Thursday 30 August 2012

The Unlucky Country.

While everybody was distracted with Gina Rinehart's efforts to improve our quality of life by cutting our minimum wages and her taxes (cuts for everybody, hey!), Peter Martin (with Tim Colebatch) was busy reading Variant Perception's report entitled "Australia: the Unlucky Country".

This is what Martin says:
"Warning: After Boom it'll be Dutch and Go" (See here)
Say, what???
"AUSTRALIA faces a run on its currency, a deeper collapse in housing prices and a bank funding crisis to rival Europe's as it tries to come to grips with life after the mining boom, according to a report from a boutique US advisory firm.
" 'The mining sector has crowded out almost all other sectors of the economy and also funneled credit and liquidity into a housing bubble in the real estate sector,' says the report, which has been circulated among global money managers."


At one hand, then, we get news of doom and gloom; at the other hand, we keep hearing that everything is hunky dory: "Mining Investment Boom Rolls on".

So, I suppose it's reassuring that our betters keep pumping money in mining.


I won't tell you what's gonna happen: I don't know.

But I do know this: commodity prices have been falling and with them corporate profits and share prices. Take for instance BHP-Billiton's:

Click to enlarge.

In the year to August 30, BHP lost 16.75% 19.50% (close price today: AUD31.99).

Last May 17, the share price was lower: that's the red dot in the chart. That day Ian Verrender reported:

"BHP Chairman [Jac Nasser] Takes Shot at Canberra Over Industrial Relations and Tax Policies". (See here)

Having distributed tonnes of cash to shareholders via dividends and share buybacks, BHP decided that further investments had to be cut back: "It was only after the speech, when quizzed by reporters, that Nasser conceded the company would not proceed with plans announced last year to spend $80 billion on projects during the next three years".

Apparently, Verrender interpreted the "shots at Canberra over industrial relations and tax policies" as a bit of a diversionary tactic to keep shareholders busy bitching against the Government.

Without denying that, I, however, believe a cut in wages and taxes (does it sound familiar, re Rinehart today?) wouldn't hurt BHP's finances, either. Two birds with one stone.

Anyway, eight days ago, (part of) the announced cutback was named: Olympic Dam:

"BHP Billiton has taken the axe to more than $US30 billion in spending on Australian expansion projects, in the clearest sign yet that the nation is past the peak of its resources boom.
"BHP’s decision to change its strategy on its Olympic Dam expansion came as the company announced a 35% slide in net profit
" ' It doesn't really make a lot of sense in this market for them to be engaging in a major capital spending program and to be bringing more supply onto the market in a time when prices are softening,' said Gavin Wendt, publisher of resources newsletter Mine Life".

Considering this, I am not so sure it's such a good thing that other miners keep pumping money into mining.

But, hey, I'm just a commie on low wages, so who cares what I think?

02-09-2012. I've just read Ian Verrender's last column for the SMH. Together with Adele Horin and Ian McIlwraith, Verrender is leaving the SMH.

It's a curious thing how, after reading an author for a while, one feels like one knew them personally. As your regular reader, I'll miss you guys.

I wish the three of you the best of lucks and I hope I'll soon see your work again.

Wednesday 29 August 2012

Fitzgerald and Rinehart.

F. Scott Fitzgerald (1937),
by Carl van Vechten. [A]
F. Scott Fitzgerald: "Let me tell you about the very rich..."


Today Australia's richest person, Gina Rinehart, became the centre of national attention after selections of one of her regular columns from Australian Resources and Investment magazine were published by the Murdoch press. (See here)

These are some of the statements attributed to Rinehart:
"There is no monopoly on becoming a millionaire." (...)
"If you're jealous of those with more money, don't just sit there and complain. Do something to make more money yourself - spend less time drinking or smoking and socialising, and more time working." (...)
"Become one of those people who work hard, invest and build, and at the same time create employment and opportunities for others."


Rinehart, who has appeared every year in the BRW Rich 200 since 1992, when her father died, owns a personal fortune variously estimated between USD29 and 18 billion. In 2012, her wealth doubled its previous year's estimates, due to then rising international prices of coal and iron ore.

It's unknown how Rinehart's hard work contributed to those price increases, how many metric tonnes did she personally dig from her mines, or the relationship between commodity prices and "drinking, smoking or socialising", but her advise to would-be self-made people is clear cut: work hard, invest and build.

To help us become wealthier, Rinehart proposes to cut our minimum wages (currently at the astronomical level of AUD606.40 per week) and cut her taxes.


This is the rest of Fitzgerald's quotation:

..."They are different from you and me.  They possess and enjoy early, and it does something to them, makes them soft where we are hard, and cynical where we are trustful, in a way that, unless you were born rich, it is very difficult to understand.  They think, deep in their hearts, that they are better than we are because we had to discover the compensations and refuges of life for ourselves."


So, this is how the rich see us: envious, lazy, drunk. So very different from them. They see themselves as so much better and deserving than us: that's what Fitzgerald says in the quote above.

And that's not the worse you can read and hear.

