Economics

Private Eye Cheers Defunding Campaign Against the Canary

I’ve blogged many times before about Private Eye’s hatred of Jeremy Corbyn and their poisonous support for the anti-Semitism smear campaign against Labour. One of those pushing it in the Eye is ‘Ratbiter’, revealed by Tony Greenstein a little while ago to be the pseudonym of Groaniad/Absurder hack Nick Cohen. Cohen, who isn’t actually Jewish despite his name, is clearly one of those miffed that Labour has elected someone who’s actually going to do something for Britain’s working people, and isn’t prepare to ignore or support crimes committed by the British establishment’s favourite colonialist state in the Middle East. He’s the author of a piece, ‘Faking Hell…’ in this fortnight’s issue of the satirical rag for 18th-31st October 2019, praising the Stop Funding Fake News organisation for their campaign to stop advertisers using those social media sites they consider to be outlets for fake news. Cohen’s article starts by praising the site for doing what he believes Google should be doing in preventing firms advertising with extremist web sites. He starts off by describing how those on the extreme right have had their advertising revenues hit, as firms like Sky, Macmillan Cancer Care, Which?, the World Wide Fund for Nature, Manchester United, Chelsea, Ted Baker, Experian and Ebay have requested Google to take down their advertising on Breitbart, Westmonster, and TR, the site of the notorious islamophobe and jailbird Tommy Robinson. Thanks to their campaign, Robinson’s site has lost 70 per cent of its income. Which might stop some of his jaunts abroad for a little while. But almost inevitable, the article goes on to attack The Canary. This has been a particular bete noir of the Eye for some time. They really don’t seem able to stand the idea that there are any social media sites supporting Corbyn, not least because they’re also a rival to the lamestream media. Which also includes Private Eye. Describing SFFN’s attacks on The Canary and its effects, Cohen says

While far-right sites target Muslim immigrants, far-left sites target Jews. “The Canary”, the campaign tells its followers and advertisers, “regularly publishes fake news and attempts to justify anti-Semitism”. it also feeds the conspiracy theories of the far left. One hideous example came when the campaign discovered that Unicef, which tends to the victims of the Syrian and Venezuelan regimes, was advertising on the Canary, which has denied the humanitarian crisis in Venezuela and pretended that Syrian president Bashar al-Assad did not use chemical weapons against Syrian civilians in Douma. In August, the Canary cut its staff from 25 to seven. Perhaps inevitably, it blamed “political Zionists” targeting advertisers.

The toppling of the Canary is “the strongest evidence yet that the clickbait business model can be defeated”, the campaign said. Combine it with changes to Facebook’s algorithms to reduce the prominence of media businesses, and fake news in the UK is taking a hit.

Let’s go through and critique this pile of driveling hogwash. 

Firstly, the Canary isn’t a ‘far left’ site. As I understand it, it supports Jeremy Corbyn. Corbyn’s programme of nationalisation, the restoration of the NHS, welfare state, worker’s rights and trade unions, isn’t extreme left, except in the addled brains of convinced Thatcherites. It’s actually a return to the social democratic consensus, which was actually the centre left before the appearance of Thatcher and her campaign of privatisation, deregulation and the destruction of the welfare state and the decimation of working class organisations.

Secondly, it doesn’t promote anti-Semitism. What it has done is attack, rebut and refute the anti-Semitism smears against the Labour party and specifically Corbyn’s and his supporters. And these are very much politically motivated. It comes from the Blairites, who are determined to cling to power whatever the cost, the British political and media establishment, which is simply terrified of anyone giving back any power to working people, and the Israel lobby. And a large part of it comes from the Israel lobby. Tony Greenstein, Jackie Walker, Asa Winstanley of the Electronic Intifada, and the Jewish American academic and critic of Israel, Norman Finkelstein,  have described at length how Israel and its supporters have been smearing any and all critics of Israel as anti-Semites since the 1980s, even when they are anything but Jew-haters, as in the case of those above. It’s their only defence against the justifiable criticism and condemnation of Israel’s government for its crimes against the Palestinians. It’s hasbara, the Hebrew term for Israeli civilian propaganda. The campaign against Israel’s critics, including Corbyn, is run by a special department of the Israeli state. This is why one of those smeared as an anti-Semite is Cyril Chilson. Mr Chilson is the son of a Russian Red Army pilot and a holocaust survivor.  He’s Israeli, and served in the IDF and then an intelligence unit producing such propaganda. It’s because of his work for the Israeli military that he recognised the attacks on Corbyn and his supporters for what it was, and denounced it. And as result, this man, the son of people whose resistance and survival of Nazism was truly heroic, has been smeared as a Jew-hater. Disgusting.

