The lucky country

The third annual report of the Workplace Research Centre’s Australia at Work project came out today. It’s a longitudinal study of the reported experiences of more than 6,000 workers. This year’s was bound to be interesting because it reports the effects of the ‘crisis’ over the last year. Apparently falling interest rates and petrol prices, as well as the stimulus package, have had a broader impact than un(der)employment:

The event that arguably had the most impact on the Australian economy and labour market in 2008 was the Global Financial Crisis (GFC) in October. While expectations that the Australian economy would go into a technical recession were unmet, the impact was felt through a rise in unemployment and reports of further reductions in working hours. However, this report finds that only small sections of the workforce have endured negative impacts from the economic downturn. Around 8 per cent of all respondents report losing a job in the last year, and around two-fifths of these people are now in a job. While the levels of job insecurity remain very low among Australian employees, there has been an increase between 2008 and 2009, from 7 to 12 per cent. Insecurity is higher among private sector employees, at 14 per cent in 2009.

There have been some positive changes that have resulted from the economic downturn. While reports of increased living costs peaked in the first half of 2008, the GFC saw Australian interest rates plummet, petrol prices return to previous levels and the Government distribute a series of stimulatory cash hand-outs. The ease on costs of living is reflected in respondents’ reports of living standards. The proportion of people finding it ‘very difficult’ or ‘difficult’ to get by on their current household income has dropped from 20 per cent in 2008 to 16 per cent in 2009. Correspondingly, those ‘living comfortably’ or ‘doing really well’ has increased from 41 to 45 per cent in the same period. [p. i]

Piracy in retrospect and prospect

The Economist (now behind a paywall) had a couple of features last week claiming that music piracy was “in decline”. The claim was based partly on a survey of British internet users in which the percentage reporting usage of file-sharing networks declined from 22% in December 2007 to 17% in July this year. What it didn’t mention is that you don’t need file-sharing software to pirate music anymore since it’s all over the web in plain Googlable sight.

It also cited a Swedish survey in which 60 per cent of former file-sharers claimed to have cut down or quit, with half of them moving to the legal ad-supported Spotify. If such a free (or near-free) service is available in a country, it’s not surprising a bunch of people would quit bothering with piracy. But it’s hardly the case that the pirates lost: rather they won, cutting a lot of the commercial value out of music recordings and massively increasing the quantity people get to listen to.

A couple of good essays on the social and musical impact of piracy over the decade: Eric Harvey’s at Pitchfork is more detailed. But Jace Clayton – who as DJ /rupture is without a doubt on my list of top ten musicians of the decade – is able to be unambiguously celebratory in a way an industry advertising funded site can’t really be, and without lip service to ‘alternative business models’ blah blah blah.

Published in: on 23 November, 2009 at 8:01 pm  Comments (3)  

Sydney Morning Herald op-eds translated into formal logic

The first in an occasional series. Now I don’t really know my syllogisms from my enthymemes, so further translation may be required. Sydney Morning Herald op-eds do not necessarily lend themselves to a logical treatment, and I have taken the liberty of supplying some unstated but necessary propositions. In other cases, I have unable to discern the missing propositions and have accordingly left them out. Unfortunately, this means not all premises lead to conclusions and not all conclusions derive from premises.

Elizabeth Farrelly, 19 October, 2009: Wake up, Greens, and savour the organic pork belly

1. Books about organic cooking ought to be literary and aesthetic delights, and contain jokes.

2. A book I bought about organic cooking turned out to be nether literarily nor aesthetically delightful, nor did it contain jokes.

3. The nature of books about organic cooking reflects the green agenda.

Therefore: 4. The green agenda is flawed by its lack of literary and aesthetic delight, particularly in regard to jokes.

5. The green agenda is naturally conservative.

6. The voters of the Higgins electorate are naturally conservative.

7. The Green Party is radical.

8. At the upcoming Higgins by-election, the winner will be the Party whose character reflects the views of the voters of the Higgins electorate.

9. The Green Party should attempt to win the upcoming Higgins by-election and future elections of its type.

Therefore: 10. The Green Party should stop being radical and become naturally conservative.