This is what their toadies think of us:
"Most people on the minimum wage are there because they're too lazy to study and learn new skills. (...) If I own a business and need someone to do something a monkey could do then I should be able to hire someone as useful as a monkey and pay them banana's.
(...) anyone who puts themselves in that position as an adult through their own lazy/irresponsible behavior only has themselves to blame. All the people I know who are on minimum wage as adults are there because of their own laziness. Eg, I'd rather jig school/uni/work and smoke fags then learn something so I can pull my own weight in society." (JamesM, Aug 30, 2012, 11:22AM. See here, you may have to click on "More comments")
This is class warfare. They started it and they are shooting at you. If they win, don't expect much mercy or understanding. And, let me tell you, they are winning.

You've been warned, repeatedly, here and elsewhere. You can't say nobody told you. If you're poor, you have two options: either you pretend you didn't read this, grab your banana and pray they'll take you prisoner, or  do something about it.

Your choice.

Image Credits:
[A] F. Scott Fitzgerald, 1937, June 4. Photo by Carl Van Vechten (1880–1964). Wikimedia.

Moving to Oz? (VIII)

Or, "cutting dole would ease labour crisis"

In the previous post on the "Moving to Oz" series I made a first Australian connection to a phenomenon that has been reported in the US: higher unemployment levels could be enabling employers to raise job requirements (skills, experience), which slows down job growth and lowers wages. This phenomenon has been disingenuously interpreted as "skills shortages" or "unwillingness to work".

In this post I will comment on two related developments taking shape in Australia. Regular readers have seen one of them (the Newstart Allowance) mentioned here repeatedly. I intend to show it's connected to the "unwillingness to work" slander.

The other, however, is new.

The old news on Newstart (aka dole)

Today Peter Martin and Dan Harrison (Fairfax Media) report:
"Revealed: Dole Recipients Too Poor to Buy Food, Medication or Heating"
I'd recommend this piece to readers (right-click on the link abovee to open in a different tab). The chart is fully interactive and it shows the percentage of individuals in each category that need to go without an item. To put it graphically: the dole recipient's red-blood stain is larger than for any other group.

For some details: "one in 10 Australians on the dole are unable to obtain a substantial meal each day, one in eight are unable to buy prescribed medicines, and one in 20 cannot heat their homes".

What's alarming is that those results, however, correspond to research commissioned by the Department of Families, Housing, Community Services and Indigenous Affairs.

Produced in 2008, the report, unusually, apparently was never published neither by the Department, nor by its authors, "Peter Saunders and Melissa Wong from the Social Policy Research Centre at the University of NSW".

And it was not considered in the review of social welfare, because the dole was intentionally excluded from its terms of reference. Why was it excluded? I leave that for you to guess.

The Martin/Harrison report comes after last week ANZ's CEO said,
"Welfare payments could be cut to encourage workers to move to labour-starved, booming mining states like WA as part of a radical rethink of how Australia overcomes its increasingly high-cost economy, ANZ chief executive Mike Smith said yesterday".
After shopping centre billionaire Frank Lowy and Rio Tinto's Tom Albanese, Smith was last year's highest remunerated CEO in Australia, with AUD10.86 million. (See here)

Smith's total compensation, expressed on a weekly basis, was approximately AUD209K. The Newstart Allowance is currently AUD245 a week.

The new news: News Ltd, the Dogooder Press

Bill Shorten (Employment minister) and Wayne Swan (Federal Treasurer), both Labor MPs and former trade unionists, have been approached in the previous days for comments on this. These were their reactions:

Shorten understands that it would "be difficult to live on AUD249 (sic)", because he's got a young family and finds it hard enough to make ends meet currently, on his AUD330K a year. (See video here)

At the other hand, Swan did not answer personally, but "a spokesman for Mr Swan said: 'The treasurer's record of protecting low income Australians speaks for itself,' pointing to pension increases and creating 800,000 jobs". (See here)

Clearly, the spokesman didn't think he needed to include the Newstart Allowance or the single parent allowances among the "pension increases".

But if Swan didn't want to talk about this, the subject did not go unnoticed. At 16:25 (EST) today (August 30), these were the results on the search "it's a hard dole life", on Google News:

Right click to enlarge

As can be seen in the screen capture above, the Murdoch press seems responsible for the vast majority of the items.

If I were a suspicious fellow, which I am not, I'd say the Murdoch press is taking advantage of Labor's obtuse, self destructive, neoliberalism, to further rubbish whatever little chance at a re-election the Gillard team may have, and that at no cost for the Coalition, whose chieftains unusually have kept under the radar.

Labor is rightly depicted as betraying the unemployed, and the Coalition is bound to bank on the backlash. And, to be honest, Labor deserves it. They are intent on being economic rationalists; like Mike Smith, for instance.

That's why they will reduce us to hunger and sickness and misery: we are like cattle who need to be prodded to enter the slaughterhouse. It reduces whatever little market power workers have against capitalists.

Or why they are intent on bringing in foreign workers, who are seen as merchandise, to be "imported" (believe it or not, overseas readers, the term is actually used by right and left wing indiscriminate immigration advocates, apparently oblivious of its implications). At best, they will further lower already falling wages; at worst, they offer an easy target for racists, a useful lighting rod against otherwise legitimate discontent (see previous post).


