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Time for George Osborne to expand discretionary deficit spending

The British Office of National Statistics released the latest – Public Finance, October 2015 – last week (November 20, 2015), which showed that the British fiscal deficit has grown by around 16 per cent in the past 12 months and is around £2.2 billion higher than was forecast by those who care to forecast such things. The hysterical press reaction was quite amazing. For example, the so-called progressive UK Guardian described the results as “shock UK deficit figures” and said that the recorded deficit was the “worst … for six years”, despite the fact that any informed dialogue about fiscal balances would eschew the use of terms ‘worst’ or ‘better’ to describe such outcomes. Meanwhile, the US press went haywire with claims of a scandal of what effectively amounts to the government hiding revenue from itself. Quite amazing.

ONS reported that:

1. The deficit “increased by £1.1 billion to £8.2 billion in October 2015 compared with October 2014”.

2. Net public debt “at the end of October 2015 was £1,526.8 billion, equivalent to 80.5% of Gross Domestic Product; an increase of £70.4 billion compared with October 2014”.

The UK Guardian commentator Phillip Inman wrote in his article (November 20, 2015) – UK deficit figures: expect a new George Osborne conjuring trick – that:

On the surface, the figures are bad.

He didn’t actually say why they were bad other than they were higher than expected.

Deficit outcomes are neither good nor bad in themselves. For a currency issuing government, like the British government, these qualitative terms make a no sense.

A fiscal outcome, whether it be a deficit or surplus, should never be the objective of policy. Rather, that outcome provides a signal to government of the state of the real economy (output, employment, inflation, overall well-being), which is the appropriate target for policy interventions and policy adjustments.

So whether a deficit is rising or falling is not the point. The point is to understand, firstly, whether the flow of net government spending (the deficit) is appropriate relative to the spending and saving behaviour of the non-government sector; and, secondly, to understand why the fiscal balance is changing from year to year.

When I say that a particular deficit or a change in the deficit is neither good nor bad per se I am referring to the fact that we can only make sense of the outcome with reference to the real economy.

However, I also use the term ‘good’ and ‘bad’ deficits, which might be misleading without further clarification. For example, a deficit might move over the course of 12 months from 3 per cent of GDP to 6 per cent of GDP. How would we go about interpreting that shift?

The sort of knee-jerk journalism that the UK Guardian displayed last week would use terms like ‘shock’, ‘bad’, ‘deterioration’ and the like because all they would be focusing on was the doubling of the deficit to GDP ratio.

However, under some circumstances the 6 per cent of GDP deficit might be a ‘good’ deficit, whereas under different circumstances, the same deficit outcome could be described as a ‘bad’ deficit.

In the former case, if the government had have responded to declining non-government spending and implemented a discretionary increase in its net spending, which had stimulated economic activity that would otherwise have been in decline, and as a result employment was higher and unemployment lower, then the resulting deficit of 6 per cent of GDP deficit would be reasonably considered a ‘good’ deficit.

Alternatively, if the government failed to respond to declining non-government spending and allowed economic activity to decline, and as a result tax revenue fell, then the resulting deficit of 6 per cent of GDP deficit would be reasonably considered a ‘bad’ deficit.

Context is everything!

Another UK Guardian article (November 20, 2015) – Shock UK deficit figures dent George Osborne’s economic plan – quoted some private sector economist is saying:

October’s poor borrowing numbers extinguish any lingering hope that the chancellor will be able to soften his austerity plans materially in next week’s autumn statement.

The journalist failed to scrutinise that comment and therefore left it as and authoritative statement without context.

The context that is relevant is that the latest national accounts data released by the British Office of National Statistics in October showed that the British economy was slowing substantially (the latest quarterly growth was a miserable 0.5 per cent) with key sectors like construction in decline and industry more broadly in decline.

Please read my blog – British government analysis shows fiscal stimulus effective in supporting growth – for more discussion on this point.

Phillip Inman’s article notes a little further on, after he has told us how shocking and bad the figures are. that the “business environment has worsened”.

Now that is the ‘bad’ outcome because it means that the already low-quality employment environment will deteriorate further, notwithstanding the claims that employment growth is strong (note I emphasise quality).

Inman writes that this “means 2014 was a high-water mark for economic growth and a slip backwards this year to a gentle expansion output is the new normal”.

