The Nazi and Israeli Use of Fellow Nationals Abroad

One of the charges laid against Mike by the Blairites and the Israel lobbyists in the Labour party was that he accused British Jews of being more loyal to a foreign state or their own people than other Brits. This, they argued, followed the classic pattern of anti-Semitism.

It’s certainly true that anti-Semitism does see Jews as more loyal to each other or to a foreign state than that in which they reside and of which they are citizens. It’s the basis of the ‘Stab in the Back’ myth that led to the rise of the Nazis in Germany: that Germany’s defeat in the First World War was due to the secret machinations of the Jews. There were similar anti-Semitic conspiracy theories going around Britain at the same time, directed against Anglo-German Jewish industrialists like Mond. It is the central idea behind the grand anti-Semitic conspiracy theory, that the Jews are in control of both capitalism and communism/socialism, and using both to enslave and destroy non-Jews. The White race is to be destroyed through immigration and intermarriage with non-Whites.

I’ve shown ad nauseam that Mike is not, and never has been, an anti-Semite, and has always regarded such conspiracy theories as vile, pernicious, murderous rubbish. That this accusation, directed at supporters of Jeremy Corbyn, is completely bogus is also clearly demonstrated by the fact that it was also leveled at Cyril Chilson. Chilson is a naturalized Brit of Israeli extraction, who served in the IDF and its propaganda unit. His mother was a Holocaust survivor, and his father an airman in the Soviet air force fighting the Nazis. Who also murdered his entire family. It is outrageous that this man in particular should have been smeared as an anti-Semite. Just as it is outrageous that so many other decent, anti-racist people, including Jews, Blacks and other Brits, who’ve been the subject of racial abuse and assault, and who may also have lost relatives to real Fascism and Nazism, have been smeared as anti-Semites.

But as I’ve shown in a previous article, the Israeli state and Zionism is very similar to Italian Fascism in that both Netanyahu’s Likud government and Mussolini’s Fascists have attempted to use members of their ethnic group or nation resident abroad to promote their countries’ interests. In the case of Mussolini and the Italian Fascists, this was the Italian communities around the world. And the Nazis attempted to use expatriate Germans in the same way. Robert A. Brady describes this in the table summarizing the main features of Nazi economics and ideology in his The Spirit and Structure of German Fascism (London: Victor Gollancz 1937), pp. 41-2.

On page 42, he writes

13. Non-Germans cannot be citizens; as a corollary, all Germans residing outside Germany either belong or owe allegiance to the Third Reich.

Israel was founded as the Jewish state, and under the law of return, only Jews may immigrate to become citizens of Israel with full rights. Furthermore, Netanyahu himself passed legislation a month or so ago declaring Israel to be ‘the national state of the Jewish people’, an advance on previous legislation which declared that all Jews, everywhere, were automatically citizens of Israel. It was ridiculed and criticized severely by Jewish anti-racists and pro-Palestinian activists. One Jewish American from Anchorage in Alaska posted a piece on YouTube making it very clear that he thought it was ridiculous that he, who had never even seen Israel, was now a citizen, while his Palestinian friend, who was born there, was not. And it is certainly true that Israel demands the supreme loyalty of all Jews, regardless of where they live. Diaspora Jews, who wish to continue living in their traditional homelands and vocally reject Zionism are denounced as ‘traitors’ and worse. And the Zionist activists, who collaborated with Shai Masot in seeking to determine who should be members of the Tory cabinet clearly were members of a conspiracy and did put the interests of a foreign country above their own. And it doesn’t matter how loudly Maggie Cousins, the Campaign Against Anti-Semitism or Labour’s NEC howls ‘anti-Semitism’ at the mere mention of this. It is still true.

But it is obviously not true of all Jews, just one section of the Zionist movement, which is concerned to close down all criticism of Israel through clandestine political manipulation and spurious and mendacious accusations of anti-Semitism.

As directed by Netanyahu and the Likudniks, the Zionist movement is acting very much like the Nazis and Italian Fascists wished their compatriots abroad to behave: as promoters and servants of their ideology, whose loyalty was to the Fatherland, rather than the peoples with whom they lived. The IHRA definition of anti-Semitism declares that it is anti-Semitic to compare Jews with the Nazis, but in this instance, as regards Zionism and its collaborators, as in so many other areas of Israeli policy, the comparison is accurate. And the IHRA definition of anti-Semitism is itself pernicious in that it is deliberately being used to deny these similarities, and silence those who point them out as anti-Semites.