Labor may or may not get Smith's vote, but they can forget about mine. And so that my intentions are clear: I will never, ever, vote for the Coalition or for any racist bigot. This is their democracy, not mine.

By the way, if you are unemployed or on low incomes, you must read the comment thread to this version of the Martin/Harrison report, to see what your fellow Australians think of you. Remember that when the pollies come to ask for your vote.


So that I am not accused of being unfair, Health minister Tanya Plibersek (Labor) announced this afternoon that "the federal government will pour $4 billion into a dental package to provide millions of children and millions of adults on low incomes or in rural areas access to government-subsidised dental care". (See here)

Opposition leader Tony Abbott, always original in his pronouncements, accused the Gillard government of "spending like drunken sailors" or something equally clever.

Tuesday 28 August 2012

Moving to Oz? (VII)

or, "no Indians or Asians, please"

The screen capture below, it was reported yesterday (August, 28) by the Murdoch media (see here), represents a job ad asking for experienced cleaners in Hobart, Tasmania, and allegedly appeared on Gumtree, from where it has since been removed.

According to the information, the openings were not advertised by Coles Supermarkets itself, but by a contractor. A Coles spokesman has expressed concern over the ad's content and denied Coles had previous knowledge of it. (See here)

The ad has generated almost unanimous condemnation, because of its obviously racist and illegal content and
"Tasmania's Anti-Discrimination Commissioner Robin Banks said she wanted to track down the cleaning contractor to pursue possible legal action".

But, apart from its racist content, the ad says a lot more about the Australian labour market than has been noted.

Beyond the ethnic selection requirement, the ad also places the additional perfectly legal selection criteria:
  1. Experience;
  2. Night/early morning work;
  3. Time limit and detail;
  4. Own transport;
  5. It's a contract position (ABN required);
  6. English language fluency.
It's not possible to argue this point on hard data (there is none available, that I know of), but those requirements for a cleaner position in Tasmania (where seasonally adjusted unemployment is currently 6.5%) seem excessive in comparison to other job adverts for comparable occupations.

Take for instance the following ad, also placed recently on Gumtree and selected because it was the first item in the search results list:

The ad is for a cleaner position in Perth, Western Australia, where, according to the latest official figures, unemployment is 3.6%. Note that only White Card and footwear are required; no experience, own transport, or English language fluency are explicitly demanded. Note as well that the position is a casual one (unlike the subcontractor Hobart position, a casual worker's employer contributes to the worker's superannuation) and the rate is to be negotiated.


In my series on "Skills Shortage? US Evidence", I've
"(...) briefly described Peter Capelli's thesis: knowing that the unemployed are looking for jobs, employers are driving hard bargains, the kind of bargain where more skills/experience get less (or at worst, no more) money in exchange. To the lowering effect on wages, this adds a slow job recovery." (See here)
While one should not place too much weight on the "no Indians or Asians" ad as evidence in support of Capelli's thesis applied to Australia, at least in my case, it makes me wonder.

In previous posts in the ongoing "Moving to Oz" series, I've presented similar ads, which, if not the majority, are not unheard of, either. (See here)


A further comment:

After reading and hearing comments on this particular ad, the understandable tendency appears to be to demand punishment for the ad poster, for what seems a clear violation of the Anti-Discrimination legislation.

That's a justified reaction and one I support. But the fact the ad was placed reveals something deep about employers. I am not sure punishment would change this.

Saturday 25 August 2012

Neil Armstrong. RIP.

Neil Armstrong, first man to step on the Moon, died today.

The Apollo 11 crew: Armstrong, Collins, Aldrin. [A]

I was one of the millions of kids around the world glued to their black-and-white TV sets, watching Armstrong and Edwin "Buzz" Aldrin's arrival on the Moon, while dreaming of the day when we would all be astronauts. How remote, heroic, exciting and inviting the future seemed to me, then. Sort of "2001: a Space Odyssey" without HAL.

At the time, I used to see the U.S. as the greatest country in the world. And, boy, I wanted to be an American. I was probably a fool then, just like I am a fool now.

But if in my foolishness I have not changed much, the world has. Or maybe the world didn't change much either, perhaps it was only my old folks who made it look so much better then.

In any case, how dreadful and bleak and mediocre and grotesque it seems right now. 2001 is no longer the distant future.

Armstrong, Aldrin and Michael Collins are not to blame, however. It is us who fucked things up.

Rest in peace, Rocket Man.

Image Credit:
[A] The crew of Apollo 11. Wikipedia.

And I forgot to mention Gerard K. O'Neill, another of my youth heroes. What are the heroes now, the swindler who took billions from greedy fools? The reckless charlatans who screwed things up and made the poor pay for their mistakes?

Niall Ferguson Goes Red (!?)

or, two red-faced big-shot professors

Transcribing a debate with arch-conservative pop-historian, big-shot Harvard professor and TV celebrity Niall Ferguson, in apparent pseudo dialogue format, Matthew O'Brien includes the following bit:
"11. I [O'Brien] said the government had helped created [sic] our middle-class society thanks to pushing mass education.
"NF: Fact checked and--oh no! I really did get that wrong. It was the government that created the middle class, as well as the Golden Gate Bridge! Remind me to tell Karl Marx about this. It will come as news to him that, contrary to his life's work, the superstructure in fact created the base. (Come to think of it, this is going to come as shock to a lot of American liberals too. Imagine! The state actually created the bourgeoisie! Who knew?)"
(See here)
My God! Did Ferguson just go all Marxist!?

