D.G. Ritchie’s Philosophical Justification for State Interference

Okay, this is going to be a long extract, but bear with it. It all needs to be said. One of the arguments I’ve seen Libertarians use to defend their ideology of a minimal state and absolute laissez-faire free enterprise and zero state welfare, is that liberals and socialists don’t have any philosophical arguments to justify their position beyond pointing to the practical, positive effects. I’ve seen this line stated by one of the more notorious Libertarians, Vox Day. Not only is Day a supporter of the miserable and immiserating economics of vons Hayek and Mises, but he has extreme right-wing views on feminism and race. You can tell just how far right he is by the fact that he calls Donald Trump ‘the God Emperor’ and refers to Anders Breivik, the man who called 70 odd children at a Norwegian Young Socialists’ camp, a saint. He really is despicable.

In fact, the philosophers of the New Liberalism, which appeared in Britain in the 1880s, like T.H. Green, D.G. Ritchie, J.A. Hobson and L.T. Hobhouse, produced philosophical defences of state interference to justify the new change in direction taken by the Liberals. These had broken with the stance of the old Radicals, who were firmly against state legislation. Instead, these philosophers argued that state interference, rather than reducing human freedom, actually enlarged it by empowering the individual. Ritchie, in the piece below, attacks the simplistic notion of the state versus personal liberty expressed by Herbert Spencer, the founder of Social Darwinism, and provides a philosophical justification for collective ownership not just in nationalization but also municipalization. In his The Principles of State Interference of 1891 he wrote

Underlying all these traditions and prejudices there is a particular metaphysical theory-a metaphysical theory which takes hold of those persons especially who are fondest of abjuring all metaphysics; and the disease is in their case the more dangerous since they do not know when they have it. The chief symptom of this metaphysical complaint is the belief in the abstract individual. The individual is thought of, at least spoken of, as if he had a meaning and significance apart from his surroundings and apart from his relations to the community of which he is a member. It may be quite true that the significance of the individual is not exhausted by his relations to any given set of surroundings; but apart from all these he is a mere abstraction-a logical ghost, a metaphysical spectre, which haunts the habitations of those who have derided metaphysics. The individual, apart from all relations to a community, is a negation. You can say nothing about him, or rather it, except that it is not any other individual. Now, along with this negative and abstract view of the individual there goes, as counterpart, the way of looking at the State as an opposing element to the individual. The individual and the State are put over against one another. Their relation is regarded as one merely of antithesis. Of course, this is a point of view which we can take, and quite rightly for certain purposes; but it is only one point of view. It expresses only a partial truth; and a partial truth, if accepted as the whole truth, is always a falsehood. Such a conception is, in any case, quite inadequate as a basis for any profitable discussion of the duties of Government.

It is this theory of the individual which underlies Mill’s famous book, Liberty. Mill, and all those who take up his attitude towards the State, seem to assume that all power gained by the State is so much taken from the individual, and conversely, that all power gained by the individual is gained at the expense of the state. Now this is to treat the two elements, power of the State and power (or liberty) of the individual, as if they formed the debit and credit sides of an account book; it is to make them like two heaps of a fixed number of stones, to neither of which you can add without taking from the other. It is to apply a mere quantitative conception in politics, as it that were an adequate ‘category’ in such matters. the same thing is done when society is spoken of as merely ‘an aggregate of individuals.’ The citizen of a State, the member of a society of any sort, even an artificial or temporary association, does not stand in the same relation to the Whole that one number does to a series of numbers, or that one stone does to a heap of stones. Even ordinary language shows this. We feel it to be a more adequate expression to say that the citizen is a member of the body politic, than to call him merely a unit in a political aggregate…

Life Mr. Spencer defines as adaptation of the individual to his environment; but, unless the individual manages likewise to adapt his environment to himself, the definition would be more applicable to death.

