Welcome to The Weekend Quiz, which used to be known as the Saturday Quiz! The quiz tests whether you have been paying attention or not to the blogs I post. See how you go with the following questions. Your results are only known to you and no records are retained.
Regular readers will know that I have been investigating how close the US is to full employment, given that various commentators and conservative types have been trying to claim it is and that, as a result, the US government should hack into the fiscal deficit and the central bank should raise interest rates. Today, I consider some more evidence of a comparative nature to advance my understanding of the situation. The Bloomberg article (March 29, 2017) – The Jobs Statistics Trump Should Be Worried About – made some good points about the state of the US labour market. It focused on the significant decline in the US labour participation rate since 2000 and the cyclical component of that decline, which is a common trend in many advanced nations and one I have written a lot about in the past. The additional evidence presented in the Bloomberg articles demonstrates that the US economy is still nowhere near full employment. This blog adds some evidence from Australia and Japan by way of comparison.
Earlier this year, the French collectif Ecolinks, which is a group of economics academics and students in various French institutions published their Petit manuel économique anti-FN, which carried a preface from Thomas Piketty. The group says it is opposed to the current consensus in economics yet its blog seems to be full of Paul Krugman or Wren-Lewis quotes or links to their articles (or other New Keynesians – who are the ‘consensus’, unfortunately). They are obviously worried about the political popularity of FN (Marine Le Pen’s National Front) and have thus produced their anti-FN book as a critique of FNs economic approach. They claim that FN proposes policies that represent “le repli sur une identité étriquée et une vision fantasmée de la nation, rendent cette perspective catastrophique” or in translation, “a retreat into a narrow identity with a fantasised vision of the nation, which would be catastrophic”. The book has received some coverage since its release by a French press that is increasingly worried about Le Pen’s popularity. Please do not interpret in what follows any hint of support for FN from this blog other than as a ‘cat among the pigeons’ force in European politics, anything that upsets the right-wing, neo-liberal, corporatist elites that run the show is to be welcome. I also support Marine Le Pen’s observation that the “The EU world is ultra-liberalism, savage globalisation, artificially created across nations”. That is why I hoped the Leave vote in Britain would win. It is a pity that she marries these views with other hostile views towards immigrants etc, although I am not an expert on immigration so I do not write much about it. It is also a pity that the so-called progressive Left in France (or elsewhere) has left it to the likes of Le Pen to articulate what I would consider to be progressive economic policies. Although, that assessment has to be tempered by the observation that Le Pen’s approach to economic policy is somewhat confused – in part, by her ‘political’ assessment that France is not yet ready to leave to Eurozone. At that point, some bizarre contradictions emerge and the anti-FN book correctly points them out.
It does not quite add up. But then why should it. Spin is spin. On the one hand, we are being constantly told that the world has entered a new era of secular stagnation, driven by an ageing population and a fall off in productive innovation, and we just have to get used to the elevated levels of unemployment that come with that. Yet, other spin doctors are talking about the innovation revolution, the second machine-age, where the march of the robots who will be embedded with AI that will make them smarter than us, big data, automation, the Internet of Things, and more will render work obsolete. In both cases, apparently, the introduction of a guaranteed income is recommended. Suspicious? Then there is more. When CEOs of big companies start advocating a policy that they claim will improve the lot of workers I become immediately suspicious. And why would people with a progressive bent advocate policies that are part of the continuing conservative ambition to achieve social control and which essentially amount to an abandonment of responsibility that government has for maintaining employment for those who cannot otherwise find jobs? So what is with this rush of support for a basic income guarantee (BIG) from all sides of politics??