Attentive readers would be probably saying as tactfully as possible:
"Ah... sorry Magpie, I don't want to hurt your feelings, but... hmmm... maybe it's a bit too early to call Ferguson a comrade. Mmmm... It seems to me, he was sort of... uh... being sarcastic? And maybe he was also doing a bit of red baiting?"
That's when I fall down to my knees and yell, arms outstretched, my eyes looking at the sky, as if clamoring to the Almighty: "NOOOOO!"

My heart is broken. Imagine the disappointment: the darling of American conservatives citing Marx... not in support, but only to pour scorn into "American liberals".

But at least I am not alone! No siree bob.

Ah! You don't believe me, right? Only silly ole Magpie could fall for that.

Well, no. Not really. Ask UC-Berkeley big-shot Prof. Brad DeLong, scourge of Marx and conservatives alike:
"Niallism Watch: Robert Waldmann Wonders Why Niall Ferguson Believes in the Inerrancy of Karl Marx
"Good catch from Robert Waldmann. Perhaps--but probably not--there are still people on the PEN-list who believe that appeal to the authority of Karl Marx is an argument because he is inerrant. But, otherwise, Niall Ferguson is AALLLOOOONNNNNEEEEEE!"
(See here)

As a good logical thinker, but apparently bad reader, DeLong does not approve of Ferguson for his appeal to Marx's authority...


Without denying the existence of genuine, honest (hell, maybe even well-founded!), criticism, I've long suspected that most of the criticism against Marx is due to dishonesty or unadulterated dumbness.

I'll leave readers decide which category best describes Ferguson and DeLong.


Dear Prof. Ferguson,

I understand you are a professor, and not just any professor, but a Harvard professor. People pay good money to attend your classes, presumably to learn. Pretty please, with sugar on top, for your employer and students' sake, try to make it worthwhile.

Read your books before teaching: the bourgeoisie in Marxist-speak is defined by its ownership of the means of production (say, the guy who owns the factory). When you talk of the middle class, you are talking about income "classes" (those who earn more, but not much more, thanks to the policies you support, than the downright poor).

Let me spell it out for you: bourgeoisie is not the same as middle class. To make it even easier: you are confusing apples and oranges. The middle class has little to do with structure, base or Marx.

One thing is to be an apologist for the rich, another is to speak of things you don't know.

Thursday 23 August 2012

Ryan Against the Machine?!

Paul Ryan and Zack de la Rocha: separated at birth?

What's with politicians and cool bands and musicians?

First, Wayne Swan rubbishes Bruce Springsteen without any mercy: "Swan enlists Springsteen to bash the bosses".

And I've just learned that Paul Ryan ten days ago threw a big bucket of shit on another of my favorites: "Paul Ryan's Favorite Band: Rage Against The Machine?"

Aw man! At least Swan pretends to want something that Springsteen could approve of: to bash the trash.

So, as Paul seems clueless about Rage Against the Machine's ideology.

Or in Tom Morello's words:
"Charles Manson loved the Beatles but didn't understand them. (…) And Paul Ryan is clueless about his favorite band, Rage Against the Machine". (See here)

Wednesday 22 August 2012

Moving to Oz? (VI)

Or, unemployment, wages, migration, NZ and Oz.

The blogosphere is a funny thing. You find all sorts of stuff: the good, the bad and the ugly. And this applies to both, the bloggers themselves, and those souls, sometimes kind, sometimes not so much, commenting their posts.

Peter Martin is a lucky blogger: often his comment threads are fairly good. This one I'm commenting today is not good, it's excellent, thanks to both the commentators and Martin himself.

Martin's post starts by remarking that 54K Kiwis moved to Australia in the year to July, which is a "dramatic increase from the same period a year before". (See here)

Why are Kiwis moving to Oz? According to Martin's information, because unemployment in NZ is higher than in Oz (6.8% vs. 5.2%) and wages in NZ "are around 20% lower than Australia's when measured in terms of purchasing power."

In short:
" 'These are economic refugees,' New Zealand Council of Trade Unions secretary Peter Conway told The Age."
This might be only me, but the difference in unemployment rates doesn't seem excessive; the difference in wages, if true, should be much more meaningful.

Regardless. This is where the following exchange between some users and Martin adds a lot of value to the original post:
Anonymous said to Martin: "So we are getting economic refugees from New Zealand. I thought New Zealand was showing us the way with policies like cutting government spending during an economic slowdown, something applauded by the economic dilettantes in the Coalition." 
To which Martin replies: "Certainly being applauded by the leader of the Coalition: " 'Let's be more like New Zealand' - Abbott"

Marek (another user): "I imagine that NZ's unemployment numbers would look worse if it wasn't for the mass exodus".

Martin: "In the same way as United States employment numbers would look worse if it weren't for prisons. That's a line actually doing the rounds in NZ".