It must not be supposed that we wish to blind ourselves to the many real difficulties and objections which there are in the way of remedying and preventing evils by direct State action. If assured that the end is good, we must see that the means are sufficient and necessary, and we must be prepared to count the cost. But, admitting the real difficulties, we must not allow imaginary difficulties to block the way. In the first place, as already said, State action does not necessarily imply the direct action of the central government. Many things may be undertaken by local bodies which it would be unwise to put under the control of officials at a distance. ‘Municipalisation’ is, in many cases, a much better ‘cry’ than ‘Nationalisation’. Experiments may also be more safely tried in small than in large areas, and local bodies may profit by each other’s experience. Diffusion of power may well be combined with concentration of information. ‘Power’, says J.S. Mill, ‘may be localized, but knowledge to be most useful must be centralized.’ Secondly, there are many matters which can more easily be taken in hand than others by the State as presently constituted. Thus the means of communication and locomotion can in every civilized country be easily nationalized or municipalized, where this has not been done already. With regard to productive industries, there may appear greater difficulty. But the process now going on by which the individual capitalist more and more gives place to enormous joint-stock enterprises, worked by salaried managers, this tendency of capital to become ‘impersonal,’ is making the transition to management by government (central or local) very much more simple, and very much more necessary, than in the days of small industries, before the ‘industrial revolution’ began. The State will not so much displace individual enterprise, as substitute for the irresponsible company or ‘trust’ the responsible public corporation. Thirdly, and lastly, be it observed that the arguments used against ‘government’ action, where the government is entirely or mainly in the hands of a ruling class or caste, exercising wisely or unwisely a paternal or ‘grandmotherly’ authority-such arguments lose their force just in proportion as government becomes more and more genuinely the government of the people by the people themselves. The explicit recognition of popular sovereignty tends to abolish the antithesis between ‘the Man’ and ‘the State’. The State becomes, not ‘I’ indeed, but ‘we.’ The main reason for desiring more State action is in order to give the individual a greater chance of developing all his activities in a healthy way. The State and the individual are not sides of an antithesis between which we must choose; and it is possible, though, like all great things, difficult for a democracy to construct a strong and vigorous State, and thereby to foster a strong and vigorous individuality, not selfish nor isolated, but finding its truest welfare in the welfare of the community. Mr. Spencer takes up the formula ‘from status to contract’ as a complete philosophy of history. Is there not wanting a third and higher stage in which there shall be at once order and progress, cohesion and liberty, socialistic-but, therefore, rendering possible the highest development of all such individuality as constitutes an element in well-being? Perhaps then Radicalism is not turning back to an effete Toryism, but advancing to a further and positive form, leaving to the Tories and old Whigs and to Mr. Spencer the worn-out and cast-off credd of its own immaturity.

In Alan Bullock and Maurice Shock, eds., The Liberal Tradition: From Fox to Keynes (Oxford: OUP 1956), pp. 187-90.

Libertarianism was discredited long ago, when 19th century governments first started passing legislation to clear slums and give the labouring poor proper sanitation, working hours and education. Its philosophical justification came later, but I think also effectively demolished it. The people promoting it, such as the Koch brothers in America, are big businessmen seeking to re-establish a highly exploitative order which allowed industry to profit massively at the expense of working people. It became popular through aligning itself with left-wing ideas of personal liberty that emerged in the 1960s, such as the drug culture, and in the ’90s produced the illegal rave scene. In the form of Anarcho-Capitalism, it also appealed to some of those who were attracted to anarchism, while attacking the communist elements in that philosophy. Its adherent also try to justify it by calling it Classical Liberalism.

But it’s still just the same old reactionary ideology, that should have finally gone out with end of the Nineteenth Century. I think that as more people become trapped in poverty as a result of its policies, it’ll lose whatever popularity it once had. And perhaps then we can back to proper political theories advocating state intervention to advance the real, practical liberty of working people.

Labour’s Foundation of the NHS and the Welfare State

Every now and then the Tories try to claim that Labour did not found the welfare state. They either claim that they did, or they try to minimize Labour’s role in its foundation by concentrating instead on the fact that it was based on the proposals made by Lord Beveridge in his report of 1943. But the NHS was effectively founded by Nye Bevan, who became the minister responsible for its establishment under Clement Attlee. Furthermore, the ultimate origins of the welfare state and NHS lay with the Webb’s minority report on the state of healthcare in Britain in 1906. The Socialist Medical Association demanded a socialized system of healthcare in the 1930s, and this was taken up by the Labour party. The Fabian Society in this period also produced a series of reports arguing for the establishment of what would be known as the NHS. Francis Williams, in his biography of Ernest Bevin, another minister in that great Labour government, also describes this process. He writes of the Labour party in the 1930’s

To most of its opponents at this time the Labour party seemed to be wasting its time on producing a whole series of policy reports which stirred little public interest and which seemed unlikely to have any practical administrative significance. In fact, however, these policy reports which, beginning with ‘Currency, Banking and Finance’, went on to ‘The Land and the National Planning of Agriculture’, ‘The Reorganisation of the Electricity Supply Industry” and ‘National Planning of Transport’ (all completed within two years of the 1931 defeat) and, continuing therefore, year after year, on almost every aspect of national policy including coal, iron and steel, a National Health Service, Education, Pensions, Unemployment, Industrial Insurance, Housing and Colonial Development, provided the party with the practical programme on which it eventually secured a parliamentary majority and laid for the foundations for the packed legislative programme of 1945 to 1950. (Williams, Ernest Bevin (London: Hutchinson 1952), pp. 182-3).

