The love which dare not speak its name

People who would want to avoid reading my dissertation or anything about neoliberalism but nonetheless would like to have some idea about what has been going on in the world of public policy and economic policy in particular ought to read the 24 page special publication by the OECD “Evolving Paradigms in Economic Policy Making.” It is a fairly interesting document given its understated criticisms of macroeconomic policies and downright silences on key policies which it had a hand in crafting and popularizing. The document is filled with tap dancing around the elephants in the room. Here is how they deal with the last crisis:

Indeed, the repetition of bubbles and busts from the late 1980s until the early 2000s, such as the Savings and Loans, LTCM, Asian and dotcom crises, had not only macroeconomic origins, but was also associated with, partly misguided, financial innovation…..With hindsight the dotcom bust in 2000-01 should have been taken as a warning signal that systemic risk was unduly increasing…..Monetary policy appeared to be generally successful in this period, with low and stable inflation and generally well-anchored inflation expectations. But it was not sufficiently recognised that this outcome was helped by globalisation, a positive aggregate supply shock that kept inflation low – at least until oil and
commodity prices surged……Fiscal consolidation also looked successful, but – as has been a recurrent theme in the OECD’s economic history – failure to attain sound underlying public finances was masked by very favourable cyclical developments…..While structural policies had been successful in several countries, there was little international coordination on policy choices, contributing to the persistence of cross-country imbalances in savings and investment and widening global imbalances (Figure 4)…..Finally, the potential for systemic financial risks was not effectively monitored, such risks being viewed as low as long as stability-oriented macroeconomic policies were pursued and micro-prudential regulation was conducted effectively.

OK now pay attention because here is the conclusion drawn from the above:

All this [the above] explains how problems in a small corner of US financial markets (subprime mortgages accounted for only 3% of US financial assets) could infect the entire global banking system and set off an explosive spiral of falling asset prices and bank losses in 2008 and 2009. Consumer and investment demand quickly started to fall in the United States. As the US financial crisis intensified, weakness spread globally. With wholesale money markets freezing up, companies started to liquidate inventories and in late 2008 world trade nose-dived. The sharpest contraction since the Great Depression of the 1930s unfolded (p.12).

Wha? First off, government fiscal policy had nothing to do with it. Even if they had run super macro-prudential budgets that would not have stopped the financial markets from imploding. And why is the OECD arguing that governments should have been running their budgets as though they were in a permanent recession? So that line is just a sop to austerity ville and its citizens. Second, I can’t get to global financial meltdown from their list. If they really believe that just 3% of US financial assets under management were the cause of the global crisis they need a much braver laundry list. In any case, one word you will not read is “neoliberalism”. Instead you will be treated to vague sentences which read: “The prevailing paradigm largely survived the post-dotcom experience” (p. 11). It is odd that a prevailing paradigm should not have name. What prey tell came after Keynesianism?

And here is the problem with this retrospective on changes in macroeconomic paradigms. Namely, it is yet another instance where one of the leading institutional protagonists of neoliberalism is simply dodging its responsibility. Nowhere is there even a hint of contrition that labour market policy was exactly the least significant area that should have been paid attention to. The OECD spent the better part of 10 years focussing advanced capitalist policy makers on the need to flexibilize labour markets to almost the exclusion of all else. Indeed, in Alan Greenspan’s famous phrase, they spent from the mid-1990s to the mid 2000s ‘traumatizing workers’. One would be hard pressed to find any research during that time frame coming out of the OECD cautioning about systemic risk, regulatory capture (corruption is the word we Europeans use for the third world), or the dangers of financial deregulation. If the researchers at the OECD are suppose to be guiding policy makers towards best practice they did a horrible job. Not only did they cut your unemployment benefits they did nothing to help make sure you would not need them.

To add insult to injury, as Paul Krugman notes, in their 89th economic outlook they are pushing for the further traumatization of workers via higher interest rates and fiscal austerity.

