Today’s blog post considers the Australian election and some issues that arose from my recent trip to Scotland – all of which bear on the progress of our work in the public debate. In Australia, we have just held a federal election and it was expected (and certainly the polls and bookies expected) that the Labor Party would win easily after 6 shocking years of conservative rule. Those 6 years have been marked by scandal, three leaders (Prime Ministers), massive internal divisions within the government, on-going climate change denial and a slowing economy. But Labor was thrashed in the election and I offer a few reasons why I think that happened. For Scotland, as they debate independence in the lead up to another referendum (as yet unscheduled) they have been struggling with the choice of currency issue and whether the new independent nation should join the EU. After initially thinking they would stick with the British currency for some time, the debate has swung heavily in favour of introducing their own currency as soon as is possible after the independence is achieved. Clearly, I have favoured that option for several years. But the overwhelming thinking is that the new nation should join the EU. That is a choice that I think would bring grief. And given the fact that the rUK will retain “continuing nation” status, a newly independent Scotland would be under significant pressure to use the euro. In other words, the currency choice and EU membership trends at present are incompatible. During my visit there I urged the activists to ditch their pretensions for EU membership and become truly independent.
Most people who follow international events will now know that on Saturday, Australian voters returned the conservative government in a result that confounded all the polling which had the Labor Party almost certain winners.
While I hate the thought of another 3 years of conservative rule, given how bad the last 6 years have been, I was also not relishing the election of a Labor government.
I am not a political strategist and so I have little to add in terms of the campaign strategies. It was a very ugly campaign with the Government adopting a negative attack at all costs campaign focusing on the rather large new taxes the Labor opposition had proposed.
The Government’s offerings were minimal and that strategy worked.
The Labor Party have become so obsessed with their claims that they will deliver a larger fiscal surplus than the conservatives have really dug themselves into a massive hole that they cannot extricate themselves from.
At the same time they had to differentiate their policy offerings from the conservatives by offering a range of rather significant spending promises aimed at advancing equity and inclusion. Mostly, these promises would have improved the lives of the lower income cohorts.
For the last six years they have been raving on about ‘budget repair’ and castigating the government for its on-going deficits.
So within that neoliberal fiscal frame – bigger surpluses are better – they were then locked into coming up with some very big tax hikes to “pay for” the spending promises.
And they chose to hike taxes on retirement incomes which is always deeply unpopular in Australia (and probably everywhere else). And this was doubly so because the seats they had to win to take government were mostly in Queensland, where because of the tropical conditions, a lot of people move to in retirement.
And on Saturday, they were punished severely = with big swings in the Queensland seats towards the conservative government despite that government having an appalling record over the last 6 years in office.
It was no surprise to me that the Labor Party’s ridiculous economic approach has been rejected outright by the voters. After all, they are allegedly receiving economic advice from the moron who wrote this piece of lies.
The Labor Party would have been better off spending the period in Opposition educating the population about how the monetary system operates and extolling the virtues of fiscal deficits, especially in the context of nearly 14 per cent of the available labour force are either unemployed or underemployed and economic growth is heading south.
And now we are day 2 in their next opposition period that is what they should do now. They won’t and so will struggle to gain office next time. What they will probably do is retain their neoliberal credentials and just offer nothing much to the electorate and hope the conservatives continue to melt down.
At present, though, the Labor Party are unelectable – even though this has been one of the worst conservative governments in history.
In an exchange I had with the Shadow Assistant Treasurer a few weeks ago (see Marxists getting all tied up on MMT. He had been writing that MMT believed there were no constraints on government spending and had appeared at a Fabian event in Adelaide last year saying MMT was crazy.
He told me that he stood next to Paul Krugman and Larry Summers who he claimed were just representative of the “sensible social democratic mainstream”.
Yes, the unelectable mainstream that is in political decline throughout the world now.
There was another element in the Queensland demise for Labor.
