Some Wednesday snippets. First, I juxtapose the political machinations that the EU President is engaged in to consolidate and expand her power within the European Commission with the reality that Member State governments are becoming dysfunction because social instability and political extremism are rife. Then I reflect on my experience as Chancellor of Britain – a great success I should say, although I was told I had broken all the rules. It tells one how stupid the rules are. Then, finally, some music to enjoy.
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Regular readers will know that I am a trenchant critic of the European Union, which has legalised neoliberalism.<\/p>\n
By that I mean that they entrenched neoliberal ideology into the treaty structure of the EU, which is quite a different matter from a particular political party gaining office on a neoliberal agenda.<\/p>\n
In that situation, voters can easily eject such a party at the next election when it realises how dysfunctional it is.<\/p>\n
In the case of the EU, voters do not have that option.<\/p>\n
Trying to change the EU treaties is a nigh impossible task and would need a unified approach from all the Member States.<\/p>\n
And with Germany standing in the way, such a unity is unlikely (in the extreme).<\/p>\n
The results of that approach have been fairly clear – especially since a subset of 20 nations decided to adopt the common currency – the euro.<\/p>\n
The people were guaranteed convergence and, instead, have been forced to endure divergence.<\/p>\n
Greece has been decimated as a prosperous nation state.<\/p>\n
Other nations are in deep trouble.<\/p>\n
Now, even the mainstream press are starting to realise what a mess the EU has become such that there is no incentive to act with common purpose anymore.<\/p>\n
The UK Guardian article (October 17, 2024) – EU\u2019s weak or distracted governments make unity of purpose hard to achieve<\/a> – was a break in the normal mainstream pro-Europe commentary.<\/p>\n The article notes that key Member States such as France, Spain, and Germany are now witnessing political instability and the resulting government machinery has been weakened.<\/p>\n The narrative emerging is that the “current European leaders are not up to the job”.<\/p>\n Meanwhile, European Commission President Ursula Von der Leyen is currently engaged in a process to consolidate her power by controlling information and doing secret deals with power brokers.<\/p>\n Her ‘divide and rule’ tactics with the Member States and their Commissioners at the EU is another story again.<\/p>\n Her machinations among the power brokers stand in contrast to her inaction on things that matter – like actual improvements in well-being via innovative policy.<\/p>\n Which is why Macron, Scholz, S\u00e1nchez and other leaders are in trouble.<\/p>\n The hoy-polloi are sick of it.<\/p>\n When Mario Draghi decided to deny his past and release his report (September 9, 2024) – EU competitiveness: Looking ahead<\/a> – he outlined a scary vision for the Continent, which would require around \u20ac800 billion per annum to address.<\/p>\n No-one can agree as to who will fund this type of agenda and Germany is clear – it will not permit any sort of increases in borrowing that involve shared liability at the Commission level.<\/p>\n So there is a combination of Member States in political chaos with the Right wing parties surging in elections which is crippling the discretion of those state to do anything and a centre that is more powerful than ever yet largely incapable of meeting the challenges.<\/p>\n The UK Guardian article believes that:<\/p>\n \nIt could be a messy, politically tempestuous period for the EU. But the force of external pressures will not go away … The \u201cforce of external events and pressures\u201d will create its own momentum, whether through climate impacts such as floods, fires and storms, public expectations for high-quality jobs, or the threat of a revanchist Russia.\n<\/p><\/blockquote>\n The whole arrangement is a joke.<\/p>\n The Financial Times recently posted its – Chancellor Game<\/a> – which demonstrates that some IT programmers can add up okay and also how insidious the media can be in promoting the economic fictions that keep us all in the dark.<\/p>\n When I played the game, the participant inherits the Tory malaise that followed 14 years of austerity and inaction on a number of fronts.<\/p>\n Unemployment remains at elevated levels and inflation is now low.<\/p>\n In addition, the UK is facing many challenges arising from that period of government (and the inherited mess the Tories got from Blair’s Labour period).<\/p>\n Climate change.<\/p>\n NHS atrophy.<\/p>\n Housing crisis.<\/p>\n Increased poverty.<\/p>\n Crumbling infrastructure.