The title is my current working title for a book I am finalising over the next few months on the Eurozone. If all goes well (and it should) it will be published in both Italian and English by very well-known publishers. The publication date for the Italian edition is tentatively late April to early May 2014.
The title is my current working title for a book I am finalising over the next few months on the Eurozone. If all goes well (and it should) it will be published in both Italian and English by very well-known publishers. The publication date for the Italian edition is tentatively late April to early May 2014.
The title is my current working title for a book I am finalising over the next few months on the Eurozone. If all goes well (and it should) it will be published in both Italian and English by very well-known publishers. The publication date for the Italian edition is tentatively late April to early May 2014.
Yesterday, the Australian Bureau of Statistics released the latest – International Trade in Goods and Services – data for November 2013 which told us that the national economy is slowing. We learned that while exports were aout steady, imports (particularly consumption goods) fell for the fourth consecutive month and capital and intermediate goods imports rose, which suggests that explanations relating to the switching of the commodities (mining) boom from the investment to export stage are not accurate. The data tells us that household incomes are being squeezed by rising unemployment which generally means that import spending will drop. The irony is that the trade deficit fell, which means that the drain on growth from the trade sector is now lower (that is, this is a stimulatory move) despite it being driven by sluggish growth. Today, the ABS released its – Job Vacancies – data for the November-quarter 2013 and it confirmed that the labour market continues to slide backwards in the face of subdued private spending and the national government’s penury. This is all in the context of conservatives coming out and slamming gay marriages, single mothers, women who seek abortions and the meagre number of labour market protections that remain in place. It is all about priorities I suppose. The current government is suggesting their priorities are to further the well-being of the well-to-do and chip away at what assistance is available for the disadvantaged Australians.
The continuing obsession among policy makers combines fiscal austerity and deregulation (particularly of labour markets) as the hope for prosperity. I know these are just catch cries that aim to obfuscate the underlying intent which is to redistribute real income away from workers. But even that conspiracy theory has certain problems when you realise that business doesn’t necessarily do very well in general when economies are locked in a recessive mire. The structural reform argument goes that growth can be engendered by deregulating the labour market to remove inefficiencies that create bottlenecks for growth even when fiscal austerity is slashing aggregate demand and killing growth. The 1994 OECD Jobs Study the provides the framework for this policy approach. The only problem is that it failed even before the crisis emerged. But with policymakers intent on slashing aggregate demand, which they know will kill growth, they have to offer something that they can pretend will generate growth. The structural reform agenda has zero credibility in the same way that fiscal austerity has zero credibility. The latest vacancy data from Australia continues to provide an evidential basis for rejecting both conservative agendas.
One despairs when a sober institution gets ahead of itself, usually because they make hiring mistakes, and start to think they know stuff. This is an organisation that is steeped in statistical analysis and should have a very good idea of empirical regularities. They know that interest rates have been “essentially zero” in Japan since the 1990s and they know that what hasn’t happened as a consequence. They know that central banks have been “expanding their balance sheets” (now “collectively at … three times their pre-crisis level”) and what hasn’t happened as a consequence (inflation). But as the neo-liberal paradigm has concentrated its control of the policy debate, this organisation has morphed from playing a useful role as a coordinator of central banking into a propaganda unit pumping out misinformation and outright lies and distorting the public debate. Welcome to the Bank of International Settlements, which is now firmly ensconced with the likes of the IMF, the OECD, the ECB, the EU, the World Bank, and others as being part of the problem the World economy faces.
Last week (June 7, 2013), the – US Bureau of Labor Statistics – released their latest – Employment Situation – May 2013 – which showed that in seasonally adjusted terms, total payroll employment increased by 175,000 in May while the Household Labour Force Survey data showed that employment rose by 319 thousand. The essence to be extracted from the data is that total employment in the US is not even keeping up with the underlying population growth. As a result the level of and the labour force shrunk by a further 496,00 persons. The twin evils – falling jobs growth and the unemployment rate edged up a little with participation constant. The question that needs to be asked is whether this is a turning point with slower growth and rising unemployment ahead. Certainly, the conservatives who claim that the budget cuts under the so-called sequestration have done no harm are way off the mark. The major part of those cuts will hit soon and already the employment situation is looking very fragile. The Gross Flows data also tells us that the probability of an employed person becoming unemployed is rising again and the probability of a new entrant getting a job is falling. Those transitions are signally a switch point. The budget deficit is currently large enough to just maintain activity. It should be significantly larger to keep the growth momentum in the right direction. The politics, however, militate against that despite the shaman on the Republican side losing their greatest authority – those Excel spreadsheet geniuses.
