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Disingenuous at best

In light of the – An Open Letter from Howard Schultz, ceo of Starbucks Coffee Company – which contains “a respectful request that customers no longer bring firearms into our stores or outdoor seating areas”, I felt it necessary to request that all readers of my blog leave all weapons (guns, rocket launchers and any other armaments that you carry on a regular basis) away from their side when they read my blog. Otherwise, violence might erupt as the arrogance of the neo-liberals scales new heights – five years into the crisis. To get your ire up several notches, you might read the latest article (September 16, 2013) by Greg Palast – Larry Summers: Goldman Sacked (thanks Gustavo). Remember keep your weapons out of reach! Then you might reflect (keeping as calm as you can) on the latest offering from the German Finance Minister, Wolfgang Schäuble in the Financial Times (September 16, 2013) – Ignore the doomsayers: Europe is being fixed. The triumphalism throughout the article demonstrates to me that Mr Schäuble has standards of excellence that lie well below what is conventionally considered to be (barely) reasonable. What he uses as the benchmark for defining mediocrity is beyond imagination. These are crazy times – when these economic criminals walk the streets at large, puffed up by their own arrogance and delusion, slapping themselves and their mates on the back, demanding credit for the human wreckage that their actions created, made worse and ensured will span generations. While we see youth unemployment rates of 62.5 per cent and rising suicide rates, these characters see glory and fulfillment. A most strange period of history and future generations will reflect on these apes poorly.

Most of the ideas that underpin the perspectives that are reflected in this article by the German Finance Minister come from my profession, which is typically occupied by well-paid individuals in secure employment who have substantial pensions to look forward to when they retire.

They wax lyrical about the world they construct in the comfortable and well appointed offices as if they were saying something about the real-world that lies beyond the campus boundary. This mythical text world we are continually being assaulted with by economists bears no relation to the world where workers strive to make ends meet and bosses manipulate workplaces to their advantage.

Interventions into the public debate from mainstream economists since the onset of the crisis has been disingenuous at best. The startling way in which mainstream economists, whose public statements helped create the crisis in the first place, have resumed their position in the public about is testimony to the way in which degenerating paradigms maintained their hegemony.

Among other tactics used, is the diversion – which involves redefining the problem that we all see into a non-problem that only they can see. For example, what was obviously a private debt crisis has been reconstructed as a sovereign debt crisis, which conveniently allows them to continue the pursuance of their anti-government policy biases.

What is obviously a problem of mass unemployment as a result of a collapse in employment growth has been reconstructed as a juxtaposition between skivers and triers. Those lazy bastard unemployed – if only they would get off their lazy butts and get a job and get off the welfare.

I know! If we cut welfare payments that obviously subsidise this idle pursuit of leisure that will force those lazy unemployed bastards to do something for themselves! Yes it will – their kids will become malnourished, their marriages will collapse and they will increasingly enter the nether world of alcohol and substance abuse and mental illness as they descend further into poverty.

That sort of thing.

Disingenuous at best. Criminal not far after that. Crimes against humanity.

Take your pick on the meaning – they all apply.

The article by the German Finance Minister is in that vein.

My comments follow directly from the brief analysis I presented in yesterday’s blog – Eurozone nowhere near creating a truly federal structure

Remember this:

The German Finance Minister was caught by German TV station ARD playing Sudoku during an important debate in the Bundestag about the first Greek bailout.

The German government ordered ARD to delete all material relating to this incident from its WWW-site. You can see the YouTube video of a very sneaky finance minister – HERE

Please read my blog – Athens burned, while I played Sudoku – for more discussion on this point.

But now, he has generously taken a break from the game to tell us how well the Eurozone is doing and how right he and his German iron booted mates – or we should use his words – “cool-heads” – have been.

The rest of us – who each day for the last five years have been witnessing an unfolding human disaster – have according to the Finance Minister been operating out of our analytical depth – bemused and angry (that Europe is a success story), and have missed all the progress the “cool-heads” were making and have been ignorant of the “ambitious”, “flexible and adaptive” strategy that has been put in place by those Masters.

If only we had heeded the lessons from the marvelously successful German reforms, which started in 2003, we would not have been so plainly stupid to think a youth unemployment rate of 62.5 per cent was anything to worry about. Just a bit of flexible and adaptive structural reform.