Now the NHS and the welfare state is being threatened by the Tories, the Lib Dems, and the Blairites. The present Labour leader, Jeremy Corbyn, has pledged to restore the welfare state, renationalize the NHS, as well as part of the electricity grid, water and the railways. This is all very much needed, and it’s very far from being some kind of Communist programme, as the hysterical press and BBC would like us all to believe. It’s simply a partial return to the programme of the 1945 Labour government, which gave the country over three decades of prosperity and economic growth before the election of Thatcher.

Thatcher’s policies of privatization, the decimation of the welfare state and the privatization of the NHS has resulted in mass poverty. It has increasingly been shown to be threadbare. If Britain’s working people are to be given proper jobs, proper rights at work, continuing free healthcare and a genuinely fair provision for their old age, sickness and disability, we have to go back to the old Labour programme of the ’30s and ’40s, and get May and her profiteers and murderers out, and Corbyn in.

COP24: Paris Agreement Rulebook ‘Does Not Deliver What The World Needs’ on Climate Change

Published by Anonymous (not verified) on Wed, 19/12/2018 - 1:55am in

Summary of the depressing lack of progress at the COP24 summit in Katowice, Poland, where the participants punted on agreeing to take significant action to confront climate change.

Elizabeth Warren Plan Would Allow the Government to Manufacture Its Own Generic Drugs

Published by Anonymous (not verified) on Wed, 19/12/2018 - 12:54am in



If I told you that there are two major efforts on the left to reform the pharmaceutical industry, and one relies on market competition while the other establishes a publicly run office to manufacture prescription drugs — to control the means of production, so to speak — you might assume that the first comes from capitalist-to-her-toes Sen. Elizabeth Warren and the second from honeymooned-in-the-USSR Sen. Bernie Sanders.

It’s actually the opposite.

Warren introduced legislation on Tuesday with Rep. Jan Schakowsky, D-Ill., that would create an Office of Drug Manufacturing within the Department of Health and Human Services. That office would have the authority to manufacture generic versions of any drug for which the U.S. government has licensed a patent, whenever there is little or no competition, critical shortages, or exorbitant prices that restrict patient access.

Last month, Sanders and Rep. Ro Khanna, D-Calif., released their own bill to tackle high drug prices, which would require the government to identify any excessively priced drugs (relative to an international index of list prices) and grant a license to private companies to provide competition with a generic version.

The two bills from Warren and Sanders, who are both likely running for president, are actually complementary efforts that deal with different elements of a system that results in Americans paying more for medications than anywhere in the industrialized world. And they reflect a broader attack on the industry from multiple angles.

“Sanders-Khanna and Warren-Schakowsky are two absolutely complementary bills,” said Alex Lawson of Social Security Works, who has worked extensively on drug prices and was involved in both efforts. “It’s important that you’re seeing multiple, transformative big ideas.”

The Sanders-led legislation seeks to reform the monopoly patent system for prescription drugs, which virtually assures high prices and incentivizes the exclusive drugmaker to restrict competition. But the bill relies on a functioning generic drug market that can drive down prices by mass-producing alternatives that steal customers from brand-name treatments.

About 90 percent of all prescription drugs filled are for generic medications. But recent events have revealed that the generic market is also broken. A 2017 National Bureau of Economics Research paper found that generic competition has weakened over time, as fewer firms compete to make alternatives. By 2016, 40 percent of all generics were made by a single manufacturer.

A Government Accountability Office report identified price spikes of 100 percent or more in the generic drug market in one out of every five drugs studied between 2010 and 2015. There is even an active investigation into cartel behavior among 16 different generic drug manufacturers, which allegedly divvied up the market and fixed prices for more than 300 drugs.

This trend toward monopoly providers of generics creates fragile supply chains that can lead to widespread drug shortages in the event of a disruption, something that almost never happens in a well-functioning, wealthy market economy.

Even with multiple generic options, the effect on prices can be illusory. Last month, Teva Pharmaceuticals, a powerful generic drug company, released a generic version of the EpiPen, the price spirals of which have angered patients. But the Teva-made generic costs the exact same amount as a generic EpiPen released by Mylan, maker of the brand-name drug.

Warren’s bill, the Affordable Drug Manufacturing Act, attempts to address that market failure by having the government pick up the slack. The Office of Drug Manufacturing would acquire rights to manufacture generic drugs or contract them to be manufactured by an outside entity. The legislation explicitly states that those generic drugs must be offered at a “fair price” that covers manufacturing and administrative costs while ensuring patient access. The office could strip a contractor of its ability to make and sell the drug if the price point is too high. Proceeds for these sales would go back to covering agency costs, making it a self-sustaining entity.

