Last week, I reported on some claims by Australian private sector economists that the Australian government was deplete of policy tools (“run out of ammunition” was the cute term used among these self-serving characters) and would not be able to handle the Brexit fallout – see When journalists allow dangerous economic myths to pervade. It was obvious that the statements were nonsensical and only reflected the dangerous neo-liberal ideology that discretionary fiscal policy should be constrained to the point of being not used! In the last week, some major central bankers around the world have given speeches which suggest they also understand that fiscal policy has come to the fore and provide some certainty to the world economy. The latest estimates from the ECB of the Eurozone output gap certainly provide the evidence base to justify a major expansion of fiscal deficits across the Eurozone. The research is suggesting that there is a significant output gap which is evidence of insufficient aggregate spending rather than any structural shifts in potential GDP. I guess they are warming the Member States for more expansionary action although the message is very clear – the European Commission has to abandon its austerity mindset and provide some old-fashioned deficit stimulus – quick smart!
Less than two weeks ago, Britain sent a bombshell into the conservative, neo-liberal policy agenda and the narrative that supports it. I have read a lot of comments that the Referendum result was a reflection of racist attitudes towards minority immigrants. While it is no doubt that the open borders policy that allows firms to batter down wages growth and keep a constant excess supply of labour as a threat was an important part of the debate and vote, that in itself, was a reflection of the underlying tension that people and their communities have with the neo-liberal policy agenda. There would be much less concern about migration if there was full employment. The same sort of tensions that pushed the majority of British voters to support the Leave campaign have been apparent in the Australian Federal election which was held on Saturday (July 2, 2016). Australian voters have rejected a first-term conservative government. It is a rare event for us to reject any first-term regime of either persuasion. The conservatives in Australia are now in tatters without credibility and the unstable situation that has arisen as a result of the political uncertainty provides a great opportunity for the Australian Labor Party, who did very well in the poll on Saturday, to refresh their outlook and reject their neo-liberal tendencies to reflect the big shift in sentiment in the Australian electorate. A similar opportunity exists in Britain and I hope Jeremy Corbyn takes it and expunges the Blairites from his own Party.
We left the trail last time with James Callaghan telling the British Labour Party Annual Conference on September 28, 1976 that governments can no longer spend their “way out of a recession” and that the Keynesian approach was an option that “no longer exists”. He even suggested that the Keynesian approach to stabilising economic cycles was never valid. Meanwhile, his Chancellor, Denis Healey, by then convinced that Monetarist had validity, was working behind the scenes at the Conference to duchess or beat his colleagues in submission and accept the TINA approach to bringing in the IMF. They worked hard to construct the situation as a crisis of massive proportions although much of the ‘crisis’ was the result of their extreme reluctance to allow the pound to depreciate, to impose capital controls to stop the non-productive speculative outflows that were causing the currency to drop in value, and to accept that in the Post Bretton Woods era they no longer had to match their fiscal deficits with private debt issuance. But in doing so, the British government effectively created their own ‘funding’ crisis. Things came to a head in November 1976 within the Labour Cabinet, which was still deeply divided over the IMF issue. We finish this analysis of Britain and the IMF today by tracing events at the end of 1976 before providing a general summation of what it was all about.
Journalists have a lot to answer for in this modern era of constant media reporting across multiple modes of communication. I have previously argued that the trend has become one where journalists are used as broadcasting tools for press releases – that is, stories that appear to be news commentary are really just precised versions of some corporate press release or a statement from some right wing think tank. The lack of critical scrutiny where one line statements that on the face of it are highly contentious are allowed to ‘go through to the keeper’ is now the model for modern mainstream journalism. An example of this was the Australian Broadcasting Commission’s PM current affairs radio program last night (June 27, 2016) – Investors brace for another wild ride on international markets post-Brexit. The PM program is the ABC’s premier evening news and current affairs program where issues are meant to be taken apart and some so-called experts (from all sides) are meant to be interviewed so as to enlighten the public, who otherwise might be uncertain about the meaning and/or impact of some event. At least that was the intent of the program when it started many years ago. Now, it has become, like most of the ABCs current affairs reporting, a rather pale imitation of its original brief.