Thirdly, the Anglo-American media have been producing fake news about Venezuela and Syria. Some of the footage of refugees supposedly fleeing persecution by Maduro’s regime was faked. Independent experts analysing the footage and evidence of the chemical weapons attack at Douma have come to the conclusion that this was also faked. Assad is a monster, who has killed and tortured in order to maintain power, and he does oppress his country’s Sunni Muslim population. But it doesn’t look like he was responsible for that atrocity. That lies instead with the ‘freedom fighters’ – ahem- which we’re supporting. You know, groups connected with ISIS and what evolved from the Syrian branch of al-Qaeda. But the neocons have been pushing for the overthrow of the Syrian regime since the 1990s, because Assad is a Shi’a, like the Iranian regime, although of a much more radical branch of that faith. He’s therefore allied to Iran, which the Americans also want to overthrow. See the pieces produced by the Jimmy Dore Show about this.

Cohen in his attack on the Canary for rightly rejecting the received view of these events is therefore parroting Neocon propaganda.

Zelo Street has written extensively about Stop Funding Fake News, exposing how it attacks decent left-wing social media sites, while at the same time remaining very shadowy itself. No-one knows who runs it, as their identities and connections are very much hidden. The Sage of Crewe has therefore advised companies not to be influenced by their misinformation and pronouncements, until they themselves become much more transparent.

And then there’s Private Eye’s hypocrisy for printing this drivel.

Ian Hislop, the magazine’s editor, appeared on Radio 4 a few years ago in a piece about satire down the centuries, explaining that what his magazine attacked was humbug, double standards. Private Eye is one of the few mainstream magazines that tries to bring the public the news behind the news, exposing double-dealing, lies and hypocrisy in the press, the government and industry. But publishing this attack on the Canary is very hypocritical, consisting as it does of nothing but lies and propaganda.

The Defunding of Arab Satirists Al-Hudood

And it’s especially hypocritical as a few pages before Cohen’s wretched piece, there’s a little article in the magazine’s ‘Street of Shame’ column, ‘Joke Now, Pay Later’, about how the Arabic satirical website, Al-Hudood, was experiencing a funding crisis. Metro Bank has told them it will no longer act as their bank, and they have not been able to find anyone else to do so. There has been no explanation from the banks for this refusal to deal with them.

This seems to be the same tactics Stop Funding Fake News are taking with the Canary and other left-wing bloggers and vloggers: try to take them down through preventing people from supporting them financially. Perhaps whichever oppressive regime or organisation has leant on the banks to withdraw their support for al-Hudood also considers that they’re ‘fake news’ and a dangerous, extremist organisation.

Private Eye does much good in its exposure of some of the underhand dealings in Britain and around the world. But this attack on the Canary is, like their attacks on Corbyn and his supporters, just pure hypocritical establishment lies.

‘Nobel prize’ winners Duflo and Banerjee do not tackle the real root causes of poverty

Published by Anonymous (not verified) on Fri, 18/10/2019 - 2:54am in

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Economics

Some go so far as to insist that development interventions should be subjected to the same kind of randomised control trials used in medicine, with “treatment” groups assessed against control groups. Such trials are being rolled out to evaluate the impact of a wide variety of projects – everything from water purification tablets to microcredit […]

The cruel reality is that there is mass unemployment in the UK and the government deny it

Published by Anonymous (not verified) on Thu, 17/10/2019 - 5:05pm in

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Economics

According to the Guardian:

According to research from the Organisation for Economic Co-operation and Development (OECD) and the Centre for Cities thinktank, large levels of “hidden” unemployment in towns and cities across Britain are excluded from the official government statistics.

The study found that more than 3 million people are missing from the headline unemployment rate because they report themselves as economically inactive to government labour force surveys, saying that they believe no jobs are available.

Three immediate comments arise.

First, this is glaringly obviously true. The statistics have been manipulated. That’s hardly news, or a surprise.

Second, this still massively understates under-employment and unemployment as millions of self-employed people are only marginally economically active in work that pays very little. And we also know that there are millions of marginal employments that are exploitative and unproductive for those who endure them. This is, then, only the tip of the iceberg on the scale of the real issue facing many in the UK, which official statistics seek to deny.

