Greek Default and Hyperbole.

Including heading, it took 1,209 words to write this ABC News story on the possibility of a Greek default and exit from the Eurozone.

Two economists, Satyajit Das and Oliver Hartwich, were asked to formulate scenarios about how one such event would develop.

This is a 96-word non-random selection (8% of the text) of what these experts said:

"Financial holocaust", "chaotic abyss", "tsunami", "nightmare", "destruction of wealth", "basically you're talking about people's life savings, their wealth, their incomes being completely wiped out", "it would be the cost of the absolute total destruction of wealth and purchasing power of the Greeks"; "cost anything from 350 billion euros to a trillion euros", "financial equivalent of the holocaust", "atomic bomb", "Hiroshima", "ground zero", "chaos and violence", "violence and chaos will reign", "it could be quite chaotic", "it could be violent", "there could be people storming banks to try and get their money out", "it could become ugly".

My God, readers may say, this is the end of the world. Perhaps we should confess our sins, take the communion, and ask for the last rites.

Perhaps, but read this before calling the priest:

"Take this analogy, he [Das] says: 'If you want to be at Hiroshima to watch what an atomic bomb does, stand at ground zero and look up, this is what you're doing when you're exiting from the euro, because none of us know how this will work.
'We know what the mechanics are, but we don't know what the full effects will be'." (Emphasis added)

So, no one knows what the full effects will be, but these two experts do know that it will be the Apocalypse of John, without the Beast (at least this time they did not mention it).

Come on, people, let's leave the hysteria for a moment.

No one is saying the transition, if it indeed comes, will be easy. But what the Greeks are already going through is not easy either.

This is how things happened in Argentina. Over there they are still awaiting for the nuclear explosion.

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Some other day, I promise, I will address the associated hysteria related to Alexis Tsipras and Syriza, the so-called extremist movement.

TED: Inequality too Hot?

Here's a TED talk by American entrepreneur and venture capitalist Nick Hanauer about income inequality (h/t Occasional Links and Commentary) and why it matters from a strictly pragmatic (as opposed to ethical or moral) point of view.

Personally, I find the talk pretty good: it's clear, direct, brief, overall accurate and easily applicable to other countries, like Australia.

As importantly, it shows that "fairness", "social justice" and other such arguments (which conservatives deride as "touchy-feely") are by no means the only arguments against inequality.

Additionally, Hanauer's wealth and business background lends him the credibility that rightly or wrongly (less rightly, more wrongly, in my opinion) others discussing similar ideas are denied. You know, something along the lines of "if you're so smart, how come you ain't rich". Well, here's a rich and smart guy saying the same thing the poor said, and you didn't believe.

From my perspective, the points Hanauer makes are: demand drives economic growth, employers hire additional staff only when the existing staff is incapable to service new business, inequality hurts demand and taxation policy can reduce inequality somewhat and allow to offer public goods, indirectly fostering demand. Neither ground-breaking, nor mistaken, although undoubtedly a contentious subject to conservatives... and some Marxists (whether you believe it or not!)

Anyway, the video's above, and here are the transcript and slides. You be the judge.

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Incidentally, Hanauer's talk created a bit of a stir in the US. In a nutshell, after recording, TED website decided not to publish it, allegedly on the grounds that the talk was "explicitly partisan", "included a number of arguments that were unconvincing", and "the audience at TED who heard it live (...) gave it, on average, mediocre ratings", as explained by TED's curator Chris Anderson.

Hanauer and others have argued that the talk is "un-incendiary", "familiar to anyone who's ever taken Econ101, or regularly watched business news", and suggest it was not published out of self-censorship. (See here, here and here)

Like I said, I believe the talk is good, if not "earth-shattering" (for one, there are other good reasons why inequality is dangerous and I intend to write about this soon) and as Anderson did not explain which arguments were deemed "unconvincing" and why, I have to conclude that, to me, his explanation sounds like bullshit.

Greece and the Euro.

[A]

There has been a lot of scaremongering involving the possibility of Greece exiting/being expelled from the Eurozone.

