Time for progressives to adopt more direct actions

Australia is about to walk the plank and sign up to the Trans-Pacific Partnership even though much of the contents will not be publicly disclosed. Last week, the US President unsuccessfully tried to get US Senate approval to fast track the authority to commit America to the TPP. His failure in that regard will not stop the process. It appears that if the TPP is introduced corporate control of government discretionary policy through the so-called “investor-to-state dispute settlement” clauses will be much enhanced. This is not an arrangement to make trade fairer and to enhance the well-being of poorer nations or to expand the choice of richer nations. The TPP builds on the punitive measures in various World Trade Organisation agreements, which give multinational corporations substantial legal bite to resist regulatory environments set up by democratically elected governments and to punish nations that resist the dictates of international finance capital. No government in its right mind would sign up to these agreements on behalf of their nations. I will have more to say about the TPP when we know more. But all of this bears on the question of who influences public policy and if we don’t like it what can we do about it. That is the topic of this blog.
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    Posted in Economics | 14 Comments

    Demand and supply interdependence – stimulus wins, austerity fails

    My Phd research, was in part, exposing the myths in conventional or mainstream economics arguments that claim that structural imbalances in the labour market arise independently of the economic cycle and hence, aggregate spending. The mainstream used this assertion to draw the conclusion that government policy could little to bring unemployment down when mass unemployment was largely ‘structural’ in nature. Instead, they proposed that supply-side remedies were necesary, which included labour market deregulation (abandoning employment protection etc), minimum wage and income support cuts, and eroding the influence of trade unions. At the time, the econometric work I undertook showed that so-called structural imbalances were highly sensitive to the economic cycle – that is, the supply-side of the economy was not independent of the demand-side (the independence being an article of faith of mainstream analysis) and that supply imbalances (for example, skill mismatches) rather quickly disappeared when the economy operated at higher pressure. In other words, government fiscal policy was an effective way of not only reducing unemployment to some irreducible minimum but, in doing so, it increased the effectiveness of the labour force (via skill upgrading, higher participation rates etc) – that is, cleared away the so-called structural imbalances. A relatively recent paper from researchers at the Federal Reserve Board in Washington – Aggregate Supply in the United States: Recent Developments and Implications for the Conduct of Monetary Policy – finds new US evidence to support the supply-dependence on demand conditions. It is a case of stimulus wins whereas austerity fails.
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      Posted in Economics, Eurozone, US economy | 19 Comments

      Saturday Quiz – May 16, 2015 – answers and discussion

      Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. 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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        Posted in Saturday quiz | 5 Comments

        Eurozone Dystopia – Groupthink and Denial on a Grand Scale – now published

        Edward Elgar, announced last night (Oz time) that my new book – Eurozone Dystopia – Groupthink and Denial on a Grand Scale – is now published and available for sale. Here are some details. I am sorry to interrupt the Saturday Quiz deliberations.
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          Posted in Euro book | 3 Comments

          Saturday Quiz – May 16, 2015

          Welcome to the Billy Blog Saturday Quiz. The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.
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            Posted in Saturday quiz | 2 Comments

            Friday lay day – Greece back in recession but austerity works doesn’t it?

            Its the Friday lay day blog and here are some snippets from the week. The Hellenic Statistical Authority (EL.STAT) released the latest – Quarterly National Accounts ( 1st Quarter 2015 ) – on May 13, 2015. After all the claims that austerity was working and the Greek economy was growing again, we now learn that Greece is back in recession, having recorded two successive quarters of negative real GDP growth. Whatever way one spins it, the policy framework employed by the Eurozone is a failure. The national accounts data released by Eurostat which coincided with the Greek release – GDP up by 0.4% in the euro area and the EU28 – also shows that the German economy slowed considerably in the first-quarter 2015 and Finland, one of the fiercest supporters of austerity entered official recession. The Finnish response was they had to cut public spending harder because they would be in breach of the Stability and Growth Pact rules relating to size of the deficit and the volume outstanding public debt. These nations are so caught up in neo-liberal Groupthink that they cannot see how ridiculous their policies and supporting dialogue have become.
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              Posted in Eurozone, Friday | 8 Comments