The Capitalist Nature of Nazism

Every now and then a Conservative defender of capitalism tries to argue that Nazism and Fascism were forms of Socialism. Jonah Goldberg tried it a few years ago in his book, Liberal Fascism, a Tory MP stood up in the European parliament a couple of weeks ago and made the same accusation, though he had to take it back and apologise. And Private Eye in recent weeks have also published a couple of letters from readers making the same claims.

Fascism did have Socialistic elements. Mussolini was originally a radical Socialist, who broke with the rest of the Italian Socialist movement in supporting Italy joining the First World War. The Fascist party was originally extremely left-wing in its programme of 1919. Its corporativism was not only based on the ideas of the right-wing Italian Nationalists, but also from part of the syndicalist movement, which moved away from demanding absolute workers’ control to advocating an industrial structure which included both capitalists and workers in a series of corporations set up to govern each industry, or sector of the economy. The Nazis also included socialist elements in their 1922 programme, such as the nationalization of firms and profit-sharing in industry, as well as the break-up of the department stores.

However, the Fascists and Nazis came to power through their alliance with business and the aristocracy. Both the Italian Fascists and Nazis in Germany were hostile to socialism, communism and workers’ trade unions. In Italy, they also allied with the Vatican to destroy the Populists, a party set up to represent Italian Roman Catholics against persecution by the Liberal state, which was distrusted by the Papacy because they considered it too radical. Once in power, the socialist elements of these parties’ programmes was soon jettisoned. Hitler declared that he had no intention of nationalizing businesses, unless they were badly run. He had the SA massacred in the Night of the Long Knives because this part of the Nazi party did take the socialist elements of party programme seriously. The word ‘socialist’ had only been included in the name of the Nazi party – the National Socialist German Workers’ Party – against bitter opposition by some of its founders. Hitler stated that he did so in order to steal potential recruits from the real left-wing parties. Furthermore, the Nationalist intellectuals who first advocated a right-wing ‘socialist’ order in the 1920s stated that they did not refer to the nationalization of industry, but to the socialization of people to serve the state. And just before the Nazi seizure of power, Hitler made a speech to German industry stating that Nazism would protect private industry.

Robert A. Brady, an associate professor of economics at the University of California, made the capitalist nature of the Nazi regime very clear in his The Spirit and Structure of German Fascism (London: Victor Gollancz 1937). The book is a thorough description of German society under the Nazis – its ideology, social structure, the coordination of science, industry and agriculture, the instruments of power and the various party organisations used to recruit and control the masses. Brady states

The regime which the Nazis proceeded to establish is fairly described, by the very nature of the major interest which sponsored it, as a dictatorship of monopoly capitalism. Its “fascism” is that of business enterprise organized on a monopoly basis, and in full command of all the military, police, legal and propaganda power of the state. (p. 33, emphasis in the original). He lays out the essential capitalist nature of the Nazi state as follows on pages 41-2.

1. Productive Property and natural resources are to be privately owned; freedom of contract is guaranteed (excepting to “aliens” and the peasants under the Inheritance laws).
2. Individual initiative, the business entrepreneur, conduct of business for profit (“reward for services performed”), and ownership (individual or stockholder) control are basic.
3. Business men are to be free, if “responsible” (“self-government in business”), to fix by agreement prices, production totals and quotas, marketing areas, and the conditions and terms of purchase and sale.
4. Stock and commodity exchanges, commission houses, brokers, and speculative transactions are inevitable and necessary for the conduct of “organic business.” (Business as usual.)
5. Heavy industries, particularly those catering to the military and foreign trade, are encouraged; large-scale units, unless “uneconomical” are to be kept intact; co-operatives are to be broken up.
6. The social class structure of society is sanctified, strengthened, made semi-hereditary, and hardened into caste lines
(Standestaat, class state); the “Middle Class” are the Myrmidons of the Elite (Fuhrerstaat, leader state) and, as such, the backbone of the state.
7. Employers have practically complete control over workmen in regard to wages, hours, and working conditions. They must “take care” of their workmen-i.e. see that they are fed and do not grumble.
8. Collective bargaining is completely abolished; strikes are illegal; trade unions are forbidden; requests for wage increases are
lese majeste.
9. Control is completely from on top; there is and can be no such thing as control or discussion of policies from below; the “leaders” decide all things as they see fit; each holds appointed office for indefinite periods at the will of his superior.
10. The National Socialist Party and the German State are one and inseparable, as spirit and body. Legislative, executive, and judicial authorities are fused together. The central government controls all local government and all activities in all their details.
11. Civil and military are fused together; as in the military there can be no freedom of speech, of assembly, of writing, of acting, of “thoughts.” “Anyone may grumble or criticize the government who is not afraid to go to a concentration camp.” (Goebbels).
12. Germany must be made self-sufficient at all costs.
13. Non-Germans cannot be citizens; as a corollary, all Germans residing outside Germany either belong or owe allegiance to the Third Reich.
14 Communism (Bolshevism, Marxism) is the major enemy. There can be no such thing as equality of rights, opportunities, or income for classes, races, or sexes. The “broad masses” are fools and must be duped and led to meet the purposes of the elite
(Herrenstaat). Class war is the major crime; material rewards for the rank and file sheer folly.
15. All sciences and “culture” must be co-ordinated and made to serve the purposes of the “leader,” “total,” “corporate” “master”
(Herren)state. propaganda is the method. Propaganda knows neither right nor wrong, neither truth nor falsehood, but only what it wants.

