A few things came up late last week which demonstrate the neoliberal Groupthink is alive an well at the highest levels of policy in Australia (and elsewhere). First, there was a story that a report from an Australian Broadcasting Commission (ABC) journalist on the Australian government’s corporate tax cuts was withdrawn after publication by the ABC after receiving several complaints from senior government ministers including the Treasurer and the Prime Minister. The story was not even radical. The journalist who I have had dealings with is a neoliberal herself when it comes to understanding macroeconomics. Second, one of the claims that the neoliberals make is that central banks are now firmly independent and not part of the political process. This is all part of the depoliticisation process whereby governments absolve themselves of political responsibility for policies that harm the citizens by appealing to ‘independent’ external authorities (such as the IMF, or central banks). Well we know that the claim about central bank independence is not true both in terms of the way the monetary system operates but also in the conduct of various central bankers over the last few decades. Last week, the Reserve Bank of Australia governor once again demonstrated how politically independent he is NOT by invoking key mainstream neoliberal myths about deficits and grandchildren. And then an old hack and largely failed British Labour politicians got in on the act. The Groupthink is powerful but becoming increasingly desperate under the increasing pressure from citizens for more accountability.
Last Friday (February 8, 2018), the Reserve Bank of Australia issued its latest – Statement on Monetary Policy – February 2018 – which in its own words “sets out the Bank’s assessment of current economic conditions, both domestic and international, along with the outlook for Australian inflation and output growth.” Of interest to me (apart from all of it) was the discussion of domestic economic conditions, in particular the discussion concerning wages growth. Workers around the world are struggling to gain any semblance of decent (if any) wages growth, are facing real wage cuts, and seeing national income redistributed to profits (even as investment ratios fall). They are observing increasing gaps between real wages growth and productivity growth, which means the workers’ share of output gains is falling. With sluggish investment ratios, it isn’t rocket science to realise that the redistributed national income is being pumped into the financial markets casino, which delivers little or no productive benefit to society and provide for continued economic instability. It is clear that major shifts have to occur in wage setting mechanisms to redress these imbalances. That should be a major focus of progressive activists. It is a global problem.
It is Wednesday, so only a snippet of a blog about a few things that caught my interest recently. Words have meaning and concepts have meaning. That is, until you are a social democratic politician in Europe. Then meaning goes out the window as does mission – unless the mission is power at all costs. Social democratic values and views do not resemble neoliberal economic or right-wing social agendas at all. Yet in the hurly burly of European and British politics that is what has been happening. Across three nations (Sweden, Germany and Britain) we have seen this trend in the last few days. The claim is that it is clever politics to shift into the ‘centre’ and take back voters from the conservatives. The problem is that the centre moved significantly to the right over this neoliberal era. Now we have so-called progressive politicians who three decades ago would have looked like conservative right-wingers. It is not clever politics at all. They just lock themselves into positions that make it very hard to pursue true progressive policies. Meanwhile, the people they claim to care about are forced to endure damaging economic policies. Stupid all round.
Some years ago, I started collecting information about the so-called Maghreb countries, which typically refers to the region spanned by Algeria, Morocco, and Tunisia, although sometimes Libya and Mauritania are also included in the aggregation. You will find it referred to as the Barbary Coast in English literature. I was interested (as a long-term project when I get old :-)) to write a book about how nations broke away from the yoke of colonialism only to fall into the hands of the IMF and the World Bank, which over time were becoming the leading attack dogs for the neoliberal domination of governments. That book is coming in the future. But I have also been interested in the way the Eurozone Member States have moved into Northern Africa to extract as much surplus as they can from exploiting the resources these African nations have. You know a nation is in trouble when there are nightly riots which were motivated by economic desperation and a pernicious new (so-called) Finance Law, which became law on January 1, 2018. I am, of course, talking about Tunisia. With high levels of unemployment and underemployment and a lack of job opportunities particularly severe in the interior regions, the IMF decided, in its infinite neoliberal stupidity, to force the Tunisian government to impose a harsh austerity program including pushing up value added taxes which have had the effect of driving up medicine, food and energy prices and impacting on those most affected by the lack of jobs. Smart thinking! The riots have now followed.
This is my Wednesday no blog day. I am working on various written pieces today. But I did stray on some anti-Brexit material overnight (thanks to all who sent it through), which shows how far the British Labour Party has to go before they can even pretend to be a progressive voice in politics. They are sounding very much like a European social democrat/socialist party on this issue and we know what happened to that lot across various elections over the last year. I have a few words to say about that in what follows.
