Blackrock and the AAA rating

Blackrock, the world’s largest asset manager has announced some big steps towards divestment from thermal coal. As I observe in this article in The Conversation, Blackrock’s shift marks the point at which divestment has become the norm for financial institutions, and continued involvement with coal a choice that must be justified in the face of the evidence.

As has already happened with Adani’s Carmichael project, thermal coal miners and power station developers will soon find it impossible to get external finance except from government and government-backed sources, such as China’s Belt and Road initiative. The Australian government is already pushing in this direction.

That brings us to the next step in divestment: government bonds. The Swedish central bank has already dumped Australian government bonds in protest against our climate vandalism. As with earlier rounds of divestment, this is a small start that is likely to accelerate quickly. A large-scale divestment from Australian government bonds would lead to the loss of our AAA rating, and an increase in interest rates across the board, including home mortgage rates. That might finally shock the quiet Australians into realising how disastrous the choices they’ve made have been.

Economic estimates don't account for tragic bushfire toll

That;s the headline for my latest piece for Independent Australia Obviously, costs like ecosystem destruction and the deaths of millions of native animals can’t easily be put into the framework of the National Accounts. But, even if we stick to the National Accounts, Gross Domestic Product is a terrible measure of economic welfare. As I always say, there are three reasons for that; it’s Gross, it’s Domestic and it’s a Product.

MMT and the impossible trinity

There’s generally not a lot of common ground between fans of Robert Mundell (the intellectually respectable face of supply side economics) and those of Modern Monetary Theory. Yet in one very important respect, their ideas are two sides of the same coin.

Mundell got his Nobel Memorial Prize, in large measure, for what’s been called the ‘impossible trinity’, namely that a country can’t have all three of a fixed exchange rate, an independent monetary policy and free capital movement.

Turn that round and it says that, if you are willing to give up one of the three, you can have the other two. If we ignore the idea of controlling capital movements completely (limited controls don’t do the job) the trinity becomes a simple two-way choice: fixed exchange rate or independent monetary policy.

If you are on the gold standard, or part of a monetary union, then you are stuck with a fixed exchange rate, and Mundell’s point is that you can’t have an independent monetary policy. Conversely, if you are a sovereign nation, issuing your own fiat money, and you choose not to defend a fixed exchange rate, you can choose your own monetary policy.

That observation is what gives Modern Monetary Theory its name. Under modern (post-gold standard) conditions, any country with its own currency can choose its own monetary policy.

Underemployment in Australia

I’m working on a revision of a chapter on unemployment (its with Stephen Bell, and the book is the 4th edition of a text called Social Policy in Australia. One of the issues we’ve stressed in previous editions is hidden unemployment, particularly including underemployment.

I haven’t paid much attention to this issue in the last few years, focusing mainly on the set of issues usually tagged as “the future of work”. When I came back to it, I was surprised to find that, even though unemployment has been more or less stable for the last decade, underemployment has risen sharply, and is now at an all-time high of 8 per cent.

The increase is concentrated among 15-24 year olds. I have a few ideas about what might be going on here, but I thought I’d see if readers can point to any serious studies or, failing that, anecdotal evidence on the question.

Cutting the financial sector down to size

That’s the provisional title I used for my latest piece in Inside Story. Peter Browne, the editor, gave it the longer and clearer title “Want to reduce the power of the finance sector? Start by looking at climate change”.

The central idea is a comparison between the process of decarbonizing the world economy and that of definancialising it, by reducing the power and influence of the financial sector. Both seemed almomst impossible only a decade ago, but the first is now well under way.

There’s also an analogy between the favored economists’ approach in both cases: reliance on price based measures such as carbon taxes and Tobin taxes. Despite the theoretical appeal of such measures, it looks as if regulation will end up doing much of the heavy work.

Cheap at twice the price

One of the vanished joys of academic life is the experience, after publishing an article, of getting a bundle of 25 or 50 reprints in the mail, to be distributed to friends and colleagues, or mailed out in response to requests from faraway places (if you live in Australia, everywhere is faraway), often coming on little postcards. Everything is much more efficient nowadays, and I just finished throwing away my remaining collection of reprints. But now, an electronic ghost of the reprint has come to visit.

Earlier this year, I contributed an article to a special issue of Globalizations on “The diffusion of public private partnerships: a world systems analysis”. This is a fair way outside my usual academic area of expertise, a fact which may be apparent to readers who know more about the topic than me, but I wanted to say something about Australia and New Zealand. I just got an email from the publisher offering 50 free e-prints . I don’t think my fellow economists will be much interested, and most would have library subscriptions anyway. So, I’m opening it up to my readers. As I understand it, the first 50 to download it get it for free. After that, anyone really interested can email me for a copy.

Update If you want a copy just click on the link