The government would also be authorized to manufacture active ingredients for medications. This has become a problem, as major drug companies routinely deny rivals samples of their products, which are used in testing to determine whether the generic is an equivalent treatment.

One drug is listed specifically: Generic insulin treatments would have to be produced within the first year of the legislation’s passage. Prices for insulin have skyrocketed in recent years and shortages are common.

“In market after market, competition is dying as a handful of giant companies spend millions to rig the rules,” Warren said in a statement. “The solution here is not to replace markets, but to fix them.”

Except the means to fix those markets is a government-directed option that puts the Department of Health and Human Services into the pharmaceutical manufacturing business. That’s the primary action in the legislation that allows competition to take root and prices to fall. In this sense, competition policy can work hand in hand with targeted nationalizations or public options.

Another section of the bill highlights Warren’s preoccupation with the notion that personnel matters as much as policy. Former drug company lobbyists would be banned from holding the position of director of the Office of Drug Manufacturing under the proposed legislation, as would any senior executive of a drug company subject to regulatory enforcement for wrongdoing.

Advocates generally welcomed the concept of a public drug manufacturer. “Anyone who is serious about controlling costs and ensuring more patients have access to life-saving drugs should be supporting this legislation,” said Richard Master, chair of the Business Initiative for Health Policy, in a statement.

But some experts believe that more work must be done to reform the entire supply chain for prescription drugs. Phil Zweig, a former journalist who works with Physicians Against Drug Shortages, believes that group purchasing organizations, or GPOs — collections of hospitals that contract to provide medical supplies and medications — are at the heart of the exorbitant pricing and shortages. GPOs are a key gatekeeper for drugs administered at hospitals. “Generic drugmakers simply stop making the drugs if they don’t get a sole-source contract,” Zweig said. “It’s a winner-take-all game.”

GPOs have an exception to the anti-kickback statute that allows them to give exclusive contracts to drug companies in exchange for cash, some of which flows back to hospital executives and administrators. Zweig wants to remove the safe harbor. “All we’re trying to do is remove obstacles to competition,” he said.

Pharmacy benefit managers, or PBMs, which negotiate prices for drugs sold in pharmacies on behalf of health plans, have also been accused of skimming off the top and artificially creating higher drug prices. The Trump administration has proposed taking away the anti-kickback safe harbor for PBMs.

Warren spokesperson Ashley Woolheater agreed that “there is bad behavior up and down the supply chain,” adding that this bill specifically focuses on the generics and active pharmaceutical ingredients markets.

“It’s going to take a multi-pronged effort,” said Lawson. “This is not a silver bullet, it’s just one piece of it.”

The post Elizabeth Warren Plan Would Allow the Government to Manufacture Its Own Generic Drugs appeared first on The Intercept.

Brexit: “Managed No Deal” and Referendum Unicorns Dispatched, but How Long Before Anyone Notices?

Published by Anonymous (not verified) on Tue, 18/12/2018 - 10:13pm in

More seemingly bad news for the UK on the Brexit front...save none of this should come as news.

The Australian Labor Party is still stuck in its neoliberal denial stage

Published by Anonymous (not verified) on Tue, 18/12/2018 - 7:24pm in



Yesterday, the Federal government released their so-called – Mid-Year Economic and Fiscal Outlook (MYEFO) – which is their half-yearly review of the fiscal policy settings. Unsurprisingly, the Treasurer was crowing about the shift towards surplus with booming company tax revenue. With a federal election coming in the next 4-5 months, the Government will now offer tax cuts to entice people to vote for what has been one of the worst governments in our history. The fiscal contraction that is going on at present is totally unwarranted from an economic perspective. The problem for Australians is that the other side of politics – the Labor Party – is no better. It is a sad state of affairs when a political system is dominated by two neoliberal parties. One of them claims to be progressive but every day just reinforces the conservative myths about the fiscal capacities of government. Welcome to Australia.

I analysed the May Fiscal Statement in this blog post – Australian fiscal statement 2018-19 – an election stunt, limited economic coherence (May 10, 2018).

Not much has changed.

The following graph shows the Australian government’s fiscal balance from 2000-01 to 2021-22 as a per cent of GDP.

The red bars are the latest projections as outlined in the updated MYEFO.

The government is now forecasting a fiscal surplus in 2019-20 of $A4.1 billion (0.2 per cent of GDP) and increasing after that to 0.9 per cent of GDP in 2021-22.