In fact, business autonomy was severely limited by the imposition of the apparatus of state planning as Nazi Germany became a centrally planned economy similar to the Soviet Union, though in the case of Germany and Fascist Italy the economy was still very definitely capitalist private industry. Brady also goes on to discuss in his book how the Nazis celebrated and lauded the businessman as biologically superior through their social Darwinist ideology, and made sure that the leaders of industry, whether state-owned or private, were all drawn from the private sector.

Nazi rhetoric was anti-capitalist, but by this they meant free trade, which they identified with the Jews, just as they claimed the Jews were behind Socialism, Communism, the trade unions and other left-wing movements. They also borrowed some elements from Communism. Fellow Germans were ‘national comrades’, rather like the Marxist use of the term ‘comrade’ to describe a fellow Communist.

However, it is clear from this that Nazism was deeply Conservative and capitalist in its economic and social policies, and bitterly anti-socialist. It had socialist elements, but they were not taken seriously and only ever used as propaganda against the genuinely socialist parties and organisations. Any description of the Nazis as really socialist is utterly false and a lie, a rhetorical attempt to discredit contemporary socialism through guilt by association, and must be seen as such.

Mainstream economics and the We-Have-To-Do-Something fallacy

Published by Anonymous (not verified) on Sun, 18/11/2018 - 1:49am in



Twenty-five years ago Phil Mirowski was invited to give a speech on themes from his book More Heat than Light at my old economics department in Lund, Sweden. All the mainstream professors were there. Their theories were totally mangled and no one — absolutely no one — had anything to say even remotely reminiscent of […]

Blacklisted economics professor found dead

Published by Anonymous (not verified) on Sun, 18/11/2018 - 12:13am in



Professor Outis Philalithopoulos was found dead in his home three days ago; the coroner’s report cited natural causes that were left unspecified. Unfortunately, all of the professor’s academic work has disappeared; the only trace left appears to be the following letter, which he sent to an admirer shortly before his death. The understandably concerned recipient […]

For England things can only get worse

Published by Anonymous (not verified) on Sat, 17/11/2018 - 9:07pm in



If you want to know why Brexit happened read the press release from the UN Special Rapporteur on Human Rights I have just republished. That is the only explanation needed.

If you want to know why Brexit will fail realise that it was motivated and driven by the same people that promoted the abuse of human rights in the UK.

And if you want to know why I am so confident it will fail, read what the Rapporteur has to say on Brexit’s almost certain impact on poverty, whatever deal we get.

Note too what Byline Investigations noted:

The [Rapporteur] said he has found that “there’s a real awareness of economic, social and cultural rights” in Scotland, but this is not the case in England.

“[Scotland’s] First Minister spoke to me about them at great length with a real understanding of what was involved,” he said. “There is a commitment to move towards sustained action... and you’ve got a society in which social rights really matter and people know what you’re talking about.

“Down in the rest of the country, in England, it is not all that far from what I encounter in my own country, Australia, and that is a ‘for God’s sake, don’t talk about human rights, it’s not going to help’.

