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The Progressive Economics Forum

The new Grecian formula: still toxic

The latest issue of the quarterly Economic Climate for Bargaining publication that I produce has just been posted on CUPE’s website.

In this issue I have pieces about:

  • the new spectre that is haunting Europe, this time of a public debt crisis
  • impact analysis of Ontario’s HST tax reform by income group, already discussed below
  • some analysis of recent employment, inflation and wage trends

On the public debt “crisis” that the media and many politicians have played up, it should be clear that they are taking tunes out of songbook Naomi Klein wrote about and Rahm Emanuel incapsulated:  “never let a serious crisis go to waste”.  

Many of the major policy measures put in place directly from the priorities identified by the IMF: “fiscal consolidation” focusing more on longer term concerns over age-related increases in pension costs and health care.   The IMF has highlight these concerns frequently in recent years and they are emphasized again in its recent Fiscal Monitor.

A lot has been written about public sector wages and salaries in Greece, but according to the OECD’s stats, they and public sector employment levels are in line with OECD averages.  The real problem in Greece seems to be on the revenue side (as well as a problem with sovereign debt and low rates of domestic saving of course).   Some have written about high rates of tax evasion in the country, but little about why this has developed.  

I think it is pretty natural for tax evasion to increase given the chance when the economic and tax system is seen as increasingly unfair and regressive, as appears to have happened under the previous Conservative government in Greece.  This is a lesson for us to draw from in different ways, I suppose.

On a couple of other topics:

New jobs generally lower paid. I did some calculations of the average wage of the jobs created since the low point in employment during the recession (July 2009) compared to the average wage for the jobs lost from October 2008 to that point.   It’s early times yet in this recovery, but the average wage for the new jobs created–most of which are in services–are about 10% lower than the average wage of the jobs lost.  This isn’t as much a difference that Statscan analysts found when looking at layoffs in previous recessions, but it should still be a concern. 

Hikes in user fees and regulated prices spurring inflation.  Some of the common culprits (fuel, housing prices, insurance) have been driving inflation higher in recent months, but recent stats show that user fees and regulated prices–including for electricity, property taxes, water, telephone and postal services–are increasingly to blame, and these are also reflected in core inflation rates, unlike fuel prices.  

I didn’t see this angle reported in the media or by other economists, though I may have missed it.  Instead, there was a fair amount of concern raised about rising rates of core inflation — and suggestions made this should lead to the Bank of Canada more aggressively hiking interest rates.  But increasing interest rates won’t suppress these type of cost pressures, instead they could have the opposite effect.

Enjoy and share:

Comments

Comment from Paul Tulloch
Time: June 18, 2010, 3:52 pm

Hi Toby,

I posted your pub to the labourstart site. I will do this monthly from now on. Great stuff.

Comment from Paul Tulloch
Time: June 19, 2010, 10:31 pm

Not sure if you seen a recent post by Paul Krugman, but he actually gave a bit of a shot to none other than our own Stephan G, I guess that makes Stephan a star, I wonder how much else Mr. K read of Stephan G.’s work?

http://krugman.blogs.nytimes.com/2010/06/18/fiscal-fantasies-2/

Comment from Paul Tulloch
Time: June 21, 2010, 8:53 pm

Why am I being such a pessimist.

With the G20 about to commence, why is it that we have somehow let the austerity crowd gain the cultural capital again and establish a such a huge. Is this what economics has come down to. Some kind of cultural space that is groomed by armchair economists bought and paid for by the orthodoxy.

Just reading some of the crap that is being passed off as economics in the last couple of weeks is mind altering, or at least those writing it must have been on some kind of hard core narcotics.

From out of nowhere, austerity somehow is a frontal assault on creating growth. I must say rereading some of Schumpeter makes you grab hold of the cultural construct space and start doing the calculus of deceit. When he speaks of the end of capitalism, and the road it travels to get their, I must say, it surely mind boggling that somehow through the cultural levers, and some kind of mass production, perceived stability within a whirlwind of economic chaos has stretched capitals economics limits in maintaining itself.

When you get to the very very heart of what is wrong with the economy (at least from my perception) we get to this notion that capital accumulation driven by profit oriented decisions is just plain broken. Who ever said that to keep driving capital accumulation towards societies needs and wants within the asymmetrical economic spaces that bordered wealth has created, could ever be maintained within a private investment regime. What if somewhere along the line, the public needs, outweighed the private needs. i.e. maybe having having 1000 type of lipstick is enough, or 1000 types of golf balls are enough. When does it stop- when does some kind of rationality kick in and say, how about safe clean drinking water is more important for all.
When do these cultural mechanisms kick in to transform the economics. When do these notion of irrationality and profit oriented regimes come to an end, in claiming all the bureaucratized industrial space. With the austerity further commodified cultural space cranking out these trumpeting budget roll backs, with blatant abandon to considering any alternatives- to me is just irrational, given our historical process we have been through in the past 100 years.

We are at a critical defining point this week at the G20. I really do think about the only news that seemed at least a bit credible in foraging a solution amidst all this grand gathering of the tribes, is Obama’s statement regarding a more cautious approach.

It simply is disturbing watching these many outcomes to the political and economic struggles, after all this history, all this fighting, all this sacrifice, and all the lives lost in the name of rationality, come forth with such irrational baseless austerity arguments. HAs it ever dawned on people that potentially, similar to what occurred after the great depression, that seemingly the only way forward to keep the orthodoxy in tact is to spend what you don’t have. There is no magic tiight rope that we must walk along. It is all culturally determined. Just think about all the assets that were just closed during the last great recession that we were through. The orthodoxy would write that off as some sort of efficiency issue, however, nothing is further from the truth. It was just short term money pinching bureaucrats living within their culturally bean counting generally accepts accounting cocoons, advising for the next quarter. Much of those assets could have been used for other purposes, many of those workers could have been transferred into alternative production.

Yet here we sit, mired with global unemployment, and bankers now telling us we need to be concerned about phantom inflationary pressures again, is this nothing more than hunter gatherers trying to figure out where the next herd of deer may have moved to as the last herd was wiped out based on rituals and customs. Our bankers, news writing economists and politicians all seem to think it is all just this simple.

It does make you wonder, how much waste there is, how much more we could do, and how many problems we could address if we could just move beyond our rituals and customs of the protectors of the rich, the assimilated and the accumulated.

Living through all this is rather hard on the head when one can think outside of the mantras of the bought and sold.

So again, I send this message to all those that can make a difference at the G20, like the labour leaders, the number one issue has got to be, what happens if we dip again, and like presented today by the ITUC, there will be no recovery without a whole bunch of new quality jobs.

okay my g20 rank is almost finished.

just wait till next week.

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