Third, this suggests that all the people required to deliver a Green New Deal are out there, waiting to work. They will need training, of course. That will be essential. But the opportunity to create a much better economy exists.

Apparently core MMT idea is now supported by the mainstream

Published by Anonymous (not verified) on Wed, 16/10/2019 - 6:38pm in

It’s Wednesday and only a collection of snippets today. Today we saw some self-aggrandising hypocrisy with a short memory come out of the sewers, and a statement by a government denying that they are a “successful case of MMT”, an advertisement (call for help) and some music linked to a recent, rather significant death, when considered in the history of contemporary music. Pretty full day really.

Short-memory hypocrisy on display …

Recall this blog post – When mainstream economists jump the shark and lose it completely (January 23, 2017).

And this one – Marxists getting all tied up on MMT (May 1, 2019).

The central character (Richard Holden) is a Sydney economics professor who moonlights as a main economic advisor to the Australian Labor Party.

Which helps to explain their dramatic failure at the last federal election when they lost the unloseable election because they played cute about achieving larger fiscal surpluses than the conservatives at a time the economy was slowing rather dramatically.

Well having gone on the public record as being vehemently opposed to Modern Monetary Theory (MMT), accusing MMT economists (and me in particular) of being “a bunch of cranks” and characterised Modern Monetary Theory (MMT) in this way:

Modern monetary theory, a term coined by Australian economist Bill Mitchell, says the following: (1) Countries that control their own currency cannot default on sovereign obligations because they can always print more money. (2) Thus, said countries can provide unlimited resources, pay for whatever they want, and create full employment. Nirvana, here we come!

In the first cited blog post above I deal with this misrepresentation and the rest of his claims in some detail.

Holden also claimed MMT economists pushed “neo-charlatanism” – which was his final comment – clearly he had worked on that a bit and thought he was being very clever.

In the Q&A section of the Conversation article that blog post discusses we read these claims from the author “MMT proposals lead to inflation. end of story. why haven’t they been tried? because nobody serious thinks they would ever work.”

And then there was this sequence:

(Commentator A): There is no reason why we cant have a job guarantee with full employment … Australia had full employment before big business demanded unemployment be kept above 5% so they could control wages.

(Holden): i would like unemployment to be much lower, but when exactly did we have “full employment” as you say?

(Commentator B): When we had a full employment policy prior to 1975

(Holden): and what was the unemployment rate then?

(Commentator B): Avg unemployment from 1945-46 to 1973-74 was 2%

(Holden): not at all clear–please provide the data. but, arguendo, sure. is 2% too high? should we print money like crazy then? or 1.5%? or 2.5%? what is the right topology?!

(Commentator B): (link) Menzies nearly lost govt by letting unemployment rise above 2.1% why all those years of deficit spending ? Don’t mainstream economists study history anymore ?

Job Guarantee is MMT’s only policy so 0% involuntary unemployed is feasible, really should go back to school, Bill Mitchell is starting MMT University later in the year, you should enrol.

As I noted in the blog post cited above, this lack of knowledge of our Post World War 2 economic history is symptomatic of the new era of economic Phds.

The problem is that students of economics in the neo-liberal era are not required to study economic history as part of their education. So we have a generation of PhDs in economics, particularly those from most mainstream American programs, who have very little understanding of history and what has gone before them.

Holden disclosed that naivety when he demanded the commentator provide data to prove that the average unemployment was 2 per cent in the Post World War 2 period up to the mid-1970s.

It is just basic required knowledge for a professor of economics to know that Australia’s unemployment rate was at or below 2 per cent with zero underemployment for more than 3 decades following the Great Depression.

A stunning ignorance was revealed in that particular interchange.

Especially for someone who holds out his advice to one of our major political parties – the party that is supposed to represent the political voice of the trade union movement.

At the time he was holding forth against MMT, Holden had no published track record in macroeconomics or monetary economics and his teaching at that stage did not involve macroeconomics. So, his intervention was hardly from the perspective of the intellectual or research cutting edge and his reliance on simplistic mainstream textbook notions was evidence of that.

Anyway, he resurfaced in the press again this morning in this New Daily article (October 15, 2019) – Union calls for Great Depression-style ‘Green Jobs’ program – which if anything is about the key idea that MMT economists have been championing for 25 years, mostly as the sole voice in this advocacy.