Which is the fundamental cultural difference that will make Scotland and Northern Ireland want to leave the UK. We are not a single country, if we ever were. Neoliberalism has torn us asunder. This is the legacy of Thatcher.

And for England it will get worse. Those driving Brexit want it that way.

The UN Rapporteur’s statement on human rights in the UK should make you angry, or wonder where your empathy has gone

Published by Anonymous (not verified) on Sat, 17/11/2018 - 8:43pm in



I thought about summarising the United Nations High Commissioners Office for Human Rights Special Rapporteur’s report on the UK, issued yesterday. But then I read the press release and thought they had already done the job and so I simply reproduce it here:

LONDON (16 November, 2018) – The UK Government’s policies and drastic cuts to social support are entrenching high levels of poverty and inflicting unnecessary misery in one of the richest countries in the world, a UN human rights expert said today.

“The United Kingdom’s impending exit from the European Union poses particular risks for people in poverty, but the Government appears to be treating this as an afterthought,” the UN Special Rapporteur on extreme poverty and human rights, Philip Alston, said at the end of a 12-day visit to the country.

Almost all studies have shown that the UK economy will be worse off after Brexit. Consequences for inflation, real wages, and consumer prices will drive more people into poverty unless the Government takes action to shield those most vulnerable and replaces current EU funding for combatting poverty, he said.

In the United Kingdom, 14 million people, a fifth of the population, live in poverty. Four million of these are more than 50 percent below the poverty line, and 1.5 million are destitute, unable to afford basic essentials. After years of progress, poverty is rising again, with child poverty predicted to rise 7 percent between 2015 and 2022, homelessness is up 60 percent since 2010, and food banks rapidly multiplying. “In the fifth richest country in the world, this is not just a disgrace, but a social calamity and an economic disaster, all rolled into one,” Alston said.

“During my visit I have spoken with people who depend on food banks and charities for their next meal, who are sleeping on friends’ couches because they are homeless and don’t have a safe place for their children to sleep, who have sold sex for money or shelter, children who are growing up in poverty unsure of their future,” Alston said. “I’ve also met young people who feel gangs are the only way out of destitution, and people with disabilities who are being told they need to go back to work or lose benefits, against their doctor’s orders,” Alston said.

Successive governments have presided over the systematic dismantling of the social safety net in the United Kingdom. The introduction of Universal Credit and significant reductions in the amount of and eligibility for important forms of support have undermined the capacity of benefits to loosen the grip of poverty. “British compassion for those who are suffering has been replaced by a punitive, mean-spirited, and often callous approach,” Alston said.

“As a ‘digital by default’ benefit, Universal Credit has created an online barrier between people with poor digital literacy and their legal entitlements,” Alston said. “And the ‘test and learn’ approach to the rollout treats claimants like guinea pigs and can wreak havoc in real peoples’ lives.”

Local governments in England have seen a 49 percent real-terms reduction in Government funding since 2010, with hundreds of libraries closed, community and youth centres shrunk and underfunded, and public spaces and buildings including parks and recreation centres sold off.

“I was told time and again about important public services being pared down, the loss of institutions that would have previously protected vulnerable people, social care services that are at a breaking point, and local government and devolved administrations stretched far too thin,” Alston said. “The voluntary sector has done an admirable job of picking up the slack for those government functions, but that work does not relieve the Government of its obligations”.

“The Government has remained in a state of denial, and ministers insisted to me that all is well and running according to plan,” Alston said. “Despite making some reluctant tweaks to basic policy, there has been a determined resistance to change in response to the many problems which so many people at all levels have brought to my attention.”

During his visit, the Special Rapporteur traveled to nine cities in England, Northern Ireland, Scotland and Wales, and met with people affected by poverty, civil society, front line workers, and officials from a range of political parties in local, devolved and UK Governments.

“Government policies have inflicted great misery unnecessarily, especially on the working poor, on single mothers struggling against mighty odds, on people with disabilities who are already marginalised, and on millions of children who are locked into a cycle of poverty from which many will have great difficulty escaping,” Alston said.

If that does not make you ashamed of the policies of this decade, nothing will. And if it does not I think you need to worry about where your empathy has gone. 

The New Classical counterrevolution​

Published by Anonymous (not verified) on Sat, 17/11/2018 - 7:52pm in



In a post on his blog, Oxford macroeconomist Simon Wren-Lewis discusses if modern academic macroeconomics is eclectic or not. When it comes to methodology it seems as though his conclusion is that it is not: The New Classical Counter Revolution of the 1970s and 1980s … was primarily a revolution about methodology, about arguing that […]

Gelman and the Economists.

