Economic insanity

[weemadando]

Insane in the economic membrane

So: If the euro stuffs up, let's keep it on. If stupid men pauper the known world, let's reward them with hundreds of millions and torment their victims with closed factories, dud schools and bad hospitals.

If tsunamis, fires and floods cause inflation, let's make everyone pay $20 a week more in their mortgages because raising the cost of living, raising it further, stops inflation, really it does. That's what we were told in graduate school and we're sticking by it, whatever happens.

And now the world's falling down because of it, why, we keep on doing it, don't we. What else can we do?

... Einstein said insanity was doing over and over and again and again what didn't work the first time. Global economic practice is, by this definition, insane. 'We must fight rising market panic,' it says, 'by cutting back the money that goes to people who use it to buy things, and by cutting back government jobs. It's by cutting back government jobs that we fight unemployment because, because'...

No, no, no. No. It doesn't work that way. As I wrote once in First Abolish the Customer, my most successful book, in 1988, every lost job, every sacked worker, means four people not buying things any more, and not having their teeth fixed and not going on school camps, and this in turn means more lost jobs, more strain on public service, and more public service jobs lost, which... And so on.

It's never helped society to sack anyone (name one instance) yet Greece is told that massively cutting back jobs will... not exactly prevent the default but delay it, and that's good because, um... umm... And America is told (by the Tea Party) that cutting back money to the poor but not the rich means, well, jobs go, jobs vanish and that's good because ...

No, no, no, no, no. No, no. Jobs should not go, and that, and no number on a page, is the bottom line. Jobs should not go. A job buys food and soap and shoes and tickets to Disneyland. It keeps scenic railways going and waitresses working on school holidays. It keeps things ticking over. A lost job causes drunkenness, crime, wife-beating, imprisonment, divorce, insanity, medication, harassment on buses. A lost job is not worth it.

Yet this 'austerity budget cuts' nonsense keeps being tried. It's like saying, 'We will win World War II by cutting back the cost of it'. It's like saying less is more. It never is. It's like saying Standard & Poor's, which gave Lehman's a triple-A rating a week before it wrecked the world economy, are worth listening to. They never were.

No, no, no, old friend. It's not some theory of what money should be (Gold? US bonds? Fifteen squalid Lucien Freuds in a locked bank safe?), but jobs, and keeping jobs, that matters. A job needn't mean that you actually do anything. A soldier doesn't do anything, or anything useful, for years on end. A presidential guard, a door guard at the cricket, a security guard, a nightwatchman, doesn't do anything. But it does mean you go dancing, fall for someone, buy a diamond ring, pay wedding caterers, have children, pay babysitters who then go dancing, and so on. You keep the wheels of commerce moving, as we used to say.

Many, many jobs are full of inactivity. What does the head of Wilson Parking do? Boom goes up, boom goes down, one thousand and twenty-seven dollars an hour, please. Or whatever he gets.

And this is why there should be more government jobs, not fewer. Bus conductors, traffic policemen, railway shunters, government-salaried babysitters, as in France. Government-salaried clowns in old people's homes, as in Scandinavia. In wartime you put on more soldiers, in time of recession more, not fewer, public servants, more idlers on wages, fooling around in offices, in jobs with little point.

And, yes, you put taxes up to pay for them. Why not do that? People don't seem to mind that much when interest rates go up (though why they go up has never been explained to me: they make life more costly, surely, and thereby cause, not cure, inflation), or cinema tickets, or bridge tolls. They feel they serve the greater good. And they should be likewise told that taxes, the price of civilisation, are worth it.

Yet the Tea Party 'economists' tell us the rich must not be taxed, not a farthing more, not ever. And the poor must be sacked, and unemployment reduced that way. It's a religious fixity, a pious and foolish formula like faith, 'the substance of things hoped for, the evidence of things not seen', that is cracking open and gutting the world. Or it's an adolescent stubbornness: not paying for what you glory in. We'll have bigger and stupider wars, but we're not paying for them, buster, no way. We're lowering, moreover, the taxes on those who profit by them. And we're keeping our AAA rating, buster, or else... or else...

None of us dare even suggest the obvious, which is socialism, the emergency socialism we have in wartime, because this is a kind of war. We don't dare even whisper it.

With emergency wartime powers to do the bleeding obvious, we could lower all rents by two thirds and solve everything, pretty much. We could power Australia with wind, sun, waves and Hot Rocks. We could take in a hundred thousand Hazaras. We could buy and protect the Indonesian forests, and bring down global warming by 20 per cent and incidentally save the orangutan. We could do the right thing, for a change.