The triumphalism in Wolfgang Schäuble’s prose is something else.

He writes:

The world should rejoice at the positive economic signals the eurozone is sending almost continuously these days. While the crisis continues to reverberate, the eurozone is clearly on the mend both structurally and cyclically.

What is happening turns out to be pretty much what the proponents of Europe’s cool-headed crisis management predicted. The fiscal and structural repair work is paying off, laying the foundations for sustainable growth. This has taken critical observers aback. It should not have, because, in truth, we have seen it all before, many times and in many places. Despite what the critics of the European crisis management would have us believe, we live in the real world, not in a parallel universe where well-established economic principles no longer apply.

Yes, just in the last few weeks we learned from – Eurostat – that:

1. Employment continues to decline – Document.

2. Industrial production fell over the last quarter and year – Document.

3. Labour Costs slowed because employment has plummetted so much – Document

4. Unemployment continues to rise – Document.

I know, lagging indicators. Of-course unemployment continues to rise in the recovery as participation rates rise because employment growth attracts the discouraged workers back into the labour force.

The only problem is that the employment growth remains negative and the employment-population ratio has fallen in the EU28 from 70.3 per cent in 2008 to 68.4 per cent in 2012 (and will be lower yet again in 2013).

Mr Schäuble tells us to “Take Germany” as an example of the success the “cool-heads” have created:

In the late 1990s it was the undisputed “sick man” of Europe … A first wave of adjustment, starting in 2003, focused on strengthening employment incentives, streamlining the public sector, fixing social security and raising consumption taxes. Down to shop-floor level, companies and unions worked together to make labour more flexible. A second wave of expenditure restraint and reforms followed once the financial crisis was past its peak.

I have written about these so-called reforms before.

Please read my blog – 72% youth unemployment – the crowning glory of the neo-liberal infestation and Eurozone production and employment still going backwards – for more discussion on the Hartz reforms.

The so-called mini-jobs have been such a wonderful innovation for German workers – cutting pay, job security and starving the German economy of the wherewithal to maintain robust domestic demand.

So what?

German real GDP growth was fairly poor in the period leading up to the crisis and was driven by its low-wage export-led approach which stifled domestic demand and relied on large current account deficits in its neighbours.

The so-called “over-spending” of nations such as Greece were just a mirror image of the underspending by German workers. The underspending was the direct result of the move to labour market deregulation and the shift in real income away from wages towards profits that followed.

If all nations are to be deprived of the capacity to maintain reasonable rates of growth in domestic demand, the German economy will go into recession because for every dollar of export revenue there has to be a dollar of import spending.

The German (low) growth model that, in part, caused the crisis to impact most severely on the peripheral economies, is an unsustainable way to generate stable growth and low unemployment.

By reforming – read destroying – the capacity of economies to maintain adequate real GDP growth rates, the so-called cool-heads are also undermining the German growth strategy.

Mr Schäuble then claims the problems with several Eurozone nations is that they have:

… let labour grow expensive and their share of world trade shrink. As the bust came, jobs vanished and public finances deteriorated.

There would have been no major crisis in Greece or Spain had their governments not signed away their currency sovereignty and agreed to operate under a fixed exchange rate system.

Their economies may be unbalanced with low productivity but when the crisis hit their exchange rates would have fallen thus reducing any non-competitiveness, the real wages of workers would have been reduced in terms of imported goods and services, and redirection of spending would have occurred to bias domestic production.

Their governments would have been able to privilege domestic expansion without the ridiculous fiscal rules embodied in the German-inspired Stability and Growth Pact. The bond markets would not have dealt with them severely because the “boot would have been on the other foot” – that is, the markets would know that the governments could spend without doling out the corporate welfare in the form of government debt.

And that would have been that. We would not have seen unemployment rates in Greece rising from the pre-crisis 8.7 per cent to nearly 30 per cent by the end of 2013. Or in Spain already at 28 per cent. We would not have seen youth unemployment rates topping 60 per cent, which condemn that cohort to a life of disadvantage and despair.

Mr Schäuble claims the:

European safety nets have provided a well-calibrated mix of incentives and solidarity to cushion the pain.

Read: starvation has been prevented in many cases.