One could interpret that NZ, which the Coalition sees as model for Australia, could be exporting their unemployed to the other side of the Tasman.

Mind you, I have nothing against Kiwis. But wherever they come from, migrants will need jobs once they arrive in Australia.

And this is where the problem lies. According to the Department of Education, Employment and Workplace Relations' latest release (August 2012):
"The Internet Vacancy Index (IVI) decreased by 3.1% in July 2012 in trend terms. Over the year, the IVI has fallen by 15.6% and is now 48.0% below the March 2008 peak. The IVI fell over the year in all states and territories, with the smallest decline being recorded for Western Australia (down by 4.3%) followed by Queensland (13.4%).  The largest decline was in Tasmania (down by 23.3%)." (See here)
And that under a nominally pro-worker Labor government! Just wait until the next Coalition government decides to follow New Zealand's example and stimulate job creation by cutting government spending (including sacking public servants), throwing the unemployed into the garbage bin, and cutting taxes to the rich.

After that, we should expect our wages to go gangbusters and increase, I suppose.

Saturday 18 August 2012

Working Class Hero.

"The Exploitation", by Diego de Rivera [A]

Frankly, I am not much of a John Lennon fan. I don't hate him, either. And I'm more than happy to admit he had some very good songs.

"Working Class Hero" is, perhaps unsurprisingly to my regular readers, my favourite. What really surprised me is that this song appears to be quite popular.

Think about it: whenever the media covers John Lennon, apart from a selection of The Beatles era, "Woman" and, above all, "Imagine" are likely to appear; but never WCH.

Perhaps one could explain this because WCH contains some "coarse language". As the f-word is so fucking unusual, respectable audiences would feel understandably shocked by hearing it, I guess.

Or maybe it's just that "Woman" and "Imagine" are less confrontational, more up-lifting, in a "Kumbaya My Lord" sort of way.

Be that is it may.


But check YouTube for that title. And surprisingly lots of versions pop up.

Here's a sample:

John Lennon's official WCH video in HQ. John as the WCH (?!).

Ozzy Osbourne!

Green Day.

Marilyn Manson (yes, believe it or not, the Antichrist Super Star in person!) is here. I'll admit it, I never imagined Warner singing this song and I do own each of the post-"Smells Like Children" albums. Anyway, it's a very good performance and Warner's voice, half anger, half melancholy, suits it very well.

But, to be honest, my two favourite WCHs were these two:

Tina Dico (from Denmark). Excellent singer, about whom I know nothing apart from what her Wikipedia entry says. Anyway, very well interpreted and produced, in a professional manner.

But the top of the sample, for me, is the video below. Obviously not as well produced, the singer (I think her name is Zoe Louk, apparently from Israel) is a good interpreter. The lack of production gives the video a touch of sincerity that won me:


There was a time when people would say that if one works hard and keeps one's head low, one gets ahead in life. If you're young, ask your old folks.

The most optimistic would say that the sky is the limit. The more level-headed would say that things shall get better for one's kids.

The cynic among us would have added that maybe hard work wouldn't be enough. Perhaps one would have to suck up to one's boss, too; adopt the "each man for himself" frame of mind, that's the smart thing to do. Above all, don't rock the boat; be humble. If the road was humiliating and degrading, full of bitterness, the destination was worth it.

Like the song says:
There's room at the top they are telling you still
But first you must learn how to smile as you kill
If you want to be like the folks on the hill
And, let's face it my friends, many of us did that. Look around you, many still do.

Where did that take us? This is now the best we can get:
"Much of the change being imposed on various industries will inevitably involve redundancies. The most workers can expect is decent redundancy pay, the avoidance of excesses designed to impress the sharemarket, and a preference for redundancies to be voluntary." (My emphasis. See here)
This is how the song puts it:
Keep you doped with religion and sex and TV
And you think you're so clever and classless and free
But you're still fucking peasants as far as I can see
And ask Ross Gittins (author of the quote above): he'll say that there's no point in screaming and kicking.

So, let's keep being humble, reasonable, clever. Don't rock the boat. It didn't work before, but it will sure work now.

Image Credits
[A] The Exploitation, by Diego de Rivera. Wikipedia.This file is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported license. I can't claim Diego de Rivera in any way endorses my usage of his image. Among other things, because he is dead.

Tuesday 14 August 2012

TINA? Yeah, Right.

Richard D. Wolff:
"Over the last six, eight months, I've noticed something. Am I still called to provide criticisms of capitalism? Yes. But something new has happened – call it the maturation of the critical movement here in the United States and the rest of the world. It's no longer enough. They want to know, OK, you're right, capitalism sucks -- for many of them that's a big step, I don't want to in any way minimize it. But they're saying to me, OK, we've read your stuff, now give us an alternative." (See here)
One word: Mondragón. This is its Wikipedia entry and this is Mondragón, in its own words.


This is when right-whingers among my readers would say: "Bah! Nonsense. There is no alternative. Only naked self-interest can make a firm productive: greed is good".

Well, tell that to the BBC:
"Basque co-operative Mondragon defies Spain slump"

A manager would ask about now: "Why would anyone oppose this, if it is so good?"

A partial answer: "Interestingly, the pay of bosses working at Mondragon is capped at six times that of the average worker."