Which really tells you what’s going on.

The decline in government receipts in October 2015 relative to the 12 months previous were driven by declining “corporation tax” which fell by 1.1 per cent (or £7.2 billion).

Government spending was also up by 3.3 per cent (or £1.9 billion).

The data also shows that not only did the government will fail to meet this year’s fiscal targets at the revisions for 2014-15 showed that government borrowing was higher than previously thought.

As I wrote in this blog – British government analysis shows fiscal stimulus effective in supporting growth – the increasing deficit has been a positive influence for total expenditure and without it the British growth rate would be falling back towards zero if not into negative numbers by now.

While the Conservatives like to make out that they’re pursuing a hard-nosed austerity program, the fact remains that up until now, the fiscal stands has been supporting growth. That’s not to say that the cuts that have been made in spending programs (you might call these a sort of micro austerity) have not been extremely damaging to those in the breach.

The other theme that came out last week, which was reflected in the quote above about the upcoming Autumn statement, was that the rising net spending will necessitate even harsher austerity plans being implemented then were previously announced.

The UK Telegraph article (November 20, 2015) – Autumn Statement 2015: George Osborne dealt a blow by ‘terrible’ borrowing figures – was similarly hysterical, which is no surprise given the ownership of the newspaper.

This article quoted the same private sector economist that the Guardian had quoted but this time use the words “terrible” to emphasise the message.

The British Chancellor should take the combination of moderating growth rate, the government’s contribution to supporting that growth rate, and the declining company tax revenue as a warning that any attempt to cut the discretionary component of the deficit will in all likelihood push the British economy back towards recession.

With the goods-producing sector in decline, any austerity-type attacks on households, particularly those low-income families with high propensities to consume, will impact heavily on the services sector, which is currently driving the (moderate) growth.

There is actually in need in Britain at present for an increase in discretionary net public spending to ensure that growth continues and non-government sector confidence doesn’t collapse again as it did in 2010-11.

Meanwhile across the Atlantic …

Moving across the Atlantic, the Magazine Politico carried the story last week (November 20, 2015) – Fed pushes back as Congress eyes its billions – which makes you wonder whether editorial functions exist anymore.

The gist of the article was that US Congress members were “plotting to use the central bank as a government piggy bank” while at the same time accusing the US Federal Reserve Bank “for being too political with its monetary policy”.

Please read my blogs – The consolidated government – treasury and central bank and The sham of central bank independence – to learn about why the notion of an independent central bank is nonsensical in a modern monetary system.

Governments create a complex accounting web to hide the intrinsic characteristics that define their currency-issuing status. These voluntary creations have little economic purpose but do serve to engage politicians in the games they play about debt ceilings, ‘disastrous’ deficits, and all the rest of the lunacy that ignorance breeds.

These labyrinthic accounting trails are quite often time-consuming to work out but they all have the same intent – they make it look as though the central bank is in some way divorced from the treasury functions, that tax revenue ‘funds’ government spending and that funds raised from debt-issuance funds government spending beyond the tax revenue.

All this is convenient for those who wish to maintain the myth that taxpayers fund government spending and are therefore being robbed when the government spends its money.

In Australia, for example the Reserve Bank of Australia:

… provides a facility to the Australian Government that is used to manage a group of bank accounts, known as the Official Public Account (OPA) Group, the aggregate balance of which represents the Government’s daily cash position. These banking arrangements include the provision of a term-deposit facility for the investment of surplus funds, the sweeping of balances to and from agencies’ accounts held with transactional bankers, and access to a strictly limited overdraft facility.

On July 1, 1999, the Australian government made the pretense of opening up its banking services to commercial private banks. The decision meant that “all Australian Government departments and agencies have been responsible for their own individual banking arrangements. Under devolved banking arrangements, agencies are required to test the services previously provided by the Reserve Bank of Australia (RBA) against what is available from other financial institutions” (Source).

However, the RBA “sweeps balances of Australian government departments and agencies from their transactional banker to the Official Public account at the RBA” on a nightly basis.

Furthermore, the so-called “strictly limited overdraft facility” can be changed by the government under the legislative umbrella that determines RBA functions anytime it chooses.

The Politico article quotes a US Federal Reserve spokesperson (presumably) as indicating the bank is horrified at the thought of the government “using the resources of the Federal reserve to finance fiscal spending”.