What are his estimates of the costs of the massive youth unemployment? No cost-benefit or cost-effectiveness studies have been published by the EU or EC on the costs of the austerity. They will be massive and span generations.

Mr Schäuble blames “dysfunctional labour markets” in Southern Europe for the mass unemployment. He apparently has an elaborate insight in some major structural change that occurred between 2008 and 2010 to explain the massive increase in unemployment in these nations.

What could that structural change be? Why did these dysfunctional markets suddenly stop producing employment? No response or insight is every provided that can substantiate that thesis.

The fact is that real GDP collapsed and that kills jobs growth. Before the crisis, employment growth in the Southern nations was sufficient to keep unemployment from rising.

The Greek economy has already shrunk by around 25 per cent with another 5 per cent coming this year. This has nothing to do with dysfunctional labour markets.

Spending equals income equals output which generates jobs.


I have run out of time today but Mr Schäuble’s message of triumph says that we shouldn’t get too worried about the bad times but look to the future:

… however bad the times, we should fight the human tendency to extrapolate the present forever into the future. Systems adapt, downturns bottom out, trends turn. In other words, what is broken can be repaired. Europe today is the proof.

Growth will return as it always does. But the detritus in this case will be massive and largely unnecessary.

Further, the real policy changes that are required to prevent the Eurozone from melting down when the next negative spending shock arrives have not been implemented.

Competitiveness is barely changed. There is no coherent federal structure in place to give legitimacy to the monetary union. All that has been achieved is that forced poverty in many states has battened the situation down for a while – his claim that current account deficits are converging. Yes, because import demand has collapsed as national incomes have collapsed.

There has been very little increased capacity in Europe created to handle what happens if growth does resume – what will happen to these current account balances then?

But also when the negative shock comes next – the whole ball game starts again – but this time from a much lower base than before.

You may also like to read the normally conservative UK Telegraph journalist Ambrose Pritchard-Evans on our Sud -playing German – My grovelling apology to Herr Schäuble. That might calm you down a bit. I thought it was a cleverly crafted response.

Moron Watch!

The new conservative Australian government today (2 days after it took office) closed the Federal Climate Commission “which had been established to provide public information on the effects of and potential solutions to global warming”.

The ABC story – Abbott shuts down Climate Commission – noted that the closure was a saving to government but despite the erroneous logic surrounding that claim, the fact is that the new Government are climate change deniers – a.k.a. morons.

This is one of many moronic acts that the Government will take as it tries to take us back to the past – where the elites could swagger around doing what they wanted and who cares about the rest.

And at the state level, the ABC reported today the NSW Government was banning hopscotch courts being drawn by children on pavements. The article – NSW graffiti laws to also outlaw hopscotch squares – tells us that police can arrest children for chalking out a court to have some fun.

But reading between the lines – the anti-gay conservatives have been hating the surge in – rainbow crossings – being drawn across our roads, after the first one emerged in Oxford Street, Sydney in April 2013.

The law is most likely targetted at punishing anyone who has the creativity, skill and temerity to draw a lovely coloured crossing across any of our streets.

The bans are moronic – but Australia is now firmly under the political grip of these climate-change denying, anti-gay conservatives. Stay tuned for the attack on the unemployed, single mothers, pensioners on disability support, indigenous Australians and other persons who are at the bottom of the pile in our society. The conservative assault on these groups will just build on the disgusting way the Labor Party dealt with them anyway.

That is enough for today!

(c) Copyright 2013 Bill Mitchell. All Rights Reserved.

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    This Post Has 15 Comments
    1. Bill,

      Surely (tongue in cheek) you can’t be critical of a new Federal Government that claims to be a ‘problem-solving’ government, not a government based on ideology? I almost choked on my dinner when I heard Abbott make this statement after being sworn in as the new PM. That man is clearly an inveterate liar. At least you should have no problems finding topics to write about in Billy Blog. Pity the disadvantaged Australians who will now have to suffer more pain.

    2. Dear Bill

      Thee has been no global warming since 2000, although the CO2 concentration in the atmosphere continues to grow. At the very least, this means that the climate models used to predict a steady increase in global temperatures are imperfect. There is no reason for complacency, but opposing the dogmatic denial of global warming by rightwingers by an equally dogmatic insistence on the reality of imminently catastrophic global warming is not helpful. Unfortunately, this whole issue has been thoroughly politicized, and rightwingers aren’t the only culprits.