For fiscal policy, exiting from crisis measures and restoring sound public finances is likely to continue well into the medium term. The pace of the exit should be commensurate with the state of public finances, the ease of sovereign funding, the strength of the recovery and the scope for monetary policy offsets. It should also take into account that delays in fiscal consolidation might increase interest rates and future growth. A credible fiscal consolidation will likely improve financial market conditions and hence the monetary transmission mechanism.

Furthermore, fiscal consolidations in which expenditure reductions have a high weight are more likely to result in durable retrenchment (Guichard et al., 2007) and more likely to be accommodated by monetary policy once it has departed from the zero-rate bound. Even so, tax increases look unavoidable in view of the size of the consolidation requirements. It is important that consolidation be growth-friendly. For example, raising the retirement age could bring long-term gains while having only limited effects on near-term growth. Priority should be given also to reducing the distortions created by subsidies and tax expenditures, and tax increases should be focused on the least distortive taxes such as on overall consumption and immovable property (p.14).

What is that about never letting a crisis that you helped create go to waste? I am just going to call this tax paradigm what it is (if your under six close your eyes): Fuck the fixed or FIF. Say it with a crappy mob accent and pretend you are an OECD economist acting macho. Next time you see a house or a worker with medium to low portable skills just say FIFem. There is of course never any mention of policies that would arrest mobile factors from playing the arbitrage game. That would of course be downright un-neoliberal and certainly too much to ask of one of the central institutional protagonists of the paradigm which dare not speak its name.

The insanity of Canada’s non-existent domestic labour training regime

Canada does not have nationally coordinated labour training regime. Why does this matter? Just take a look at what is going on in Alberta. There the oil patch is gearing up for record labour shortages and the federal government is pumping out temporary foreign worker permits and individual corporations are opening training centers in Mexico. The estimated labour “shortage” in Alberta ranges from 75 to 130 thousand. The highest estimate therefore is less than 1/10 of a percent of currently unemployed Canadians. Moreover the estimated demand is around 1/5 of unemployed Canadian workers who qualify for unemployment insurance.

Clearly something beyond labour supply is going on here. I can think of only two reasons a deluge of temporary worker permits is being contemplated in the context of nearly 1.5 million unemployed Canadian workers: semi skilled and skilled foreign workers are both cheaper and more pliant than Canadian workers. Oil companies simply do not want to pay the cost of retraining central and eastern Canadian workers nor make the remuneration attractive enough to convince unemployed workers to move to Northern Alberta. What is more the federal government has no appetite for robust national labour training and mobility regime. The result is that the most expedient path is the issuing of temporary foreign worker permits.

Speak

Since the story broke abut African migrants forcibly dying off the coast of Libya, abandoned by NATO’s humanitarian mission, so many trite remakes have been made. The most common is some variation of, “I am reduced to silence”, or better, “what can I do, over there is so far away, I feel so lucky here?” etc. In the face of these remarks I am posting two poems from Faiz Ahmed Fiaz. Here is the link to the story about the migrants. Below are the poems. So speak.

http://www.guardian.co.uk/world/2011/may/08/nato-ship-libyan-migrants

Speak

Speak, your lips are free.
Speak, it is your own tongue.
Speak, it is your own body.
Speak, your life is still yours.

See how in the blacksmith’s shop
The flame burns wild, the iron glows red;
The locks open their jaws,
And every chain begins to break.

Speak, this brief hour is long enough
Before the death of body and tongue:
Speak, ’cause the truth is not dead yet,
Speak, speak, whatever you must speak.

Stanza

If they snatch my ink and pen,
I should not complain,
For I have dipped my fingers
In the blood of my heart.
I should not complain
Even if they seal my tongue,
For every ring of my chain
Is a tongue ready to speak

Efficient Market Hypothesis, the corporate bond sales pitch and rationality

If the EMH were true then would this sales pitch be a lie? This pitch says that they can pick winners and can avoid losers. Does the EMH imply that winners cannot be persistently picked and losers consistently avoided? Does the EMH further imply that fundamental research is worthless? If fundamental research is worthless then why pay for it? Are investors irrational?

NB There is no sarcasm in these questions.

