European Elections and the Debt Debacle

John Quiggin61 Comments

That;s the title of my latest piece in The National Interest. Here’s the three-para teaser

European Elections and the Debt Debacle

The victory of socialist François Hollande in the French presidential election has been interpreted, correctly, as a repudiation of the austerity policies imposed on the euro zone by his predecessor, Nicolas Sarkozy, in collaboration with German chancellor Angela Merkel, who endorsed Sarkozy in the election.

Hollande’s win was part of a backlash across Europe, with pro-austerity parties from Britain to Greece taking electoral drubbings. Even in Germany, Merkel’s coalition parties were crushed in a state election in Schleswig-Holstein.

It’s safe to predict that Hollande and Merkel will soon come into conflict over austerity. But Hollande’s real opponents in the struggle over European economic policy are not Merkel and the German government but the European Central Bank and its chairman Mario Draghi.

A moment that has passed?

John Quiggin12 Comments

As I wrote before, my immediate (over-)reaction to George Megalogenis The Australian Moment, was driven by the ageist generational clichés that started on page 1, and reappeared periodically thereafter. But I promised to write something about the serious content of the book and here it is.

My one-line summary is that this is probably the best exposition of Australia’s political history, over the period of market liberal reform, and from the viewpoint of the reformers, that we have seen, or are likely to. In particular, it’s better than the main rival, Paul Kelly’s End of Certainty.
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Zombies reach Australia

John Quiggin17 Comments

The Australian edition of Zombie Economics, updated and with an additional chapter on Economic Rationalism, is about to go on sale. I’ll be appearing at a launch event at Gleebooks in Sydney on Wednesday (9 May) talking with Jessica Irvine of the SMH.

The launch coincides with the US publication of a paperback edition, with a new chapter on Austerity. The Italian translation also came out recently, and there are versions coming in French, Greek, Portuguese, Korean and Simplified Chinese. Collect them all!

Is Australia prepared for a crisis?

John Quiggin65 Comments

I spent yesterday in the Budget lockup for Crikey. There’s little real need for a lockup these days. The original justification was to stop people taking advantage of inside information on things like higher tax on cigarettes, but these taxes are now indexed, and changes are mostly either backdated or applied from well after Budget night. Then, for a while, the Budget was the central statement of economic policy. But nowadays, policies are put out all through the year, and most of the Budget measures are leaked in advance. Still, it’s a traditional piece of theatre and no-one seems to mind.

The first piece I wrote, over the fold, was about the implications of the European crisis

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Megalogenis and the generation game (updated)

John Quiggin29 Comments

Update On reflection, I went a bit over the top here. Generational stereotypes press my hot buttons, but that’s no excuse for the excess aggression in this post. I respect George Megalogenis as a journalist and, except on this point, I’ve found him to be insightful and thoughtful. So, apologises for losing my temper here. I will try to write a proper review of the book soon. End update

When I started reading George Megalogenis’ new book The Australian Moment I was stopped on page 1 by a piece of generation-game nonsense so silly I could scarcely believe someone as smart as GM would write it. Several people commented that it was unfair to judge a book by its first page[1], which is true, though I don’t see that there is anything wrong with commenting on the first page.

Anyway, after finishing a couple of other books that had jumped ahead in the queue (notably Red Plenty about the hopes for, and ultimate failure of, planning in the Soviet Union), I got back to The Australian Moment last night.

It started well. The discussion of the Whitlam government was excellent with some keen insights and use of declassified US State Department cables I hadn’t previously seen[2]. Then on p29, we get a quote from a young fogeyish Paul Keating in 1970, saying that “husbands have been forced to send their wives to work”. Graciously admitting that Keating is too old to be a baby boomer, Megalogenis nevertheless asserts that he “spoke for boomer men”.

