Posts Tagged ‘Princeton University’

John Quiggin on the Absolute Failure of Austerity

January 9, 2019

One of the other massively failing right-wing economic policies the Australian economist John Quibbin tackles in his book Zombie Economics: How Dead Ideas Still Walk Among Us (Princeton: Princeton University Press 2010) is expansionary austerity. This is the full name for the theory of economic austerity foisted upon Europeans and Americans since the collapse of the banks in 2008. It’s also the term used to describe the policy generally of cutting government expenditure in order to reduce inflation. Quiggin shows how, whenever this policy was adopted by governments like the American, British, European and Japanese from the 1920s onwards, the result has always been recession, massive unemployment and poverty.

He notes that after the big bank bail-out of 2008, most economists returned to Keynesianism. However, the present system of austerity was introduced in Europe due to need to bail out the big European banks following the economic collapse of Portugal, Italy, Greece and Spain, and the consequent fall in government tax revenue. Quiggin then goes on to comment on how austerity was then presented to the public as being ultimately beneficial to the public, despite its obvious social injustice, before going on to describe how it was implemented, and its failure. He writes

The injustice of making hospital workers, police, and old age pensioners pay for the crisis, while the bankers who caused it are receiving even bigger bonuses than before, is glaringly obvious. So, just as with trickle-down economics, it was necessary to claim that everyone would be better off in the long run.

It was here that the Zombie idea of expansionary austerity emerged from the grave. Alesina and Ardagna, citing their dubious work from the 1990s, argued that the path to recovery lay in reducing public spending. They attracted the support of central bankers, ratings agencies, and financial markets, all of whom wanted to disclaim responsibility for the crisis they had created and get back to a system where they ruled the roost and profited handsomely as a result.

The shift to austerity was politically convenient for market liberals. Despite the fact that it was their own policies of financial deregulation that had produced the crisis, they used the pretext of austerity to push these policies even further. The Conservative government of David Cameron in Britain has been particularly active in this respect. Cameron has advanced the idea of a “Big Society”, meaning that voluntary groups are expected to take over core functions of the social welfare system. The Big Society has been a failure and has been largely laughed off the stage, but it has not stopped the government from pursuing a radical market liberal agenda, symbolized by measures such as the imposition of minimum income requirements on people seeking immigrant visas for their spouses.

Although the term expansionary austerity has not been much used in the United States, the swing to austerity policies began even earlier than elsewhere. After introducing a substantial, but still inadequate fiscal stimulus early in 2009, the Obama administration withdrew from the economic policy debate, preferring to focus on health policy and wait for the economy to recover.

Meanwhile the Republican Party, and particularly the Tea Party faction that emerged in 2009, embraced the idea, though not the terminology, of expansionary austerity and in particular the claim that reducing government spending is the way to prosperity. In the absence of any effective pushback from the Obama administration, the Tea Party was successful in discrediting Keynesian economic ideas.

Following Republican victories in the 2010 congressional elections, the administration accepted the case for austerity and sought a “grand bargain” with the Republicans. It was only after the Republicans brought the government to the brink of default on its debt in mid-2011 that Obama returned to the economic debate with his proposed American Jobs Act. While rhetorically effective, Obama’s proposals were, predictably, rejected by the Republicans in Congress.

At the state and local government level, austerity policies were in force from the beginning of the crisis. Because they are subject to balanced-budged requirements, state and local governments were forced to respond to declining tax revenues with cuts in expenditure. Initially, they received some support from the stimulus package, but as this source of funding ran out, they were forced to make cuts across the board, including scaling back vital services such as police, schools, and social welfare.

The theory of expansionary austerity has faced the test of experience and has failed. Wherever austerity policies have been applied, recovery from the crisis has been halted. At the end of 2011, the unemployment rate was above 8 percent in the United States, the United Kingdom, and the eurozone. In Britain, where the switch from stimulus to austerity began with the election of the Conservative-Liberal Democratic coalition government in 2010, unemployment rose rapidly to its highest rate in seventeen years. In Europe, the risk of a new recession, or worse, remains severe at the time of writing.

Although the U.S. economy currently shows some superficial signs of recovery, the underlying reality is arguably even worse than it now is in Europe. Unemployment rates have fallen somewhat, but this mainly reflects the fact that millions of workers have given up the search for work altogether. The most important measure of labour market performance, the unemployment-population ration (that is, the proportion of the adult population who have jobs) fell sharply at the beginning of the cris and has never recovered. On the other hand, the forecast for Europe in the future looks even bleaker as the consequences of austerity begins to bite.