A few weeks ago, in my three part series answering questions about Modern Monetary Theory (MMT), I addressed the issue often raised about the fiscal policy emphasis in MMT, that it is difficult to time government spending injections to match the cyclical need. These criticisms go back a long way and were used by the likes of Milton Friedman to build up his case against discretionary fiscal activism in favour of monetary rules. Of course, that was an ideological preference, given the Monetarists wanted ‘small’ government and technocrats implementing economic policy. The basic precepts of Monetarism have not stood the test of time and the GFC and its aftermath have showed, beyond doubt, that monetary policy is an ineffective means of stimulating aggregate spending and that fiscal policy is the best way to counter non-government spending collapses. In those blogs, I outlined several ways in which fiscal policy could overcome ‘timing’ issues and deliver prompt stimulus when needed and be able to contract the stimulus in a timely manner once non-government confidence and spending had recovered. The points I raised are not new and have been discussed and made operational many times in the past. A tweet from my MMT colleague Stephanie Kelton last week reminded us of this again when the US National Resources Planning Board (NPP) was mentioned with a link to the The Internet Archive is a “non-profit library of millions of free books, movies, software, music, websites, and more” and is a fabulous resource for researchers. Reading the Report from the NPP is like music to the ears! History has a lot to say if we listen properly.
My Wednesday commitment not to write a detailed blog remains. But given the sad news yesterday from South Africa I thought some nice music should be shared and some news from the French press. So not really a blog but some music to listen to while I work today.
The UK Guardian Editorial ran a sub-header yesterday (January 21, 2018) “Democracies will fall under the spell of populists like Donald Trump if they fail to deal with the fallout of globalisation?”, which I thought reflected the misunderstandings that so-called progressive have about ‘globalisation’ and its impacts on the capacities of the sovereign state. The UK Guardian Editorial was responding to the release of the latest Oxfam report (released January 16, 2018) – An Economy for the 99%: It’s time to build a human economy that benefits everyone, not just the privileged few – timed to coincide with the gathering of “billionaires and corporate executives” at Davos this week. The Oxfam report reveals further staggering shifts in inequality across the globe, that the GFC barely interrupted. A major shift in political sentiment on the Left is needed to arrest these trends before they break out in destructive social instability.
There are times when so-called progressives outdo themselves with their (usually self-styled) ‘genius solutions’ to the ravages of neoliberalism. They come up with elaborate ‘solutions’ that people on the Left get feverishly excited about yet fail to see how obviously ridiculous these strategies are when all the options are allowed. They, in fact, step further into the mirky neoliberal world by trying to be progressive because they fail to see what the basic issue is. One recent example of this was the proposal by Britain’s Big Innovation Centre to divert the private sector into doing good for society in general. Apparently, the British government could resume control of the failing (privatised) essential services without laying out a single penny. This would apparently allow them to avoid running foul of Treasury borrowing limits yet satisfy the overwhelming desire by the British public for a restoration of quality services. It is clear that the British public are sick to death of the privatised services and are ready for a large revival of public sector activity. In that environment, why would the government, with such a powerful mandate and plenty of political cover, maintain the economic myths that were advanced to justify the (unjustifiable) sell-offs of public enterprises? Once we cut through these economic myths, it becomes apparent how lame these ‘solutions’, which perpetuate profit-seeking, corporate ownership of the essential services in Britain, really are.
There was an article posted by American political analyst Jared Berstein yesterday (January 7, 2018) – Questions for the MMTers – which I thought was a very civilised exercise in engagement from someone who is clearly representative of the more standard Democratic Party view, that the US government has to move towards balancing its fiscal position and reducing government debt in order to meet the social security challenges posed by an ageing population and the accompanying increase in dependency ratios. He is sympathetic to Modern Monetary Theory (MMT), given that he wrote “there’s no distance between my views and a core principal of MMT: the need for deficit spending when the economy is below full employment”. In other words, he notes that “MMT or whomever else argues on behalf of expansionary fiscal policy is correct”. But that is a fairly standard ‘progressive’ position when the economic cycle is below full capacity. This position typically alters quite dramatically when so-called longer terms considerations are brought into the picture. Jared Bernstein worries about the inflationary consequences of fiscal policy (so do MMT economists by the way) and thinks central banks should be the primary macroeconomic policy makers (MMT economists reject this). He also thinks that if the government doesn’t sell bonds to match its deficits then there will be “currency debasing”. MMT economists have pointed out the fallacies of that proposition but he is still in the dark about it. And he also things that fiscal position should be balanced at full employment. MMT economists do not agree with that proposition pointing out that it all depends on the state of saving and spending decisions in the non-government sector. It is likely that continuous deficits will be required even at full employment given the leakages from the income-spending cycle in the non-government sector. So while his queries are conciliatory and written in an inquiring fashion, the gulf between this typical ‘progressive’ view of macroeconomics and MMT is rather wide. This is Part 1 of a two-part series that responds to the questions that Jared Bernstein raises and hopefully puts the record a bit straighter.