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When old central bankers know what is wrong but can’t bring themselves to saying what is right

Last Friday (October 4, 2019), a group of former central bank governors and/or officials in Europe, issued a statement damming the conduct of the European Central Bank. You can read the full text at Bloomberg – Memorandum on ECB Monetary Policy by Issing, Stark, Schlesinger. The timing of the intervention is interesting given the change of boss at the ECB is imminent. As I explain in what follows, the Memorandum should be disregarded. Its central contentions are mostly correct but the alternative world it would have Europe follow would be a disaster for many of the Member States and the people that live within them. It would almost certainly result in the collapse of the monetary union – which would be a good outcome – in the face of massive income and job losses and the social and political instability that would follow – which would be a bad outcome. What it tells me is that the monetary union is a massive failure. It would be far better to dissolve it in an orderly manner to avoid those massive income and job losses and to support the restoration of full currency sovereignty and national central banks. That would be the sensible thing to do.

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Modest (insipid) Green New Deal proposals miss the point – Part 2

This is the second and final part of my recent discussion on the what a Green New Deal requires. All manner of proposals seem to have become part of the GND. The problem is that many of these proposals sell the idea short and will fail to achieve what is really required – a massive transformation of society and the role the government plays within it. The imprecision is exacerbated by progressives who are afraid to go too far outside the neoliberal mould for fear of being shut out of the debate. So we get ‘modest’ proposals, hunkered down in neoliberal framing as if to step up to the plate confidently is a step too far. In Part 1, I argued that the progressive side of the climate debate became entrapped, early on, by ‘free market’ framing, in the sense that the political response to climate action has typically emphasised using the ‘price system’ to create disincentives for polluting activities. In Part 2, I argue that we have to abandon our notion that the role of government in meeting the climate challenge is to make capitalism work better via price incentives. Rather, we have to accept and promote the imperative that governments take a central role in infrastructure provision, rules-based regulation (telling carbon producers to cease operation) and introducing new technologies.

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Modest (insipid) Green New Deal proposals miss the point – Part 1

All over the globe now there are cries for a Green New Deal. What constitutes the GND is another matter. Like the concept of the Job Guarantee, there are now countless versions springing out of various groups, some that only seem to offer a short-term, short-week job or other arrangements that fall short of the way Modern Monetary Theory (MMT) constructs the concept. There is only one Job Guarantee in the modern parlance and that is the MMT concept. Other job creation programs are fine but they should stop using the term Job Guarantee, which is a comprehensive macroeconomic stability framework rather than a job creation program per se. In the same vein, all manner of proposals seem to have become part of the GND. The problem is that many of these proposals sell the idea short and will fail to achieve what is really required – a massive transformation of society and the role the government plays within it. The imprecision is exacerbated by progressives who are afraid to go too far outside the neoliberal mould for fear of being shut out of the debate. So we get ‘modest’ proposals, hunkered down in neoliberal framing as if to step up to the plate confidently is a step too far. This is Part 1 of a two-part blog post series on my thoughts on the failure of the environmental Left and climate action activists to frame their ambitions adequately.

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Being anti-European Union and pro-Brexit does not make one a nationalist

The European Parliament elections start today and finish at the weekend (May 23-26). The Europe Elects site provides updated information about the opinion polls and seat projections, although given the disastrous showing of the polls in last Saturday’s Australian federal election, one should not take the polling results too seriously. But it is clear that there is an upsurge in the so-called populist parties of the Right at the expense of the traditional core political movements (centre-right and centre-left). It is also easy to dismiss this as a revival of ‘nationalism’ based around concepts of ethnicity and exclusivity and dismiss the legitimacy of these movements along those lines. However, that strategy is failing because the ‘populist’ parties have become more sophisticated and extended their remit to appeal more broadly and make it difficult to relate them to fascist ideologies. The fact that the progressive (particularly Europhile variety) continue to invoke the pejorative ‘nationalist’ whenever anyone begs to differ on Europe and question why they would support a cabal which has embedded neoliberalism and corporatism in its very legal existence (the Treaties) is testament to why the traditional Left parties are showing up so badly in the polls these days. The British Labour Party, for example, should be light years ahead of the Tories, given how appalling the latter have become. But they are not a certainty if a general election was called and the reason is they have not understood the anxieties of the British people and too many of their politicians are happy to dismiss dissent as being motivated by racism. The Brexit outcome so far is a good case study in that folly.