Who would have thought! The government being upset and using its currency issuing capacities for its own spending.

Meanwhile, the doleful congress members are apparently scheming to get their hands on the government’s own money, because they claim it is the “only politically feasible way to fund the long-term transportation bill” because the deficit is so large and they think the public will not realise what is going on.

The account at the central banking question is the so-called Capital Surplus Account, which is used by the bank to “absorb weekly losses” (and gains) that the Federal Reserve’s operations might generate.

Of course, given that the Federal Reserve can create US dollars ‘out of thin air’, these accounts are just veils for obfuscating the intrinsic nature of a currency-issuing government. From a different perspective, they may be seen as pigeon holes for arranging and describing the different activities the central bank engages in.

But as an expression of any intrinsic financial constraint on either arm of government – Central bank or Treasury – the accounting structures have no meaning.

The article quoted the Federal Reserve Vice Chairman as claiming that such a move constituted “quasi-fiscal policy, with manifold implications for central bank independence as well as for the quality of fiscal policy decisions” but chose not to elaborate on why this would compromise fiscal policy decision-making.

This is just a rehearsal of the old taboo relating to what we now call Overt Mon`etary Financing. The implication is that without the political constraint of having to issue public debt to match deficit spending governments would go crazy as they raided their own bank.

And, indeed they might! But the consequences would reveal themselves very quickly and guarantee a short political tenure for that particular government.

And the economic incompetence so demonstrated would rival the irresponsible behaviour we now call pro-cyclical austerity, although the consequences of the latter are significantly more damaging than about of inflation brought about by a government pushing nominal spending growth ahead of the capacity of the economy to respond by producing real goods and services.

Please read my blogs – OMF – paranoia for many but a solution for all and There is no need to issue public debt and Overt Monetary Financing – again – for more discussion on this point.

Whether the transportation bill being proposed is a sensible policy intervention is another matter. I have nothing to say about that in this blog. The point is more general and relates to the myths that are used to constrain government from using its currency-issuing capacity to advance well-being for all.

The Washington Post article on the same topic (November 7, 2015) – Republicans raid the Federal Reserve – articulated the nonsense in more detail.

It claimed that the central bank’s Capital Surplus Account was necessary because it “increases public confidence in its ability to weather a crisis, albeit marginally”. Note the “albeit marginally” qualification.

In fact, I doubt the public even know about the existence of that account and its purpose. The public are by now aware that in terms of ‘weathering’ a shortfall of capital, the US Federal Reserve has unlimited capacity.

After all, they saw billions created out of ‘thin air’ by Ben Bernanke in 2008 and 2009 which was handed over to the banksters. No-one questioned the central banks capacity to weather a crisis then.

Amazingly, the Washington Post writes:

Note that the maneuver does not generate new financial resources, as taxes or offsetting spending would have done. Rather, it takes money out of one government pocket — the Fed — and puts it into another — the highway program. This is an offset only in the artificial world of budget “scoring.”

Which is about as confused as a journalist can become on these matters. It certainly “takes money out of one government pocket … and puts it into another”.

But note, the money then goes in to “the highway program”, which means that it is left the government sector and entered the non-government sector to provide productive public infrastructure (in this instance).

So it does generate new net financial resources in the non-government sector whereas if the government spending had been matched by an offsetting tax drain, the net financial resources of the non-government sector would be unchanged. I need to qualify that last statement because the government spending even if matched, initially, by tax revenue, would have multiplying affects in the non-government sector that would leaves that sector wealthier.

I also note the Washington Post writer acknowledges that all this accounting is really an artificial scoreboard and, like scoreboards around the world in sporting venues, it is nonsensical to say they can run out of points to post during a particular game.

The Washington Post leaves its readers with the typical Weimar scare mongering. It says:

Many a banana republic, by contrast, has come to grief using its central bank to facilitate government deficit spending. Post-World War I Germany had a similar problem, if memory serves. We’re not saying that the highway bill creates a precise analogy between the United States and those sorry examples — or even a close one. We just wish we could say that there’s no analogy whatsoever.

There is no analogy. The highway bill expands the supply side of the economy, whereas the hyperinflation in Germany in the 1920s was largely caused by a dramatic reduction in the supply capacity of the economy to meet the growing nominal spending.