Published by Anonymous (not verified) on Sat, 17/11/2018 - 10:01am in

Andrew Gelman, professor of statistics, believes that “a quick rule of thumb is that when (1) someone seems to be acting like a jerk, an economist will defend the behavior as being the essence of morality, but when (2) someone seems to be doing something nice, an economist will raise the bar and argue that he’s not being nice at all”.

I think he is right. Readers should pay attention.

If one were to believe the always vocal Keynesian economists the economy is full of paradoxes and they alone mastered its workings. To demonstrate that one only needs to mention the “paradox of thrift”.

Described by Keynes himself, readers are likely familiar. A quick reminder, in case they aren’t. Thrift, conventional wisdom and Aesop’s fable of “The Ants and the Grasshopper” say, is a moral virtue: one prudently saves for the rainy day and that brings financial security.

Well -- Keynesian economists oppose -- what may seem reasonable for one individual leads to unintended consequences when all individuals act in the same manner. Some may invoke the fallacy of composition as reinforcement. At any rate -- they explain --  too much saving from income leads to low spending, which leads to low sales, low production, low employment, low incomes and … low savings. Thrift is self-defeating (Gelman’s case 2). Public loss was the unintended consequence of private virtue.

And after The Lord provided them with the Philosopher’s Stone that turns wisdom into folly and back, at their discretion, his legitimate children quickly discovered a true armoury of paradoxes, to deploy against their opponents.

In liberal democracies, where arguments’ only real value is political expediency, those paradoxes clearly are useful rhetorical weapons. The Keynesian eagerness is understandable.

Paradoxes, however, have weaknesses.

Observe the text emphasised above. Post-Keynesians may hate to hear this, but when they speak of “paradoxes” they are unwittingly invoking their opponents’ notion of “unintended consequences”. Readers need not take my word for that. Whether it was a Freudian slip or not, I can’t say, but if readers check that link (repeated here) they’ll discover what seems to be old news for Marc Lavoie. I am not misquoting him out of context, instead he is being quoted approvingly by a fan, presumably knowledgeable. He used that notion, and -- more importantly -- it fits. The idea being that the economy is a complex system whose behaviour transcends and may contradict that of its components.

In fact -- and this too may shock both internet Keynesians and their Austrian arch-foes -- The Lord did not create the “paradox of thrift”. Its creator was Bernard Mandeville (1670—1733) in his poem “The Fable of the Bees: or, Private Vices, Publick Benefits”, from where it took its name: “private vice, public benefit paradox”. Public benefit as the potential unintended consequence of private vice.

But it’s in the version Adam Smith (1723-1790) popularised that the paradox was first made acceptable to the public:

“He [i.e. a capitalist] generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”

Let me disabuse readers of the idea, perhaps fostered by Smith’s careful phrasing, that that pedigree has only historical interest. Paradoxes are two-edged swords and unintended consequences may also run the other way.

Enter Gelman’s astute remark #1 about everyday economic disputes.

Take for instance the case of price gouging, which had unpleasant consequences for Tim Worst-of-all when he tried to defend it recently (it had less unpleasant consequences for Matt Yglesias a few years earlier). When emergencies like a hurricane disrupt the supply of an essential good, as bottled water or petrol -- the argument runs -- price gouging signals the existence of unmet demand. As “entrepreneurs” rush to profit, supply goes up, prices fall and demand is met. In this argument, thus, price gouging, like thrift in the “paradox of thrift”, is self-defeating.

Judging by anti-price gouging almost universal legislation, it seems most people -- myself included -- find arguments like that unacceptable. Others, of course, find it perfectly reasonable, condemn such laws and dismiss the argument behind the “paradox of thrift” as nonsense.

The point here, however, is that in essence is the same consequentialist reasoning. The difference being that in one case moral individual behaviour allegedly has harmful collective unintended consequences (private virtue, public loss), in the other immoral individual behaviour allegedly has beneficial collective unintended consequences (private vice, public benefit).

The difficulty in choosing one or the other is that it is not a priori obvious -- to me at least -- why one, depending on one’s political stance, should consider one the distillation of wisdom and the other mumbo jumbo. I could subscribe to the second part of Gelman’s view: “I’m not saying I think economists are mean people; they just seem to have a default mode of thought which is a little perverse.” And there seems to be reasons to doubt the empirical consequences of at least one of the post Keynesian “paradoxes”.

