Depression and Democracy | Paul Krugman

Paul Krugman says that the current ‘depression’ and turmoil in Europe is aiding and abetting the rise of authoritarian rule in Europe. He points to the anti-democratic actions of Fidesz in Hungry, a party he refers to as ‘Centre-Right’. People should  stop using this ‘centre’ stuff as there is nothing ‘moderate’ about what is going on. While everything he describes here is true, it’s a little odd that there is no mention of a far right party fascist being appointed Minister for Infrastructure in Greece in a technocratic government appointed by the ECB, or about a future EU treaty would make any alternative to expansionary fiscal contraction illegal in Europe.

The details are complex. Kim Lane Scheppele, who is the director of Princeton’s Law and Public Affairs program - and has been following the Hungarian situation closely - tells me that Fidesz is relying on overlapping measures to suppress opposition. A proposed election law creates gerrymandered districts designed to make it almost impossible for other parties to form a government; judicial independence has been compromised, and the courts packed with party loyalists; state-run media have been converted into party organs, and there’s a crackdown on independent media; and a proposed constitutional addendum would effectively criminalize the leading leftist party.

Taken together, all this amounts to the re-establishment of authoritarian rule, under a paper-thin veneer of democracy, in the heart of Europe. And it’s a sample of what may happen much more widely if this depression continues.

The EU Treaty is a disaster for the Left | Owen Jones

In the New Stateman Owen Jones, author of Chavs: The Demonisation of the Working Class, has a take on what the EU is proposing. The EU will from now on be exactly like Ireland. We didn’t import neoliberalism. We’re exporters of oligarchical rule.

Stop your crowing about Cameron leaving Britain marginalised, lefties. The proposed EU treaty is perhaps the biggest catastrophe to befall the European left since World War II.

Sounds like semi-deranged hyperbole? Consider this. As Paul Mason has written, “by enshrining in national and international law the need for balanced budgets and near-zero structural deficits, the eurozone has outlawed expansionary fiscal policy.”

Read that last bit carefully. Left-wing governments of all hues will be effectively banned by this treaty. If the French or German left return to power in the near future (and they are in a good position to do so), it will be illegal for them to respond to the global economic catastrophe with anything but austerity. An economic stimulus is forbidden — because the treaty has buried Keynesianism.

Michael Perelman | Occupy Chico State

Good interview with Michael Perleman for his local NPR station which he would have given to a Occupied Chico State teach-in broadcast if the location for the talk hadn’t been locked down due to a ‘bomb scare’. Perelman, who’s the author of the highly recommended Invisible Handcuffs talks about previous social movements for change including “the Bonus March, the GI Bill, which made higher education more accessible, then Reagan’s 1966 institution of tuition for the previously tuition-free university system, culminating in the mess we have today.

This is an unedited version of the discussion

Justice for Magdalenes group | It’s wrong to appoint Seán Aylward to the Council of Europe’s Committee for the Prevention of Torture

Letter from the Justice for Magdalenes group  in the Irish Times about the inappropriateness of appointing former secretary general of the Department of Justice, Seán Aylward to the Council of Europe’s Committee for the Prevention of Torture.

Sir, - The appointment of former secretary general of the Department of Justice, Seán Aylward to the Council of Europe’s Committee for the Prevention of Torture (Home News, December 8th) could not be more inappropriate.

Mr Aylward displayed an extraordinary attitude towards women and girls who were incarcerated in Magdalene Laundries during his appearance before the United Nations Committee Against Torture (UNCAT). At the examination in Geneva on May 24th, 2011, acting UNCAT chairperson Felice Gaer questioned Mr Aylward’s statement that “the vast majority of women who went to these institutions went there voluntarily, or if they were minors, with the consent of their parents or guardians”.

She said, “We had testimony about locked doors and people being captured by the police and returned to the institutions - so there’s State involvement as well.”