But as long as we don't equate it with a wartime emergency, as long as we say the word 'tax' as if it's radioactive (all it means is 'price, the price of good things, a dollar a week for the ABC, sixteen dollars a week for free health care), and so on, as long as we don't have tariffs the way they were in 1985 , our best economic year, protecting our jobs and small businesses, we'll continue to feign amazement that jobs lost kill everything. Jobs lost bust up the economy. And so it will go, and go, and go, till a socialist economy, China, owns us all.

It's not too hard a concept, old friend. You pay your bills. You contrive new jobs, however useless, to keep young people sane and out of jail. You keep jobs here.

A job can be anything. It can even be enjoyable. It can be playing the flute in a high school graduate orchestra, in Mrs Carey's concert on tour.

And the Tea Party's right in one way: it's a religious, almost fundamentalist principle. You look after people. You don't punish them for the sins of men earning eighteen hundred dollars an hour for moving jobs overseas.

You come back to the idea of a fair go. You consider what that means.

Or perhaps you disagree.

Bob Ellis is a writer and commentator.

[aerius]

It's never helped society to sack anyone (name one instance) yet Greece is told that massively cutting back jobs will... not exactly prevent the default but delay it, and that's good because, um... umm... And America is told (by the Tea Party) that cutting back money to the poor but not the rich means, well, jobs go, jobs vanish and that's good because ...

One word. Canada.

Back in the early 90's we were in deep shit and lost our AAA rating thanks to the massive deficits we were running up and our poor economy. We jacked up taxes, shitcanned about 1/5 of our public sector workers and cut back transfer payments to the provinces which pay for healthcare among other things. 3 years later we had a balanced budget and our economy was recovered and rolling.

[JME2]

Perfect summation of the current quagmire.

[thejester]

I feel that only informing me that this was by Bob Ellis at the end was cruel.

TBH most of it is Ellis' usual shit, but the disconnect between 'pay people to do nothing so consumerism can flourish' and his end cry of 'we can fix the world IF ONLY YOU'D LET ME' is pretty funny. I would have thought the 'fair go' is ensuring everyone has a shot at being the best person they can be, not putting them in a permanent useless limbo where life is reduced to working a nothing job at a shopping centre, buying useless shit from said shopping mall, and propagating. If the government were to start mobilising workers brigades for infrastructure projects or whatever and we reversed the last fifty years of unsustainable suburbia, awesome. But what Ellis articulates for most of the article is the exact opposite of that - it's a perpetuation of that system.

[Lord Zentei]

Perfect summation of the current quagmire.

It sounds more like a paleo-Keynsian whine-fest to me, actually.

Also, why does he have to write the way over-caffeinated people talk? It's obnoxious, to say the least.

[weemadando]

Yeah, Ellis is one of those guys who has the right basic idea, but it lacks the ambition to actually fix anything rather than return to status quo.

[JointStrikeFighter]

Its not even very good paleo-keynes.

[weemadando]

Speaking of infrastructure brigades....

Last week we got the annual return of the East Coast high speed rail proposal with endorsement from every political party (except maybe the CEC because its not a monorail) and yet again nothing will fucking happen because every party is afraid to be the one who greenlights what is now a 100 billion dollars project (ams will be 110 billion next year when it comes around again).

That's the fucking infuriating part.

Oh and that dickwad mining magnate who came out today and went "you know who does HR policy right? Guangdong province." I love that he's complaining about how much his workers are making. Even without addressing his pay, I guess if you paid the wages that weren't massively distorted you wouldn't have the problems that you do.

[Stark]

Its not even very good paleo-keynes.

If only he'd said 'I wonder why decisions made by people who are or are paid by financiers are primarily directed towards financiers rather than the people in general' it wouldn't have taken so long to write or read.

[JME2]

Perfect summation of the current quagmire.

It sounds more like a paleo-Keynsian whine-fest to me, actually.

Also, why does he have to write the way over-caffeinated people talk? It's obnoxious, to say the least.

Sorry. I'm just really depressed and upset about the developments of the last few weeks.

[Lord Zentei]

I guess I can't fault you for that.

We're overdue for some positive news.

[Coop D'etat]

It's never helped society to sack anyone (name one instance) yet Greece is told that massively cutting back jobs will... not exactly prevent the default but delay it, and that's good because, um... umm... And America is told (by the Tea Party) that cutting back money to the poor but not the rich means, well, jobs go, jobs vanish and that's good because ...