How would we assess whether a monetary system was working? There are several dimensions that warrant attention. On any dimension that we might put forward, the Eurozone has been a miserable failure. I have just read the latest – Benchmarking Working Europe 2017 – compiled and published by the European Trade Union Institute and the European Trade Union Confederation (ETUC), which documents these dimensions of failure of the European Union and the Eurozone in particular. It puts the White Paper on the future of Europe released by Jean-Claude Juncker on March 1, 2017, into better perspective. The White Paper is the European Commission’s “contribution to the rome Summit on March 25, 2017” to “mark the 60th anniversary of the EU”. It is a document bereft of any substance and should be disregarded. The ETUI and ETUC Report provides sufficient evidence to conclude that the whole monetary union shebang should be dismantled as quickly as possible.
Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.
Welcome to The Weekend Quiz, which used to be known as the Saturday Quiz! The quiz tests whether you have been paying attention or not to the blogs I post. See how you go with the following questions. Your results are only known to you and no records are retained.
Regular readers will recall a few of my blogs where I have demonstrated that the US economy is still nowhere near to what one might call full employment, even though that concept is highly contested and can span a range of outcomes depending on the ideological disposition one takes. I have also done some research decomposing the marked decline in the US participation rate since around 2000 into age-related effects and what I call the discouraged worker effects (workers giving up looking for jobs because of the slow employment growth). This week (March 20, 2017), research published by the Federal Reserve Bank of San Francisco bears on this topic –
How Tight Is the U.S. Labor Market? – and they essentially concur with my previous assessments. There work is interesting because it reaches the same conclusion from a variety of methods, which is always a good sign because it means the result is not method-specific. However, there are those who for their own ideological reasons want to argue that the US economy is already at full employment. If they were correct, it would mean the quality of that ‘full employment’ had shifted markedly – lower – as a consequence of the GFC and its aftermath and that the associated underutilisation levels had risen.
Maybe the Australian Government should examine all its contracts with the biggest 121 companies in Australia and cancel them. Perhaps it should, where these companies provide public infrastructure consider setting up not-for-profit public companies to compete against the private 121 (thus lowering prices) and direct all public procurement to these new public institutions. The reason I suggest that is because the Business Council of Australia, which represents the largest companies in Australia (membership equals 121) is demanding the Australian government introduce rather sharp spending cuts or “suffer the consequences”. Okay, a good place to start, might therefore be to cut all public assistance to the companies that are members of the BCA, which would generate huge reductions in government spending. Do you think they would be so aggressive if that was on the table? Not a chance. This is a tawdry lot of corporatists who have had a long history of whingeing about government intervention unless, of course, it is helping grease the profits of their membership. Why the media has given their latest calls for fiscal rectitude the coverage it has reflects on the quality of our media these days.
In 2012, while unemployment and underemployment was still at elevated levels after rising in the early days of the GFC, non-government spending was weak, the external deficit was around 4 per cent of GDP, real GDP growth remained well below its trend in the 5 years before the GFC, and the economy was no-where near full employment, the then Treasurer, Wayne Swan launched into the largest fiscal shift away from deficit in recent history (in the modern era since 1970). He was obsessed with ‘getting the budget back into surplus’ in the following year because somehow he had gleaned from the work of John Maynard Keynes that a responsible government has to pay back deficits with surpluses. The Australian government’s deficit had risen because tax revenue had fallen as a result of the slowdown in activity and because the Government introduced a rather large fiscal stimulus, which saved Australia from going down the recession route that other nations were mired in. Maintaining that deficit or enlarging it with further stimulus is what a responsible government should have done. But Swan, apparently thought that with Europe heading further into the morass (as a result of mindless austerity) that he had to show the world what a good government does – run surpluses. Apparently, he thought the credit rating agencies would close the government down. Apparently, he thought inflation would runaway from its low levels. Apparently, he believed the lie that fiscal deficits pushed up interest rates. Apparently, he didn’t know that introducing fiscal contraction when non-government spending was weak would further slow the economy and damage confidence. All of which happened. Quite obviously he didn’t know a thing. Swan, ever the politician (but in opposition now) is apparently thinking differently – now he is claiming fiscal deficits have to rise to push the economy towards full employment. This chameleon-like performance is rather sickening given the damage he caused when he was actually the Treasurer in charge of fiscal policy and full of neo-liberal lies and confusion.