The fiscal shift from one year to another is the change in the fiscal balance as a percentage of GDP changes. It is the result of two factors – the fiscal balance itself (in $As) and the value of nominal GDP (in $As).

The following graph shows the recent history (from 1970-71) of such fiscal shifts.

The biggest fiscal swing in the previous conservative government’s tenure was in the financial year 1999-2000 (a shift of 1.34 per cent).

A sharp slowdown in the economy followed that contraction and the fiscal balance was in deficit the following year.

The Australian economy only returned to growth because the Communist Chinese government ran large fiscal deficits themselves as part of their urban and regional development strategy. That spurred demand in our mining sector.

The largest fiscal shift in the sample period shown was the second-last fiscal statement from the previous Labor government in 2012-13 which was equivalent to 1.7 per cent of GDP.

The Labor Treasurer (Wayne Swan) prematurely withdrew the fiscal stimulus bowing to the assault from the neo-liberal press and commentariat about the dangers of deficits. It was a moronic and damaging retreat.

A major slowdown followed and dented the recovery from the GFC that had been spawned by the fiscal stimulus in the previous two years.

That Labor government was obsessively trying to achieve a fiscal surplus in 2013-14 and was blind to the reality that the private domestic sector was not going to fill the spending gap left by the retrenchment in net government spending.

The result – which was totally predictable – the economy took a nosedive, tax revenue fell even further and the fiscal balance moved further into deficit with unemployment rising.

In the MYEFO estimates, the contractionary fiscal shift disclosed for 2017-18 (actual result) is now the second largest since 1970-71 – 1.4 per cent of GDP.

This represents a sharp tightening of fiscal policy which the government is projecting will continue out to the end of its forecast period.

Part of this shift is being driven by the strong company tax payments which are the result of two factors: (a) the end of loss write-off periods for mining companies; and (b) the massive infrastructure spending boom at the State government level, which has boosted activity and employment.

The question is whether this degree of fiscal contraction is warranted.

The answer is a firm no!

How do I determine that:

1. Real GDP growth has slowed dramatically and the annualised September-quarter growth rate is just 1.2 per cent. That is not fast enough to maintain current levels of unemployment.

Please see – Australian national accounts – economy is slowing and looking shaky (December 5, 2018).

2. Wages growth in Australia has been very subdued over the last several years, with real wage gains difficult to achieve.

Wages growth is now at record low levels and real wages started falling in 2017, and in recent quarters have just kept pace with inflation.

There has been a massive redistribution of national income to profits and away from wage-earners as real wages growth continue to lag well behind the growth in labour productivity.

Please read my blog post – Australian workers losing out under neoliberalism (December 10, 2018) – for more discussion on this point.

3. State government infrastructure projects are finite.

4. Labour underutilisation remains high.

The monthly broad underutilisation estimates for October 2018 show that underemployment comprised 8.7 per cent (1,105.5 thousand). The total labour underutilisation rate (unemployment plus underemployment) was 13.3 per cent. There were a total of 1,777.5 thousand workers either unemployed or underemployed.

The Australian economy is nowhere near full employment.

Please read my blog post – Australian labour market – treading water this month (November 15, 2018) – for more discussion on this point.

5. The ratio of household debt to annualised household disposable income is now at record levels and there are now signs that the demand for credit is in decline.

So household consumption expenditure, which has been propping up growth, will decline as the households exhaust their saving balances.

But the Government’s projections imply that it is intent on driving the private domestic sector into ever more increasing debt levels.

The economic predictions, which underpin the fiscal statement and are contained in Budget Paper No.1 – Economic Outlook, show that the Treasury is forecasting an increasing external deficit over the estimates.

The MYEFO estimates have increased the forecasts from the May statement.

The current account deficit is projected to be 2.75 per cent of GDP in 2018-19 rising to 3.75 per cent of GDP in 2019-20.

The average current account deficit since fiscal year 1974-74 to 2016-17 has been -4 per cent of GDP. So the projections for 2019-20 are approaching the that long-term performance.

So the sectoral balances can tell us what this implies.

We know that the financial balance between spending and income for the private domestic sector equals the sum of the government financial balance plus the current account balance.

The sectoral balances equation is:

(1) (S – I) = (G – T) + CAB

The sectoral balances equation says that total private savings (S) minus private investment (I) has to equal the public deficit (spending, G minus taxes, T) plus the current account balance (CAB) or net exports (exports (X) minus imports (M)) plus net income transfers.

So (1) is interpreted as meaning that government sector deficits (G – T > 0) and current account surpluses (CAB > 0) generate national income and net financial assets for the private domestic sector to net save (S – I > 0).

Conversely, government surpluses (G – T < 0) and current account deficits (CAB < 0) reduce national income and undermine the capacity of the private domestic sector to accumulate financial assets.