One would find it hard to substantiate a claim that this idea has come out of mainstream economics in any way.

Over the years, the core MMT economists have taken massive flack in advocating for a Job Guarantee, which is a central aspect of our macroeconomic stability framework.

The article talks about a proposal from the Australian Unemployed Workers Union (AUWU) which was submitted to the – Jobs for the Future in Regional Areas – enquiry being conducted by the Australian Senate at present.

In their submission – Possibilities for a Regional Green Job Guarantee – you will see the document relies heavily on work done by myself, on work done with my colleagues at my research centre, the – Centre of Full Employment and Equity and on our textbook (Mitchell, Wray and Watts) – Macroeconomics.

Pure MMT.

It writes:

The Australian economist Bill Mitchell has developed a workable model of what a GJG would look like. Mitchell (2013) argues that as a first step to introducing a rights-based commitment to full employment the Australian government needs to introduce an open-ended public employment program. This would create a buffer stock of available jobs, into which workers would be shed when the mainstream labour market contracts, and from which they would be drawn when there is growth in employment demand.

And more.

I have had extensive discussions with the Australian Unemployed Workers Union over the years.

But all that seems to escape Holden, who was quoted in this morning’s New Daily article as saying:

According to University of NSW economics professor Richard Holden, the idea of a GJG has merit – especially given interest rate cuts are “running out of firepower”.

Dr Holden said such a scheme would provide a much-needed boost to the economy, as workers would likely spend most of their income.

He is quoted as saying the “scheme would have to satisfy two requirements to be successful”

The first thing is the jobs people are doing would have to be socially productive in some way – in other words, the environmental benefits would need to be real …

The second point is that you need to be careful with any of these job guarantees not to crowd out private-sector employment.

If your goal is to provide jobs for the unemployed, and you create some jobs in one part of the economy, but destroy jobs in another part of the economy, that’s counter-productive.

Core and pure MMT.

All of that is in our literature that we started developing together 25 years ago.

It was also in my fourth-year thesis from 1978.

So either Holden has had a memory lapse and forget his previous attacks on MMT or is just a self-aggrandising hypocrite.

Or both.

Well done to the Australian Unemployed Workers Union though!

And Japanese government issues statement …

Fancy a government that runs an economy that demonstrates that the fundamental principles of mainstream macroeconomics are incorrect and the dynamics of the monetary system ratify all the major insights provided by Modern Monetary Theory (MMT) issuing a statement that their economy is not “a successful case of MMT”.

The Bloomberg article (October 15, 2019) – Japan Denies Policy Influenced by Modern Monetary Theory In Any Way – reported a statement issued by the Japanese government that says:

As a government, we don’t implement policy based on the idea that Japan is a successful case of MMT because its inflation and interest rates are not rising despite massive debt … We are working to restore fiscal health

Bloomberg add that “The statement was issued in response to a lawmaker’s written request to clarify the government’s views on the theory”.

The Government hasn’t yet published its official answer on the Diet publications and I will comment further when they do.

But the question is publicly available and was filed by Japanese CDR politician Kazuma Nakatani on the opening day of the new Parliament (October 4, 2019) – Question No. 14: MMT (Contemporary Monetary Theory) Questions.

Hilarious.

I am off to Japan in two weeks and it looks like we will be having a lot of fun.

Call for financial assistance to make the MMT University project a reality

The – Foundation for Monetary Studies Inc. – aka The MMT Foundation serves as a legal vehicle to raise funds and provide financial resources for educational projects as resources permit and the need arises.

The Foundation is a non-profit corporation registered in the State of Delaware as a Section 501(c)(3) company. I am the President of the company.

Its legal structure allows people can make donations without their identity being revealed publicly.

The first project it will support is – MMTed (aka MMT University) – which will provide formal courses to students in all nations to advance their understanding of Modern Monetary Theory.

At present this is the priority and we need some solid financial commitments to make this project possible and sustainable.

Some sponsors have already offered their generous assistance.

We need significantly more funds to get the operations off the ground.

In order for FMS to solicit tax-exempt donations while our application to the IRS is being processed, the Modern Money Network, Ltd. (“MMN”) has agreed to serve as a fiscal sponsor, and to receive funds on FMS’s behalf.

MMN is a non-profit corporation registered in the State of Delaware, and is a federal tax-exempt public charity under Section 501(c)(3) of the Internal Revenue Code.

Donations made to MMN on behalf of FMS are not disclosed to the public.