I would also like a list of so-called ‘banana republics’ that have come to grief through governments using their Fiat currency capacities to expand productive infrastructure. I think the list would be relatively short if not non-existent.

Building highways and maintaining transport infrastructure is quite a different thing then building statues of political leaders who wish to perpetuate a cult of personality!

Conclusion

The British fiscal figures tell me that the discretionary deficit is too small relative to the spending and saving plans and actions of the non-government sector.

It is quite obvious that George Osborne’s hope that Britain would return to prosperity through the ‘March of the Makers’ (that is, though an export-led growth boom) will not come to fruition. It was one of those Conservative dreams or cover-ups to justify hacking into domestic demand when they resumed office in 2010. The dream hasn’t reflected reality since then.

With household debt still extremely high and the resulting balance sheets of the debt holders in a precarious state, and with industrial production and construction activity in the doldrums, the correct thing for George Osborne to announce in his Autumn statement would be and expansion of discretionary deficit spending.

He won’t and the British economy will reap the rather nasty harvest.

That is enough for today!

(c) Copyright 2015 William Mitchell. All Rights Reserved.

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    This Post Has 21 Comments
    1. Though a relative newcomer to MMT who has struggled at first to understand it, I am amazed at either the depths of ignorance displayed by governments and nearly all the media or the extent of deliberate deception.
      The paradigm that a sovereign government needs to fund itself from tax revenue and that deficit spending is unsustainable is accepted by most without question, almost as holy writ.

      Spreading the word is the only way forward but it is difficult to make much impact.

    2. October’s poor borrowing numbers extinguish any lingering hope that the chancellor will be able to soften his austerity plans materially in next week’s autumn statement.
      If, somehow, borrowing had reduced then this would have been taken as an austerity win, so the chancellor would feel no need to ‘soften’ his policies. Luckily, borrowing has increased and he is ‘unable’ to soften his policies.
      As chuck yeager said in the right stuff:

      Sometimes there’s a pooch that can’t be screwed

      Who on earth held ‘lingering hope’ regarding the vivisectionist’s social engineering programme?

    3. Bill,
      Thanks for the details of lower Corp tax this Oct – I now just monitor the UK tax take as all other HMG statistics appear to be gerrymandered ( Gideonised?) So as to glean what is going on.
      Regards

    4. “And, indeed they might! But the consequences would reveal themselves very quickly and guarantee a short political tenure for that particular government.”

      It’s always amazed me that government and parliament can be trusted with deciding the death penalty, sending the country to war, or deciding on public education and health without having their hand held. Yet when it comes to finance, parliament apparently must have its hand held by Very Clever People.

      Why aren’t we putting the Department of Work and Pensions in charge, so that the bureaucrats there can refuse to implement any tax credit cuts imposed by parliament because it would impact on effective demand?

    5. Bill,
      ‘the so-called progressive UK Guardian described the results as “shock UK deficit figures”’

      To be fair to the Guardian I think their criticism is based on the standards/target that Osborne has set for his economic policies ie. budget surplus (first 2015) & now 2020. I do not believe (hope not) that they endorse his ‘austerity’ programme.

    6. “Whether European leaders like Orbán or not, the Hungarian’s critique of the EU’s migration policy this year changed the terms of the debate. With blaring alarms about terrorism across Europe, the leader of this country of 10 million is again the uncensored Id of the European right, offering ideas that the rest of the bloc can’t ignore (and even, in some cases, pronounce aloud).

      In Orbán’s proposed reform of the EU, the balance of powers would tilt back toward nation states and away from leaders in Brussels who have “very much the pro-United States of Europe position,” he says.”

      http://www.politico.eu/article/viktor-orban-interview-terrorists-migrants-eu-russia-putin-borders-schengen/

    7. The austerity argument IS over, but the supreme irony is that socialism is not going to actually solve the problem. Not because socialists are evil or something, quite the contrary they’re basically all well intended, but they miss the point that the problem is not profit but scarcity, that the economy is monetary not barter and that man’s ultimate worth is not just in his labor but in all of his purposes most especially Wisdom, Beauty and Graciousness.

