In yesterday’s short blog post – Some Brexit dynamics while across the Channel Europe is in denial (January 2, 2019), I noted that various European Commission officials were boasting about how great the monetary union had been over the last 20 years. European Commission President Jean-Claude Juncker had the audacity (and delusion) to claim it had “delivered prosperity and protection to our citizens. it has become a symbol of unity, sovereignty and stability”. I think he was either drunk or in a parallel universe or both. I provided two graph (GDP growth and employment) to show how poorly performed the monetary union has been since its inception. Today, I want to bring to your attention a Bank of International Settlements (BIS) research report which categorically finds that the European banks during the pre-crisis period not only fuelled the massive boom in sub-prime loans and doomed-to-fail assets that were floating around at the time, but also “enabled the housing booms in Ireland and Spain”. Rather than the US banking system being primarily responsible for the pre-crash buildup of private debt, the European banks were also helping the “leveraging-up of US households”. The “European banks produced, not just invested in, US mortgage-backed securities”. This role is not well understood or recognised. And it was because the Single Market mentality of the neoliberal European Union which abandoned proper prudential oversight and regulation allowed it to happen. So much for “prosperity”, “protection” and “stability”.
It is Wednesday and I am going to stick to my decision to ‘not publish a blog post’ on Wednesdays unless there is some new data (such as the quarterly release of the Australian National Accounts). I want to use this time to attend to other writing obligations. But a few snippets won’t hurt, will they? The first, looks at some extraordinary denial from the European Union bosses. The second, looks at evidence that the Brexit environment is already providing positive dynamics for British workers in low-wage areas of the labour market. And that is being presented by the Remainers as something negative! We move into 2019, just as we left 2018!
What editorial control does the UK Guardian exercise on Op Ed pieces? Seemingly none if you read this article (December 24, 2018) – What Labour can learn about Brexit from California: think twice – written by some well-to-do American postgraduate working for DiEM25 in Athens. But when Thomas Fazi and I sought space to discuss our book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017) – or when I have sought space to provide some balance to the usual neoliberal, pro-Europe bias, the result has been no response (yay or nay). We never received a response to our solicitation. Even if we ignore the obvious imbalance in experience and qualifications (track record) of the respective ‘authors’, it seems that the UK Guardian only wants a particular view to be published even if the quality of that view would make the piece unpublishable in any respectable outlet. Go figure. Anyway, I now have read the worst article for 2018. And, I thought that the Remain debate had reached the depths of idiocy but there is obviously scope for more if this Guardian attempt at commentary is anything to go by. And I know the Guardian journalists read this blog – so why not allow Thomas and I to formally respond to all this Remain nonsense?
On December 19, 2018, the Federal Reserve Bank Open Market Committee (FOMC), which determines the monetary policy settings in the US, increased the policy interest rate by 25 basis points to 2.5 per cent, as part of its plan to ‘normalise’ monetary policy. Even within the parameters of their own logic, it is hard to see any inflation threat. Long-term inflationary expectations suggest that people expect an unchanged situation over the next decade. Which suggests that the current unemployment rate is not seen as a threat to the price level. Now, while the FOMC decision may or may not cause some slow down in real GDP growth, given the blunt and ambiguous nature of monetary policy adjustments, the really disturbing aspect of the policy change is the fact that the FOMC members were plotting to push up unemployment by more than 1.2 million people as a plan to lower the inflation rate by a few basis points. Not only is that an obscene revelation but the fact that the FOMC use economic models that cannot tell them that the economic costs of such a shift are massive compared to any benefits that might arise from a slightly lower inflation rate tells us that policy is being made using deeply flawed, useless economic theory and models. Moral bankruptcy and incompetence rules.
Wednesday and a shorter blog post so that I have a little more time to do other things. I don’t know what topic attracts the most hate E-mails that I receive on an almost daily basis: my position on the Eurozone, my position on the EU generally, my position on Brexit, my position of surrender monkey social democrats (parties and people), or my work on Modern Monetary Theory (MMT). I guess I could count and build up a frequency distribution but I just prefer to delete them these days – the first few words give the game away. Save your time. This week, I have had a torrent of such E-mails telling me more or less “see, you claimed Brexit would be good, but it is a disaster”. Last time I checked Brexit hasn’t happened yet. All that we are witnessing is a conservative government of considerable incompetence in disarray after being bullied by the neoliberal, corporatists in Brussels into a ridiculous ‘agreement’ that changed hardly anything. But there were some interesting data releases in the last few weeks that bear on the Brexit question. I have been looking into them.
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.
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.
I am travelling most of today to distant climes. And it is Wednesday, my alleged shorter blog day. Apart from some scintillating music suggestions today, I foreshadowed in Monday’s blog post, which analysed the British national accounts, that I would make some statements about the EU forecasts released in their latest – European Economic Forecast. Autumn 2018 – (published November 8, 2018). The forecasts posited that the UK would be among the two worst performers for 2019 in terms of Real GDP growth, accompanied by the waning Italy. And within seconds of the forecasts being published, social media was a light with those opposed to Brexit, using the forecasts to claim that Brexit would be a disaster – again! Brexit may still turn out to be a disaster. But these forecasts should be treated with a grain of salt – they are ideological in nature and the forecasting performance of the EU has not been good.
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.
On Thursday (November 8, 2018), the British Office of National Statistics (ONS) released the – GDP first quarterly estimate, UK: July to September 2018 – data, the first release under their new publication model, which is designed to improve “the accuracy and reliability” of the initial (formally denoted the “preliminary”) release. The next update will come in December and the expectation is that there will be less revisions, which is a good thing for those trying to assess where things are at. Remember, also that national accounts data is a rear-vision view of the economy – where its been rather than necessarily where it is at, although the two ‘views’ are obviously linked. The third-quarter national accounts data shows that Britain grew by 0.6 per cent, with “all four sectors” contributing to what is a strong result. But, under the headline, are mixed trends: household consumption spending continues to grow with rising debt, although wages growth appears to be moving finally; business investment was negative; and net exports “contributed 0.8 percentage points” with a strengthening of exports. What the data tells us at this stage is that Britain continues to defy the claims that a meltdown is imminent as a result of Brexit. There appears to be a resilience that is driving relatively strong growth. And, for all those who have been hammering the point that Britain is the worst-performed (in growth terms) of the EU Member States, they will have to revise their scripts. Britain is now growing much faster than many other European economies.