Today I am in Finland after a long flight and have to catch up on things. My usual blog posting will resume tomorrow. Over the page, I have listed the speaking events that I will be involved in over the next two or so weeks. I hope to see some regulars at these events. And I will be back in early May for another solid speaking tour of Scotland and England with several opportunities to meet people and talk about MMT and the future. For now, it is cold, icy and there is a lot to organise.
In the past week, the UK Guardian readers were confronted with the on-going scandal of wealthy British politicians and ‘peers’ receiving massive European Union subsidies under the Common Agricultural Policy (CAP). The article (January 27, 2019) – Peers and MPs receiving millions in EU farm subsidies – recounted the familiar tale –
“Dozens of MPs and peers, including some with vast inherited wealth, own or manage farms that collectively have received millions of pounds in European Union subsidies”. The story is not new and this scandal is just a reflection of the way in which the development of the European Union has contradicted the idealism that the Europhile Left associate with ‘Europe’. As an aside, it would be telling, one imagines to map the EU payments (and well-paid job holdings) with Brexit support – one would conjecture a strong negative correlation. This is a two-or-three part mini-series on the evolution of concepts of ‘cosmopolitanism’ in the European context. It is part of work I am doing for the next book Thomas Fazi and I hope to publish by the end of the year. In this blog post, I introduce the conflict that is inherent in the European Union, and the way the Europhile Left has been seduced by a concept of cosmopolitanism that bears not relevance in the reality of modern Europe.
My head is hurting less today! But while I haven’t been able to write much I have been able to amuse myself by examining the Brexit Referendum figures and juxtaposing them against the vote in the British Parliament last night. I realise (so don’t start Tweeting what a fool I am!) that the vote last night was not whether to exit or not! And if I was a British parliamentarian I would have certainly voted against the Act presented by the Prime Minister to the House of Commons last night. But then I favour (yes, Tweet away) a No Deal Brexit, which I believes puts the bargaining chips firmly in the favour of the British. But I have made that point often. The problem with last night’s vote is that it sets a dynamic for the parliament to reject the outcome of the 2016 Referendum outright, when the British government promised the people before the 2016 vote that they would respect and implement the outcome. The outcome wasn’t complex – it was clearly to Leave. And if last night’s vote leads to a process where the 2016 outcome is not implemented as promised then there are a lot of MPs who are behaving in a way that violates the wishes of their constituencies – the worst offenders being British Labour MPs. In the 2016 election, 60.7 per cent of the Labour constituencies voted to Leave (75.4 per cent of Tory constituencies). Yet only 3 out of 256 Labour MPs voted for the Act last night. One hopes that when it comes to the crunch a much higher proportion of Labour MPs will see to it that Brexit occurs.
Wednesday and a shorter blog post so that I have a little more time to do other things. I don’t know what topic attracts the most hate E-mails that I receive on an almost daily basis: my position on the Eurozone, my position on the EU generally, my position on Brexit, my position of surrender monkey social democrats (parties and people), or my work on Modern Monetary Theory (MMT). I guess I could count and build up a frequency distribution but I just prefer to delete them these days – the first few words give the game away. Save your time. This week, I have had a torrent of such E-mails telling me more or less “see, you claimed Brexit would be good, but it is a disaster”. Last time I checked Brexit hasn’t happened yet. All that we are witnessing is a conservative government of considerable incompetence in disarray after being bullied by the neoliberal, corporatists in Brussels into a ridiculous ‘agreement’ that changed hardly anything. But there were some interesting data releases in the last few weeks that bear on the Brexit question. I have been looking into them.