There is no alternative? My ass.


Wolff's website Democracy at Work.

Saturday 11 August 2012

The Narco and the Prez.

Last Friday (August, 10th) as a result of a joint operation with the FBI, the Spanish National Police announced in Madrid the arrest of 4 men, allegedly connected to the feared Sinaloa drug cartel. (See here in Spanish, here in English).

The men, suspected of being connected with a 373 Kg cocaine shipment confiscated by the police last July, were identified as Jesús Gutiérrez Guzmán, Rafael Humberto Celaya Valenzuela, Samuel Zazueta Valenzuela and Jesús Gonzalo Palazuelos Soto and are also wanted in the US for drug trafficking and money laundering.

The news initially attracted attention because Jesús Gutiérrez Guzmán is said to be a cousin of Sinaloa cartel big boss' Joaquín "Chapo"/"Shorty" Guzmán, attempting to expand family business into Europe.

However, the interest shifted to Celaya Valenzuela, after Mexican sources reported that:
"Rafael Humberto Celaya Valenzuela was appointed by [then centrist PRI presidential candidate, now president elect Enrique] Peña Nieto as PRI coordinator of federal candidates for San Luis Río Colorado municipality. He was a PRI pre-candidate for Congress for District One of Sonora state.
"He is a cousin of Víctor Hugo Celaya, an influential Sonora politician for San Luis Río Colorado, a municipality with strong organized crime presence"
. (See here, my translation from Spanish)
Below are two photographs from Celaya Valenzuela's Facebook, showing Celaya Valenzuela and then PRI candidate Enrique Peña Nieto attending electoral campaign events:

Peña Nieto (left), Celaya Valenzuela (Right),
in Mexico DF. [A]
Celaya Valenzuela [left, centre], Peña Nieto
[right, with hat] during the election campaign
launch in Sonora. [B]


PRI has denied any links to Celaya Valenzuela, who, it's claimed, was never officially appointed coordinator. (See here, Spanish)


Enrique Peña Nieto, who appears to enjoy the support of considerable business interests, was considered by The Economist as preferable to Left-winger Andrés Manuel López Obrador ("whose messianic character and disgraceful behaviour, after he narrowly lost in 2006 and declared war on the country's democratic institutions", for challenging the election results) and centre-right Josefina Vázquez Mota (who "has run a shambolic campaign").

Peña Nieto at the World Economic
Forum on Latin America (2010). [C]

According to The Guardian:
"Young, telegenic and impeccably smooth, Enrique Peña Nieto has helped the [PRI] party gloss over a reputation for corruption and periodic authoritarianism accrued over 71 uninterrupted years in power that ended in 2000 when it lost the presidency to the [centre-right] National Action party (PAN)." (See here)


Although no direct links have been alleged to exist between Peña Nieto and the Sinaloa cartel, Latin American prominent politicians have been directly involved in drug trafficking. Manuel Noriega, de facto Panamanian head of state and government, comes to mind.

Image Credits:
[A] and [B] both Facebook images, hosted by El País.
[C] Peña Nieto at the World Economic Forum on Latin America (2010). Wikipedia. Image licensed under the Creative Commons Attribution-Share Alike 2.0 Generic license. Author World Economic Forum. My use of the image doesn't suggest the author's endorsement of said use.

Wednesday 8 August 2012

Australian Exceptionalism: Home Loans Edition.

Australia, it is well-known, escaped the GFC relatively untouched (we won't go into the "relatively") pretty much alone among developed countries. Therefore, Australia is exceptional.

But, why?

For many reasons, experts and talking heads say. Here's part of Gerard Henderson's take:
"Australia, on the other hand, has one of the strongest economies in the Western world with relatively low unemployment, primarily due to the economic reforms undertaken between 1983 and 2007 by the Hawke, Keating and Howard governments. Also, the Australian financial system was well-regulated. Here the reforms initiated by Peter Costello, to ensure the independence of the Reserve Bank and to establish the Australian Prudential Regulation Authority, had a most beneficial effect when the global financial crisis occurred in 2008." (My emphasis. See here)
Mind you, Henderson was not alone in this evaluation. Here's from former Treasury Secretary Ken Henry's own pen:
"Australia's banking industry has emerged from the GFC in a comparatively strong position. Its reputation globally has been enhanced". (See here)
I could go on, but you get the idea: we're so fucking good. Actually, it's not us, but those in power who are so fucking good.

Well, perhaps. But before we throw them a well-deserved party, read "Australia's sub-prime lending", by Leith van Onselen:
"Back in April, The Australian reported how Australia's largest banks are being forced to forgive mortgage debts of borrowers granted loans based on falsified or fraudulent information supplied by mortgage brokers." (See here)
I'll be honest: I was caught with my pants down. In other words, this is news to me. And it taught me a lesson: although I deeply, viscerally despise the Murdoch press, I'll have to take a deep breath and have a look at it... occasionally. My other usual news sources never mentioned this or, if they did, I completely missed it.

In any case, Van Onselen's post links to two news items, so with the readers' forbearance:

"The Mortgage Sting" by Anthony Klan. The Australian, June 5, 2012.