Really? On the standard dating of the baby boom from 1946 to 1964, the youngest of them were six years old at the time, and even the oldest (at 24) were mostly unmarried. I doubt that many of them were worrying about household budgets. In any case, the terminology of “sending wives out to work” was crankily old-fashioned even in 1970. Keating was probably the last (in the sense of latest-born) person ever to use it in Australia. Boomer women joined the workforce as a matter of course when they finished school. The big problem for boomers entering the workforce in the 1970s wasn’t the need for two jobs but the lack of any.

At this point, I went to the index to check whether the generation-game stuff gets any better. It doesn’t. To take one of many examples, Megalogenis touts his own “generation W”[3] as responsible for punk rock, and, in particular the Sex Pistols (fronted by John Lydon, aka Johnny Rotten, born 1956), The Saints (Ed Kuepper, born 1955) and The Ramones, (formed in 1974, when most of Generation W was still unborn).

My point here isn’t that Megalogenis needs to redo his generation stuff with more accurate dating[4], though that would be better than nothing. It’s that any approach to political analysis that classifies people by birthdate is doomed to failure. As I pointed out more than a decade ago,

by the time the members of a given cohort reach their late twenties, their life courses have diverged so much that they cease to form a well-defined group with common experiences. The differences between men and women, rich and poor, workers and bosses, married and single, parents and nonparents count for much more than the commonality that comes from sharing a date on a birth certificate.

So what am I going to do here? If I could I would get Megalogenis to rewrite his book, deleting every reference to generations. Since that’s not possible, I will do the next best thing, and skip a couple of pages every time the word is mentioned. With that omission, the book promises to be a good read.

fn1. In reality, of course, given that it’s impossible to read more than a tiny fraction of the books that are printed every year, we all, quite literally, judge books by their covers most of the time.

fn2. No mention of the rumors, rife at the time, of CIA involvement in Whitlam’s dismissal.

fn3. An amalgam of Gens X and Y, consisting of those born between 1964 and the early 1990s. W stands for “Wogs and Women”.

fn4. If you are going to play this game at all sensibly, you need to split the Baby boom into the Vietnam generation, born before 1954 and therefore, if male, liable to conscription, and Generation Jones, born after 1954, who entered the workforce after the collapse of Bretton Woods. But the best thing to do is not to play the game at all.

Housework in Utopia

John Quiggin27 Comments

The immediate reason for this post is the Crooked Timber discussion of my previous post on world meat supplies which morphed into a (mainly First World) arguments about cooking. But my bigger concern is the need for the left to offer a feasible utopian vision as an alternative to the irrationalist tribalism of the right.

My idea of feasible utopia is prosaic compared to some of the utopias that have grabbed attention in the past, but have led either nowhere or into disaster. On the other hand, it’s positively, well, utopian, compared to what’s on offer from Obama and Romney, or their counterparts in other  countries. In essence, it’s an extrapolation of the course we seemed to be on from the end of World War II to the early 1970s, a mixture of social democracy, feminism and environmental sustainability applied to ever broader spheres of activity.

The central element of my idea of utopia is that everyone should be able to live decently, without being forced to spend a lot of time doing crappy jobs. That brings us pretty directly to housework[1], something most of us spend quite a bit of time on, and which involves a fair amount of crappy work, literally and figuratively.

If my conditions for utopia are to be feasible we need two things to be true. First, the total amount of crappy work has to be small enough that the average amount per person is not too large. Second, the work has to be organized so that no one actually has to do a lot more than their share.

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I only read it for the pictures, honestly

John Quiggin81 Comments

The Economist gets some well-deserved derision these days, but it still delivers lots of interesting data, illustrated by graphs that are usually well designed and informative. Via Kenny Easwaran I found this table (published by EconomistDailyChart, but I haven’t yet located the chart) of annual meat consumption per person by country. The data set has plenty of anomalous features, but looks accurate enough for my purposes.

I’ve previously argued that we can feed the world if we make the right choices. . More precisely, our current food system produces more per person than is needed for adequate nutrition, and can continue do so in future if the right policy choices are made. The key problem is distribution, not production.