On the issue of climate change – the burning debate was over the proposed Adani coal project in Queensland, which is likely to damage the Great Barrier Reef and other natural assets. It is a terrible project and has been pressuring governments (both federal and state) for subsidies (for example, transport infrastructure).
The Conservative government supports the project because they are largely climate change deniers.
But the Labor State government in Queensland also supports the project because they understand that the local population needs jobs in an area where unemployment is much higher than the national average and there are few alternative opportunities (at present).
But it has been delaying approvals because they fear the backlash from the environmental lobby.
So federal Labor had a problem.
The urban voters in the Southern states were fairly firmly against the Adani project, but then it is easy to oppose something if you have a well-paid and secure job that will not be affected by the project one way or another.
Federal Labor was unable to articulate a clear position on the mind and despite claiming it wanted to be pro-active on climate change action it also admitted it would not stop the mine.
However, within its ranks various senior Labor politicians had come out against the mine.
Labor should have opposed the mine outright. But then it should have offered policy proposals to address the employment shortage in the region. Its only offering to the unemployed in Australia had been to refuse to promise to increase the unemployment support benefit above the poverty line should it be elected.
So without any other future being outlined by the Labor Party for this region, the people of Queensland took the coal option being offered by the Federal government.
And then we had progressive activist group – GetUp’s contribution – a total failure. They spent millions big-dealing about how they would be able to swing key seats away from the Government.
Their campaign was marred with them trying to be too clever by half.
And after all of the millions being spent, they really only succeeded, as far as I can tell, in influencing one seat and that was to install a top-end-of-town liberal independent who made noises about climate change but still supports the neoliberal fiscal strategies. Not much to crow about there.
In other key seats, they delivered increased majorities to the conservatives (Dutton etc).
So a lesson for Labor. But I doubt they will learn much – at least until they jettison their neoliberal fiscal mindset.
Scotland – currency and the EU
My visit to Scotland was very interesting – there were two events I spoke at in Edinburgh and Glasgow. Both were well attended and the discussions were fruitful.
My conclusions are my own perceptions only.
When the Scottish independence thing was first pursued by the SNP and they appointed the so-called Sustainable Growth Commission to come up with a blueprint, the resulting report was neoliberal in intent.
The so-called six rules would have locked the new nation into using the British currency and being constrained by British monetary policy settings indefinitely. In other words, no independence at all.
I have been following the debates closely since then and it is now clear that the idea of sterlingisation (as it is called) is dead in the water.
The recent SNP conference passed (reluctantly from the perspective of the leadership) the so-called Amendment D, which set in place a path to an independent currency as soon as possible after independence.
The conference failed to jettison the six tests but that will come in time I suspect.
So from an MMT perspective the outstanding issue is their continued desire – even among progressives in Scotland – to be part of the EU.
The discussions I had on that topic while there were interesting and I sensed that there was a shift going on among the pro-EU thinkers to question that position in the light of our visit. I may be seeing what I want to see though!
The point that is fairly clear is that the two ambitions currently shared by progressives in Scotland – to have their own currency and to become members of the EU are incompatible upon my reading of the situation.
I am not sure how many people really understand that point.
First, I wonder how many people have read and absorbed the report from the Sixth Report from the Foreign Affairs Committe of the British Parliament – Foreign policy considerations for the UK and Scotland in the event of Scotland becoming an independent country – released on April 23, 2013.
This Report aimed to clarify legal status of the rUK (remainder of UK) and Scotland should the independence vote succeed.
The Report expressed concern that:
… the Scottish Government is strenuously advocating legal positions without the benefit of official legal advice from its law officers.
In other words, the Scottish people were not being informed on the likely legal status of the new nation relative to rUK and the rest of the world.
An important point is that the Committee concluded that:
There is an overwhelming body of evidence that endorses the UK Government’s view that the RUK would be considered by the international community to be the continuing state and that it would inherit the vast majority of the UK’s treaty obligations, while Scotland would essentially start afresh at an international level.
This “continuing state” status would mean “that the RUK would retain the UK’s permanent seat in the UN Security Council”, which is clearly a motivation.