And that is the problem. The Treaty (of Lisbon) and all the related Eurozone legalities that define the way the Brussels bureaucracy interacts with the member states is incapable of delivering prosperity to its citizens. In the last week, a senior Dutch economics official (boss of very conservative Centraal Planbureau) has delivered a wake-up call to European policy makers. In his departing press briefings the CPB chief, who is no Keynesian (rather he is a rigid supply-sider) has called for flexibility with respect to the application of the fiscal rules and an easing of the planned austerity because his nation’s economic performance is deteriorating fast. The Southern malaise is now impacting on the richer, more smug northern nations, as it always was going too. Many economists remain in denial of what is happening. It is 2013 not 2009. The world has been caught up in this crisis for 5 years. It is an entrenched crisis and the data is now showing us that the recent manifestation of the crisis is being driven by fiscal austerity. The initial impacts of the GFC were large but recovery had commenced and have now been killed off by the fiscal zealots. While the departing CPB boss called on the Dutch government to ignore the Stability and Growth Pact rules for the next few years, he also observed, that the nation had “treaty obligations”. That is the problem. These obligations prevent responsible fiscal positions, which in the current circumstances, would suggest budget deficits of several more percent of GDP than the 3 per cent rule being fully supported by the ECB.
I thought that blog title today was appropriate given that Aristotle was Greek. Today I explore motor vehicle registrations – well to be exact, a single registration. That is a backdrop to a brief discussion about the OECD’s latest publication – Going for Growth 2013 Report – which takes the ludicrous to a new level. These organisations need to be closed and the cash that governments pump into them to provide very amenable – some would say, over the top – working conditions (high pay, no tax obligations, well supported travel, first class facilities etc) could be diverted into something more useful. Like provide some low-paid workers with jobs. Lets assume one OECD manager earns the same wage as about 20 low-paid workers per week. The trade-off 1 job lost for 20 gained sounds a good bet to me. Anyway, amidst all the talk about structural agendas and reform zeal there is an ugly truth. There has to an easing of the macroeconomic constraint that is preventing economies from generating enough jobs. Firms need to see spending before they will increase production. Making life harder for workers through cuts to wages, conditions of work, pensions and the like will not create a single job. I lie – at least one job. Some OECD official will get assigned the job of evaluating their work and then a renewed bout of lies will emerge clothed in techno-speak. I just know that one Ferrari does not a recovery make. It tells me that the world is turning for the worse.
Last week (February 1, 2013), the – US Bureau of Labor Statistics – released their latest – Employment Situation – January 2013 – which showed that total “nonfarm payroll employment increased by 157,000 in January, and the unemployment rate was essentially unchanged at 7.9 percent”. The question is whether that is a good outcome or not in the scheme of things. The answer is that it remains a fairly bleak outcome especially when we consider the data more deeply. The economy is not growing fast enough to absorb the backlog of workers who were made unemployed in the downturn. There is massive waste now being endured by the economy and disproportionately being borne by the most disadvantaged workers in that economy. It is madness for the politicians to argue about debt ceilings and the rest of the irrelevancies when there is this much waste being created.
Regular readers will know that I place the shifts in the distribution of national income (at the sectoral level) as one of the keys to understanding the current economic crisis and the what needs to be done to get out of it. I covered this early on in this blog – The origins of the economic crisis. The mainstream press is now finally latching on to this issue, which is good but sadly the media is still allowing itself to be captured by mainstream economists who have a particular and wrong view of what has been happening, why it has occurred and what the implications of it are for public policy. The fundamental changes that are needed to policy frameworks and societal narratives before the crisis is full resolved are still so far off the radar though. Until we start promoting discussions such as that which follows there will be only limited progress to a sustainable solution.