Krugman clarifies: modern Keynesians are no planners.

I do think it’s useful to read Keynes. But Greg is right: modern Keynesianism is to be understood through the views of modern Keynesians, not by hunting through the original works for hidden meanings.

And modern Keynesians are emphatically not advocates of central planning…

Uncontroversial and totally right as long as we do not go Austrian and include price setting as central planning. Indeed some version of this is what libertarian critiques of central banking amount to.

NDP intelligentsia needs to get its shit together

What is going on in NDP land? Exhibit A: the Progressive Economics Forum. Outside of Erin Weir the posts have all been downright glum.

Hello is anybody home?

You just fkin took Qubec.

Hello get off the Prozac!

While there is definitely a low here it is not the NDP which handed the Conservatives a majority it is the broken, incontinent party that is the LPC. That is not my opinion it is the opinion of Liberal like Warren Kinsella. The idea that a weak NDP performance would have helped the Liberals is fanciful.

But there is also a high here.

The NDP not only took Quebec it got back a good deal of the protest vote in BC. And it is exactly the self same wave of protest that Stephen Harper helped cultivate and then surfed to a majority. This is the long game and given last night’s results the NDP is in very good shape. As I commented over at the PEF, if the Conservatives had come from where the NDP came from they would be plotting world domination. I would humbly suggest nothing less is in order for the NDP.

If they do not believe their own success who will? Try being hegemonic would you.

The Day After: Majority, Left-Turn and Sovereignty

The implications of last night’s election are by now a series un-knowable knows and hopeless speculations. I am going to make some comments based on a mix of the two.

The Conservative majority is huge. In the context of a minority government the Conservatives have already shown mass contempt for parliament, its traditions and contempt for agencies such as the PBO and Stats Canada which attempt to provide solid data and reasonably neutral analysis of that data. A majority has serious implications right down to committees. This is likely to be a very opaque and vindictive government full of hubris and the power to act on all those instincts. A hint of things to come was already in the air when one of the Conservatives who actually managed to hold their seat in Quebec proudly smiled and said, to translate and paraphrase: “Quebec will be shut out of power for the next 4 plus years.” That is a very odd position to be taking for a supposedly federalist party. The watch phrase of this government is likely therefore to be: “reward your friends and punish your enemies.” And the enemy is fully sixty percent of the Canadian electorate.

The left-turn is being overdone. As I have already commented on, today’s NDP is not really left-wing. By any sober account the NDP is middle of the road and philosophically reform liberal in their ideological outlook. For the NDP the challenge going forward is huge. The English Canadian contingent of the NDP is more doggedly centrist then their francophone (and a majority of the caucus now) colleagues. So while the centrist strategists will declare victory and attempt to further alienate their left as they look towards mopping up the remnants of the Liberal party the Quebec caucus is likely to push in the other direction. Any talk of a merger with the Liberals is dead. I can’t see the Quebec wing having any interest in it. It was already a tough sell before last night’s results.

On the subject of Sovereignty is where my wild speculation comes into to play. Here it is for what it is worth. I do not think last night marks the end of the sovereignty movement in Quebec. As I have commented before, I think a conservative majority sets the stage for a renewal in the sovereigntist forces. Having thrown their lot in with a progressive federalist party many soft nationalist are going to get a harsh schooling on just how little the official opposition matters in terms of concrete policy. Over time this is going to fuel a sense of alienation and the sense that federalism is unworkable. Pauline Marois and the PQ are likely to be the direct benefactors of last night’s election. Expect a PQ majority in the near future. And this brings us full circle beck to the subject of a Conservative majority and hubris. If as the Conservatives have now proven that they do not need Quebec to win (which is a mistake) they are likely to be exceedingly intransigent vis-à-vis Quebec. This is of course the perfect storm to precipitate a referendum

Much of course depends on the economy and whether or not Harper can get outside his bunker long enough to think clearly. If the economy remains mediocre and Harper retains an essentially vindictive posture then a country that has been taken once again to the brink of break-up with a lack-lustre economy could very well set the stage for the next federal election.