Video of my public lecture in Helsinki, February 27, 2018

Thursday is my last day in Helsinki and I have a lot of travelling to do later in the afternoon after I finish teaching. So I am posting this in the early hours of Thursday (Oz time), even though I am still in Helsinki. The new Post Graduate program in Global Political Economy, which we have launched at the University of Helsinki is a great development. I have been conducting lectures in a subject – From Modern Money Theory to Global Political Economy and Revival of Classical Political Economy. The class is largely made up of non-economics students and so the challenge has been to develop a set of conceptual and analytical tools fairly quickly and apply them to the major debates of the day. I think the time I have spent working out how to do that will be of great use when we launch programs under the MMT University banner later in the year. After my trip to Barcelona last weekend, we are hoping to introduce a similar type of course into the University there as part of an expanding network where students will be able to learn the principles of Modern Monetary Theory (MMT) and apply them to real world problems. More later on other developments.

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Australian national accounts – growth slowdown continues

The Australian Bureau of Statistics released the latest December-quarter 2017 National Accounts data today (December 6, 2017). It showed several things that defy the hype in the media. First, overall real GDP growth was just 0.4 per cent for the quarter – 1.6 percent annualised – miserable. Even the actual annual rate of 2.4 per cent is well below past trends. Private capital formation was negative. Net exports were negative. Growth is being sustained by household consumption on the back of record levels of household debt and government spending (mostly local and state level investment). Without the contribution of government spending, overall growth would have been negative in the December-quarter. And this is a government that is trying to cut its deficit. This ‘rear vision’ account of where the economy was in the last three months of 2017 is thus not very good reading. Real GDP growth has fallen from 0.8 per cent in the June-quarter, to 0.6 per cent in the September-quarter to 0.4 per cent in the December-quarter. That is a trend I suspected would emerge. What is obvious to me is that private investment is flagging after showing some signs of recovery and a stronger fiscal contribution is necessary to ensure that household consumption scales more proportionately with growth in incomes rather than debt. than is evident in the current data. The external sector continues to make a negative contribution to growth with exports falling. There is no big Post Mining Boom-Export Boom happening folks. The one positive was that growth in compensation of employees was above 1 per cent for the quarter and 4.8 per cent for the year. We will see whether that materialises into a trend. As I concluded last quarter, the overall assessment is that growth is positive but slowing. And, it remains unbalanced and uncertain.

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Workers’ parties in NZ and Australia compete to be the most neoliberal

The Italian elections were held last Sunday (March 4, 2018) and the results are devastating for the Europhiles that think that the EU and the Eurozone, in particular, can be reformed to bring the people together in some sort of democratic paradise. Anti-establishment parties including the far right Lega Nord (who want to expel all migrants) have made spectacular gains. This follows elections in several nations where rather extreme results have emerged. What is apparent is that social democratic parties have started to lose electoral supports in large swathes and, in some, cases are now diminished and ruined forces. After hearing what the Shadow Treasurer in Australia said yesterday I can only hope the same electoral whitewash of the Australian Labor Party occurs at the next election. The message from the various national elections is pretty clear. Voters have seen through all the neoliberal nonsense that they have been bombarded with over the last decades and the miserable actual outcomes that have followed in terms of things that matter for peoples’ prosperity – jobs, real wages growth, income security, public services and infrastructure etc. They are sick of seeing the top-end-of-town walk off with the largesse while government’s attack the poorer elements in the name of ‘budget repair’. The neoliberals have pushed their luck to far. Sunday’s Italian result is just part of the evidence mounting to support that view. But, back in the Southern Hemisphere the Labour government in New Zealand the Labor opposition in Australia do not seem to have understood the trends. They are still thinking it is clever to ape the neoliberal nonsense about fiscal surpluses, AAA credit ratings and war chests to help fight future recessions. Sad sad sad.

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Poverty among the unemployed now close to 50 per cent in the EU

Last week, Eurostat released it updated data covering people who are at risk of monetary poverty. In the press release/news page (February 26, 2018) – Almost half the unemployed at risk of monetary poverty in the EU – we learn that 48.7 per cent of unemployed persons in the EU “were at risk of poverty” in 2016, even “after social transfers” were taken into account. The situation has deteriorated significantly since 2005 as a result of the impacts of the GFC and the policy response taken by the European Commission and the Member States (under the EC’s thumb). While the usual suspects perform badly on these indicators (Spain, Greece, Italy), a stark result is that 70.8 per cent of German unemployed persons are at risk of poverty. This proportion has jumped from 40.9 per cent in 2005 (a 29.9 percentage point shift). So, even in the strongest Eurozone economy, the policy frameworks are delivering terrible outcomes. Increasing divergence and inequality and rising social exclusion are the most striking characteristics of the 13 years of European Union history since 2005. It doesn’t look like a policy bloc that any sensible nation should aspire to be part off (or remain within).

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The Weekend Quiz – March 3-4, 2018 – answers and discussion

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.

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The Weekend Quiz – March 3-4, 2018

Welcome to The Weekend 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.

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The New Keynesian fiscal rules that mislead British Labour – Part 3

This is Part 3 (and final) in the series which examines the robustness of claims made by two British academics about the desirability of the British government (particularly Labour) adopting further fiscal constraints on their flexibility to advance well-being in that nation. Part 3 further develops the critique and focuses on the validity of tightening voluntary constraints on government and outsourcing key parts of the fiscal policy development process to so-called ‘independent’ fiscal councils or boards. We conclude that these suggestions would further entrench the neoliberal dominance of government policy and reduce its capacity to serve the wider interest. In effect, taking this sort of advice would be counterproductive for British Labour, which really needs to to further break out of its recent Blairite neoliberal past and present a truly progressive manifesto to the British people that will force the Tories to move closer to the centre and squeeze the extreme right-wing elements. This will require more than articulating progressive-sounding social and environmental policies. It will require more than proposals to renationalise the railways. Effectively, British Labour has to reframe the macroeconomic debate and eschew the sort of reasoning that the mainstream of my profession offers. It must, in my view, embrace Modern Monetary Theory (MMT) principles to free itself from the shackles of all the neoliberal mumbo jumbo that the New Keynesians continually offer as economic verities. The reality is the the New Keynesian approach has one output – an elaborate litany of lies.

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