The way out of that contradiction (or perversion) I can find is to be highly skeptical of both arguments. But that’s me. It’s the readers’ opinion that matters.

Life at the sharp end of austerity

Published by Anonymous (not verified) on Sat, 17/11/2018 - 6:39am in

Rough sleeper sitting on a benchImage © Taylor Wilkins – Deamstime

In the news this week…..

“I’m scared to eat sometimes in case we run out of food.”
“We had people coming to us who hadn’t eaten for several days,”
“I wash in what I call a birdbath – a little hot water in a basin and have a spruce down,” she said. “To keep warm I wrap up in layers and layers. I never thought I would be 48 and in this position.”
“They have taken everything from me but my body. What do they want me to do? Do they want me to sell my body?”

These are some of the many shocking indictments of the UK government arising from the UN Special Rapporteur, Philip Alston’s two-week fact-finding mission to gather evidence about the impact of austerity on British families. He has been visiting some of the poorest cities and towns across the UK including Jaywick in Clacton, Newcastle and Newham where he has heard the heart-breaking testimony of families and individuals plunged into hardship and despair as a result of the government’s welfare reforms and cuts to public spending.

It is sure to prove yet another shameful assessment (the fourth so far) by the UN of the last 8 years of government imposed austerity. Here, in the world’s fifth largest economy, the UK has over 4 million children living in households that struggle to feed them. The growth of food banks and charitable food collection has become normalised and child homelessness is at its highest level since 2007. According to a report published by the Equality and Human Rights Commission last year, it is disabled people, single parents and women who have suffered disproportionately as a result of the government’s harsh welfare reforms which have left people in penury and abandoned.

In 2009 David Cameron declared that the ‘age of irresponsibility’ would give way to the ‘age of austerity’. The government committed to cutting £billions of government spending claiming that failure to do so would leave the country under mountains of public debt and facing bankruptcy. Public sector jobs were lost and benefits slashed as the government set in motion its programme for welfare reform.

Almost a decade on the consequences of its cuts are laid bare for all to see. The neoliberal belief that it was possible for a nation to cut its spending without wrecking the economy has proven catastrophic and has delivered unnecessary human suffering, increased poverty and rising income inequality.

As Philip Alston told a packed public meeting in Clacton:

“What tells you most about a society is how it treats its poor and vulnerable. A wealthy country could decide to help those who hit hard times, to ensure that they don’t slip through the net and are able to live a life of dignity. It’s a political choice.”

That is the crux of the matter. Beginning or ending austerity is a choice. An ideological choice by government. At the ballot box voters should base their decisions not on a party’s promise to be fiscally accountable but whether it has a clear agenda to act in the best interests of citizens for their economic and social well-being. That it will make its spending decisions based on the best use of resources it has available to deliver public, social and economic purpose.

An understanding of monetary reality is essential in challenging the idea that fiscal prudence, taken out of its wider context, is a stand-alone marker of good government.

Restoring public service to its rightful place as a public good.

So said the Chancellor Philip Hammond in the Autumn Budget, conveniently sidestepping the increasing public concerns about public private partnerships which over the last year have been in the news again and again.

After the collapse of Carillion last year, the on-going fiasco over the part privatisation of the public probation service and now fears over the financial health of Interserve one of the British government’s biggest contractors alarm bells are ringing very loudly.

Adam Leaver, professor of accounting at Sheffield University claims that this ‘failure’ is due to ‘there [being] something structurally wrong with the outsourcing model”.

Over decades the rationale presented by politicians for private involvement in the delivery of public services is that it can deliver more efficient services at lower cost thus creating less of a burden for taxpayers. But at the root of free market ideology is a belief that when the state interferes in service provision it is distorting the market in such a way that it can’t find its natural ‘equilibrium’. The solution, therefore, must be for government to try harder to ‘liberate’ the market from the constraints of state interference by stepping aside and only providing the services that the market can’t or won’t provide because they are not profitable i.e. services for the poor.

In the meantime the so-called failure of Private Public Partnerships can be remedied, the government claims, not by a change of policy to bring services back into the public sector but by better negotiated contracts to deliver better value to the taxpayer. This is not just a fantasy but is also confirmation to corporations that it’s business as usual.