But the meat consumption data leads me to a more surprising conclusion.  Using current technology and with no additional diversion of food grain, the world could produce enough meet to give everyone an intake comparable to that of the average person in the Netherlands[fn1].

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Info item on modular nuclear reactors

John Quiggin29 Comments

Since lots of readers are interested, or, perhaps, a few are very interested, I thought I would mention that the US Department of Energy is beginning an effort to promote the development of modular nuclear reactors in the US. The plan is to choose two designs, with the object of having them in production by 2022. It’s pretty much a foregone conclusion that one of them will be the Westinghouse SMR, a cut down version of the Westinghouse AP1000 which is the only serious contender remaining as far as conventional reactors are concerned. That leaves one spot for another contender, call it SMRX.

I therefore need to revisit my previous conclusion on SMRs, namely, that none of them except the Westinghouse have any prospect of being in operation before 2020. First, I think it’s pretty clear that the designs that don’t make the DOE cut are finished – in a generally dire funding environment, who is going to back a horse that has already placed third or worse. Second, the DOE 2022 date is an aspirational target that is virtually certain to be missed, at least by SMRX. But, if things go well, 2025 is a possibility. So, by then we might have one conventional design and two SMRs in production on a serious scale.

Classical economics and recession in many countries (wonkish)

John Quiggin95 Comments

Sharp tests of economic theories are rare and hard to find, particularly in macroeconomics. Any examination of particular episodes in economic history necessarily involves counterfactuals, and these provide room for endless dispute. As an obvious example, assessing the impact of the Obama Administration’s 2009 stimulus requires an estimate of how things would have gone without the stimulus, and that is obviously hard to do.

Similarly, arguments about unemployment in the US get bogged down in disputes over whether it is structural or demand-driven and the extent to which policies such as the extension of unemployment benefits to 99 weeks have contributed. 

There is, though, one way in which the current Great Recession/Lesser Depression provides a sharp test of a critical proposition in economics. All forms of classical economics involve, in one form or another, the claim that the causes of unemployment are to be found in labour markets, and not in  macroeconomic variables such as the level of aggregate demand. That’s equally true of the Say’s Law version of classical economics criticized by Keynes, the New Classical macroeconomics of Robert Lucas and the attempts by Real Business Cycle theorists like Kydland and Prescott to explain cyclical fluctuations in terms of labor market shocks.

The crucial problem for all these theories is that labor markets and the associated institutions operate mainly at the national level. Even within the EU, different countries have very different labor markets. So, it is essentially impossible for labor markets in many different countries to move together, except as the result of macroeconomic influences operating at an international level[1]. That means that the occurrence of a sharp and sustained increase in unemployment, taking place in many countries at once, is inconsistent with classical economics.

This point seems trivially obvious, but as far as I can tell hasn’t been made, or at least not clearly. Once it’s conceded, it seems impossible to avoid a view of the world that is basically Keynesian in its analysis of the macroeconomy.  It is possible to hold such a view and reject Keynesian policies on pragmatic grounds, as in Friedman’s critique of ‘fine-tuning’. But the longer and deeper the recession the harder it is to sustain this view.

This seems like a good time to plug the fact that a paperback edition of Zombie Economics will be out soon (May 6) with a brand-new chapter on Austerity, bits of which have been seen here. On 9 May, I’ll be launching an Australian edition, where the added material is a chapter on Economic Rationalism. And a week or two ago, I received some copies of the Italian edition

http://www.stampa.unibocconi.it/articolo.php?ida=9724&idr=6

 

 

 

 

 

 

 

 

 

fn1. Of course, you can cheat and label these macro influences “technology shocks”, then assume them to be internationally correlated. But in the ordinary meaning of technology, there is no plausible way in which economies as disparate as, say, the US and Greece can experience a common technology shock.

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