Last night in Britain (October 29, 2018), the British Chancellor released the – Budget 2018 – aka the 2018 fiscal statement (my terminology, to avoid triggering the flawed household budget analogy). The detailed analysis is being done by others and I haven’t had enough time to read all the documents produced by the Government and others yet anyway. But of the hundreds of pages of data and documentation I have been able to consult, the Government is trying to win back votes while not particularly changing its austerity bias. That is fairly clear once you dig a little into the outlook statement produced by the Office of Budget Responsibility (OBR). The Government’s strategy is also unsustainable because it continues the reliance on debt accumulation in the non-government sector, which will eventually hit a brick wall as the balance sheet of that sector becomes overly precarious. Nothing much has been learned from the GFC in that respect. The Government can only cut its debt by piling more onto the non-government sector. Second, the response of the Left has been pathetic. The Fabians, for example, has put out a document that uses all sorts of neoliberal frames and language, making it indistinguishable from something the mainstream macroeconomists would pump out – the anathema of the constructs and language that the Left should be using. There is a reason the political Left has fallen by the wayside over the last 3 or so decades. And their penchant to write and speak like neoliberals is part of the story.
Regular readers will know that I have become interested in the concept of messaging and language to help in the practical goal of widening the spread of Modern Monetary Theory (MMT) knowledge and putting really powerful tools into the hands of activists who build social and political movements. There are some great efforts underway (for example, Real Progressives in the US). On October 5, 2018, I will be launching the Gower Initiative for Modern Monetary Studies and running some workshops for them in London. This is another excellent activist group setting out and prepared to climb the hill and all the mainstream economics obstacles that are in their way. The aim is to build a network of these groups around the Globe (Italy, where there is already a solid network; Spain, similar; Germany – I will be there October 13); Finland, already solid activity; Scotland, I will be there October 10; Ireland, I will be there October 3-4, and elsewhere). On this theme, some current research, which Dr Louisa Connors and myself will unveil at the The Second International Conference of Modern Monetary Theory (New York, September 28-30), is the role that social media (among other things) plays in spreading knowledge. Regular readers will know I occasionally point to what I see as the futility of twitter firestorms where some MMT activists interact with some neanderthal-economics type who can’t get Zimbabwe typed quick enough and a drawn out back-and-forth of tweets, which can sometimes go for days, with increasing numbers of twitter addresses copied into the thread. They usually end in grief. The question is whether these social media platforms are suitable given what we know about effective framing and the type of language and strategy that is necessary to make that framing persuasive.
A former student sent me an E-mail recently and updated me on his progress and his current research project – the history of British banking in the 19th century. He also wanted to draw my “attention to a little known period in British Economic history that seems to reinforce the interrelationship between fiat currencies, public debt and expenditure and rates of economic growth and unemployment”. So square centre of my own research interests (among others). So I did some further digging and read back through the notes I have taken over the last 35 years as a researcher. I was aware of the Bank Restriction Act 1797 “was an Act of the Parliament of Great Britain … which removed the requirement for the Bank of England to convert banknotes into gold.” This essentially created a fiat currency system with the central bank as the currency issuer. More interesting things arise as you dig further. For a period of 24 years, Britain lived under this form of monetary system. And, need I add, during this period Britain usurped the Netherlands as the most developed economy in the world at that point in history and the industrial revolution boomed. The mainstream economists of today would have predicted catastrophic results from the 1797 Bank Act. But then we know that what they say has zero credibility anyway.
There have been lots of E-mail requests overnight for commentary on the US election result. I think that space is pretty crowded at present – with Clinton supporters trying to reconstruct events to defray their responsibility (a denial strategy), in a similar vein to the Remainers in Britain in the early days after the Brexit vote. I expect to read learned columns in the New York Times and other establishment newspapers in the weeks ahead outlining, with all the gravity that is possible in the written word, how millions of Americans who voted for Trump are now regretting it. Same as in the UK. I expect to read a lot about racism and misogyny and various numbers wheeled out to show who voted for whom to prove this or that. The twitterverse has already gone crazy with this sort of ‘analysis’. Maybe later when I have had a chance to reflect on the actual data I might write something. But what part of “the people are sick of the establishment even though they don’t quite know what they are going to do about it and given the choices support those who will do little about it” is hard to understand. The neo-liberal lust has created a monster that they now cannot control. The highly concentrated mainstream media doesn’t call the shots as much as it did. The academic economists who preach fear of change but who people know from the GFC are a depreciated cohort without much insight at all are now ignored. That is how I am seeing it. A great chance for a new progressive element but also space for the worst of the right-wing to fill. A big contest is now there for ideas to play out. The only problem is that the mainstream ‘progressive’ forces (like the Democrats, British Labour Party, Socialist Parties, etc) have been so captured by the establishment that they have become the establishment – neo-liberal to the core. But today, I will write a bit about the abuse of Disability Support Pension schemes to hide unemployment and make austerity look less worse than it is.