One word. Canada.

Back in the early 90's we were in deep shit and lost our AAA rating thanks to the massive deficits we were running up and our poor economy. We jacked up taxes, shitcanned about 1/5 of our public sector workers and cut back transfer payments to the provinces which pay for healthcare among other things. 3 years later we had a balanced budget and our economy was recovered and rolling.

Canada in 1993 and America in 2011 are in a very similar place financially in terms of dept burden at both a federal and overall level but Canada had three major advantages against the current American situation.

1) The ability to severely devalue the currency to improve the competitiveness of the export sector.
2) Strong growth of the global economy during the nineties which promoted growth of the Canadian economy.
3) Acknowledgement by the voting public that drastic action must be taken to fix the situation, a ruling party committed to solving the problem and a governmental system that allows rapid action to be taken. In short, far more political will than what can be found in modern day America.

[UnderAGreySky]

shitcanned about 1/5 of our public sector workers and cut back transfer payments to the provinces which pay for healthcare among other things

But there was still national healthcare, right? And unemployment insurance? (Both genuine questions) Because I'd rather be an unemployed person in Canada than one in the US in times of recessions.

[aerius]

But there was still national healthcare, right? And unemployment insurance? (Both genuine questions) Because I'd rather be an unemployed person in Canada than one in the US in times of recessions.

Yeah we still had both. However, some provinces had to put in an extra healthcare surcharge tax after transfer payments were reduced by the federal government. Anyone making over $X a year was hit with an extra tax on a sliding scale.

[Stark]

Canada still has a better/less horrible system than in Australia, where they do the same shit in a punitive way to move people into the private system... because Health is pretty much the most corrupt and poorly organised department in the civil service.

[JointStrikeFighter]

Is healthcare in Canada organised at the federal or state level?

[aerius]

Provincial level. Every province has its own universal healthcare coverage plan, they differ slightly in the details but all the important things are essentially the same. They cover you anywhere in the country so if I go on vacation in another province and break my leg the only thing I have to pay is a ~$50 administration fee, which sometimes gets waived for whatever reason. The provinces pay for a chunk of it through taxes and the federal government chips in the rest through transfer payments.

[bobalot]

It's never helped society to sack anyone (name one instance) yet Greece is told that massively cutting back jobs will... not exactly prevent the default but delay it, and that's good because, um... umm... And America is told (by the Tea Party) that cutting back money to the poor but not the rich means, well, jobs go, jobs vanish and that's good because ...

One word. Canada.

Back in the early 90's we were in deep shit and lost our AAA rating thanks to the massive deficits we were running up and our poor economy. We jacked up taxes, shitcanned about 1/5 of our public sector workers and cut back transfer payments to the provinces which pay for healthcare among other things. 3 years later we had a balanced budget and our economy was recovered and rolling.

You left out a few major reasons. Canada greatly benefited from a general worldwide economic recovery and a large trading partner to the south with a booming economy. America has neither.

[aerius]

You left out a few major reasons. Canada greatly benefited from a general worldwide economic recovery and a large trading partner to the south with a booming economy. America has neither.

Sure, but it's completely besides the point. The article claims that there's no instance in history where cuts helped get things back in order. It sure as hell helped in the case of Canada. Without the cutbacks and tax raises we'd probably be close to or in default by now even with the way the economy played out in the last 20 years.

There's no denying we had some good luck and timing on our side which sped up the process and made it less painful, but bottom line is we would not be in nearly as good shape as we are today if we didn't make the hard choices we did back then.

[JME2]

There's no denying we had some good luck and timing on our side which sped up the process and made it less painful, but bottom line is we would not be in nearly as good shape as we are today if we didn't make the hard choices we did back then.

And no one in the US seems willing to make those hard choices. They want to have their cake and eat it too.

I'm getting a sense of what it was like living in the 1930's: the perception that was everything go wrong and that every attempt to fix it failed or made things worse.

[bobalot]

There's no denying we had some good luck and timing on our side which sped up the process and made it less painful, but bottom line is we would not be in nearly as good shape as we are today if we didn't make the hard choices we did back then.

You are underplaying it.

Canada offset its fiscal austerity by massively devaluing its dollar against its biggest trading partner, thus increasing exports significantly. As you can see below, the major driver for GDP growth was exports. All you have proven is that using exports to cover up the losses in aggregate demand (from government cuts), you need a booming trading partner and devalued currency.