"Hope for Mortgage 'Victims' with Homeowners Winning Battle Against Banks" by Anthony Klan. The Australian, June 4, 2012.


Does this mean that the end is nigh? I don't know. I haven't seen this mentioned anywhere else, and if it was really important I suppose it would have been noticed. But, then again, who knows?

In any case, there, this is my atonement: I'll have to keep a reluctant eye on the Oz version of the Voelkischer Beobachter. Because, however exceptionally good our fearless leaders might be, in the quality of its newspapers Australia certainly is not exceptional.

Skills Shortage? US Evidence (III)

"We have a lot of ways to observe how the unemployed behave. (...)  But none of that mental framework exists for employers and job openings. A cynic might note that economics, as practiced, is a machine for observing and disciplining labor." (Mike Konczal)

In the last two posts in this series on structural unemployment in the US (here and here) we dealt with empirical evidence challenging the view that "structural ('large') changes in technology or in the willingness to work" explain current levels of unemployment in the US. As these views have policy implications, policies advocated on this basis were challenged, too.

Today we'll revisit the two posts. Readers could find it convenient to open them in separate tabs, so as to follow the present exposition.

In the first post we described what the Beveridge curve was and how unemployment/vacancy data appearing to the north/east of it was to be interpreted: either jobless workers were less willing to work or a deep technological change made workers' skills obsolete (more "colourfully", the "job snob"/"technological change" view). In other words, we deduced the causes from the effect.

Before moving on, let's observe that in the labour market, workers represent the supply side of the market; employers, the demand side. Therefore, standard search theory claims that a high unemployment/vacancy ratio is caused by an inadequate labour supply: the story is all about workers' motivations and/or what they offer employers.

In the same post we presented evidence gathered by Faberman and Mazumder casting doubt on the "job snob"/"technological change" view. The specific piece of evidence I am referring to was the chart labelled "4. Labor market trends by skill group. B. Index of labor demand".

Given the previous paragraph, I hope readers will have noticed a subtle shift in focus: from considering the supply side of the market as the cause, we are considering now the demand side (that is, the employers); and, we find that the problem of slow job recovery may be caused by an inadequate demand, that is, by the employers.

For brevity's sake I'll bypass the examination of the MF evidence presented in the second post. Readers are invited to check by themselves: slow job recovery no longer is all about workers, but about prospective employers.

So, if we chose to focus on the jobless' characteristics in isolation, we deduce that they are responsible for joblessness; and we conclude this on the basis of an a priori reasoning: basically the only evidence adduced is the Beveridge curve itself, and, as already stated "from the Figure itself one cannot conclude what causes this".

If, on the other hand, we chose to focus on employers' characteristics, we find that, to a large degree, employers seem responsible for joblessness. And we conclude this, because the data say so.

From this characterization, it seems the choice of one explanation is an arbitrary decision. Next I intend to show it isn't.


In 2010 the Nobel Prize for Economics was awarded to 3 economists, Peter A. Diamond, Dale T. Mortensen and Christopher A. Pissarides for their work in search theory. In December 13, the same year, the recipients delivered their lectures at Uppsala University.

Among other subjects, Mortensen and Diamond treated Diamond's retail market model. Diamond considered a market where shoppers perform a sequential search; the search involves a cost (time, effort, money). In these circumstances retailers establish a unique monopoly price. As Mortensen explained in his oral presentation:
"The rationale is simple: if [the search] is sequential and you are the buyer and you know that all prices are the same, you buy the first time you have an opportunity at the going price. But if all the buyers are buying at the going price, then the sellers know that the workers are not going to search for a second price". [5]
At a monopoly price, retailers get all the benefits of trade, as monopoly prices are higher than competitive prices. Note that in this case, the supply side gets the upper hand.

The direct application of this model to the labour market only requires substituting jobseeker for shopper, employer for retailer. The conclusions remain the same. In the retailers' case, we speak of monopoly price; in the employers' case, of monopsony wages (which are lower than competitive wages). And in this case, it is the demand side, the employers who get the upper hand.

Eventually, researchers (not so much Diamond who moved on to other areas, but Mortensen, Pissarides and others) decided that these original assumptions were unrealistic and "relaxed" them. Models proliferated.

Why these assumptions were found unrealistic? Frankly, I don't know. I can speculate, though: maybe these researchers felt it unrealistic that employers had market power; perhaps they found it more realistic that the jobless are too picky when looking for jobs. This, for instance, could explain comments like those one sees in the media.

In any case, one can chose a specific model, with a given set of assumptions that guarantee one's preconceptions follow. From that, one "deduces" the causes (usually "unwillingness to work", "technological change"). And this is what the economic policy discussion boils down to.

This is where evidence comes to the fore and why the Faberman and Mazumder paper is vital: maybe these other models follow logically from their assumptions (and that in some cases could be a big if), but they are not supported by the evidence.


Regardless, even after all this relaxation was done, this is how Diamond concludes his own exposition (about 35:40 into it):
"I come away with the view (tentative view because we don't have nailed down all these effects) that what we really need is a lot more aggregate demand stimulation in the US. And of course any attempt to measure mismatch is gonna be sensitive to the tightness of the labour market. The idea that you can measure that as something independent of tightness and then say what's left is cyclical seems to me to be basically wrong". [2]
Again, the primacy of evidence comes to the fore.