      The rightwing position is: the guilt of CO2 emissions is unproven, therefore its innocence is proven. That is a logical fallacy because you can’t go from uncertainty to certainty without further evidence.

      the leftwing position is: Never mind what is actually happening, if we don’t curb CO2 emissions very soon, we will be struck with disasters.

      Regards. James

    3. “Thee has been no global warming since 2000, although the CO2 concentration in the atmosphere continues to grow.”

      The economy continued to grow at a steady rate through the 1990s and 2000s even though the private debt to GDP ratio was rising.

      It was called the ‘Great Moderation’ – then it collapsed, suddenly and catastrophically.

      Dynamic systems have a tendency to quieten down – right before they rip themselves apart. I’d see a period of calm as a big red flashing warning signal.

      What’s bizarre of course is that curbing CO2 emissions should be a good thing. Constraints are liberating and lead to massive technical progress. Tighten the regulations hard and let progress happen.

    4. James,

      You are displaying your ignorance about global warming. The Earth is heating up at a rapid rate. What people don’t realise – but would if they were prepared to read the literature before making comment – is that there are influential heat transfer systems at work that go through various cycles. These heat transfer systems alter the relative storing of the heat trapped by greenhouse gases in the world’s oceans, seas, atmosphere, and various land surfaces. One of the most influential heat transfer mechanisms is the Pacific Decadal Oscillation (PDO). When the PDO is in a positive phase, a smaller than normal proportion of the heat trapped by greenhouse gases is stored in the world’s oceans, which means a larger than normal proportion of the trapped heat ends up in the Earth’s atmosphere. During a positive PDO phase, average surface temps are higher than they would otherwise be. The opposite occurs during a negative PDO phase. Each phase lasts for 30 to 40 years.

      Over the last century, there have been three full PDO phases. Between 1905-1945 (positive PDO), average temps rose by 0.4C; between 1946-1976 (negative PDO), average temps fell by 0.2C; between 1977-2007 (positive PDO), average temps rose by 0.55C. That’s right – temperatures fell during the 1950s and 1960s, but not nearly as dramatically as they rose during the last positive PDO. So we are now in a negative PDO phase. Average temps should be falling, but they are not. Why? Because the warming effect of rising CO2 is offsetting the cooling effect of the negative PDO. If temps don’t rise during the next 30 or so years, sceptics and the Tony Abbotts of the world will keep claiming that CC science is crap. Given that average surface temps rose by 0.55C in the last 30-year positive PDO phase, one can only guess what temps will do during the next positive PDO phase, especially if we do nothing about CO2 emissions – which appears likely.

      By the way, it has been estimated that the Earth’s accumulated heat content – which is being disproportionately stored in the world’s oceans during the current negative PDO phase – is rising at a rate equivalent to building 65,000 reasonably-sized nuclear power plants each year and emptying their entire energy output into the world’s oceans. Believe me, the world is warming rapidly!

    5. I am unable to locate the reference right now but there is evidence that the Pacific is exerting an influence on global temperature through cooling of the ambient temperature. But as this is a function of the Pacific cycle, it is clearly temporary. It provides no evidence whatsoever for the conclusion that global warming is an illusion, only that the situation is more complex than we at present may be aware.

    6. James showing his considerable scientific illiteracy. As pointed out there are two major heat sinks for global temperature, the sea and air. At the present more energy is accumulating in the sea than has occurred in the recent past. This is absolutely shown by the relevant scientific research.

      On the other hand nothing in science is absolutely certain. Since the science shows humans are the main source of increased CO2(from gas fingerprinting), and that CO2 is a greenhouse gas (this can be shown in a lab very easily) its possible that the science of thermodynamics or the greenhouse effect is wrong. Its about as likely as that the theory of gravity is wrong.

      In fact the first scientist to discover co2 was a greenhouse gas realised this implied there would be some global warming in the atmosphere as a result. That was in the year 1820.