All these relationships (equations) hold as a matter of accounting.

The following graph shows the sectoral balance aggregates in Australia for the fiscal years 2000-01 to 2021-22, with the forward years using the Treasury projections published in the financial outlook.

The vertical black line demarcates the actual from the projected data. The dotted lines just reflect different CAB assumptions (either the Government’s or the long-term trend).

All the aggregates are expressed in terms of the balance as a percent of GDP.

So it becomes clear, that with the current account deficit (green area) more or less projected to be constant over the forward estimates period, the private domestic balance overall (solid red line) is the mirror image of the projected government balance (blue line).

In the earlier period, prior to the GFC, the credit binge in the private domestic sector was the only reason the government was able to record fiscal surpluses and still enjoy real GDP growth.

But the household sector, in particular, accumulated record levels of (unsustainable) debt (that household saving ratio went negative in this period even though historically it has been somewhere between 10 and 15 per cent of disposable income).

The fiscal stimulus in 2008-09 saw the fiscal balance go back to where it should be – that is, in deficit – given the external situation.

This not only supported growth but also allowed the private domestic sector to rebalance its precarious debt position somewhat.

You can see the red line moves into surplus or close to it. The long-run average private domestic deficit is 2.4 per cent of GDP and was achieved largely when the household saving ratio was between 10 and 16 per cent and private investment was strong.

The fiscal strategy reaffirmed in the MYEFO yesterday would require the private domestic sector to be accumulating more debt as it progressively spends more than its income to fund consumption growth.

That will probably not happen and the slowing economy will see to it that the fiscal contraction leads to grief.

Taken together, there is a need for a larger fiscal deficit right now and into the future.

But the Labor Party never learns either

The second graph above showed that the record contractionary federal fiscal shift was implemented by a Labor Treasurer (Wayne Swan) in 2012-13, which cut real spending growth by 3.2 per cent of GDP and saw overall spending drop from 24.7 per cent of GDP to 24 per cent in one year.

This graph tells you what happened.

Australia had been recovering from the GFC and the fiscal stimulus that Wayne Swan introduced in late 2008 and early 2009 saved the nation from recession.

Apart from a blip in the March-quarter 2011, growth was moving back towards trend and unemployment was falling.

But by 2012-13, the Labor government claimed that a fiscal surplus was of paramount importance despite unemployment and underemployment remaining at elevated levels and household debt remaining at record levels.

The facts are obvious.

They introduced a massive fiscal contraction (reduced the deficit) in one year which killed the movement back to trend growth rates and saw Australian economic growth slide from around 3.2 per cent per annum in the June-quarter 2012 to 1.2 per cent by the March-quarter 2013.

You can relate the real GDP performance to the first graph above, which shows the way the discretionary fiscal stimulus increased the deficit to support that growth.

You can also see the fiscal contraction in 2012-13 failed to sustain a lower fiscal deficit beyond that year.

By killing the growth impetus, the Treasurer stimulated the automatic stabilisers, which, of course, worked against the Treasurer’s intentions.

You would think a person would learn lessons from that.

Now, Wayne Swan is wandering around the nation lecturing us on inequality, the sins of trickle down economics and how his vision for Australia is for a fairer society.

I have seen Tweets lately where he is being used to advocate a “jobs guarantee” as if he some new progressive voice in Australian politics.

It is a pity he didn’t take the opportunity to pursue those sort of things when he was Treasurer.

When the Labor Government was elected in December 2007, the unemployment rate was 4.3 per cent and by the time he left his position as Treasurer it had risen to 5.7 per cent.

The Broad Labour Underutilisation rate in in December 2007, the unemployment rate was 10.4 per cent and by the time he left his position as Treasurer it had risen to 13.2 per cent.

Further, the Gini Coefficients measuring for wealth and income inequalities rose during his time as Treasurer.

And, as I show below, the gap between the unemployment benefit payment and the poverty line continued to climb during his period as Treasurer and his government refused to redress the issue by increasing the unemployment payment because it would damage their surplus ambitions.

So his tenure as Treasurer could only be considered a failure from a progressive perspective.

But, I agree that a person can find a path out of their ignorance to enlightenment through more education, thought and an admission of one’s own failings.

The question is whether Swan has reached that point and whether we should take his current ramblings about employment guarantees and more equitable economic policies seriously..

The evidence is that despite his claims to be concerned about equity etc there is no basic shift in his position. He would do it all again.

He gave a speech at the National Press Club in Canberra on August 21, 2018 – The Global Financial Crisis: 10 Years On – where he reflected on his time as Treasurer during the GFC.