              Australian wages growth – lowest on record

              The day after the Australian government published their fiscal strategy for 2015-16, which assumes (unrealistically) a significant upstep in economic growth and hence taxation receipts, the Australian Bureau of Statistics published the latest – Wage Price Index, Australia – for the March-quarter today and we learn that the annual growth in wages is now at the lowest level since the data series began in the December-quarter 1997. Last quarter, we learned the same thing. In other words, consecutive quarterly lows have now been set in the Wage Price time series measure. The annual hourly wage inflation is now down to 2.3 per cent overall down from 2.5 per cent in the December-quarter. Private sector wages growth was a miserable 2.2 per cent. In the 2015-16 fiscal statement, the Government had assumed wages growth for 2014-15 would be 2.5 per cent rising to 2.75 by 2017. On current trends, that is highly unlikely to occur, which means the arithmetic surrounding its fiscal outcomes is awry already and the fiscal deficit will be larger than assumed. Overall productivity growth is running around 1.8 to 2.1 per cent (depending how one measures it) and despite the decline in the annual inflation rate in recent quarters as the overall economy slows down (and oil prices fall), Real Unit Labour Costs (RULC) continue to fall. This means that the gap between real wages growth and productivity growth continues to widen as more the wage share in national income falls (and the profit share rises). The flat wages trend will not only blast the forward estimates in the fiscal statement out of the water but the on-going redistribution of national income to profits is intensifying the pre-crisis dynamics, which saw private sector credit rather than real wages drive growth. The lessons have not been learned.
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                Posted in Labour costs | 4 Comments

                Australian fiscal statement 2015-16 – cynical and venal

                Last night, the Australian Federal Treasurer brought down his second ‘fiscal statement’ (aka, the Federal ‘Budget’). I try to avoid the term ‘budget’ when discussing national government fiscal balances because it leads to a confusion between a the finances of a household, which uses the currency and is financially constrained and the finances of a sovereign government, which is never revenue constrained because it is the monopoly issuer of the currency. In last night’s fiscal statement, the Treasurer committed the Government to a policy path that will entrench mass unemployment (over 6 per cent for the next three years and not much below that in 2018-19). In each of the next four years, the fiscal shift is contractionary despite claims that it is a ‘big-spending budget’. It has nothing much to do with economics and all to do with the dramatic failure of last year’s fiscal strategy and the resulting plunge in electoral support. With an election next year, the Federal government has tried to run a fiscal policy with headline appeal but the reality is that the outcomes will continue to undermine the well-being of the disadvantaged. It will also fail to achieve its own fiscal targets because the in-built growth assumptions are too optimistic. Finally, it exposes the lie that the Government peddled in the lead up to the last election that on-going deficits would cripple the economy and send the nation bust. In that sense, the government is looking like the Tories in Britain in 2012 when they cut short the ridiculous austerity push which had sent the economy back into recession and instead allowed for an on-going deficit. The deficit wasn’t nearly large enough and so growth there has been pitiful. But it was large enough to support some growth. The same will be the case in Australia.
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                  Posted in Fiscal Statements | 2 Comments

                  The existential crisis of Labour-type political parties

                  At one point in my student days anyone who wasn’t reading Marx on a particular day, was reading Satre, Camus and Merleau-Ponty, among others, at least in the groups that I mixed in. But then they were also reading Dostoyevsky. Whichever way – they learned a lot about class conflict and existentialism. Labour-type political parties might reflect on the concept of an existential crisis because the declining electoral fortunes around the World are of their own making and reflect a lack of identity and certainly little ‘essence’. These parties have lost their meaning and purpose of existence and everyone knows it. The reasons are relatively straightforward. They have bought into the free-market myths and demeaned the role of the State. They now only argue about how much fairer their version of fiscal austerity will be relative to the conservatives, never challenging the underlying lies that drives the austerity agenda in the first place. Here are some lunchtime thoughts on the matter.
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                    Posted in Economics, Politics, UK Economy | 39 Comments

                    Germany’s serial breaches of Eurozone rules

                    Last week (May 5, 2015), the European Commission’s Directorate-General for Economic an Financial Affairs (ECFIN) published the – Spring 2015 European Economic Forecast – which provide a picture of what they think will happen over the next two years across 180 variables. To the extent that the forecasts reflect past trends (given the inertia in economic time series outside major cyclical events), they provide a clear picture of what is wrong with the Eurozone. The salient feature of the Forecasts is that the European Commission expects Germany to increase its already astronomical Current Account surpluses to peak at 7.9 per cent of GDP in 2015 and falling only to 7.7 per cent in 2017. The Commission has in place a set of rules that require nations to restrict external surpluses to not exceed 6 per cent of GDP. Germany repeatedly fails to abide by those rules, yet lectures the rest of its Eurozone partners about their failures to meet the targets, crazy as they are. The unwillingness of the European Commission to enforce their own rules in relation to Germany is one of the telling failures of the whole Eurozone experiment.
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                      Posted in Eurozone | 15 Comments