G7 as evidence that Brexit was causing so much damage. So now European G7 nations are starting to lag behind, these commentators will have to find another ruse to pin their anti-Brexit narrative on. We also consider in this blog post some more Brexit-related arguments – pro and con – which reinforce my conclusion that a No Deal Brexit will not cause the skies to fall in.

Read more

Greece “neither thrived nor struggled” – the financial press alt world

It is my last blog post for the year. And we leave the year with not much gained from a progressive perspective. The mid-term elections in the US just swapped deficit-terrorist Republicans (who have been compromised by the big-spending Trump) with ridiculous PayGo Democrats, who are intent on repeating all their previous mistakes. The Brexit negotiations reveal how appallingly compromised the Tories have become and how venal the European Commission is. The British Labour Party fiscal rule shows that the next British government hasn’t yet jettisoned its Blairite past and its New Keynesian economic advisors are dogmatically taking Labour down a path it will regret. Italy has been bashed into submission by the European Commission bullies, which a week or so later, choose to turn a blind eye to France breaking the rules, because the Gilets threaten the whole show. And Germany still accumulates massive external surpluses in violation of European law and nothing happens. Happy New Year.

Read more

The Job Guarantee is more than a Green New Deal job creation policy

Everywhere I read it seems, the ‘Green New Deal’ appears. I wrote a bit about it last week in my evaluation of the latest US job numbers – US labour market moderated in November and considerable slack remains (December 11, 2018). The point I made there was that a shift to a green economy would possibly generate around 21 million jobs (14 per cent of total US employment), which given reasonable estimates of excess capacity would require a huge shift in the employment structure and multiples of the available idle labour supply. Of course, that is the objective – to shift workers from fossil fuel, carbon intensive industries into sustainable activities. That is no easy task and would require a fundamental shift in the government-market balance in terms of resource allocation. The market alone will not accomplish that shift in a desirable manner. Cue – more regional and occupation planning. I have also been seeing an increasing number of Tweets talking about a ‘Just Transition’ framework, something I have written about in the past. And there are now Tweets out there equating that with a Job Guarantee. At that point, we get ahead of ourselves. We must see the Job Guarantee in perspective and not ask it to do too much. That is what this blog post is about.

Read more

IMF Euro hitman in denial of the reality that the monetary union has become

The IMF hitman in Europe, one Poul Thomsem recently published a European Money and Finance Forum (SUERF) Policy Note (October 2018) – A Financial Union for the Euro Area – where he basically told us that any changes that the IMF will allow to occur in the Eurozone architecture will be minimal and will not stop Member States “from being forced to undertake large pro-cyclical fiscal adjustments when the next shock or major downturn hits”. The term “large pro-cyclical fiscal adjustments” means harsh fiscal austerity at the same time as the non-government sector spending in those Member States is collapsing. Fiscal policy thus reinforces the non-government spending withdrawal and worsens the outcome for employment, growth, income generation etc. Why? Because “all member countries” must “respect the Stability and Growth Pact”. End of story. Welcome to the Eurozone dystopia – the world where governments must follow rules set by technocrats which are incapable of delivering sustained prosperity for all but clearly suit the top-end-of-town. He then waxed lyrical about a whole set of neoliberal financial market reforms that the IMF is proposing which will further diminish the capacity of the Member States. But, at that point, he just starts to dream. The Member States are already deeply suspicious of the financial reforms that have been introduced to date, ineffective as they are. They are not about to cede more power to Brussels and Frankfurt any time soon.