He claimed in that speech that his views on economics had changed such that he now believes that reducing inequality “will give Australia a better economic result.”

He then produced a graph which I reproduce here – comparing the unemployment shift since 2007 (in percentage points) in Australia, the US and the UK.

Of the graph, he said:

The capital and skills destruction that we avoided in Australia was crucial to locking in higher levels of growth in the years following the crisis, which meant that unemployment was lower, and deficit and debt were lower than if our Labor Government hadn’t acted.

By contrast, the early withdrawal of stimulus in Britain and the inadequacy of stimulus in the United States condemned these countries to a slower recovery and to high levels of capital and skills destruction, which continue to this day.

There is denial writ large here:

1. It is clear that as a result of the fiscal stimulus he introduced as Treasurer, the unemployment rate was moving downward from 2000 to 2011.

2. Then his obsession with achieving a fiscal surplus led to the massive fiscal shift I document above and look what happened.

At the same time as the unemployment rates were falling in the US and the UK, the Australian unemployment rate started to rise again – under his watch.

3. It was all down to his poorly conceived rush to achieve an fiscal surplus, unachievable at the time, given the external situation and the spending plans of the private domestic sector.

4. The following graph shows the fiscal shifts (explained above) for the UK, US, and Australia from 2000 to 2014. Swan was Treasurer between 2007 and 2013.

The fiscal expansion (sum of discretionary and automatic stabilisers) was higher in the UK and the US in 2008 and 2009.

It is also true that the US and UK shifted to a contractionary stance earlier than Australia.

But by 2011, all governments were contracting their fiscal positions, well before the economies had even remotely recovered from the the GFC downturn.

And by 2014, that strategy had backfired.

And while the growth rate was stronger in the US and the UK and the unemployment rate continued to decline, under Swan’s stewardship, the unemployment rose again and the gains made by the fiscal stimulus were lost.

On March 15, 2017, Swan gave a speech in Adelaide where he discussed the concept of full employment.

He talked about why a future Labour government should adopt the so-called “Buffett rule”, which says that “everyone making over $1m a year pays a minimum effective tax rate of at least 30%”.

Different thresholds have been discussed but this is the ‘tax the rich to pay for services’ trap that many misguided progressives have fallen into.

Wayne Swan claimed that by adopting the rule plus other tax measures, Labour would be able to ‘fund’ more future infrastructure investments.

He told the audience that (Source):

Both sets of measures would go a long way towards repairing our budget bottom line.

And once a person starts talking about ‘budget repair’ and taxing the rich to pay for services you know they have learned nothing from their period as Treasurer.

Same old neoliberal garbage.

So I would not be holding out any faith in Wayne Swan leading the Labour movement (either the unionised or political arm) to any new progressive nirvana.

What you get from him is bluster about equity and job creation couched in all the voodoo stuff about running surpluses and repairing fiscal positions.

Same old.

And don’t expect anything from the current Shadow Treasurer in the Labor opposition – Chris Bowen.

He cannot stop telling everyone that under his Treasurership, a Labor government elected next year will run larger fiscal surpluses.

Idiocy has no bounds on that side of politics.

Refusal to lift the unemployment benefit out of poverty

At the Labor Party Annual Conference in Adelaide this week, a ‘Left-faction’ delegate proposed from the floor of the convention that the unemployment benefit should be increased.

None of the current leadership was willing to go along with such a motion.

The reality is that the Labor Party leadership will only permit another ‘enquiry’ (aka delay the decision hoping the issue will go away) to consider the issue.

The facts are astounding.

I have commented several times on the parlous income support schemes in Australia that have rendered recipients in an increasing state of poverty as a deliberate ploy by government to create a desperate underclass.

We should also never forget that the unemployed (apart from those moving between jobs) are without jobs because the government has chosen not to use its fiscal capacity to cover the spending gap left by non-government spending and saving decisions.

Mass unemployment is always a policy choice by government. It can always ensure there is full employment by offering an unconditional job opportunity to anyone who desires to work but is currently unable to find a job elsewhere.

I have previously considered the state of poverty among the unemployed in these blog posts among others:

1. Why are we so mean to the unemployed? (September 23, 2009).

2. The plight of the unemployed – under growth and decay (November 16, 2010).

3. Our pathological meanness to the unemployed is just bad economics (February 15, 2012).

4. Fat cat bankster wants to make the unemployed even more desperate (August 23, 2012).

5. The indecent inconsistency of the neo-liberals (April 30, 2013).

6. Framing matters – the unemployed and the farmers (August 7, 2018).

7. ‘Progressive’ groups in Australia captured by neoliberal ideology (September 18, 2018).