    8. Kweladave, re the Guardian, whether or not any journalistic piece supports austerity or not depends on which Guardian journalist is writing the thing. Will Hutton, a regular Observer columnist, clearly sets out, on Sunday November 22, what he thinks is the current government’s agenda, which is the shrinking of the state whatever the social and psychological costs, but then shows that he doesn’t understand the basics of deficit spending, to wit: “This is not to contest the need to balance current public spending and current revenues over the economic cycle”, a position he attributes to Keynes. The fact is, of course, that there is no need whatsoever to balance the budget over the economic cycle, if ever, and, therefore, a great need to actively contest any assertions made to this effect. Hutton is not the only Guardian/Observer journalist who shows little or no understanding of how the real economy works.

      In regard to the possible conjuring trick mentioned by one journalist, Osborne will have the assistance of Treasury mandarin aka Principal Accounting Officer, Macpherson – he couldn’t have achieved his almost impenetrable April budget by himself. That budget involved a conjuring trick, which fooled a few people for a while. This conjuring trick will have to be better than the one tried in the April budget, and he will may wish to avoid the blowback that followed the tax credits fiasco of the summer spending review. It remains to be seen whether Macpherson and his team can implement the general economic disaster Osborne intends to inflict upon the British population who inhabit the less than .1% economic sphere while avoiding substantial blowback.

      These are some of the departments that will likely be hit: the police, courts, education, local councils, and the department of business (which has already been virtually destroyed). Aside from the business department, which it could be argued may not be necessary, the rest have already been substantially cut and further cuts will be devastating in certain areas, if only because the cuts have been unequally distributed. The NHS is another area that is being hit. The strike by junior doctors is an indication of how serious this situation is.

    9. Neil,

      You say you’re “amazed”. The only amazing observation is that you are actually amazed. Like so many comments from learned minds that inhabit this “academy”, this statement betrays a misunderstanding or lack of exposure to the sentiments and opinions of many people.

      Even if the general public could differentiate between a Central Bank and Treasury in language it would have the same sense as the public’s understanding of the interplay between antibiotics and viruses; sadly deficient.

      Perhaps it would get your message across more successfully if you criticised neo-liberalism’s shortcomings less and instead gave extensive examples (time-proven and workable) of how MMT policies have delivered practical success stories.

      The typical negative denigration could then be replaced by upbeat examples of what widespread economic success and its benefits looks like. Or would this look too much like Capitalistic success?

      By all means stick to highfalutin analysis and interpretation, but the purpose of all this exemplary work is to change the world is it not.

    10. Micky9finger

      Don’t think so,but I’m not sure.I am surprised that Argentine people actually voted in neo-liberals!

      https://www.liberationnews.org/as-argentina-votes-neoliberalism-threatens-its-return/

      This article shows how successfully the kircheners tackled unemployment down from 26% to 7%.I believe they have also used job programs.

      http://www.telesurtv.net/english/news/Reactions-to-Argentina-Election-Results-20151122-0027.html

      Ihttp://www.telesurtv.net/english/analysis/The-New-Contours-of-Latin-Americas-Right-20151026-0029.html This article suggests that the right has sharpened it’s message,no longer emphasising privatisation and spending cuts but things like security.But as the liberation article points out the right wing reforms will likely worsen the the domestic situation in all sorts of areas.

      The article also describes Kirchner mistakes….I wonder what those might be.I do speak and read some Spanish ,but I stick to English for reading.And it’s hard to come across any decent analysis on the Americas -south of the Rio Grande in the anglophone.

      I can only imagine that eventually these reforms will inevitablly result in worsening living conditions and we will see a reversal of these electoral results.

    11. Here’s a lecture a couple of years ago by Richard Koo. He explains well what is happening, still today, and suggests deficit spending sufficient to overcome corporate tendency to pay down debt and to get in early, as delays will drag out a turn around for years more.
      Funnily enough he misses out on proper understanding of MMT principles, so there are a couple of kinks needing ironing out but in the main it’s very good IMO, and Governments should take note.

      http://www.ritholtz.com/blog/2009/11/richard-koo-great-recessions-lessons-learned-from-japan/#comment-233008

    12. Gogs: Neil is right to be amazed. An earlier commenter called him naive. These days “naive” means: believes things which are obviously true [in this case that in the UK the elected government is actually in charge]. Or that an Emperor [international capital & finance] isn’t actually wearing any clothes. I am happy when people call me “naive”, because it means I am on the right track.