The nation is paying the price for the government’s obsession with balanced budgets. While the lie continues to be perpetuated that there is a finite amount of public money determined by taxation and the confidence of markets to lend it or that public debt not private debt is the real problem, the government will be able to continue its ideological assault. The damaging economic cost of the government narrative about creating value for the taxpayer will increasingly put more strain and pressure on the lives of citizens and the social and public infrastructure which will ultimately lead to further economic decline and unnecessary suffering.

If Philip Hammond was serious about restoring public service to being understood as a public good then he could start with the recognition that public service adds real value to society and its well-being. It provides the infrastructure upon which everything else depends including corporations, from the NHS and social care, to education, bin collection and street cleaning. Given their strategic importance to the health and well-being of the nation and the economy such services would be best delivered by the public sector not profit hungry corporations who derive profit through cutting costs. Secondly, recognising the value of public service must be accompanied by a better public understanding of how money works and the powers of a sovereign currency issuer so that we can challenge once and for all the narrative which has served market driven ideology so well that the government has no money but taxpayers’ money.





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The Real (Real) Wealth Effect: Do Wealth Changes Change Spending and Cause Recessions?

Published by Anonymous (not verified) on Sat, 17/11/2018 - 2:40am in



My gentle readers who have followed me over time will have seen this graph and statement far too many times by now:

Since 1970 in the U.S., (almost) every time you saw a year-over-year decline in real household assets or net worth, you were either just into or about to be into a recession.* It’s seven for seven. Though to be fair: there have been two recent false positives, following the 2000 and 2008 recessions. So nine for seven. But interestingly, David Andolfatto and Neil Irwin have pointed to 2012/13 and 2015/16 as “mini” or “invisible” recessions. Ditto the weak GDP growth in 2002?

In any case, it’s a pretty impressive track record of predicting recessions. The apparent takeaway: when people (suddenly) have less wealth, they spend less. Seems plausible.**

But I’ve long meant to look at this relationship more systematically: what’s the correlation between changes in real household wealth, and spending in the economy? In particular: is the correlation concurrent, or is there a lag? Do you see greater correlations with spending changes one, two, or four quarters after a wealth change? Or: earlier? Do spending changes precede wealth changes? Post hoc ergo propter hoc?

Or: which came first? The chicken or the egg? Looking at wealth and spending changes (for example), which one looks like the dependent variable, which the independent?

I had no real idea what results I’d see. This was pure curiosity.

I’ll start with the results. But one key explanation first: the “spending” measure in these graphs seeks to capture spending that households and firms have the discretion to change over short periods; it excludes housing and health spending — a great deal of which is spending by other parties, imputed to households in the national accounts (see Cynamon and Fazzari, below). It also excludes spending on new structures by firms, which involves long-term decision-making.

For the year-over-year series, bigger bars on the right. Wealth changes correlate (much more) with spending changes in later quarters. You can also read this in reverse: Changes in spending don’t correlate as much with ensuing wealth changes.

It seems especially notable: Changes in spending actually show a negative correlation with changes in wealth a year later. The naive takeaway — higher spending “causes” less wealth increase and lower spending causes more — should probably be eschewed. But…what’s with that?

The quarter-on-quarter changes show much less of a pattern than year-on-year, in both this graph and all the ensuing — perhaps just due to more random variation in the quarterly series. I’ll just show year-on-year in the following graphs, to remove clutter. (This means there’s overlap; in the +1 and -1 lags, for instance, the YOY change-in-wealth measure has a three-quarter overlap with the change-in-spending measure. +4 and -4 have no overlap.)

It would be great to see this graph elaborated, somehow depicting the correlations for wealth/asset-market runups versus downturns. I would expect higher correlations for the downturns, since they generally happen so much faster and so would have fast impact on spending.

The spending measure here includes both consumption and investment spending. Which type of spending seems to respond more to wealth changes?

The overall pattern is the same. But if wealth changes do affect spending, the effect seems to be greater on investment spending. (Though investment spending is of course only about 20% of total spending — 15–20% in this discretionary spending measure.)

Next, just for reference: by this method, consumption and investment spending seem to move together, concurrently. (Note the Y axis change below; perhaps not surprisingly, these are far bigger correlations.)

More curiosity: do we see the same apparent wealth effect on GDP that we do on spending?

