It amazes me that politicians actually believe the neo-liberal lies that the path to lower fiscal deficits is to cut the hell out of public spending during a recession when private sector expectations are conservative if not downright pessimistic and their spending is subdued. If you add in the fact that these politicians make these claims en masse – that is, they are all caught in this “fiscal consolidation” madness – then it becomes obvious that the only other route to growth – exports – will also be closed. The latest data from Britain is all bad and suggests that the claims that cutting net public spending would stimulate growth are wrong and also that the way to cut a deficit is not to deliberately reduce economic growth. At least 172 thousand Brits have their government to blame refers to the change in unemployment in Britain since June 2010 (just after the new Government was elected). The unemployed are the human face of the ideologically-driven vandalism that the British government is currently engaged in.

The British economy is clearly declining and the Government has moved from denying the decline (it initially spent months talking up its claims that austerity would promote growth) to admitting the decline but diverting the blame to others. The others in this case – are the hopeless Europeans who move from one disaster to another. So now the narrative that is emerging in Britain is that its export-led recovery plans are being damaged by the failure of the Europeans to do something about the crisis there. There are two ways of thinking about that. If Europe was such a problem then it has been a problem for nearly 4 years and so it was misguided to deliberately damage domestic growth (via austerity). The other way to look at it is to note that the British economy has resumed growth under the support of the fiscal stimulus (introduced by the previous government) and then started to experience declining growth virtually from the day the current British government announced its scorched earth policy cutbacks. The recent Euro crisis has really nothing to do with that. It is clear that the British government is moving from denial to blame shifting.

On May 10, 2011, the Australian Treasurer delivered his Budget Speech 2011-12. At the time I wrote these blogs – Australian Federal Budget – more is not less and Time to end the deficits are bad/surpluses are good narrative. Some 6 months later the Australian government received news (November 07, 2011) – Swan warned on surplus timeline – that indicated the economy was slowing and tax revenue was going to be much lower than estimated. It is becoming obvious to most people now (what was clear months ago) that the Government’s obsession with achieving a budget surplus is undermining the growth prospects of the economy. They should never had withdrawn the fiscal support in the first place but now they should definitely abandon this surplus obsession. The Australian Treasurer was like a wind-up doll yesterday when told the economy was faltering. All he could say was “We will cut harder”. Moronic.

Today we learned that – China posts slowest GDP growth in two years – yes, the annual rate of growth has dropped to 9.1 per cent which was 0.4 per cent lower than the second-quarter and 0.2 per cent lower than the estimate provided by the Bloomberg News survey of 22 economists. The reason given for the “slowdown” was “monetary tightening and weaker export demand”. The anticipation of a slowdown over the last week has fuelled a host of doomsday projections about how the Chinese investment boom will crash and how it will cripple the rest of the world. My view is different. I consider the Chinese government to be totally on top of managing their economy, which sets them apart from the leaders in the advanced world. They will not let a major economic crisis occurring within their own borders. They have so much more scope to expand although all of us will rue the environment impacts of that expansion. Their problems are going to political – taming an increasingly rowdy middle class. For the rest of us, China provides an economic example – when all other sources of expenditure fail, turn on public spending and do it quickly and don’t err on the conservative side.

I did an interview in August with the Harvard International Review (published by Harvard University). It was finally published yesterday (October 16, 2011) – Debt, Deficits, and Modern Monetary Theory. I consider the principles that are outlined in that interview to provide a sound organising framework for progressive movements aiming to make changes to the current failed systems. I think Modern Monetary Theory (MMT) does provide insights to the general population that are not only obscured by the mainstream media but which if they are broadly understand will empower the 99% to demand governments redefine their roles with respect to the non-government sector. Part of that re-negotiation has to be to reduce unemployment and redistribute national income more equally. We will also be better placed to have a sensible discussion about the human footprint on the planet. The three goals – full employment, reduced inequality and environmental harmony – should be central to the current civic protests (such as OWS). But we also have understand that government has to be involved in the pursuit and maintenance of those goals. The problem is not government but the politicians we elect and the coalition between them and the corporate elites. An understanding of MMT can energise the progressive fight back.