As I see it, this frenzy intends to scare the Greeks into accepting the Troika-imposed slavery.

Unlike those charlatans, I will not give the Greek people an unsolicited advice. It's their future and their lives that are at stake, so it's for them to decide.

I, however, agree with the analysis Bill Mitchell produces here. If you are one of my very few Greek readers, or from the only slightly larger handful of other Southern European readers, you should read it.

A solution to the austerity crisis passes for Greece having its own sovereign currency. This requires leaving the Eurozone.

From a Marxist point of view (and I describe myself as a Marxist), a real solution also requires other things, but a first step to any solution, not necessarily a Marxist one, is that.

It won't be easy to take even that first, limited step, but if the experiences of Iceland and Argentina tell us something, it is that growth will return after initial hardship.

Whatever your decision, good luck.

Update:
16-05-2012. It appears that many commentators are freaking out on the possibility of Syriza and Alex Tsipras being propelled into power in the now unavoidable elections.

But what is Syriza? This is what the BBC's Paul Mason has to say:

"At the same time it explains that the resulting government may, in effect, be little more than a left-social democratic government, despite its symbology and the radicalism of some of its voters. By forcing the mainstream parties into positions where they could not express the will of the majority of centrist voters, the EU may end up destroying the Greek party system as it has been shaped since 1974."

It probably won't be worse than the buffoons who ruled Greece until now. But not much of a revolution, I'd say.

So, what is behind this hysteria? Pure stupidity or deliberate scaremongering? You be the judge.

Image Credit:
[A] Flag of Greece. Wikipedia.

Two Hands.

Economists are well-known for their attachment to the "at one hand... at the other hand...".

Well, here's the mighty invisible hand of the Hallowed Market:
















And here's the very visible hand of the people:

[A]

This post is dedicated with love to big-shot economists, paid stooges of capitalism in the media, politicians and Very Serious People all over the world. Particularly, to those charlatans threatening the peoples of Greece and Southern Europe and I am looking towards Brussels, Berlin, Rome, Madrid and Athens.

Let the Greek people decide their own future and cut the crap: not one among you bunch of hypocritical parasites gives a shit about them. So fuck you.

Image Credit:
[A] Author: vidrio. My usage of this photo doesn't imply its author endorses my work. Image licensed under Creative Commons Attribution-Share Alike 2.0 Generic license. Yadda-yadda. Wikipedia.

The RoboJourno

A short news story published by Forbes rattled The Guardian:

Screencapture from Forbes website. Click for a larger image.

I can't blame them.

The apparently surprised reaction, however, is not due to The New York Times Company's finances, but rather because the author of the note (Narrative Science) is not a human being, but a software agent that turns "data into stories of a type which will not be winning many Pulitzers but which certainly pass the Turing test of making one unsure whether they were written by a person or machine". (See here)

As the story, reproduced by The Sydney Morning Herald, put it:

"The irony of the rather poor first-quarter earnings of the New York Times being reported into the Forbes database by a series of algorithms should not be lost on anyone, not least the NYT itself." (See here)

And, according to some, in at least some simple cases, this software is already doing a better job than a human writer would. So it may be too soon for the never-Pulitzer remark.

A previous post deals with a related development, its relationship with inequality and how it is seen by right-wing ideologues.

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Thirty, perhaps even twenty years ago, few would have put their reputation at risk by saying that something like this would happen. Perhaps the more technologically savvy would have readily admitted that this is possible in an assembly line, where repetitive manual operations are performed in a mechanical way; but in a job requiring analysis and synthesis of information?

Don't get me wrong, perhaps it's unfair to demand this from any expert, including big-shot economists.

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For one, Karl Marx did not do this. Working over a century ago, he did a much simpler thing: he observed that the bourgeoisie, in its eternal effort to make a buck, went to great lengths to reduce costs. But there's only so much "cost cutting" to be done on materials: no matter how much you tweak your production line, a hotdog is always a sausage inside a bun.