Now if America did this, other countries would be sure to follow and if every country in the world tried to devalue their currency...ah. The US of 2011 is not the Canada of the 1990's.

[aerius]

You do realize that I'm talking about government budgets and not GDP growth. Because Canada more than doubled its GDP in the 1980's while running up the largest deficits (as a percentage of GDP) in recent history. Which was part of why we got downgraded. Exports and GDP growth do not translate into balanced budgets unless the government makes it so. Also note that our GDP didn't take off until after 1998, IIRC we got our budget balanced in 97 or 98.

[bobalot]

You do realize that I'm talking about government budgets and not GDP growth. Because Canada more than doubled its GDP in the 1980's while running up the largest deficits (as a percentage of GDP) in recent history. Which was part of why we got downgraded. Exports and GDP growth do not translate into balanced budgets unless the government makes it so. Also note that our GDP didn't take off until after 1998, IIRC we got our budget balanced in 97 or 98.

That's not quite true.

Devaluing the dollar, having a huge booming trading partner geographically close by and a generally buoyant world economy would have increased exports and therefore government revenues regardless of whatever budgetary decisions it made. This increase in revenue made balancing the budget a far easier job.

I would like to point out before this goes any further that I'm not against American deficit reduction of its bloated programs (particularly the military) nor increases in revenue in the long run. I'm simply sceptical that austerity in itself will lead to economic growth. Rather than focusing on debt, the U.S government should be focusing on job creation.

[aerius]

Devaluing the dollar, having a huge booming trading partner geographically close by and a generally buoyant world economy would have increased exports and therefore government revenues regardless of whatever budgetary decisions it made. This increase in revenue made balancing the budget a far easier job.

More or less true, unless your government is run by retards who swear by Reaganomics. "Look at all this extra money we're getting, let's give massive tax cuts for everyone, especially corporations and rich bastards!"

I would like to point out before this goes any further that I'm not against American deficit reduction of its bloated programs (particularly the military) nor increases in revenue in the long run. I'm simply sceptical that austerity in itself will lead to economic growth. Rather than focusing on debt, the U.S government should be focusing on job creation.

The bad part right now is you could eliminate all discretionary spending (this includes the military) and it would barely balance the budget, and with the amount that healthcare & social security costs are forecast to grow it'll become impossible to balance the budget in the future if we let things go for too long.

My opinion is every single program needs to be reformed right now along with eliminating every single tax break in the last 20 years or so, the longer you let things go on the worse the adjustments will have to be in the future. Gotta put a stop to offshoring jobs and get rid of those offshore tax loopholes. Put in a "nuclear power for everyone" program which gives you energy independence at the same time, that's millions of high paying high skill jobs right there in everything from mining to steel mills & manufacturing to construction and R&D. But that ain't happening since it's easier to lie to everyone, play the blame game, and promise everyone a free lunch.

[bobalot]

Devaluing the dollar, having a huge booming trading partner geographically close by and a generally buoyant world economy would have increased exports and therefore government revenues regardless of whatever budgetary decisions it made. This increase in revenue made balancing the budget a far easier job.

More or less true, unless your government is run by retards who swear by Reaganomics. "Look at all this extra money we're getting, let's give massive tax cuts for everyone, especially corporations and rich bastards!"

Quite true.

I would like to point out before this goes any further that I'm not against American deficit reduction of its bloated programs (particularly the military) nor increases in revenue in the long run. I'm simply sceptical that austerity in itself will lead to economic growth. Rather than focusing on debt, the U.S government should be focusing on job creation.

The bad part right now is you could eliminate all discretionary spending (this includes the military) and it would barely balance the budget, and with the amount that healthcare & social security costs are forecast to grow it'll become impossible to balance the budget in the future if we let things go for too long.

My opinion is every single program needs to be reformed right now along with eliminating every single tax break in the last 20 years or so, the longer you let things go on the worse the adjustments will have to be in the future. Gotta put a stop to offshoring jobs and get rid of those offshore tax loopholes. Put in a "nuclear power for everyone" program which gives you energy independence at the same time, that's millions of high paying high skill jobs right there in everything from mining to steel mills & manufacturing to construction and R&D. But that ain't happening since it's easier to lie to everyone, play the blame game, and promise everyone a free lunch.

That's the disappointing thing about Obama. In the two years of his presidency, he could have ran with this agenda (or something similar, a mass high speed rail system for example). Instead he decided to compromise for the sake of compromising and alienated his entire base.