Less than two weeks ago, Britain sent a bombshell into the conservative, neo-liberal policy agenda and the narrative that supports it. I have read a lot of comments that the Referendum result was a reflection of racist attitudes towards minority immigrants. While it is no doubt that the open borders policy that allows firms to batter down wages growth and keep a constant excess supply of labour as a threat was an important part of the debate and vote, that in itself, was a reflection of the underlying tension that people and their communities have with the neo-liberal policy agenda. There would be much less concern about migration if there was full employment. The same sort of tensions that pushed the majority of British voters to support the Leave campaign have been apparent in the Australian Federal election which was held on Saturday (July 2, 2016). Australian voters have rejected a first-term conservative government. It is a rare event for us to reject any first-term regime of either persuasion. The conservatives in Australia are now in tatters without credibility and the unstable situation that has arisen as a result of the political uncertainty provides a great opportunity for the Australian Labor Party, who did very well in the poll on Saturday, to refresh their outlook and reject their neo-liberal tendencies to reflect the big shift in sentiment in the Australian electorate. A similar opportunity exists in Britain and I hope Jeremy Corbyn takes it and expunges the Blairites from his own Party.
The foundations of national sovereignty are the currency-issuing capacity of the national government. The foundations of a democracy include the ability of the citizens of that currency zone (the ‘national government’) to choose the political representatives at regular intervals who will make decisions on their behalf. A direct chain of responsibility between the elected officials to the voters is thus established and the citizens can take action accordingly if they feel they are being disadvantaged by the legislative outcomes. The anathema of this sort of direct responsibility and accountability is the European Union, which is cabal ruled by unelected officials (in the conventional sense) who are not held accountable for their decisions, no matter how poor they turn out to be. The history of the Eurozone is one of policy failure with millions of people rendered unemployed, in poverty, or otherwise disadvantaged by the destructive decisions made by successive European Commission administrations. There was a good reason why the French president Charles de Gaulle resisted the development of supranational power blocks in Brussels and elsewhere (for example, in Frankfurt under the Eurozone). His preference for Inter-Governmental relations, where large common issues such as climate change, migration, rule of law, etc could be decided upon by representatives of each Member State government, without surrendering national sovereignty, was sound. Given all of that, the United Kingdom should exit the dysfunctional European Union immediately and only negotiate with other states on a government to government basis.
The elites are gathering for another junket aka the World Economic Forum, in the frosty, but salubrious surrounds of Davos this week (January 20-23, 2016). The Monday morning temperature there is forecast to be -22°C. According to the Forum’s homePage – Searching for the 21st century dream at Davos – the delegates are going to be reimagining life under the theme “Mastering the Fourth Industrial Revolution”, which is spin for eating a lot of gourmet food, drinking a lot of expensive wine, and, denying the presence of the very large elephant in the conference venue. I suppose it is easy for them to live in denial when the sort of policy regimes they have influenced have categorically failed and will continue to do so with the result that millions remain unemployed and poverty rates are rising. Apparently, the elites have to “‘defetish’ … dialogues about future technologies” and the “onset of a new era of ‘limits’ is a chance we must not miss to imagine and engineer the futures we want”. Here is some gratuitous advice to the elites – forget the robots; forget worrying about the so-called “inflection point … where social, economic and political crises meet rapid technological change, where progress feels like disruption, not promise”; and, instead, more fully understand why this obsession with “a new era of ‘limits'” (by which they mean fiscal limits on governments) has sidetracked any hope of progress and deliberately disrupted people’s lives in a way that dwarf the impacts of technological change.