      if you gave extensive examples (time-proven and workable) of how MMT policies have delivered practical success stories.
      Bill wrote a whole book on this Full Employment Abandoned. Basically, the answer is, the whole world during the postwar full employment era. The whole world decided that disemploying people was a bad idea. So it largely stopped doing this. Result, the greatest, most widely shared prosperity in human history, period. People forgot this- result, the Great Stagnation of the neoliberal era. As Randall Wray said just this week “We never claimed to have invented all this—we are mostly recovering what was lost.” Countries that decided to keep their old full employment policies, iirc Bill singles out Austria, Japan, Norway & Switzerland, had superior economic performance. The devil is not in the details. The devil is in the decision, the devil is in becoming mature enough to realize how ridiculously, unbelievably stupid the whole world has been. (Becoming mature enough to realize how ridiculously, unbelievably stupid one has been in one’s own life is a great aid in this :-) )

      The point is that there are no trade-offs, no drawbacks with adopting MMT. MMT and the JG are rocket science. MMT in general is the observation that we live in a 3 dimensional space developing in time. Gotta get that – the accounting – straight before you say anything intelligible.
      The JG is the Zeroth Law of Rocket Science: Pointy End Up. MMT is not trying to convince people that they have the better rocket engine design etc., which is what many seem to be looking for – and not finding. They are just saying that you probably won’t get anywhere if you don’t point that pointy end up. The “market” may be comparable to the rocket’s path. Perhaps one should be very careful about interfering with the rocket’s path once it is launched. But the market or the path does not, can not exist independently of the rocket and the launch crew’s decisions, the way so many imagine. What does exist is the Zeroth Law: Pointy end up. Let’s have Zero Unemployment.

      If anything, the MMT Rock Stars give too many details. The devil is not in the details, but taking the intelligent decisions that the whole world did, however haltingly or half-heartedly in the 30s and 40s. You have mentioned resource allocation – the JG is basically a decision “Hey, let’s not misallocate (squander, destroy) resources, especially the most valuable ones of all.” The essential zeroth step in not misallocating resources is deciding to not misallocate them. Thinking that resources allocate themselves is magical thinking, which no capitalist has ever indulged in, no matter how often they and their hirelings preach it.

    13. Some Guy,

      I have no dispute with the argument that resources do not allocate themselves. The problem in a highly competitive world is that a sub-optimum allocation threatens to result in inefficiencies that can have detrimental effects on a country’s ability to maintain living standards; notwithstanding that idle resources produce the same result.

      The desired re-allocation of resources, especially labour, tends to generate conflicts which, especially in the case of labour can produce huge political problems (eg miners strike). We need therefore, to convince the proletariat that a Job Guarantee can achieve a smoother outcome .

      Your reference to the post-war period of full employment policies suggests that JG is the right route, but you need to be convincing in suggesting that politically controlled industries (I presume these are more likely under MMT) can adapt to economic developments without human disruption and dislocation on a political scale. That puts the emphasis on political leadership that is superior to the arbitrariness of the market place.

    14. Some Guy,

      I realise that including reference to the miners dispute is likely to raise emotional issues, but we had already been in similar situations in other industries.

      Perhaps the first post-war example was British Rail closures and redundancies under Beeching; which shows that even in a period of full employment commitment (the problem was identified officially as early as 1948) resource misallocation was a significant political problem.

      I am aware of how this affected not just railway lines but also railway workshops; being an ex railwayman himself, Bill can probably recognise the validity of these comments.

    15. Dear jake and micky9finger
      I do hope Bill doesn’t mind a little deviation from the topic at hand… !

      On the point of Argentina, they have a large problem of not being able to collect enough tax. Something like 60% of the public work in “negro” – on the black market and therefore don’t pay any tax.

      The Perónistas have put a lot of money into social programs spending money helping a lot of the poorer people in Argentina but without the ability to tax efficiently it has caused inflation. By the way I wouldn’t trust any statistics, coming out of Argentina, telesur included (telesur is a Venezuelan owned media outlet that is staunchly in favor of the Perónistas). An example of statistical trickery, or incompetence, would be a recent claim by Christina Kitchener that there was, according to their statistics, no poverty in Argentina… For anyone walking around in (the beautiful city of) Buenos Aires this is obviously not true.

      As MMT shows us, it’s not that they can’t fund their spending, but actually that their spending is outstripping production and they cannot dissolve enough Argentine pesos via taxation to counter the problem.