The summary of the current state is as follows.

The Newstart Allowance (unemployment benefit) is adjusted every March and September.

The following graph shows the evolution of the Single Unemployment Benefit and the Single Unemployed Poverty Line since 1973 until September-quarter 2018.

The single unemployment benefit stands at $39.30 per day which is well below any reasonable estimate of the poverty line in Australia (for singles at $A59.89 per day).

For married couples the unemployment benefit is currently at $70.96 per day, while the corresponding poverty line is set at $84.83 per day.

Whether one is single or in a couple, once accommodation is paid for, there is not very much left of the unemployment benefit income.

You can date the widening gap between the unemployment benefit and the poverty line to the early 1980s, when the neoliberal mantra about fiscal surpluses really took hold in Australia.

It was a Labor Party in the 1980s that really cemented the erosion as it started to obsessively pursue fiscal surpluses.

As that narrative gained dominance the gap has widened – both sides of politics have embraced it. The Left sold out in other words.

And now, as they claim to represent the progressive side of politics, they are still arguing that increasing the benefit payment would “cost billions” and jeopardise their fiscal surplus target.

How is that for a party that is meant to represent the workers, the downtrodden and the fragile.

They are an utter disgrace.

The previous Labor government (with Swan as Treasurer) refused to countenance a rise in the benefit payment while they deliberately forced hundreds of thousands to endure prolonged unemployment.

Nothing much has changed.


As I noted in the Introduction, it is a sad state of affairs when a political system is dominated by two neoliberal parties.

And in Australia that is certainly the case, despite the Labor Party stalwarts trying to revise history and claim to be progressives.

Not a lot to look forward to really on that front.

And I hope no-one is beguiled into thinking that the Labor Party, if it gains office next May, will remotely support a Job Guarantee.

Anyone who thinks that they will has no clue about Australian politics and how far the Labor Party has gone down the neoliberal road.

That is enough for today!

(c) Copyright 2018 William Mitchell. All Rights Reserved.

Rah Rah Economics

Published by Anonymous (not verified) on Tue, 18/12/2018 - 10:14am in



Rah Rah Economics Greg Mankiw read Trumponics by Art Laffer and Stephen Moore so we don’t have to: When economists write, they can decide among three possible voices to convey their message. The choice is crucial, because it affects how readers receive their work. The first voice might be called the textbook authority. Here, economists act as ambassadors […]

100 Percent Of US Senate Against MBS

Published by Anonymous (not verified) on Tue, 18/12/2018 - 9:13am in

100 Percent Of US Senate Against MBS Wow. Sometime ago here, I called for Crown Prince of the Kingdom of Saudi Arabia, Mohammed bin Salman bin Abdulaziz al Sa’ud, (MbS) to be rmoved from his position. How he is punished beyond that for his crimes, I do not care, especially as I think being prevented […]

“I’m Just A Mere Male” Claims Andrew Broad

Published by Anonymous (not verified) on Tue, 18/12/2018 - 8:18am in

Andrew Broad

Andrew Broad has resigned after a story in New Idea’s “Mere Male” column revealed the member for Mallee had been doing more than charging like a mallee bull.

“I was furious at my MM husband and member of parliament for acting like a sleaze on an overseas trip but had to laugh when he excused his behaviour by saying that he just wanted to show a local girl what an Australian member looked like,” read the anecdote in the magazine’s popular Mere Male section.

“Mere Male is generally devoted to everyday blokes acting like doofuses and making dodgy puns so we’re thrilled to have cracked a story that had eluded the Canberra press gallery,” said chuffed New idea editor Paula Babybump. “Our political content is mostly about hunting down topless photos of Clive Palmer frolicking on Caribbean beaches and speculating about whether Julie Bishop has had any work done so we’re elated to be out competing the Michelle Grattans and the Malcolm Farrs.”

Meanwhile Andrew Broad’s horse and plane are consulting their lawyers after it was revealed that Mr Broad had been riding other horses and flying other planes.

Peter Green

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Spitting Image on the ‘No Confidence’ Vote Against Thatcher

Published by Anonymous (not verified) on Tue, 18/12/2018 - 6:52am in

Corbyn’s finally tabled a motion of ‘No Confidence’ in Tweezer after her refusal to allow a meaningful vote on the pathetic deal she’s made with Brussels. So I though I’d put up this video from Andrewscottuk’s channel on YouTube of a classic Spitting Image sketch about Thatcher. It’s a spoof on the ‘No Confidence’ vote the Tories held about Thatcher, which resulted in her resignation, and shows parliament singing ‘Go Now’ to her.


And I hope the same thing happens to Tweezer, and she gets the message: Go. Now!