The class struggle is back! Who would have thought. After years of being told by the likes of John Major and then Tony Blair that “the class war is over” (Blair) and the we now all live in “the classless society” (Major) the working class has fought back, albeit under the motivation of the looney, populist Right rather than a progressive left, who remain a voice for capital. Remember when we were told that the Left-Right continuum was irrelevant now in this global world where nation states had given way to grand communities (like the EU) and that, in this new post-modern world, we could all be entrepreneurs (meaning we sell our labour to a capitalist!). And now we know that class never went away. It might have been hi-jacked by the Right but it is there – and it is powerful. Planet Earth to British Labour – do something about it or wither away and make way for a progressive new organised working class movement.
Tomorrow, Britain gets to cast a vote on its continued membership in the European Union, although it is unclear how binding such a vote would be on the Government. Probably not binding at all. The latest opinion polls are giving it 51 per cent remain to 49 per cent leave. The bookie odds are in favour of the remain camp. I am guessing the remain vote will win. It shouldn’t. The debate has been asinine to say the least. The public deception has reached unbelievable heights. My own profession has been wheeled out or wheeled themselves out in grand statements about how catastrophic exit would be. I don’t believe much of it at all. I provided my opinion on the topic in this February 23, 2016 blog – If I was in Britain I would not want to be in the EU. I will not repeat the analysis here. But in the research I have been doing on how the Left has become neo-liberal, there was a lot of overlap in how the Left became, to their detriment, pro-Europe. Here is some points on that. I hope the Exit wins.
This is a further instalment in tracing through the British currency crisis in 1976 and its retreat to the IMF later in that year. Today we discuss the tensions within the British Labour Party at the time, the Callaghan Speech to the Blackpool Annual Labour Conference on September 28, 1976, the behind the scenes work by Denis Healey and some clandestine activity between the US and British bureaucracies which was aimed to bring Britain to heel, one way or another and to overcome its ‘immorality’ – yes, the US thought the fiscal deficits the Brits were running were immoral.
This is a further instalment in tracing through the British currency crisis in 1976 and its retreat to the IMF later in that year. Today we discuss whether it was the IMF that forced the change of direction for British Labour or all their own dirty work with the IMF just being used to depoliticise what Callaghan and Healey wanted to do (and were doing) anyway. We trace through the way the leadership of the British Labour government were building the case for austerity and the path they followed leading up to the request to the IMF for a stand-by loan. Far from being the only alternative available, the course taken by the Government was a triumph of ideology and perception over evidence and reality.
This blog continues the discussion of the British currency crisis in 1976. Today we discuss the growing discontent within the British government over the need to negotiate the IMF loan in 1976. While it has been held out that Britain had no alternative but to impose austerity and allow the IMF to dictate policy, the fact is that an alternative was proposed which would have been a superior option.
This blog continues the discussion of the British currency crisis in 1976. It traces the growing anti-government influence on key players within the British Labour government as the pressures on the exchange rate were mounting in the early part of 1976. While the Chancellor was clearly influenced by the growing dominance of Monetarist thought, he also fell under the influence of the so-called Bacon-Eltis thesis, which argued that the growth of the public sector in the 1960s and early 1970s in Britain had starved the private sector of resources, which had led, directly, to the declining growth, high inflation and elevated unemployment. The conservative mainstream used this thesis to call for harsh cut backs in public spending and the British Labour government were increasingly cowed into submission by the vehemence of this mounting opposition. The problem is that the ‘thesis’ didn’t stand up to critical scrutiny, although that fact didn’t seem to bother those who used it to advance their anti-government ideological agenda. This blog is longer than usual because I felt it important to put this part of the story into one continuous narrative rather than break it up into two or three separate, shorter blogs.