I am travelling for the better part of Monday – so no detailed blog. Just a few snippets to keep things going. I will compile a report on Finland at some point soon once I reflect more on what I have learned in the last week while being here. It has been a very instructive time even though every time one steps out doors the brain freezes (as well as the body). The blog will return on Tuesday (Australian time).
Two articles in the UK Guardian this week summarise what is going on with the British Labour Party at present. The first (August 3, 2015) – Jeremy Corbyn’s supporters aren’t mad – they’re fleeing a bankrupt New Labour – refutes the notions propagated by the previously dominant ‘New Labour’ factions that the Left of the Party are in some way mad, deluded, or otherwise sick. Instead, it argues the Left are part of a new “grassroots political movement” reacting to the bereft nature of New Labour which is without a “clear vision, or a set of policies, or even a coherent distinct set of values”. The second article (August 3, 2015) – Corbyn’s economic strategy would keep Tories in power, top Labour figure says – provides proof of concept. It is written by the Shadow Labour Chancellor Chris Leslie and reflects an abysmal understanding of macroeconomics that only a deluded free-marketeer would dare suggest had anything to do with reality. The article demonstrates that the top echelons of the British Labour Party parliamentary wing are caught in the destructive neo-liberal Groupthink economics that not only caused the GFC but has also led to austerity being the norm for policy makers these days. And there is no doubt that it is a failed doctrine and not worthy of a progressive opposition. The new “grassroots political movement” is reacting sensibly to the intellectual carnage at the top end of their Party and lets hope it is triumphant and purges these ideas from Labour forever. But, first, it must break out of the neo-liberal framing that is pervasive in its first major statement.
Its my Friday lay day blog. So a rather short blog but with a research trail that can occupy the reader for hours if they pursue all the links. It seems that the mainstream American is rather progressive. Who would have thought given that public opinion is being continually drowned out by the deafening shrieking from the conservative think tanks and their media bully boys. In March 2013, a research paper from Northwestern and Princeton academics – Democracy and the Policy Preferences of Wealthy Americans – demonstrated the vastly different policy preferences held by high income Americans (in this case the top 1 per cent of the income distribution) relative to the general public. The research was motivated by the observation that the “wealthy exert more political influence than the less affluent do” and so if their preferences were not representative of American society in general then that would be “troubling for democratic policy making”. The authors find that the high income earners in the US are not only very active politically but hold ultra conservative views “concerning taxation, economic regulation, and especially social welfare programs” that are not remotely shared by the general public. The results might surprise people.
Its my Friday lay day blog. I try to devote the major part of Fridays to writing other things (some book projects I am working on and some journal articles and other things). That is the logic of the lay day. I cut the time I devote to the blog in half (down to around 1 hour) in recognition of that logic. Today, I was examining the recent population data from Latvia to see what the latest trends were. Most countries would not judge success by the number of its population that leaves, especially when the departing souls are among the young and talented. But the so-called Latvian ‘miracle’ does just that. When the Latvian government aided and abetted by the IMF and the EU stooges imposed the harshest austerity of all on the people and real GDP growth followed, the neo-liberals were beside themselves with joy. Austerity works they screamed. Well not for the 10 per cent of the population who left. And now, the peak of the ‘miracle’ appears to be over as growth slows and the residual of a privatised, socially damaged society remains. I wouldn’t be holding out this little nation as a success story. More like a disaster if the reality is to be correctly appraised.