I am researching a project at the moment on the role of humanities (and social sciences) in enhancing standards of living and rendering societies open, empathetic (to the disadvantaged) and dynamic. It is in the face of trends within Universities to concentrate funding and attention on the so-called STEM disciplines (Science, Technology, Engineering and Mathematics) and contract funding for the humanities (and social science). The funding cuts undermine the viability of these areas and whole departments have been closed – having been declared by the bean counters – as being uneconomic. This is reinforced by conservative neo-liberal political diatribes which seek to construct the humanities/social sciences as bastions of “left-wing” radicalism and post-modernist degradation (for example, eschewing studies in sexuality, gender, ethnicity etc). There is strong evidence available to show that studying the humanities is a socially transformative endeavour (for example, the Clemente program). But like all “individual” initiatives, there is a danger that the reasoning used to justify them will fall foul of compositional fallacies. We have to defend the humanities to enrich individuals. But we also have to use that empowerment to challenge the elites on the macroeconomics battleground. The two motivations are self-reinforcing. The former is not a sufficient condition for social transformation.
Last week, Eurostat released the latest – Retail Sales – data for the EU. It formalised what has been obvious for some time – private spending in the European economy is going backwards. But didn’t leading economists, including Nobel Prize winners, tell us a few years ago that if governments imposed austerity, the private sector would lose their worries about future tax hikes and start spending? Didn’t the current British Government say the same thing as a justification for the ficsal austerity that now looks like pushing the UK into a triple-dip recession (almost unheard of)? The answer is that these economists and politicians tried to convince us that there was such a thing as a fiscal contraction expansion. Fancy words like Ricardian Equivalence were dragged from the sordid annals of mainstream macroeconomics to give this notion some “authority” (because they knew hardly anyone understood what it was anyway). The wash up is they were wrong. And millions more are unemployed and moving towards or into poverty as a consequence. There is a wholesale failure of government at present in most advanced nations. A current proposal in Europe is to introduce a Youth Guarantee. However, for it to be effective it has to include a Job Guarantee component as its centrepiece. More supply-side activation is part of the problem and cannot be part of the solution.
I am in working in Seoul all day today and then rushing to the airport to get back to Sydney – so this blog has to be quick. When I saw the headline in the UK Telegraph (October 20, 2012) – A rude awakening for those who refuse to play by the rules – I thought it could have referred to the British government who are intent on defying the rules of responsible fiscal policy by pursuing pro-cyclical austerity and who are seeing the unfolding problems that their policies were generating. I didn’t really think that but it should have been referring to the abandonment of proper fiscal practice in the UK. Upon reading the article I learned it was about the British government – in that it was written by the Minister for Employment. The article was like deja vu for me and the message was one that Australians will be familiar with. It said that the unemployed are in that state because they game the “most generous” system of support and benefits that the UK provides to its citizens. Forget about the lack of jobs. The smokescreen descends – the victims become the perpetrators.
There was an article in this morning’s Melbourne Age (September 26, 2012) by former Australian Federal Finance Minister Lindsay Tanner, which talked about the structural decline of social democratic parties around the world. Recently I was in the Netherlands for the Dutch national election and the Labor Party could not gain office and is likely to go into coalition with the Conservatives (what?) – the common bond – their support for the Euro and fiscal austerity. What set of circumstances would see what should be polar opposite political forces in coalition? And then there are the LDP and the Tories in the UK. And the debate in the US is not about a deficit versus a surplus but how quickly to get into surplus. The same goes in Australia. The policy debate is marked by claims from both major parties that they will generate bigger budget surpluses quicker than their opponents. The social democratic political tradition is fading because the parties have become indistinguishable from the conservatives in economic policy. They are all neo-liberals now and that is an ugly option for those with a progressive bent who have traditionally supported the social democratic parties.