The reanimation of expansionary austerity represents zombie economics at its worst. Having failed utterly to deliver the promised benefits, the financial and political elite raised to power by market liberalism has pushed ahead with even greater intensity. In the wake of a crisis caused entirely by financial markets and the central banks and regulators that were supposed to control them, the burden of fixing the problem has been placed on ordinary workers, public services, the old, and the sick.

With their main theoretical claims, such as the Efficient Markets Hypothesis and Real Business Cycle in ruins, the advocates of market liberalism have fallen back on long-exploded claims, backed by shoddy research. Yet, in the absence of a coherent alternative, the policy program of expansionary austerity is being implemented, with disastrous results. (pp. 229-32, emphasis mine).

As for Alesina and Ardagna, the two economists responsible for contemporary expansionary austerity, Quiggin shows how their research was seriously flawed, giving some of their biggest factual mistakes and accuracies on pages 225 and 226.

Earlier in the chapter he discusses the reasons why Keynes was ignored in the decades before the Second World War. The British treasury was terrified that adoption of government intervention in some areas would lead to further interventions in others. He also quotes the Polish economist, Michal Kalecki, who stated that market liberals were afraid of Keynsianism because it allowed governments to ignore the financial sector and empowered working people. He writes

Underlying the Treasury’s opposition to fiscal stimulus, however, was a fear, entirely justified in terms of the consequences for market liberal ideology, that a successful interventionist macroeconomic policy would pave the way for intervening in other areas and for the end of the liberal economic order based on the gold standard, unregulated financial markets, and a minimal state.

As the great Polish economist Michal Kalecki observed in 1943, market liberal fear the success of stimulatory fiscal policy more than its failure. If governments can maintain full employment through appropriate macroeconomic policies, they no longer need to worry about “business confidence” and can undertake policies without regard to the fluctuations of the financial markets. Moreover, workers cannot be kept in line if they are confident they can always find a new job. As far as the advocates of austerity are concerned, chronic, or at least periodic, high unemployment is a necessary part of a liberal economic order.

The fears of the Treasury were to be realized in the decades after 1945, when the combination of full employment and Keynsian macro-economic management provided support for the expansion of the welfare state, right control of the financial sector, and extensive government intervention in the economy, which produced the most broadly distributed prosperity of any period in economic history. (p. 14).

So the welfare state is being dismantled, the health service privatized and a high unemployment and mass poverty created simply to maintain the importance and power of the financial sector and private industry, and create a cowed workforce for industry. As an economic theory, austerity is thoroughly discredited, but is maintained as it was not by a right-wing media and political establishment. Robin Ramsay, the editor of Lobster, said in one of his columns that when he studied economics in the 1970s, monetarism was so discredited that it was regarded as a joke by his lecturers. He then suggested that the reason it was supported and implemented by Thatcher and her successors was simply because it offered a pretext for their real aims: to attack state intervention and the welfare state. It looks like he was right.

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Richard Falk: Another Pro-Palestinian Scholar Smeared as an Anti-Semite

May 9, 2017

Another week, another decent person smeared by the ultra-Zionists as an anti-Semite.

Another decent, self-respecting Jew smeared as ‘self-hating’.

This time, the victim of the smears was Richard Falk, the Albert G. Milbank emeritus professor of international law at Princeton, and Visiting Distinguished Professor in global and international studies at the University of California, Santa Barbara.

Professor Falk describes his experience of Ultra-Zionist abuse and harassment in an article in Monday’s Counterpunch. He had just had his book, Palestine’s Horizon: Towards a Just Peace, published by Pluto Press a few weeks ago, and was on a speaking tour about his book of universities in England and Scotland. The book was published at the same time the UN issued a report concluding that Israel was indeed an apartheid state. This led to such a campaign by the special snowflakes of Zionism against Professor Falk, that the universities of East London and Middlesex cancelled his visits for reasons of health and security. He states that one factor in their decision may have been the highly disruptive behaviour adopted by the Ultra-Zionists when he gave an earlier talk at the LSE.

He states that he had never previously had universities cancel his visits, even though considerable pressure had been exerted on them to do so. And in addition, he suffered personal attacks on him as ‘anti-Semitic’ and ‘self-hating’.