On September 15, 2014, the Melbourne Age article – Workers can forget about big pay rises for some time to come – summarised the wages outlook that workers can expect in the coming year as the labour market weakens. Its bleak. Meanwhile, CEO pay while down from the peaks of 2007 remains excessive according to a major survey released in Australia this morning. Depending on how one measures it, the average CEO of the Top 100 companies earns between 65 and 84 times what the average worker takes homeeach year. And these bosses lead the cheer squad when industry leaders and government ministers claim workers have to take pay cuts and surrender penalty rates and that the minimum wage should be abandoned. The neo-liberal obscenity survived the GFC and has now reorganised. Woe be us!
Another relatively short blog coming up today – it is still holidays here and very sunny. There was an interesting Bloomberg article the other day (April 5, 2011) – Don’t Worry About Deficit That Will Heal Itself – which although containing some conceptual flaws arrives at the correct conclusion. That governments would be far better pursuing real goals – such as ensuring there is adequate infrastructure investment, putting into place appropriate climate change initiatives and maintaining high levels of bio-security – that becoming obsessed with fiscal horizons that they have very little control over. Further, in attempting to control these horizons, governments tend to err on too much austerity (for example, the UK and the Eurozone), which not only undermines growth but also thwarts their deficit reduction goals (via the automatic stabilisers). The lesson to be drawn from all of this is that – Governments should not worry about deficits.
I woke up to the headlines this morning about the apparently failed German bond tender yesterday and all the experts predicting doom. In my E-mail box there was around 30 requests for an explanation from readers who had read the news and concluded that it was a major event in the current crisis but didn’t really understand what the implications were. The implications are fairly simple – the bond markets are working out that no EMU government is free of insolvency risk because they all use a foreign currency (the Euro). Germany is better placed to resist the crisis because of the relative strength of its economy but it is not immune from it. Its economy will also deteriorate as the effects of austerity spread out through trade. While the “experts” waxed lyrical about the crisis being confined to profligate EMU states (the PIIGS), it was always clear that the northern strong-hold states were going to be dragged in as the crisis deepened. That is because the problem is the Euro itself and the way the monetary system is designed. All the other emotional stuff about lazy Greeks is a sideshow. Germany is starting to find that out – yesterday, it received its first strong message. The crisis is going right to the top in Europe now.
The laboratories are multiplying. We are in an interesting period – I say that in an intellectual sense only – where stark policy decisions have been taken based on certain theoretical economic claims and regular data is arriving which allows us to assess the viability of those claims. So as a researcher it is interesting. As a person I don’t find it interesting that governments are prepared to gamble with peoples’ lives in a self-serving way to appease the elites that fund them. For many years we have had Japan as an Modern Monetary Theory (MMT) laboratory. I gave a talk here in Maastricht yesterday and asked how any mainstream economic theory could explain Japan over the last two decades or so. By any standards if the mainstream macroeconomic theories were of any value then Japan should have very high interest rates and accelerating inflation and the government should have gone broke. It hasn’t and that tells you the value of mainstream theory. Now we have various fiscal austerity experiments being undertaken and the data is coming in daily to tell us that the claims made about the certainty of a “fiscal contraction expansion” are spurious. The most recent British labour force data released this week provides a very interesting laboratory terrain. Two geographic regions within the same nation, two governments (of different status) and two very different economic policy approaches. Result: one side of the border the labour market deteriorates, the other side it improves. So this blog is a tale of those two labour markets – one south of a border the other north. The data provides further evidence that fiscal austerity damages economic prosperity.
There has been a lot of “opinion” expressed over the last few days about the causes of the British riots. If I had a meter to assess the ideological biases given breath in the press over this issue to date it would be swinging out there in the right-wing of opinion – “cultural problem”, “lawless lazy youth fed by the welfare state”, “criminality”, “intolerable monsters” all words I have read or heard in the media recently. Anyway who has my view is labelled a “left-wing cynic” who want to “makes excuses for thugs”. Opinion is after all just that so it is always of benefit to temper it with research evidence. Anyway, the short conclusion – supported by the research evidence – is that I blame the British government for the riots.