Furthermore, all donations made to MMN on behalf of FMS will be used exclusively for FMS projects.

Please help if you can.

We cannot make the MMTed project viable without funding support.

Remembering Ginger Baker

He was not my most favourite drummer. Nor person really. But he was part of a massive band – Cream – who made sounds when I was a teenager becoming obsessed with guitars and bands that made my head spin.

He died last week (October 6, 2019).

But I remember him less kindly (he was an aggressive character who hated Jack Bruce, who in my view was one of the great bass players) than I remember Cream and Blind Faith the band that followed from the wreckage of Cream, only to die a short term death from too much ego.

Here is a story about him – Ginger Baker, the drummer for rock supergroups Cream and Blind Faith, dies at 80 (October 7, 2019).

But here is a classic – White Room – which was written by Jack Bruce with the lyrics by Pete Brown.

It appeared on their 1968 double album – Wheels of Fire – which was released on August 9, 1968.

That is enough for today!

(c) Copyright 2019 William Mitchell. All Rights Reserved.

The experimental approach to global poverty

Published by Anonymous (not verified) on Wed, 16/10/2019 - 4:21am in

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Economics

 

On Perry Anderson; writing on the Politics of Austerity, discursive power, Greece and the EURO

Published by Anonymous (not verified) on Wed, 16/10/2019 - 12:35am in

It was no accident that the first tremors of the earthquake to come originated not in the us but in the eu, with the crisis of bnp Paribas and collapse of Northern Rock in August–September 2007. Entanglement with America to the west; predation in Europe itself to the east, where Tooze shows the extent of the financial appropriation of local assets in the former Communist countries by Dutch, Austrian and Scandinavian capital. Nor, of course, has he anything but scorn for the role of the ecb and the turn to austerity once the crisis broke.
There, in one of the many gripping set-pieces of the book, Tooze delivers a damning verdict on the treatment of Greece by the Commission, the ecb and the imf, and subsequently the European Council, which presided over its fate from 2010 onwards. The crushing of Syriza’s attempt to negotiate less draconian terms for its society and economy is not only vividly portrayed, but set in the wider context of the thwarting of governments of the left in these years by the external imposition of ‘political and financial discipline’ on them. No one could doubt on which side Tooze’s sympathies lie in this exercise of brute power. But just where did this discipline come from, and how far did it extend? At this crux, his account takes leave of absence. At its centre lies the nature of the European Union, and the position of Germany within it. Evasive on the first and inconsistent on the second, Crashed offers no coherent account of the relationship between them, for it is too protective of each.
Decisive in this regard is the book’s abstraction of the decisions taken by policy-makers from the structures in which they were working. What was the matrix of the monetary union created at Maastricht?--Perry Anderson (2019) "Situationism a la Envers," in New Left Review (119), p. 80.

Prompted, apparently, by a review (by Cedric Durand) of Tooze's Crashed: How a Decade of Financial Crises Changed the World, Perry Anderson's widely circulated essay, which ranges widely over Tooze's oeuvre and twentieth century politics, is a stinging rebuke of the "complacency" and brutality of "left liberalism" (a term also used by Tooze to describe himself) or "centrist liberalism" (a term used by Anderson (85)). My interest here is not in defending left liberalism; much of Anderson's (and Tooze's) criticism of it is spot on.

Rather, my interest is in the claim that "governments of the left" within the EU have been thwarted by "external imposition of 'political and financial discipline' on them" by the EU. This claim fits two larger trends of broadly left-wing intellectual British writing about the EU, which has two functions: (i) to combat the politics of austerity in the UK; (ii) to undermine the legitimacy (and its anti-democratic technocracy) of the EU. (Since the Brexit vote not all left-sympathetic intellectuals embrace (ii), of course.) For all their merits, such writings tend to present intra EU debates in ways that fail to do justice to the political agency of the participants in them. 

First, it is undeniable that the EU creates obstacles to certain forms of "governments of the left," especially those that are in the Eurozone. The most important of these are rules against government control of the economy and attempts to pursue industrial policy that end up favoring local producers. That is to say, left-wing governments that would pursue nationalist agendas are indeed severely handicapped by the EU. But redistributionist left-wing governments are, if they are willing and capable of taxing the local rich, not so-handicapped. Yes, the rich have ways of hiding some of their money, but it's not EU rules that prevent member states from finding and taxing it; rather there is a lack of political will. And the lack of political will is a function of the lack of local political power. The absence of political power makes the reliance on debt so tantalizing. But debt-financing is not itself characteristic of governments of the left. (As the next paragraph illustrates.)