11. A clear sign of the Green Party becoming naturally conservative would be the appearance of a recipe for organic pork belly in future books about organic cooking.

Published in: on 20 November, 2009 at 10:37 am  Comments (4)  

We fought the law, and we won (with the help of some other laws and good lawyers)

Twelve years ago I was arrested on New Zealand Parliament Grounds during a protest, along with 74 others. It was my first year of uni. A bunch of us later sued the government for arbitrary arrest and false imprisonment. This year Beggs v Attorney General finally reached a conclusion with a settlement offer. (It’s in my name by accident of alphabetical order.) I banked the cheque today. A formal apology is apparently on the way. Cheers to Tony Ellis who saw it all through, after defending us for free, for this and for generally inspiring fear and loathing in the hearts of cops and Crown prosecutors over the years. Also to Tony Shaw and everyone else who worked on the case.

It was in the news back in July. This post at Public Address gives the history of the case, and its headline is a hilarious pun.

Published in: on 10 November, 2009 at 7:51 pm  Comments (4)  

Choleric Economic Man


Recessions are part of human nature, says Reserve Bank Governor Glenn Stevens [pdf]:

No country has managed to eliminate the business cycle. No country ever will, because the cycle is driven by human psychology, which finds expression in financial behaviour as well as ‘real’ behaviour. We are seemingly just made – ‘hardwired’, as some would put it – in a way that makes us prone to bouts of optimism and pessimism. Occasionally, we are prone to periods of myopic disregard for risk followed, in short order, by an almost complete unwillingness to accept risk. [p. 2]

‘Behavioural finance’ is one of the new big things in economics. It ditches the assumption of rationality but keeps the methodological individualism. 

Better explanations for booms and busts ditch the methodological individualism, and it follows from that that psychological states don’t matter so much. Rationality we can actually keep, but (1) bureaucratic rather than personal rationality, (2) embodied in a variety of fundamentally different kinds of institution, and (3) bearing in mind that ‘rationality’ does not mean ‘omniscience’ and certainly not ‘knowledge of the future’. (The last might go without saying, but the term has slipped a long way in economic theory.)

Published in: on 9 November, 2009 at 10:40 am  Leave a Comment  

DeLong wrong on Kalecki


Kalecki: The mockery I can take. But this?

Brad DeLong damns Kalecki with praise:


Productivity increased 9.5 percent in the nonfarm business sector during the third quarter of 2009 as unit labor costs fell 5.2 percent (seasonally adjusted annual rates). In manufacturing, productivity increased 13.6 percent while unit labor costs fell 7.1 percent…

Back in the 1930s there was a Polish Marxist economist, Michel Kalecki, who argued that recessions were functional for the ruling class and for capitalism because they created excess supply of labor, forced workers to work harder to keep their jobs, and so produced a rise in the rate of relative surplus-value.

For thirty years, ever since I got into this business, I have been mocking Michel Kalecki. I have been pointing out that recessions see a much sharper fall in profits than in wages. I have been saying that the pace of work slows in recessions–that employers are more concerned with keeping valuable employees in their value chains than using a temporary high level of unemployment to squeeze greater work effort out of their workers.

I don’t think that I can mock Michel Kalecki any more, ever again.

Well I don’t think DeLong knows much about Kalecki.

In Kalecki’s general model of the business cycle, gross profits fall in recessions just as the pre-3Q-2009 DeLong would have expected them to, because investment and hence total demand declines. The effect on profit and wage shares depends on how much total output and employment fluctuates alongside it, and in fact, on how much labour businesses keep (under)employed – exactly the reason DeLong gives for the worldview he maintained before 3rd-quarter 2009 data came along and shattered it.

In “Distribution of National Income” (1956) Kalecki writes that the wage share excluding salaries “does not seem to show marked cyclical fluctuations”. [p. 66 in his 1971 ‘Selected Essays’ book] But once salaries are included, “the ‘real’ wage and salary bill… can be expected to fluctuate less during the course of the cycle than the ‘real’ gross income of the private sector.” [pp. 75-76] Therefore, the wage+salary share increases in a recession. He gives theoretical reasons – mainly that salaried workers’ employment and pay does not vary so much with output – and runs a regression on US data 1929-41 to back it up. This is exactly the opposite of deLong’s representation.