The rUK would assume the NATO membership status that UK currently has. Scotland would not immediately be admitted.
On EU membership, the Committee concluded that in light of the “continuing state” status of the rUK, Scotland would have to seek membership under Article 49 of the – Consolidated version of the Treaty on European Union.
It also noted that:
The impression given by the Scottish Government that treaty change would be a mere technicality seems to us to misjudge the issue and underestimate the unease that exists within the EU Member States and EU institutions about Scottish independence
It also doubted that if Scottish accession was successful, that the new Member State would be able to “retain the UK’s EU opt-outs”, which include maintaining a separate currency from the euro.
Article 49 says:
Any European State which respects the values referred to in Article 2 and is committed to promoting them may apply to become a member of the Union. The European Parliament and national Parliaments shall be notified of this application. The applicant State shall address its application to the Council, which shall act unanimously after consulting the Commission and after receiving the consent of the European Parliament, which shall act by a majority of its component members. The conditions of eligibility agreed upon by the European Council shall be taken into account.
The conditions of admission and the adjustments to the Treaties on which the Union is founded, which such admission entails, shall be the subject of an agreement between the Member States and the applicant State. This agreement shall be submitted for ratification by all the contracting States in accordance with their respective constitutional requirements.
So a new state has to apply for admission and be accepted by all the current Member States.
This is no small issue.
In the period leading up to the referendum vote in 2014, the Scottish government has assumed that it would be able to use Article 48 of the TFEU as “a suitable legal route for Scotland’s continued membership of the EU as an independent member state” (Source).
Article 48 is about existing member states seeking variations in the terms of their membership.
The Commission disputed this assumption and pointed to Article 49. In other words, they were following the guide of the 2003 Parliamentary Commitee by asserting that the rUK was the ‘continuing state’ which held EU membership (including the Opt-Outs) and Scotland as a newly created independent state would have to seek accession according to that status.
This means two things:
1. Scotland would not be able to exploit the current UK Opt-Outs and accept the euro as its currency.
2. Scotland would have to go through a convergence process to ensure its fiscal and other economic parameters were consistent with the EU Stability and Growth Pact rules.
Given the current fiscal deficit is around 8 per cent of GDP and would more likely go to around 10 per cent in the event of independence or risk a major recession, it doesn’t appear likely that Scotland would ever satisfy the harsh and irresponsible fiscal rules.
I am no constitutional lawyer or political strategist. There are other political issues involved – such as Spain’s suspicion of allowing an independent Scotland to join the EU given the sensitivity over the Catalan issue.
But if Article 49 prevails in this case, which is highly likely, Scotland would struggle to have its own currency and would also be forced to scorch its economy to meet the convergence rules.
At any rate, all this is moot if Scotland takes the more sensible path after independence and stays out of the EU altogher. This is especially the case should the UK finally leave itself before the independence issue is resolved.
A progressive Scotland has no place among a corporatist, neoliberal cabal that will impose rules and that is the challenge that the progressive groups such as MMT Scotland should work through next now that the currency issue has been resolved (or mostly so).
The last point I would make relates to the false claim that I see in social media that, because I support the reclaiming of currency sovereignty, I advocate anti-EU nationalism.
Anyone who makes this type of allegation only displays their ignorance.
What I advocate is currency sovereignty. That just means that I want the government that is elected to serve the people of that state to have the full fiscal capacity to advance public interest. I also dislike neoliberalism in all its forms and the EU is the exemplar of that sort of ideology – having embedded it in its core legal structure.
I do not support notions of cultural supremacy, patriotism, religious hierarchies, language hegemony, and all the rest of the characteristics that typically define ‘nationalism’ as an ideology.
Further, while I want the currency-issuing government to advance the well-being of that nation I also want that nation to look outward and ensure that other nations, particularly those without adequate resources, can also prosper.
Tomorrow I will look at the current debate in Japan which is very interesting from an MMT perspective.
That is enough for today!
(c) Copyright 2019 William Mitchell. All Rights Reserved.