And yet, all the Very Serious People in the US, Europe and Australia keep talking about skills shortage, mismatch and such, with assurance only matched by their evident ignorance and possibly by the vested interests speaking through them. And they do that, basically on one statistic: the Beveridge curve. That is, when they actually mention evidence.

And all Very Serious People keep talking about austerity.

In the previous discussion we mentioned that, depending on context and assumptions, sometimes supply, sometimes demand, gets the upper hand in search models. But in the economic policy discussions, one only sees references to the supply side of the labour market: the workers. Here I close this exposition, by invoking Konczal's quote opening this post.


As time permits (and I'll remind readers that I'm doing this on my spare time) I intend to proceed this investigation, focusing now on the Australian labour market.

Further Resources:

For an accessible exposition on search theory, see Andolfatto.

[1] Andolfatto, David. (2006). "Search Models of Unemployment". A preliminary document prepared for the New Palgrave Dictionary of Economics, 2nd. Edition.

[2] Diamond, Peter A. (2010). "The Nobel Prize Lectures in Uppsala 2010 - Economic Laureates - Peter A. Diamond".

[3] Diamond, Peter A. (2010). "Unemployment, Vacancies, Wages. Prize Lecture", December 8, 2010.

[4] Mortensen, Dale T. (2010). "Markets with Search Friction and the DMP Model. Prize Lecture", December 8, 2010

[5] Mortensen, Dale T. (2010). "The Nobel Prize Lectures in Uppsala 2010 - Economic Laureates - Dale T. Mortensen"

Saturday 4 August 2012

Swan, Springsteen and Oz.

I was going to finish today my series on the "job snob"/"technological change" myth, when acting PM and Treasurer Wayne Swan (Labor), by coming out of the closet as a devout Bruce Springsteen fan, forced me to change plans.

Now, as excuses go, that's a really crappy one, readers might say.

Perhaps; but, believe it or not, this was one of the big topics in Australia this week, as this Google Trends screen capture (taken Sunday, August 5, at 07:08 am EST) shows, comparing with the industrial relations legislation recently reviewed:

Screen capture from Google Trends. Right-click for a larger image in a separate tab.

As I see it, whether one believes him or not, Swan is claiming to share working class feelings and fears.

He is also reiterating a point he's made before: Australian plutocrats are becoming a danger to democracy (see here and here).

That Phillip Coorey (Fairfax Media) seems to share my views gives me some confidence my reading isn't entirely off the mark (see here).


But if that was pretty clear to some, it wasn't so clear to most.

For one, it wasn't clear to Australia's Very Serious People. For them, to invoke a singer and songwriter for his emotional appeal to working class people is nothing short of ridiculous. VSP leave emotions to lower classes, as we know; they are rational intellectuals, well above such things, in the best randian/misesian tradition.

For shadow treasurer Joe Hockey (see here), for instance, inspiration comes from much higher sources, as Adam Smith, John Stuart Mill or their Australian "equivalent" Robert Menzies!

Which goes to show that Hockey's interests have changed fast, over a few years:


It seems a considerable segment of our middle class (or petit bourgeoisie, as Marx used to call them) can't really wrap their minds around the idea that Springsteen may have something to say to Australians, mainly poor Australians.

Take for instance Fairfax Media's columnist Paul Daley, an apparently progressive or at least centrist bloke. For Daley, the problem with Swan's musical choices is a generational one: Generation X would be more partial to Aussie bands like The Triffids, the Go Betweens, Midnight Oil, or singer/songwriter Paul Kelly.

Don't get me wrong: they are terrific bands. Paul Kelly clearly appeals to working class audiences (I'm a fan, to be honest). I have no problem with the idea that they appeal to Daley and many others like him, either.

The point Daley misses is that, with Midnight Oil's exception, these bands and singers don't deal with political issues, as Springsteen often does; they deal with personal issues. And Swan's central message, sincerely felt or not, is about politics.

The Triffids' "Wide Open Roads", which Daley nominated "as Australia's brooding anthemic equivalent for my generation", for example, is about a large, depopulated country and its vast landscape; about loneliness and isolation on the road. Or, at least, that's my reading.

I'm speculating here, but Daley's inability to see this difference could be explained because for him (and he claims his generation) political issues are irrelevant or at least secondary, perhaps due to his presumably mid/upper middle class circumstances afford him that.

The video below, where Springsteen, his band and Tom Morello perform "The Ghost of Tom Joad" (inspired by the character from John Steinbeck's "The Grapes of Wrath"), should speak to a modern working class Australian audience, even if it doesn't speak to Very Serious People or middle class Australians.

Above all, it should speak, and loudly, to would-be migrants:

Prospective migrants should place themselves in the shoes of the Joad family: Australia could be their very own new California. Read the book, it's a terrific reading. Enjoy the music.

Thanks Boss, Tom and all.

05-08-2012. I've just read Springsteen's brilliant biographical/musical profile, by David Remnick, from The New Yorker (July 30, 2012):

We Are Alive - Bruce Springsteen at sixty-two.