Back in the US, the Zionists attempted to prevent his book selling by writing negative reviews about it on Amazon. He went on Facebook to encourage his friends to write positive reviews of the book. The Ultra-Zionists then resorted simply to writing one or two sentence attacks on the book, which just attacked it without even engaging with the content of the book itself.

This again, was a new tactic to him. He describes it as

‘an innovative version of digital book burning, and while not as vivid visually as a bonfire, its vindictive intentions are the same.’

He states that beyond the attacks on him and his book there is a wider campaign by Israel against its critics, including the Boycott, Divest and Sanction movement, defying UN NGOs, banning foreign tourists from visiting Gaza or the West Bank, and smearing the country’s critics as ant-Semites. As part of this campaign, the entire body of US senators sent a letter to Antonio Guterres, the UN Secretary General, demanding a new, friendlier approach to Israel, an attitude Professor Falk describes as ‘arrogant’ and ‘blue-washing’.

He states that Israel has now embarked on a war of cultural aggression, aided by groups such as UN Watch, GO Monitor and AIPAC, aided by ‘flame-throwing militants’ at street level who resort to symbolic forms of violence. This sets a very dangerous precedent and is profoundly anti-democratic as it is leading government to close down debate on policies affecting the lives of a long oppressed people.

Professor Falk concludes

There are two further dimensions of these developments worth pondering: (1) In recent years Israel has been losing the Legitimacy War being waged by the Palestinians, what Israeli think tanks call ‘the delegitimation project,’ and these UN bashing and personal smears are the desperate moves of a defeated adversary in relation to the moral and legal dimensions of the Palestinian struggle for rights. In effect, the Israeli government and its support groups have given up almost all efforts to respond substantively, and concentrate their remaining ammunition on wounding messengers who bear witness and doing their best to weaken the authority and capabilities of the UN so as to discredit substantive initiatives; (2) while this pathetic spectacle sucks the oxygen from responses of righteous indignation, attention is diverted from the prolonged ordeal of suffering that has long been imposed on the Palestinian people as a result of Israel’s unlawful practices and policies, as well as its crimes against humanity, in the form of apartheid, collective punishment, ethnic cleansing, and many others. The real institutional scandal is not that the UN is obsessed with Israel but rather that it is blocked from taking action that might exert sufficient pressure on Israel to induce the dismantling of apartheid structures relied upon to subjugate, displace, and dispossess the Palestinian people over the course of more than 70 years with no end in sight.

See http://www.counterpunch.org/2017/05/08/israels-new-cultural-war-of-aggression/

This is precisely right. And it hasn’t just happened to Professor Falk, as we’ve seen. The Israel lobby’s determination to stop any criticism of their country’s oppression and ethnic cleansing of the indigenous Palestinians, and their support for the Blairites in the Labour party, were behind the spate of anti-Semitism accusations against Labour members and activists last year, including Ken Livingstone. Mike’s defence of those unfairly accused has seen him also vilified and suspended from the Labour party on the utterly spurious and contemptible accusation that he is an ‘anti-Semite’.

He isn’t. Neither are the people he defended. Many of them were convinced anti-racists, and included Jews, who had suffered real assault and intimidation because of their ethnicity, and gentiles, who had suffered the same for their solidarity with their Jewish friends and comrades.

As Professor Falk makes clear, this is all part of a campaign to prevent proper debate and scrutiny of Israel, and give the Palestinians the peace and justice they deserve.

In the meantime, I find it shameful that British universities have caved in to this foul bullying. Just as it is repulsive and abhorrent that decent people are being slandered as anti-Semites.

I cannot say that I’m entirely surprised by Prof. Falk’s statement that in their cultural war against his book, the Ultra-Zionists had to resort to writing one or two lines, which didn’t engage with the book at all. My impression of the Zionists waging this war is that they’re not just moral pygmies, but also stunted intellectually. They can’t refute what their critics are writing, and so their only recourse is abuse and misrepresentation.

Mike has asked the police to investigate those, who have libelled him, including the Campaign Against Anti-Semitism, the Zionist front group responsible for the smear. There is also a petition by Tony Greenstein urging the Charity Commissioner to strip them of their charitable status on Change.org. Mr Greenstein states that the CAA provides no public benefit and only smears critics of Israel, while having little or nothing to say about the real Fascists and anti-Semites running amok. Mike has a link to the petition on his blog post discussing the libel and deselection: http://voxpoliticalonline.com/2017/05/06/no-council-seat-for-vox-political-writer-because-of-politically-motivated-interference/