In today’s Melbourne Age there was a headline that attracted my attention – Hurling invective at CEOs over salaries is a bit rich. The writer from the conservative Institute of Public Affairs was reacting to a speech made by the President of the ACTU this week who proposed a salary cap on executives. The writer, Chris Berg claimed this was just whipping up some “traditional class conflict”. He asked: “who seriously believes that the level of CEO pay in Australia had anything to do with the subprime crisis that set off this whole mess?” Well, I for one think that the growth in executive pay was linked to the crisis. Here is the point.

I have been doing work on international trends in unemployment today and spent some time on the UK economy. Of-course, Britain is in the news at present because its polity is melting down rapidly. We have been laughing a bit I am sure about the so-called rorts scandal, especially the story about the ducks not liking their island anyway. I laughed anyway. I also applauded the skilled research that tracked the island down on Google Earth. Anyway, the rorts scandal is a sideshow in a much bigger problem that is unfolding in Britain at present. Its labour market is in free fall!

Today the ABS released the March quarter National Accounts data which showed that the Australian economy is actually resisting the global slowdown although barely. The results allowed all and sundry to pronounce that Australia had escaped recession, despite there being no acceptable definition of what actually constitutes a recession. For now then we do not have a recession based on the national accounts benchmark – two consecutive quarters of negative GDP growth. But I hardly think this is the end of it. And if we take a labour market definition of recession which researchers such as me think is a better approach because unemployment is a personal experience that allow us to feel the movements in the cycle – then we are already in recession. That is what this blog is about – R we or R we not!

It is interesting when a local journalist exploits the work of a foreign journalist to perpetuate neo-liberal myths about the way the modern monetary economy works without any critical scrutiny of the underlying ideas that he is mimicking. So we have one US journalist reiterating the views of a so-called “top US policy maker” without critical scrutiny then being copied a few days later by a senior Australian journalist who also doesn’t bother to question whether the underlying economics being fed to his readers makes any sense at all. Pretty poor really – the power of the conservative press!

Some readers have asked me to comment on the economic policy of The Australian Greens and how it sits with the other major political parties. I base this assessment on what appears to be the policy statement which was current as at November 2008. There is not a single reference to employment, unemployment or full employment as key economic goals. Moreover, there is as much neo-liberal macroeconomics in the document as you would find in the papers espousing the approach of the main parties. And worse still … if The Greens actually tried to implement some of their macroeconomics principles then they would undermine most of their other major policy goals. So there is no joy to be found in this place for a progressive who understands how the modern monetary system operates.

Yesterday we had the rather unusual situation of the Treasury Head presenting a robust defence of his Department’s work after various commentators have suggested the forward estimates were flaky to say the least. Overall, it is an amazing exercise given that the issue is about how quickly the federal budget balance will return to surplus. So instead of a robust debate about why the Government is allowing unemployment to blow out and long-term unemployment to become entrenched again, all the hot air is about how quickly the federal government can start trashing the saving capacity of the private sector again. You get some feel for how low brow the debate actually is out there in expert media commentary and interview land by reading the ABC 7.30 Report transcript from last night when the presenter tried to question the Opposition Treasury spokesperson. It was as bad as it gets.

Continuing the developing country theme of Friday and in response to a comment from a reader I decided to write a short blog on the applicability of employment guarantees to poorer nations. They have particular issues which means that a Job Guarantee scheme has to be carefully designed. But with the experience of several countries and extensive research and evaluation of these schemes, I conclude that the employment guarantee approach to income security is broadly applicable. Most of the arguments against providing a buffer stock of jobs to insulate the workers against the fluctuations of the private economy are based on false neo-liberal arguments about national government budget constraints. Once you get over that sort of fallacious reasoning, then there are real issues left to confront and overcome. This is now an important part of my academic work and a very interesting part to say the least.

Today’s ABS retail turnover data is very interesting considering the meltdown that is occuring elsewhere in the world. The summary result that retail turnover grew by 2.2 per cent in the month of March suggests that the Australian economy is still alive – at least in the consumer markets. This figure was a surprise to all those who were in denial of the usefulness of budget deficits – both the discretionary components (the “stimulus packages”) and the automatic stabiliser components.

In today’s Melbourne Age we learn very clearly that the previous Federal Treasurer didn’t have much idea at all about how the economy actually works. While he continues to promote his years in office as the great period of fiscal rectitude, the reality is that after 11 years at the wheel he still failed to create full employment. His Treasury years, in fact, will be remembered for his Government’s wilful neglect of the disadvantaged and the on-going and incredible waste of human potential that this disregard created. Now, as he sits at the back of our Parliament smouldering about his lost chance to rule, he thinks he has something to say about the monetary systems. Its a shame he isn’t clever enough to know how little he knows.

Today I am in Melbourne (my home town) presenting a workshop on skills development for the new green jobs economy which is a joint Victorian Government/Brotherhood of St Laurence show. But that is not what I am writing about here. Regular readers of billy blog will know that when I talk about budget deficits I typically stress two points: (a) that the Government is not financially constrained and therefore all the hoopla about debt and future tax burdens are just a waste of time. But just because the Government can buy whatever is for sale by crediting relevant bank accounts doesn’t mean they should not place limits on the size of the deficit; and so (b) given the federal deficit “finances” private saving, it should therefore be aim to “fill” the spending gap left by the private desire to save. If the Government does that then it can maintain full employment and price stability and move towards a more equitable society. So it is of importance that we have some idea of the size of this spending (or output) gap.

The recent policy decisions of the Federal government appears to be in line with those of the previous (insidious) regime when it comes to the unemployed. In expansion packages which have so far totalled more than $A50 billion, there has been an allocation of $650 million for a Jobs Plan and renewed funding for the privatised and failed Jobs Network. You might think that odd given that the unemployed bear the brunt of any economic downturn. I find it obscene. And with the May budget coming up, there will be increasing claims that there is “not enough fiscal room” to do anything more. After all, the Federal Employment Minister has told us “there is no quick fix” despite knowing full well they have the capacity to offer minimum wage public sector jobs to anyone who wanted one. We might take lessons from more enlightened

On Friday, the US Bureau of Labor Statistics (BLS) published their latest labour force data which revealed that the US aggregate unemployment rate had risen to 8.5 per cent, the highest level since March 1982. It is clear that thousands of jobs are being lost (in net terms) in the US as the recession there intensifies and the deterioration is spawning protests. Times are changing for the US. Australian commentators seem to be suggesting that Australia is faring better at present. On the surface that may be right, but when you start digging a little, things do not look as well. This blog takes you through some graphs I have constructed as part of an academic paper I am working on. They are easy to understand and tell an interesting story.