    7. James – The basic evidence for global warming is straight forward and well within the grasp of the average high school student.Most people of average intelligence not having an axe to grind can differentiate weather and climate.
      (1) Carbon dioxide levels have risen and are still rising since the beginning of the industrial revolution. These are confirmed scientific measurements.
      (2)It is known from ice core measurements and other methods that high CO2 levels have been invariably associated in the past with higher temperatures.
      (3) The oceans are a huge heat sink and are slow but certain responders to higher atmospheric tempertures. The oceans are warming – that is a proven fact.
      (4) The oceans are a sink for CO2. This is part of the carbon cycle. If the rate of CO2 uptake exceeds what the oceans can recycle then the oceans become acidic.This is happening.
      (5)Glaciers worldwide are in almost 100% retreat.
      (6)The Arctic Ocean is becoming increasingly ice free over summer. This has a direct bearing on the huge land areas abutting it and the stability of the Greenland ice sheet.
      (7) There is increasing instability in the ice shelfs of West Antarctica.This freshwater ice is thinning from the bottom.The cause is probably warmer ocean water.The ice shelfs act as a bulwark for the ice caps and slow down the rate of movement towards the ocean.
      (8) Sea levels are rising – measured scientific fact. To date this has been due to thermal expansion of warming oceans but we can logically expect that melting ice sheets will make an increasing contribution.

      I don’t normally get involved in arguing with climate change deniers as I regard that activity as a complete waste of time.However, I have always thought that this site is read by mainly intelligent and progressive people.I was surprised when I read your contribution and decided it needed to be addressed.

      Finally,I support Bill’s use of the word “moron” in this context. I think that he is going to get plenty of opportunities to use it in future.

    8. Seems like it’s been one of those WTF? weeks Bill ?

      You got moron Abbott (never much of a choice tho, is there) and by the looks of it we’re going to get Merkel & piece of shit Schauble again.

      As ever, Bill your efforts are hugely appreciated. A beacon of sense in a very fcuked up world.

      Tho’ I have been enjoying Steve Keen’s ‘Crash Course in Disequilibrium Economics’ new lecture series from Ecuador on Youtube :)

    9. Dear Neill and others

      It was not my contention that there is no global warming or that there is no causal connection between man-made CO2 emissions and global warming. My point was that if a model predicts a steady increase in a variable and then there is no increase for an extended period, then the model is incomplete and should be revised.

      Nobody in his right mind doubts that humans can’t emit CO2 at the current rate indefinitely. We only have to look at Venus. The atmosphere there consists almost exclusively of CO2 (96%), and as a result it is blazing hot there. Still, the speed at which the Earth is warming matters a great deal. The greater the speed, the less time we have to wean ourselves off fossil fuels. The lower the speed, the more time we have.

      Regards. James

    10. “The greater the speed, the less time we have to wean ourselves off fossil fuels. The lower the speed, the more time we have.”

      Arguing for any lower speed just leads to procrastination and a greater chance of being past the point of no return (given the weakness of the models). Acting as though we have no time left is the most sensible strategy.

      All models are wrong. If they weren’t then they’d be replicas, not models. Regardless of how inaccurate they are, they all point to the same obvious conclsuion – if you generate more heat than your air-conditioning system can get rid of, then you cook.

    11. Dear Neill

      Suppose that farmers in a certain area irrigate their land with water from an aquifer. The aquifer contains 400 million cubic meters of water and they are using 1.2 million of them each year. Supposing that the annual inflow into the aquifer is 200,000, the aquifer will be exhausted 400 years from now. In these circumstances, the irrigation is unsustainable, but should the farmers already stop using the aquifer now? I would say that they should stop worrying. Who knows what will exist 300 or 400 years from now. We shouldn’t be short-sighted, but our time horizon shouldn’t be ridiculously long either.

      Professor: “The Sun will stop burning 5 billion years from now.”
      Student: “My God, what did you say?”
      Prof: “I said that the Sun would stop burning 5 billion years from now.”
      Student: “What a relief! I thought that you had said 5 million years from now.”

      Regards. James

    12. “but should the farmers already stop using the aquifer now? ”


      Nobody is asking anybody to stop doing anything. We’re asking them to change what they are doing to something sustainable.

      So develop a water supply that is based upon a renewable circulation and put that in place as soon as possible. Then the aquifer can be left where it is and has no need of being depleted.

      There is a problem. It needs to be solved and we’re short of things for people to do.

      Seems straightforward to me. A stitch in time saves nine.

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