Read more

Britain should reject the Brexit ‘agreement’ but proceed with the exit

It is Wednesday, and only a short blog post beckons today. I have restrained myself from commenting on Theresa May’s unbelievable Brexit deal, which has the dirty paws of the European Commission all over it. Regular readers will know that if I had have been a voter in Britain in June 2016, I would have resolutely and happily voted in favour of Brexit. And if I was a British Parliamentarian now I would vote to reject the ‘deal’ and force the Brexit on British terms. I will write a little more about that in a further post. But today, I just want to pass comment on the extraordinary UK Guardian article from Phillip Inman – A leftwing UK post-Brexit is as likely as a socialist Rees-Mogg (November 24 2018) – which summarises the problem quite well. I say ‘well’ because it illustrates the progressive surrender that has allowed the neoliberal era and monstrosities like the European Union to persist. You can see it all over the place – surrender that is. The Democratic obsession with Paygo in the US. The British Labour fiscal rule in Britain. The ‘we will have a bigger surplus’ boast from the Australian Labor Party, when there is around 15 per cent underutilised productive labour. Inman’s article is encouraging the Left in Britain to lie down and surrender to the dictates of the neoliberal, corporatist machine that is the EU. It presents an impoverished vision of the future and a disgustingly vapid depiction of the possibilities that a truly progressive British Labor government could achieve once it jettisons the neoliberal frames.

Read more

The flexibility experiment in Portugal has largely failed

Portugal has been held out by the Europhile Left as a demonstration of how progressive policies can manifest in the European Union, even with the Fiscal Compact and the Stability and Growth Pact (SGP). In 2015, after the new Socialist government took over with supply guarantees from the Left Bloc (Bloco de Esquerda) and the Portuguese Communist Party (PCP) and The Greens (Partido Ecologista “Os Verdes”), it set about challenging the austerity mindset that has blanketed the European continent in stagnation. Things improved in 2016 with increased government spending. But by 2017, the European Commission had reasserted its austerity mindset and the supposed flexibility that the Left were hoping and which Portugal had briefly embraced in 2016 was gone. And we learned that the neoliberal bias of the Eurozone and its fiscal rules dominates any progressive ambitions that a nation state might entertain. Another blow for the Europhile Left. The lesson: start looking at and supporting exit if you are truly serious about restoring a progressive policy agenda in Europe.

Read more

EU Services Notification Directive will undermine democracy within cities

In a blog post last week – Financial services agreements – the EU as a neoliberal, corporatist project (November 13, 2018) – I wrote about the way the EU compromised the capacity of elected Member State governments to advance the well-being of their nations by the way they negotiate trade arrangements in services, particularly with respect to the financial services sector. For all those Europhiles that regularly deny the core agenda of the EU is to compromise democratic outcomes in favour of capital, that analysis, alone, should be sufficient to discourage those thoughts. Of course, that isn’t the only manifestation of this neoliberal, corporatist bias in the way the EU has developed over the last decades. I mostly conduct my analysis at the macroeconomic level but I am also interested (as my publication record demonstrates) in urban and regional analysis. At the level of the European city, the EU is behaving in the exactly the same way – to curb that ability of city authorities to render their cities favourable environments for the residents who live there.

Read more

Financial services agreements – the EU as a neoliberal, corporatist project

I have been reading the new book by Costas Lapavitsas – ‘The Left Case Against the EU’ – which has been recently published. It is solid and clearly explains why the EU is not an institution or structure than anyone on the progressive Left should support or think is capable of reform any time soon. It has become a neoliberal, corporatist state and hierarchical in operation, with Germany at the apex bullying the weaker states into submission. Divergence in outcomes across the geographic spread is the norm. It is also the anathema of our concepts of democracy both in concept and operation. It is more like a cabal of elites who are unelected and, largely unaccountable. By giving their support to this monstrosity, the traditional Left political parties (social democrats, socialists etc) have been increasingly wiped out such is the anger of voters to what has become a massive coup by capital against labour. These are the themes that Thomas Fazi and I also explored in our recent book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017). I also just finished reading an interesting report – Financial Regulation challenged by European Trade Policy – published by the Veblen Institute and Finance Watch (October 2, 2018), which examines “the impact of European trade policy on financial regulation”. It is essential reading for those progressives who still think that Britain should remain in the EU. If they understand the research findings they would change their minds.