Again the pattern’s similar. We even see the same negative correlation between GDP changes and wealth changes a year later. But the correlations are much lower. Not surprising: much of the spending that comprises GDP is not amenable to short-term discretionary changes by households, firms, and government.

For comparison: what kind of correlations do we see between changes in personal income and spending?

The correlations are high (note the Y axis) and strongly positive throughout. But the pattern is opposite to the apparent real wealth effect we saw above. Income changes have a weak(er) correlation with ensuing changes in spending. Put another way, spending changes tend to precede income changes, more than the reverse.

Finally, closing the loop, wealth changes vs income changes. This is a surprising result.

Note that personal income does not include asset-price-driven capital gains and losses, which are the prime movers in short-term wealth changes. So we’re comparing very different measures here.

The correlations are smaller than we’ve seen, but the left-to-right gradient shows big differences. Wealth changes correlate with ensuing income changes, but income changes have a negative correlation with ensuing wealth changes. Do with that what you will.

Knowing you’ll want to collect the whole set, here are all of these graphs combined into one.

The spreadsheet’s here. It’s pretty easy to add your own data series to compare other measures. It would also be great to see longer periods; the almost sixty-year data set might suffice for five-year lags?

Wealth, Consumption, and Spending

I can’t resist adding an overall comment on mainstream economics and economic modeling, which I think is pertinent to all this: it seems crazy to me that Keynes’ consumption function:

1. Isn’t a spending function. The proportion of spending that goes to consumption vs investment is arguably an important thing to look at, but it’s secondary and peripheral to the larger question of aggregate demand, or more aptly, aggregate expenditure. Or just…”spending.” So in addition to the never-ending befuddled saving-investment confusion that Keynes has delivered unto us (oh: “desired” saving and investment), the whole Keynesian “investment-led recovery” construct promulgates and participates in reifying the pervasive and pernicious notion of noble, job-creating “investors.”

2. There’s no wealth term, or function, in the consumption (spending) function — something that’s SOP in advanced Godley/Lavoie-style stock-flow consistent (SFC) models such as this great one from Michalis Nikiforos, Genarro Zezza, and Marshall Steinbaum. There’s only an income term. Rather, econs bolt the rather gimcracky contraption of “budget constraints” onto the back end of their models. KISS.

Credit Where Due

This correlations approach comparing positive and negative lags is inspired by Arindrajit Dube’s, in his magisterial takedown of Reinhart and Rogoff’s sophomoric “government debt causes slow growth” claptrap. (Though his statistical sophistication vastly surpasses the freshmanic effort you see here.)

Further inspiration came from Roger Farmer’s article, “The Stock Market Crash Really Did Cause the Great Recession.” The work here perhaps generalizes the asset/wealth effect implicitly bruited in that title, and helps demonstrate it over a long period and multiple recessions.

The “discretionary” spending measure used here is inspired by the work of Barry Cynamon and Steven Fazzari (viz), deconstructing personal consumption expenditure measures to exclude imputed spending and etc. Hat tip to J. W. Mason for pointing me their way. I actually have an older spending/consumption series of theirs to hand, but only annual. A more recent and quarterly version could quite easily replace the consumption-spending series here.

The temerity to write this post — including its implicit assertion that in reality the monetary/financial economy (here: asset-price-driven wealth changes) is what drives the real economy (recessions) — owes much to a great tweet by Sri Thiruvadanthai:

Contra neoclassical econ money/finance are not epiphenomena but they are the real deal and the real economy is the epiphenomenon!

Also thanks to Jason Smith for his comments on Twitter. Thread.

To all my other interlocutors: many thanks.

* Interestingly, adding liabilities to assets, to derive net worth, adds no predictive value. This is perhaps not surprising; household liabilities are only about 15% of household assets, and they change slowly or in other words not much, compared to changes from asset-price runups and especially drawdowns.

** It’s also very much in keeping with Kahneman and Tversky’s Prospect Theory: people are especially sensitive and responsive to losses. So it seems plausible that this is a real economic effect driven by real human behavioral reactions. (Microfoundations!)

Related posts:

  1. Do High Marginal Tax Rates Kill Economic Growth? Again: No
  2. Predicting Recessions The Easy Way: Monetarists, MMT, and the Money Stock
  3. Marginal Rates and Economic Growth: They Go Up Together
  4. Noahpinion: What Causes Recessions? Debt Runups or Wealth Declines?
  5. State Taxes and Prosperity, Revisited