If after your production tweaking you can't force your workforce to take on lower wages (and that's not always possible, although downsizing, offshoring, outsourcing and labour market liberalization are powerful strategies), you are left with one course of action:

1. invest in newer equipment, requiring less workers or using less skilled workers; 
2. invest in larger plants to exploit economies of scale; 
3. create vertically integrated industrial complexes to exploit "synergies"; and finally, 
4. become a monopolist/monopsonist, so that you can "make" the prices you sell and buy on.

Marx saw much of this and the evidence is in his writings.

Aided by Friedrich Engels and writing for a working class readership, this is how Marx expressed some of this in The Communist Manifesto:

"Owing to the extensive use of machinery, and to the division of labour, the work of the proletarians has lost all individual character, and, consequently, all charm for the workman. He becomes an appendage of the machine, and it is only the most simple, most monotonous, and most easily acquired knack, that is required of him. Hence, the cost of production of a workman is restricted, almost entirely, to the means of subsistence that he requires for maintenance, and for the propagation of his race. (...)
"The lower strata of the middle class - the small tradespeople, shopkeepers, and retired tradesmen generally, the handicraftsmen and peasants - all these sink gradually into the proletariat (...) Thus the proletariat is recruited from all classes of the population." (K. Marx and F. Engels. Manifesto of the Communist Party, chapter 1)

Replace "workman" and "proletarians" with "journalist" and "journalists" and you have an explanation/prediction of what's going on and what could happen next. If you are a small businessperson, look at yourself in the mirror of "small tradespeople, shopkeepers...".

Not bad for a refugee and exile, without formal economics training, working without professorial tenure, computers, Internet, video/phone conferences, electronic media, research assistants, grad students, over one hundred years ago, while enduring terrible misery and political persecution for most of his adult life.

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You should read the Manifesto; unlike most of Marx, it's an easy read. There are worse ways of spending your time.

Think about this: how many among the crowds of dime-a-dozen big-shot economists populating academe, media, think-tanks, business and government, can boast of similar achievement? And one still reads them.

Highway to Hell

So that I'm not accused of being pessimistically biased, I'll say it proud and loud: I like Tony Abbott's budget reply speech. Cross my heart and wish to die.

The AUD 50 bn cuts he promised once he's elected is just what the economy needs and his program to teach 40% of Aussie kids a foreign language (presumably Asian) is spot on, pure genius: after Abbott inflicts the proverbial death by a thousand cuts to the  already wounded and weakened Oz, these kids can at least scape the sinking boat and migrate to Asia, just as Latin Americans, Southern Europeans and Irish try desperately to make it to Australia!

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For some strange reason I was reminded of  that iconic Aussie band AC/DC:

And we're goin' down, all the way, woah

On the highway to hell.

Moving to Oz? (V)

I don't often read John Birmingham's posts at the National Times. His latest, however, is very interesting and quite timely, too.

It's interesting, among other things, because it contains links to these two articles (a recent one from the most unexpected source, Stars and Stripes newspaper, about employment possibilities with the Australian Defence Forces -ADF-; a slightly older one, from The Guardian about Greek migrants).

It's timely because this week the Gillard Government unveiled its 5000-word suicide note... err... 2012-13 Austerian budget and today the ABS released its latest labour force figures (catalogue no. 6202.0, April 2012).

The Stars article contained this passage:

"The job offers could be tempting for U.S. troops as the Afghan War winds down and the Department of Defense looks to trim billions of dollars and more than 100,000 uniformed personnel from its books.
"At a time when other Western countries have slashed spending, the prosperous Australians have been growing their military." (See here)

Sorry, folks, not anymore. The area most affected by budget cuts was defence: AUD 5.4bn during the next 4 years. Further, faced with warnings that budget cuts of about 3% of GDP would be a drag on economic growth and make it unlikely to achieve budget surplus, Treasurer Wayne Swan "is fully prepared to make further cuts to the federal budget to ensure the Labor government delivers a surplus next financial year". (See here and here)

Considering that, according to the Stars, before the cuts the ADF has recruited some 500 personnel from the US, UK, Canada and NZ, if I were one of the 100,000 in the firing line, I wouldn't put too much hope in an Aussie placement.