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The Job Guarantee misinformation campaign – UBI style

Apparently the British Left is “fizzing with ideas for a smarter economy” according to the UK Guardian article (May 12, 2019) – The zeitgeist has shifted. Now the left is fizzing with ideas for a smarter economy – written by Will Hutton. I can’t say I sensed an outbreak of fizz. But in the colloquial language from where I come from, the term fizzer means “Something that promised excitement but instead was a disappointment”, Yes, Hutton’s fizzers include promoting the insights of a long-standing (pun intended) critic of employment guarantees, who prefers people to be propped up as consumption units by a UBI, and, yes, surely, if Hutton is involved, reversing the “tragedy” of the democratic choice the British people made to exit the EU. Apparently, “Remain” is the “great progressive social force of the moment” and if Britain was to leave the EU it would “stand in the way of any of it ever being implemented”, where “it” refers to all these ‘left’ fizzers. It is hard getting one’s head around this logic. A restoration of democracy and sovereignty apparently disables the elected government from using its currency-issuing capacity to deliver a progressive program aimed at advancing well-being. But, staying in a corporatist cabal which has embodied neoliberalism in the core legal structure of its existence and allows corporations to sue governments which threaten their profits and is unaccountable to the people is the exemplar of progression. This stuff is in the world of the pixies!

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The austerity attack on British local government – Part 2

I have been doing research on local government funding in the UK recently as part of preparation for a workshop I am presenting in London on Sunday, May 12, 2019. The workshop – Local Government Funding: Challenging the Status Quo – is primarily designed to tackle this issue from an Modern Monetary Theory (MMT) perspective. My brief is to speak about the way in which flawed understandings of the capacities of currency-issuing governments, combined with a vicious, ideological attack on working people from a government fully invested in neoliberal transfers to the elites, have ravaged the capacity of local government in the UK to deliver essential public services. See the Events Page for more details. It is a public event and I hope people support it. In – The austerity attack on British local government – Part 1 (April 30, 2019) – I examined the way in which the central government austerity had impacted on the major service areas in Britain and considered some of the motivations that have been driving this agenda. In this Part, I am examining the way in which these cuts have been distributed at the local government level. How their grants have been cut and how they have been forced to rely on their own income bases to maintain a semblance of service delivery. I also consider the shifting composition of service delivery in the face of these cuts from broader areas that define a sophisticated society to the raw essentials of human social care. I clearly cannot provide a complete account of what has been going on in two blog posts and that is not my purpose anyway. For example, I am not considering the controversial Universal Credit scheme and the way housing benefits, previously paid by councils have been rolled into that scheme. So bear that in mind when reading. Any reasonable person observing what has been going on in Britain would conclude that this period of Tory government has been a disaster for the well-being of citizens and regions.

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The austerity attack on British local government – Part 1

On Sunday, May 12, 2019, I will be presenting a workshop in London on – Local Government Funding: Challenging the Status Quo. Basically, I will be speaking about the way in which flawed understandings of the capacities of currency-issuing governments, combined with a vicious, ideological attack on working people from a government fully invested in neoliberal transfers to the elites, have ravaged the capacity of local government in the UK to deliver essential public services. See the Events Page for more details. It is a public event and I hope people support it. To prepare for that workshop, I have been digging deeply into the data to fully acquaint myself with how the ideological austerity push has been distributed across central and local government service delivery. It is no easy task. The data is a ‘dog’s breakfast’ and coming to summary positions is quite time consuming. There are also nuances in the way local government is structured (particularly since the Thatcher years where devolution and cost-shifting was accelerated), which mean that care must be taken in making sensible comparisons. Here are some of the things I found. I have learned a lot in this process, which is a good thing. This is Part 1 of a two-part series.