Read more

US growth robust but doubts remain

Last Friday (October 26, 2018), the US Bureau of Economic Analysis published their latest national accounts data – Gross Domestic Product, 3rd quarter 2018 (advance estimate) , which tells us that the annualised real GDP growth rate for the US remains strong at 3.5 per cent (down from 4.2 per cent in the June-quarter 2018). Note this is not the annual growth over the last four-quarters, which is a more modest 3 per cent (up from 2.9 per cent in the previous quarter). As this is only the “Advance estimate” (based on incomplete data) there is every likelihood that the figure will be revised when the “second estimate” is published on November 28, 2018. The US result was driven by a growing household consumption contribution (2.7 points) with the personal saving rate falling by 0.4 points. Further, the government spending contribution was also strong (0.6 points up from 0.4) with all levels of government recording positive contributions. Real disposable personal income increased 2.5 percent, the same increase as in the second quarter. While private investment was strong it was mostly due to unsold goods (inventories). Notwithstanding the strong growth, the problems for the US growth prospects are two-fold: (a) How long can consumption expenditure keep growing with slow wages growth and elevated personal debt levels? Most of the consumption growth is coming because more people are getting jobs even though wages growth is flat. (b) What will be the impacts of the current trade policy? It is a work in progress.

Read more

Left-liberals and neoliberals really should not be in the same party

This week’s theme seems to be the about how the so-called progressive side of the economic and political debate keeps kicking ‘own goals’ (given a lot of this is happening in Britain where they play soccer) or finding creative ways to ‘face plant’ (moving to Europe where there is more snow). Over the other side of the Atlantic, as America approaches its mid-term elections, so-called progressive forces who give solace to the New Democrats, aka Neoliberal Democrats are railing against fiscal deficits and demanding that the left-liberals in the Democratic Party be pushed out and that the voters be urged to elect candidates who will impose austerity by cutting welfare and health expenditure and more. And then we have progressive think tanks pumping out stuff about banking that you would only find in a mainstream macroeconomic textbook. This is the state of play on the progressive side of politics. The demise of social democratic political movements is continuing and it is because they have become corrupted from within by neoliberals. And then we had a little demonstration in London yesterday of the way in which the British Labour Fiscal Rule will bring the Party grief. The Tories are just warming up on that one.

Read more

Progressive political leadership is absent but required

One of the themes that has emerged in the discussions of the British Labour Party Fiscal Credibility Rule (which should be renamed the Fiscal Incredulous Rule) is when is the right time for a political party to show leadership and start educating the public on new ideas. The Modern Monetary Theory (MMT) project has been, in part, about educating people even if our ideas have been strongly resisted by the mainstream. The mainstream (New Keynesian) paradigm in economics is degenerative (meaning it has little empirical validation) and eventually it will fade into historical obscurity. For many of us that cannot come quickly enough. The defenders of the Rule argue that progressive politicians have to tread carefully or else the amorphous financial markets will turn on them and destroy their initiatives. The problem is that by kowtowing to the City or Wall Street, the progressive political forces become captured and redundant. Witness the electoral demise of social democratic parties over the last several decades. The conditions are ripe (see below) for a courageous head-on attack on these financial market elites and educate the public so that they allow elected governments to legislate for all rather than serving the interests of the elites, which has become the norm over the last several decades. The problem is that progressive political forces are also taking advice from mainstream economists who use the tools of neoliberalism. The upshot is that progressive political leadership is absent but desperately required.

Read more

The destruction of Greece – the slow-burn decline of a nation

Herman Van Rompuy, the former European Union president told us all we needed to know about democracy in the EU when he spoke to a a gathering in Louvain (Belgium) in 2010. In his speech (September 8, 2012) – A Test of Solidarity – Von Rompuy said that the Eurozone meant a “loss of sovereignty for all”. He went on to wax lyrical about the need for solidarity – “Solidarity is a duty, not only a right”. Unfortunately, his behaviour when in power, and the policies pursued by other EU bosses was not consistent with their narratives. Their constant claims that solidarity and convergence marked the aspirations of the EU was never borne out in reality. In the case of Greece, the Troika inflicted such harsh policies that, not only has the material prosperity of the nation been trashed, but now, evidence is emerging that the underlying physical and mental health of the people has been significantly damaged. One step short of genocide. The slow-burn destruction of Greece and its people continues.

Read more
Back To Top