Second, it is undeniable that the EU has thwarted the democratic will of some of the citizens of its member states during the crisis. But this is not directed at governments of the left. This becomes transparent if we reflect on the following passage (partially quoting Tooze): "when Papandreou and Berlusconi were ousted as premiers of Greece and Italy in 2011, senior officials in Berlin could be heard boasting: ‘We do regime change better than the Americans’; and to admit that the Fiscal Compact of 2013 was a straightforward imposition of the German ‘debt brake’ on the rest of the Eurozone." (81) Whatever else one may wish to say about Berlusconi, his is in no sense a government of the left.

As an aside, it is notable that Portugal goes unmentioned. In 2015 an anti-austerity would-be-left-wing government was thwarted (briefly). But it was not the EU who did so, but the country's president. Eventually constitutional processes prevailed, and Portugal has had a left-wing government since.

Third, and let me now turn to the heart of the matter: Greece. It is worth mentioning that Syriza was never crushed. After it became the main opposition party, in May 2012, it became the governing party in 2015. It called a snap-election after its defeat in EU elections, and was defeated (in Summer of 2019). But it is now the regular opposition. And if Greek politics has stabilized (that is by no means certain) it can expect to govern again.

It is, of course, true that Syriza failed to undo much of the austerity that was imposed on Greece by the Troika prior to its ascension to power. I have  been quite critical of the EU's policies toward Greece in the midst of the crisis (see for example here in Dutch). These policies were manifestly designed to protect well connected (German, Dutch, and French) bankers and not Greek citizens. But English language critics of Greek austerity tend to ignore four pertinent facts: (1) the annual budget deficit of Greece was, when the crisis started, around 15% of GDP. It remained above 10% for the next few years. While one can argue about the size and speed of budget cuts and the distributional effects of these, austerity in Greece has very different character from the voluntary austerity pursued by, say, Tory/Lib Dem and Tory governments in the UK. Austerity in Greece was real, but claims about it also tend to be exaggerated. Its "size relative to GDP of [was] 4.0% in 2010, 3.1% in 2011, 2.8% in 2012 and 0.8% in 2013."+ In particular, in contrast to the UK, the Greek state lacks the capacity to raise income; this was, in fact, exhibited in the boom period prior to the crisis

In addition (2), there was widespread distrust of the Greek ruling elites in the rest of Europe thanks to the decades long fraud by successive Greek governments, statisticians, etc. It is pretty clear that non-Greek banks and officials were (sometimes actively) complicit (and profited) from this. While I think more should have been done to hold those responsible (inside and outside Greece) accountable, and to show more public good-will toward Syriza, politically (1) and (2) made it impossible for any EU politician to advocate for massive transfers from Northern taxpayers to Greek citizens. If Anderson  (recall also this post) cared to advance a reform of the EU, he would argue that some such structural transfers are necessary inside the Eurozone. Of course, he is not interested in doing so.**

Also, (3) a majority of Greek citizens apparently prefer staying inside the Euro.* And when given the option to leave the Euro on favorable terms and staying in, they seem to wish to stay in even if it means austerity. This is by no means irrational because inside the Euro, the purchasing power of Greek citizens is better preserved (at the cost of high unemployment and low growth). Even accounts (correctly) highly critical of German and Dutch politicians, acknowledge that the German government was willing to spend serious money to facilitate a Greek exit from the Euro.

One never hears the intelligentsia critics of austerity talk about (1-3). This is remarkable because such intellectuals use their discursive power to deny Greek political agency (within the constraints that they face). This is also evident in Cedric Durand's review of Tooze: 

Tooze rightly stresses, from the very start it was never a question of economic necessity. The ecb could have bought Greek bonds in 2010 and stabilized the crisis very rapidly, but chose not to because it ‘meant to send a message: austerity or else!’ By using Greece as their exemplum, he argues, ‘right-wing fearmongers, conservative political entrepreneurs and centrist fiscal hawks shifted the political balance’ in the Eurozone. This was the moment when a crisis with its origins in the private financial sector was rebranded as a problem of fiscal and welfare profligacy.