      The portion of the population that has voted for the Conservative government (it was close by the way 51.4 % to 48.6%!) is mainly the white middle class who were frustrated by restrictions on travel currency, very high taxes on farms and businesses and the large amounts of money that they saw as being “given to the poor while they sat around”. From anecdotal experience I can say that I think corruption within Argentina is rife and therefore there is quite a lot of benefit fraud. Let’s hope they don’t repeal too many of the social programs!

    16. @Some Guy
      Result, the greatest, most widely shared prosperity in human history, period. People forgot this- result, the Great Stagnation of the neoliberal era.

      People in general probably really didn’t know how it was engineered. When they at least early on in the neo-liberal counter revolution tried to invoke why it couldn’t be repeated they were told that it was a very special case and moment in history and the prerequisite for this have gone, disappeared.
      As here in Sweden it goes that this period was a very special Swedish case, that it was a common feature in other OECD countries is a fact that don’t exist. The common narrative is that we weren’t participating in WWII and had undamaged industry that could export to rebuild Europe. Then the Swedes got lazy and the others could catch up. As the 30s industry had tremendous shelf life and was still competitive in the 1950s and 60s.
      Neoliberalism air brush history and the citizens are badly misinformed on economic matters. That it was everybody engaging in having vibrant domestic markets building common goods like infrastructure, health care, general education systems and so on is “forgotten”.
      They even have the nerve to claim 50-60 was the golden age of export industry and that during the 1990s and 2000s was in badly shape teared by globalization and why it was mass unemployment. When the fact is that the export industry never by any measure have done better. Be by export/GDP, export per capita in fixed USD, abnormal export surpluses. Still people have to be restrained to not jeopardize the “fragile” export ability. A golden age for top <10%. A modern industry high up in the value chain with high productivity where labor cost is maybe less than 10-20 %, and also increasing service part, e.g. Swedish international companies that add to service export by e.g. royalties, foreign production and consumption but the transaction/book keeping go thru the Swedish head office.
      This make that you can have growing export surpluses without being any major spread out in the local economy via more jobs. It stays at the top. That would make an export surplus less job creating than government deficits injected in the domestic economy. I.e. a 3% gov deficit is more valuable for the domestic economy than a 3 % export surplus.
      Germany haven created its fairly "low" unemployment by its export "miracle", it has hidden it in mini jobs and other poverty schemes. An unemployment con game created by Social-democrats, the party that claim to be on the many's side.

    17. /L: People in general probably really didn’t know how it was engineered. When they at least early on in the neo-liberal counter revolution tried to invoke why it couldn’t be repeated they were told that it was a very special case and moment in history and the prerequisite for this have gone, disappeared.

      Yes. The 70s transition period, a bit later for Sweden, was a very important time to tell such Big Lies. Bill’s former student Victor Quirk is great on providing evidence for the deliberate and conscious decision to have a Great Stagnation, and on history in general. The only prerequisite for the “very special case” of the 30s & 40s and the postwar era was that people got tired of putting up with that excrement, and decided to have a very special period of more justice and less listening to con men & their Big Lies, which caused the prosperity, not vice versa.

      As here in Sweden it goes that this period was a very special Swedish case, that it was a common feature in other OECD countries is a fact that don’t exist. The common narrative is that we weren’t participating in WWII and had undamaged industry that could export to rebuild Europe. Yes and another line of BS, often spouted by some “Marxists” is the exact opposite. Destroyed postwar Europe & Japan etc became prosperous because it was so destroyed. The US (like Sweden) was prosperous because it exported to them. The UK became a laggard (notwithstanding that its growth rates were higher than the 19th century when it ruled the waves) because it escaped much of the WWII destruction.

      No consistency but the Very Specialness of periods when people don’t swallow BS, which is the State of Nature. Perhaps true, but this particular BS – that employing everyone with decent pay is hard or has some critical, mysterious negative effects which have never been observed anywhere and which mysteriously outweigh the enormous and obvious positive effects which have been observed everywhere. This BS – is getting really, really old. Time to remember that there was a period when the whole world stopped swallowing this BS & was healthier than when it swallowed this BS snake oil cure for nothing. Time to stop swallowing it and progress to the exploration of some new and slightly less ridiculous nonsense in a saner, more just and prosperous world.

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