<\/p>\n Public services in bad state.<\/p>\n etc.<\/p>\n So what should a good Chancellor do in those circumstances?<\/p>\n Increase public spending obviously and carefully change the tax structure to make it more progressive and reduce the spending capacity of the top-end-of-town.<\/p>\n Which I did.<\/p>\n The overall assessment from the game’s analysis was:<\/p>\n \nYou\u2019ve caused chaos in your first Budget by breaking fiscal rules we only just committed to. New chancellors generally try to avoid picking fights with financial markets!<\/p>\n Frustrated with your result?\n<\/p><\/blockquote>\n Definitely not frustrated.<\/p>\n And the assessment from the first year of being Chancellor continued:<\/p>\n \nYou\u2019ve failed to stick to your own fiscal rules: the pound has taken a dive and bond yields are up. A worrying start for a new chancellor.\n<\/p><\/blockquote>\n The overall assessment also told me that:<\/p>\n \nThe government is considering a change to its debt target to create more scope for borrowing to invest. Using this alternative gauge, you would manage to meet your fiscal rules.\n<\/p><\/blockquote>\n Which just tells you how the setting of arbitrary rules can lead to totally different real outcomes.<\/p>\n But when we look at what I achieved, even within their biased framework, we see:<\/p>\n 1. “Relative to inherited plans, you\u2019ve raised day-to-day spending by \u00a319bn a year by 2029-30” – as planned.<\/p>\n 2. “Although you have raised spending, this will not be enough to deliver the improved services voters will be expecting” – so I was too cautious. I would now bring in a supplementary fiscal statement and amp up spending further.<\/p>\n 3. “Relative to inherited plans, you’ve raised investment by \u00a343bn a year, taking public investment to 3% of GDP by 2029-30” and “This takes public investment above the recent average as a share of GDP. If this is sustained, we should start to see big improvements to the quality of public buildings and transport infrastructure”.<\/p>\n That’s what I like to see – a “big improvement in the quality” of public infrastructure, which would have created more employment in well-paid, highly skilled areas.<\/p>\n 4. “Taxes are set to rise by \u00a324bn a year relative to inherited plans, taking the amount of tax imposed on individuals and businesses to 37.8% of GDP by 2029-30”, which meant that I “immediately established a reputation as a tax-hiking chancellor. Your government is taking the amount of tax collected to record highs as a share of GDP.”<\/p>\n But note, the tax revenue is coming from large corporations who have been dodging tax for years and very wealthy individuals who live high on the hog while the rest of the nation endures austerity.<\/p>\n So I was happy with the shift to more progressivity in the fiscal system.<\/p>\n There was nothing in the game that reported the labour market effects.<\/p>\n In the notes, we read that:<\/p>\n \nThe game assumes that growth rates and interest costs are unaffected by policy decisions, but changes in borrowing do affect debt interest levels.\n<\/p><\/blockquote>\n Which are absurd assumptions.<\/p>\n How can the growth rate be unaffected if I pump an additional \u00a319bn per year into the spending stream?<\/p>\n The basic rule of macroeconomics is that Spending -> Output -> Income -> Employment demand.<\/p>\n In the real world, GDP growth would have increased and unemployment would have fallen, given my fiscal choices.<\/p>\n Further, I would have instructed the Bank of England to control the bond market.<\/p>\n And, I would have changed the legislation to abandon the administrative requirement that I issue gilts (government bonds) to match the fiscal deficit.<\/p>\n The game is in fact very destructive from a public education perspective.<\/p>\n By just judging the outcomes in terms of a couple of narrow fiscal parameters and judging the decisions taken by relating the outcomes to the narrow ‘fiscal rules’ that are adopted, it biases the reader against fiscal discretion.<\/p>\n And by suppressing any welfare outcomes in terms of climate amelioration, labour market outcomes, poverty, housing availability and quality, etc. it breaks the nexus between fiscal policy choices and societal well-being, which is the raison d’\u00eatre of fiscal policy after all = to improve well-being.<\/p>\n This is what I have been listening to while working this morning.<\/p>\n This song – Flamingo<\/a> – is taken from the 1959 Blue Note album – The Sermon<\/a>.<\/p>\n This was a monster recording and featured:<\/p>\n 1. Jimmy Smith<\/a> – Hammond B3 organ.<\/p>\n 2. Lee Morgan<\/a> – Trumpet.<\/p>\n 3. Art Blakey<\/a> – Drums.<\/p>\nRidiculous and dangerous Financial Times Chancellor Game<\/h2>\n
This is music …<\/h2>\n