Even if one were to grant that the financial crisis as a whole has its origins (not at least partially in misguided government regulations and policies but) wholly in the private financial sector (and ignore the enormous investment of subprime loans by European, regional state owned banks, etc.), this is manifestly not the case of the Greek crisis (which has a relatively small financial sector).++ In addition, and again this is often ignored by the English speaking intelligentsia writing for each other, the Euro crisis is really caused by the mercantile policies of Germany and the Netherlands.

That is to say, Anderson is right to claim (in his criticism of Tooze) that "The single currency is the ark of a covenant that is not to be questioned." (83) I think there is no doubt that at the height of (the ongoing!) crisis, no government leader wanted to be responsible for the break-up of the Euro on their watch. But the reason for this is pretty clear: (4) there is no evidence to think that ordinary citizens in even the countries that suffer most during the financial crisis wanted to leave the Euro.*** (This, of course, does not play well to British audiences, and is discomfiting to Lexiters, and so one never hears about it.) But if one wants to understand "decisions taken by policy-makers from the structures in which they were working." this is non-trivial omission.  

 

 

+There was significant suffering in Greece, due to collapse of growth and rise of unemployment. Because salaries and currency are not flexible, and the effects of structural re-organization are slow, this became inevitable. Much more should have been done to put income in the hands of ordinary Greek citizens.

*Once this became clear, Greek bargaining power inside the EU has been negligible. 

**There is no political path to such transfers at the moment. But by focusing on austerity or not, the intra-Eurozone debate is mis-represented. The real question is, are German (and Dutch) taxpayers willing to finance a European wide safe-net. Phrased like that it is no surprise the former are unwilling to do so. But one can imagine one being developed out of a European Green Deal in the future. 

++One may well think that Durand has a point that the ECB could have directly bailed out the Greek government. As Anderson notes, eventually ECB did start buying Greek bonds. But he fails to realize (recall) that during the financial crisis, the ECB was de facto allowing the Greek central bank to print money. Both prevented collapse of the system, but neither helped ordinary citizens much. 

***I played around a bit on the Eurobarometer website. And I am confident of this claim, but I welcome learning of more finegrained studies per country, etc.

Fantasy economics

Published by Anonymous (not verified) on Tue, 15/10/2019 - 9:25pm in

Made in 2017. Worth sharing again:

In Germany Thomas Cook is being saved with EU support. Here we let it go.

Published by Anonymous (not verified) on Tue, 15/10/2019 - 6:34pm in

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Economics

As the Guardian notes, Thomas Cook executives face a grilling in parliament this morning.

In Germany there is a different story. There Reuters note:

Thomas Cook German airline wins EU okay for 380 million German loan

And they add:

EU competition regulators on Monday approved a 380-million-euro German bridging loan to Thomas Cook’s German airline Condor, saying the measure would ensure the continuation of air transport services.

Condor ran into a liquidity problem after its parent company and the world’s oldest travel firm Thomas Cook collapsed last month.

The European Commission said the loan will either have to be repaid after six months or Condor will have to be restructured to ensure its long-term viability.

In other words, the UK government need not have let Thomas Cook fail. It could have guaranteed a loan that meant it did not have to fall to ABTA, which is guaranteed by the UK government, to spend more than the value of the required loan guarantee to repatriate vast numbers of people who could have instead continued their holidays uninterrupted whilst an orderly reorganisation of Thomas Cook could have been arranged. And EU law permitted that.

It's often said that the EU obstructs commercial matters to promote competition: the reality is it very clearly takes reality into account. This is a case in point. It's the UK government and free-market ideologues who promote the idea that the EU is a problem. Very often it is not.  And the left should take note.

Randy Wray on modern monetary theory and tax

Published by Anonymous (not verified) on Tue, 15/10/2019 - 6:13pm in

I have already mentioned a piece I had written for the Real World Economic Review on modern monetary theory and taxation recently. Now Randy Wray, one of the leading MMT thinkers has reviewed the price on New Economic Perspectives. I quote at length, as I think that's fair in this case:

[T]his issue of rwer contains what I believe to be a first—an article that tries to fill a perceived gap. Some months ago Richard Murphy had written to me arguing that MMT has not gone sufficiently in depth on the issue of taxes. I thought that was a strange accusation—since most critics argue we talk too much about taxes (as in driving the currency and fighting inflation). Further, I had added a chapter to the second edition of my Modern Money Primer to discuss taxes in more detail—good taxes and bad taxes. But what Murphy meant was taxes at the micro level. I responded that I accept the Musgrave&Musgrave approach (which I had studied—and taught; it is THE source on public finance). He responded that that is not sufficient. I remained puzzled.