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But not all is bleak. The ABS data revealed good and bad news. This is how the good news was reported: "Jobless Rate in Surprise Fall". Woo hoo!

After losing ground in the last few days, both the S&P/ASX200 index and the All Ordinaries index rose 0.5%, reported this way: "Shares Buoyed by Jobs Data".

This is how the bad news was reported: "Unemployment Drops as Job Seekers Give Up". Indeed, the seasonally adjusted unemployment rate fell, from 5.1% of the labour force in March, to 4.9% in April. But, during the same period, the labour force itself also fell (from 65.3% to 65.2%): the unemployed are giving up looking for jobs and are no longer considered unemployed... You beauty! (See here and here)

D'Oh!

Good News... Bad News... (III)

The Good News in France...

The Bad News...

It depends on the answer to these two questions:

How likely is it that the "socialist" François Hollande will actually justify the adjective and do something good for his country and Europe? Unlikely: he's a socialist in name only.

However, the Holy Markets already spoke: ASX is afraid, very afraid, which in cases like this, if irrational, is predictable:

"The Australian sharemarket took a heavy beating today, as fears the French and Greek election results could derail the collective response to the eurozone debt crisis sent spooked investors running for the exits.
"The benchmark S&P/ASX200 index plunged 94.7 points, or 2.15 per cent, to 4301.3, posting its biggest loss since mid-December. The broader All Ordinaries index fell 97.8 points, or 2.2 per cent, to 4361.6." (See here)

You know how it is: to mention the blasphemous S-word is like praying to God during the exorcism of young Regan MacNeil.

And who's going to end up seizing power in Greece?

Moving to Oz? (IV)

or, "Question but no Answer"

Last Monday (April 30, 2012) the ABC TV program Question and Answer, broadcast live from Dandenong (VIC) and hosted by Tony Jones, was particularly interesting. The debate was about immigration, racism, unemployment and industrial relations, subjects I have dealt with, to some extent (see here, here and here).

I recommend readers the show in its entirety. However, here I'll focus in an exchange on immigration policy and unemployment.

After a discussion of the problems African migrants face to find a job in Dandenong, and 22:25 minutes into the episode, Dave Simpson, a Caucasian member of the public asked the following question:

"Good evening, panel. My question is why today, with the high number of unemployed, especially in Dandenong being 12% currently I read, why do we have a leader of the Australian Government suggesting that we bring in migrants to this country to replace our jobs which we're struggling to keep ourselves? Why don't we put our finances into improving programs for the skills of our own people and keeping our families growing?"

I am quoting Simpson's whole question, in an attempt to give readers the full picture. I urge those interested to consult the transcript and footage of this particular part of the program, should they find it necessary.

Local libertarians and progressives (even many Marxists), alike, often feel racism underlies questions like this, either because:

1. people asking such questions just use the lack of jobs as an excuse to justify migration cuts, or,
2. even if racism/xenophobia does not motivate the question, it could be interpreted that way or used to those ends.

I'll state it clearly here: I don't know this Simpson man, let alone his motivations. So, I can't vouch for him. Regardless, I find these two standard answers/objections to Simpson's question absurd and I don't think we should ignore it.

However, readers are free to judge by themselves.


Panelist 1: Mark Dreyfus (MP, Labor)

Jones passed the question on to Dreyfus, who spoke at length and in generalities; thus, I'm forced to summarize. For him immigration policy has been inherently bipartisan and is justified because:

"There is a shortage of skills in many industries in this country and part of the immigration program is directed to filling those skills (...). And part of the immigration program is about family reunion. (...)"

To focus the question back from generalities and into Dandenong's case, Jones insisted:

"So what have you identified as happening here in Dandenong, where clearly you've got double the rate of unemployment of the rest of the country or at least of the nearest city, plus you've got a very high rate of youth unemployment? In fact among Sudanese it's 39%."

Distilling Dreyfus' long answer, perhaps one could say he considers racism is indeed a problem.