Kalecki does not use the Marxian value terminology, so DeLong’s use of ‘relative surplus value’ is odd.

DeLong seems to be vaguely remembering and mashing into Kalecki’s business cycle theory his infamous 1943 essay “Political aspects of full employment”, although here too Kalecki clearly argues that less-than-full employment is bad for profits: “It is true that profits would be higher under a regime of full employment than they are on average under laissez-faire; and even the rise in wage rates resulting from the stronger bargaining power of the workers is less likely to reduce profits than to increase prices…” [p. 141]

But full employment was likely to meet political opposition from ‘business leaders’ and ‘captains of industry’ (he also never says ‘capital’ or ‘the ruling class’) because of (i) ideological prejudice against Government deficit spending and (ii) any expansion of public investment “which may foreshadow the intrusion of the state into the new spheres of economic activity” [p. 142], and (iii) dislike of the social and political consequences of greater working class confidence that comes with full employment. ‘Rentiers’ would have an additional reason: the erosion of their wealth from more rapid inflation. Kalecki thus predicted a political alliance between rentiers and the intellectual representatives of big industry, “and they would probably find more than one economist to declare that the situation was manifestly unsound.” [p. 144]

DeLong’s account of Kalecki’s views is thus completely misleading. But there’s some wholesale inventories data out today that might just make him rethink everything he thought he knew about Joan Robinson.

Published in: on 6 November, 2009 at 10:57 am  Comments (3)  

All that is solid melts into liquidity (and then sometimes freezes)

What follows is a descendant of the paper I presented at Historical Materialism in London about a year ago. It’s an attempt to introduce a post-Keynesian conception of liquidity into Marx’s theory of credit-money. It has gone through a few versions. After the conference I was invited to present a longer version as a seminar at SOAS to a bunch of post-Keynesians, including the eminent Victoria Chick, Emeritus Professor of Economics at the University of London, whose work I love and draw in the paper. I reworked it quite a bit: at HM I was explaining what I thought Marxian economics can get from Keynes, this time I reversed it to explain what Marx does that Keynes doesn’t. Back in Sydney I reworked it again to turn it into a thesis chapter, which is why you see references to other chapters, etc. I have been meaning to clean it up and submit one version or another to a journal at some point, but thesis has taken over. I’m putting it up here now because what it deals with came up in conversation over at Duncan Law’s blog.

Commodity money, state money, capitalist money

5306. If there should not be currency to settle the transactions at the clearing house, the only next alternative which I can see is to meet together, and to make our payments in first-class bills, bills upon the Treasury, and Messrs Smith, Payne, and so forth.’ — ‘5307. Then, if the government failed to supply you with a circulating medium, you would create one for yourselves? — What can we do? The public come in, and take the circulating medium out of our hands; it does not exist.’ — ‘5308. You would only then do in London what they do in Manchester every day of the week? — Yes.’

– Chapman, a banker, testifies before the Bank Acts Committee in 1857, quoted in Marx [1981: 671]

In some respects, Marx and Keynes appear at opposite poles of monetary theory. Marx is the theorist of commodity-money, for whom “the money-form is merely the reflection thrown upon a single commodity by the relations between all other commodities” [Marx, 1976: 184], and “gold confronts the other commodities as money only because it previously confronted them as a commodity” [ibid: 162]. Keynes, on the other hand, is patron saint of modern cartalists, writing that “the Age of Chartalist or State Money was reached when the State claimed the right to declare what thing should answer as money to the current money-of-account – when it claimed the right not only to enforce the dictionary but also to write the dictionary.” [Keynes, 1930: 5] Commodity-money versus state-money: this disagreement does indeed stem from deeper, fundamental differences of vision regarding the place of the state within capitalism. (more…)

Published in: on 1 November, 2009 at 3:11 pm  Comments (3)