But his piece in rwer, “Tax and modern monetary theory”, clarifies his point. And, I must add, in a reasonably respectful manner. Again, this is something we rarely see from critics—who call us fascists and communists (without I suppose recognizing that there’s an ocean of difference between the two—but, then again, the critics aren’t scientists). Richard argues that “cash paid in tax is a residual figure arising from a plethora of decisions on tax bases, reliefs and allowances, as well as tax gaps that result from non-compliant taxpayer behavior”. Recognizing MMT’s argument (based on Ruml) that taxes are not really for revenue purposes, he argues for seeing “use of tax [instead] as a critical instrument in economic and social policy management”. I agree.

My own contribution to the rwer issue actually addresses his first point, that taxes are a residual—what I call (following Keynesian theory) a leakage. They cannot “pay for” anything since the spending must come first. I argue that it is truly amazing that our Post Keynesian critics adopt the leakages and injections approach, recognizing that saving (a leakage) cannot finance investment (an injection) because injections logically come before leakages, but then drop it when they discuss government spending and taxes. The same logic MUST be true of government spending (injection) and taxes (leakage). But they all get “dazed and confused” when it comes to government. They simply abandon any understanding of basic macro theory and jump on the “taxes pay for government spending” bandwagon. Truly bizarre and rather embarrassing too.

In many places I have also discussed the use of taxes for behavioral management (sin taxes, and the like). But Murphy’s article goes deeper than I have in the past. I recommend reading it, and I’m going to incorporate some of his arguments in my future work. I want to be clear—I’m not embracing everything in his article and I’m not convinced that his insights lead to an entirely different (and implicitly presumed to be better?) paradigm, modern taxation theory (MTT). But I’m glad he tried to make a positive contribution.

I most certainly tried.

Where was the Green New Deal in the Queen’s Speech?

Published by Anonymous (not verified) on Tue, 15/10/2019 - 3:46am in

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Economics

Yanis Varoufakis and David Adler argue in the Guardian today:

American carnage and Brexit collapse, detention camps and environmental breakdown – the daily barrage of bad news makes it easy to forget that these are disparate symptoms of the same disease unleashed by the 2008 financial crisis.

Back then, activists in Europe and the US pushed for a holistic cure: a Green New Deal to deliver necessary investments in people and planet. But establishment economists waved them off, preferring a shot-in-the-arm of easy money. Now, all the grave symptoms of recession have returned – and the old drugs don’t work any more, antibiotics to which the disease has already adapted.

But now is not the time for I-told-you-so. Never before has so much idle cash accumulated as in the past decade – and never before has circulating capital failed so miserably to invest in human health and habitat. We are long overdue for a Green New Deal.

But as they rightly say, conventional quantitative easing bought change off and maintained the status quo. But not any more it won't. Change is, now, essential:

If 2008 saw the original development of the Green New Deal proposal, then, 2019 is the time to deploy it: a moment when the architects of the old strategy, pockets empty, no longer seem able to defend it. “There was unanimity,” said Mario Draghi, retiring president of the ECB, “that fiscal policy should become the main instrument.”

It is not, however, the case that any old change will do:

But fool me twice, shame on me. Having squandered the last crisis, we cannot fall again for Draghi’s promise of a mild Keynesian stimulus in the face of human extinction. Instead, we must mobilize behind the Green New Deal as the only reasonable response to the coming recession.

As they conclude:

It is tempting to think of the present moment as a crossroads: we either get our Green New Deal, or we descend into eco-fascism. But the fallout from the last recession suggests that – if we do not articulate a shared demand – we might just as easily get a slightly reconfigured version of the status quo: a little more green around the edges, sure, but with roughly the same distribution of power and resources. Such a plan is already under way in Europe, where the European commission now calls for a “green deal” with none of the transformative content of the Green New Deal agenda.

With the climate strikers marching on their front feet – and the old guard caught retreating on its heels – we have a clear opportunity to achieve a true systems change. But it will require us to make clear to our governments: it is a Green New Deal or bust.

I could hardly disagree, could I? It's been more than a decade coming, and about 440 blogs worth of effort here to help keep it going, but the time for the Green New Deal has arrived. And it's now.

But not a word of it was heard in the Queen's Speech, which hardly mentioned climate-related issues at all. Which is how out of touch this government is.

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