I am doing a bit of cleaning up old filing boxes each day now as the date I will be moving offices approaches. It is actually an interesting process – looking through boxes and articles that have been stored away for some years now. Today, I came across an article that was in the US Magazine Challenge (March-April, 1982) entitled The Guilds of Academe and written by one Jack Barbash, who was an academic at the University of Wisconsin. It discussed the way in which the economics profession protects its belief system from criticism and avoids, as far as possible, addressing real world problems. The mainstream will talk as if they are addressing a real world problem – such as entrenched unemployment – but when you realise the models they are dabbling with you know that they are really talking about nothing real at all. This leads onto a forthcoming book by some British conservative MPs who have the temerity to argue that the British unemployment problem is due to the workers being to idle and diverted by pop music to bother working. You know instantly that the underlying model has come from a mainstream economist who hasn’t recently looked out the window or read any data.
I am sick of reading about Europe’s lost decade. For example, in the UK Guardian article (July 27, 2012) – Spanish recession to last until 2014, IMF warns – the economics editor Larry Elliot says that the IMF is “Predicting a lost decade of growth for the eurozone’s fourth biggest economy”. The lost decade terminology emerged to describe the experience of Japan in the 1990s after its spectacularly damaging property crash. But I think it is offensive to use the term in relation to the Eurozone crisis. We are not seeing a lost decade emerge Japanese-style. Rather, we are witnessing a self-imposed humanitarian disaster driven by the ideological arrogance of the Euro elites (aided and abetted by the OECD and IMF). The experience of Japan in the 1990s was nothing compared to what these elites are doing in the name of neo-liberalism. Journalists should stop making the comparison and, instead, call the current crisis in Europe for what it is.
There was a story in the UK Guardian yesterday (July 29. 2012) – Million jobless may face six months’ unpaid work or have benefits stopped – that described how the failed neo-liberal British government is following the path that the conservatives followed in Australia in attempting to “manage” the unemployment that their flawed policy regime created. The Australian approach has failed dramatically and imposed considerable hardship on the most disadvantaged citizens in our midst. The same approach is unfolding in Britain and it to is already looming as a failure.
I had a little reminisce today and took a mental journey back to the North of England where I studied for a time. Although this time (early 1980s) was just before the digital age, I have collected bits of information about the economic and social life of workers and capitalists in early industrial England. And, of-course, there are some wonderful accounts in the wider literature of what life was like in those days. These were times when there were no unions, no job security, no income support, no safety standards, and little or no sanitation of public health regulations in the urban areas where workers were sequestered by the ruling elites. While the rich industrialists erected open spaces and promenades to surround their luxury residential facilities, the workers mostly lived in filth and died dreadful deaths. There was a reason that this way of doing business was attacked by growing worker discontent throughout England and Europe in the late 1840s and beyond. There is a reason trade unions formed. There is a reason that governments were forced by popular pressure to introduce income support and labour market regulations. People can only be put down for so long and the capitalist system is built on a very small minority seeking to repress the rights and rewards of the vast majority. Once the greed pushes the balance too far to the minority – their hegemony is threatened. We might be in 2012 but the elites are once again driving us all back to 1844 or thereabouts. They will rue the day.
I have been reading the latest report from the International Labour Organization (ILO) – World of Work Report 2012 – which documents the disastrous trends in employment that are expected as fiscal austerity grinds economies into the ground. The ILOs Social Unrest Index has risen in 57 out of 106 nations and negatively related to employment fortunes. The ILO also found that “deregulation policies … fail to boost growth and employment” and “there is no clear link between labour market reforms and employment levels”. They conclude that the “austerity trap” is destroying jobs and that concerted effort is needed to ensure that “wages grow in line with productivity” and that there should be a “coordinated increase in the minimum wage”. I will analyse this report in more detail another day because it is schizophrenic in approach reflecting the struggle within the ILO between the neo-liberal influences that have grown over the last few decades and the more balanced labour market understandings that come from a thorough understanding of the importance of labour market institutions and government oversight and a keen appreciation of the empirical dimensions. But today I am going to briefly reflect on an extraordinary interview – Former Reserve Bank Governor bemoans state of politics and inequity – on the ABC current affairs program – 7.30 – last night, where the former RBA governor let fly at budget surplus obsessions and demanded more expansionary fiscal and monetary policy interventions at a time when demand is faltering and growth falling. And some other snippets appear afterwards.