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Ridiculous MMT critiques distorting Scottish independence debate

In a few weeks I am off to Britain again to participate in a series of events. Two of these events will be in Scotland where we (Warren and I) will discuss, as outsiders, issues pertaining to the monetary arrangements that might accompany a move to Scottish independence. It is a controversial issue in itself, but, unfortunately, is also intertwined with the vexed issue of EU membership. And the complication then becomes that progressives, who might otherwise be attracted to the Modern Monetary Theory (MMT) way of understanding the monetary system, also exhibit the standard misconstrued Europhile view that the EU, neoliberal though it is, can be reformed and that an independent Scotland should be part of that mess. And, in doing so, they then take problematic positions on the currency question. So a sort of ‘nest of vipers’ sort of situation, from the Aesop’s fable – The Farmer and the Viper. As in the Fable, the Europhiles embrace of the EU will always pay them back in grief. Anyway, while I am always cautious discussing the pro and con of situations where I have no direct material stake and a less than full understanding of specific cultural and historical influences that are at work, the Scottish question is interesting and demonstrates many of points that nations should be cogniscant of when discussing monetary sovereignty. And besides I have to get up in Edinburgh and Glasgow in a few weeks so as a researcher I am trained to be prepared and seek the best understanding that I can of the complexity of the situation. I will be writing a few posts on the Scottish issue as I prepare for that speaking tour.

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The Europhile dreamers are out in force

It appears that the Brexit process in Britain will now stall. My understanding of the Referendum was the majority of British people who voted wanted to leave the EU and that the politicians from all sides of politics unambiguously stated they would honour the outcome, whichever way the vote fell. That is what democracies are about. A lot of people are disappointed by vote outcomes. They have to grin and bear it. But in the case of the Brexit vote, the Remainers have never accepted the outcome and have used various means – foul or otherwise – to undermine the choice of the majority. There have been regional strains involved and social class strains (cosmopolitans and the rest) involved. There have been nasty imputations that those who voted to Leave were ignorant, racist or otherwise not entitled to cast an opinion. The Europhile Left had conniptions because their dream looked like evaporating. I use the term ‘dream’ deliberately – as in, not ground in reality. As the incompetence of the Tory government in managing the exit process reaches new heights – embarrassing heights – the Europhile Left has become emboldened and are now reasserting their claims that the British Labour Party should articulate a clear Remain position and push to reform the prevailing European treaties, which embed neoliberalism in their core. Talk about dreaming.

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IMF changes tune on industry policy – shamelessly – Part 2

In Part 1, I introduced the discussion about the use of industry policies in the Keynesian period after World War 2. Most nations adopted a mixed planning-market based system for allocating productive resources and the state was always central in setting out planning parameters, direct ownership and employment, and regulation. It was a system that researchers described as being “highly successful”. Two approaches to industrialisation were taken: (a) export-oriented (for example, South Korea); and (b) import-substitution (for example, India), although in most cases, nations used both strategies. As neoliberalism emerged and the fixed exchange rate system broke down in the early 1970s, the IMF, whose purpose was intrinsically tied to providing foreign reserves to nations under the fixed exchange rate system, no longer had a purpose. They reinvented themselves as the neoliberal attack dog for corporations and global capital. They also provided cover for governments who were embracing the Monetarist ideas of Milton Friedman and intent on imposing fiscal austerity. These governments had become captured by corporate interests and by appealing to external demands from bodies such as the IMF, these governments could depoliticise harsh policy shifts away from Keynesian full employment. I used Britain as an example. Tony Benn, a Left Labour member in the British Parliament and Secretary for Industry, proposed an alternative industrial plan to revitalise British industry in 1975. It was rejected at the time by Harold Wilson and Denis Healey, who were intent on imposing fiscal austerity and deregulating. They used the scare that the IMF would have to bailout Britain as a ruse to force their Monetarist ideology onto the British Labour Party. It was no surprise that in an era where governments started abandoning fiscal support to maintain full employment, deregulated labour and financial markets, and abandoned domestic protections for their industries, many industries would go to the wall. The IMF claimed that this shows industry policy focused on import-substitution can never work. But the culprit was not flawed industry policy. Rather, it was the withdrawal of all the accompanying support structures that made it work, but which ran counter to the neoliberal ideology of ‘free markets’. Now the IMF is having a rethink based on the devastation that neoliberalism has caused. On March 26, 2019, the IMF published a new working paper (19/74) – The Return of the Policy That Shall Not Be Named: Principles of Industrial Policy. Now, we are reading that the IMF has conceded that industry policy interventions that were the basis of economic planning in the Keynesian era were highly successful and only stopped being so, in some cases, when fiscal austerity was imposed and trade controls were abandoned in the 1970s. This is Part 2 of the two-part series on this topic.

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