This could explain why African migrants have a higher unemployment rate than locals, but does not necessarily explain why the aggregate unemployment level in Dandenong doubles that in Melbourne, according to Jones (see above). In any case, Dreyfus did not address an eventual racism in Dandenong or Simpson's concern.


Second panelist: Peter Reith

Reith (former Workplace Relations and Defense minister, last Coalition Government):

"Well, I think the - some of the issues that have been raised, racism and skills, are obviously relevant to the unemployment rate but there are also wider policy positions which affect this and when you think of it from the point of view of the employer, you know, governments should have programs which basically say to employers we want you to give somebody a job, we want to make it easy for you to give somebody a job and the truth is that in that regard, I'll take one issue, which is a big issue for the small business community, a lot of them don't want to give somebody a job because they think they'll end up having to pay unfair dismissal go away money. Now, I think we should do something about that. For small business and for larger business, many of them have to pay payroll tax. So they give somebody a job. What's their reward? Well, they've got to pay tax to the Government. Personally, I think we should get rid of payroll tax. It's a big call but I think it's something we need to do."

That's the full, unedited text of Reith's intervention. So, in a single breath Reith says that some of the issues raised are relevant, and then goes on to ignore them. Next he turns a discussion about unemployment, racism and immigration in Dandenong into a discussion about what's profitable to employers, in general.

I've written about this subject before (see here and here), as it appears to be the raison d'etre of the Liberal Party.

Jones rebukes Reith:

"Peter Reith, the rest of the country has a very low level unemployment and the same laws apply there."

Third panelist: Ged Kearney (ACTU, president)

Kearney accurately notes that "I always find it amazing that whenever there's a problem the Liberal Party (...) turns to drop wages, get rid of penalty rates, sack someone".

But this, however accurate, doesn't answer Simpson's question nor addresses the situation of African migrants in Dandenong.

Jones notes that:

"I'm just going to bring both you and Peter actually back to the question. The last question we asked was whether jobs are being taken by migrants. That was the essence of that question."

Exchange between Kearney and Mirabella

Urged by Jones, Kearney proposed that the entry of 457 temporary residence work visas be conditioned upon employers, specially big mining firms, also re-training a proportionate number of local unemployed workers, warning that "workers on 457 visas are often exploited", as "they have a sickle [sic] hanging over their head saying if you don't accept these lower-than-market wages, for example, we can send you home".

Replying to Kearney, Sophie Mirabella (MP, Liberal/Coalition) intervened. Leaving aside the partisan point-scoring, her answer boils down to: "There is nothing wrong with bringing in people on 457 visas which is very flexible, because you can impose conditions on which employer you will work for and which location and for how long you will be needed. So when those workers are no longer needed they can go back to the country where they came from (...)".

Conclusion

In my opinion, Kearney (ACTU), with her 457 visas/re training proposal, came closest to address Dave Simpson's question. How effective that proposal would be, however, is debatable: there is little to be gained from training the unemployed, if there are no jobs or the willingness to hire them.

Nobody, not even Kearney, actually offered anything resembling a solution to the African migrants' problem. In spite of Jones' repeated efforts to focus the discussion, it was evident the thought of Dandenong did not cross the panelists' minds; but if Dandenong as a whole was overlooked, imagine how much thought these people gave the African migrants.

Interestingly, all parties in dispute were in furious agreement about the need to bring in foreign workers. The point of contention, as evidenced by the exchange between Mirabella and Kearney, is the idea of attaching conditions to employers using 457 temporary workers.

Clearly, what in Kearney's view is a problem of the 457 visa program (namely, that it places foreign workers in a position of complete dependency on employers), is what makes the 457 visa program so attractive to Mirabella.

That goes a long way into explaining why Mirabella did not even make a token reference (like Reith did) to the African migrants or to Simpson's question. As long as immigration is convenient to employers, those details are irrelevant.

In Dreyfus' case the motivation seems less evident. If I had to make a guess, I'd say it gives him the moral high ground, without the cost of solving the issues raised by the migrants and Simpson.

In other words: immigration policy is profitable for some and comfortable for others. And that's what matters.