She added, “There were physical barriers and there seems to have been an intent to confine people” and she stated, “I think ‘voluntary’ means that one makes a choice; I think that ‘voluntary’ means that one is informed; I think that ‘voluntary’ means that one is then free to leave. I think it means that there is nothing coercive in this context.” She asked, “Can you identify any examples of efforts by State authorities to inspect or regulate these facilities? Were they exempt from standards? And can you tell us what means were taken to ensure that there were no acts or omissions that amount to torture”?

This appointment is a shocking validation of Mr Aylward’s attitude to some of the most vulnerable in our society and will come as a slap in the face to women who have suffered in Ireland’s Magdalene Laundries, who still await their validation in the form of a State apology. - Yours, etc,

MARI STEED, JAMES M SMITH, CLAIRE McGETTRICK, KATHERINE O’DONNELL, MARY MCAULIFFE, MAEVE O’ROURKE,

Justice for Magdalenes,

Bailieborough,

Co Cavan.

Piketty, Saez, and Stantcheva | Taxing the 1%: Why the top tax rate could be over 80%

[...]

At a time when most OECD countries face large deficits and debt burdens, a crucial public policy question is whether governments should tax high earners more. The potential tax revenue at stake is now very large. For example, doubling the average US individual income tax rate on the top 1% income earners from the current 22.5% level to 45% would increase tax revenue by 2.7% of GDP per year,1 as much as letting all of the Bush tax cuts expire. But, of course, this simple calculation is static and such a large increase in taxes may well affect the economic behaviour of the rich and the income they report pre-tax, the broader economy, and ultimately the tax revenue generated. In recent research (Piketty et al 2011), we analyse this issue both conceptually and empirically using international evidence on top incomes and top tax rates since the 1970s.

[...]

Up until the 1970s, policymakers and public opinion probably considered – rightly or wrongly – that at the very top of the income ladder, pay increases reflected mostly greed or other socially wasteful activities rather than productive work effort. This is why they were able to set marginal tax rates as high as 80% in the US and the UK. The Reagan/Thatcher revolution has succeeded in making such top tax rate levels unthinkable since then. But after decades of increasing income concentration that has brought about mediocre growth since the 1970s and a Great Recession triggered by financial sector excesses, a rethinking of the Reagan and Thatcher revolutions is perhaps underway. The United Kingdom has increased its top income tax rate from 40% to 50% in 2010 in part to curb top pay excesses. In the United States, the Occupy Wall Street movement and its famous “We are the 99%” slogan also reflects the view that the top 1% may have gained at the expense of the 99%.

In the end, the future of top tax rates depends on the public’s beliefs of whether top pay fairly reflects productivity or whether top pay, rather unfairly, arises from rent-seeking. With higher income concentration, top earners have more economic resources to influence social beliefs (through think tanks and media) and policies (through lobbying), thereby creating some reverse causality between income inequality, perceptions, and policies. We hope economists can shed light on these beliefs with compelling theoretical and empirical analysis.

Thomas Piketty, Emmanuel Saez, Stefanie Stantcheva © voxEU.org [These extracts are reprinted under voxEU's rules on reproduction -- Tombuktu.]

Martin Wolf | ‘Merkozy’ Failed to Save the Eurozone

Martin Wolf in the Financial Times argues that the Merkozy solution won’t work, as it is doesn’t address the cause of the crisis or the problems within the Eurozone.

Now consider average current account deficits over 1999-2007. On this measure, the most vulnerable countries were Estonia, Portugal, Greece, Spain, Ireland and Italy. So we have a useful indicator, at last. This, then, is a balance of payments crisis. In 2008, private financing of external imbalances suffered “sudden stops”: private credit was cut off. Ever since, official sources have been engaged as financiers. The European System of Central Banks has played a huge role as lender of last resort to the banks, as Hans-Werner Sinn of Munich’s Ifo Institute argues.

If the most powerful country in the eurozone refuses to recognise the nature of the crisis, the eurozone has no chance of either remedying it or preventing a recurrence. Yes, the ECB might paper over the cracks. In the short run, such intervention is even indispensable, since time is needed for external adjustments. Ultimately, however, external adjustment is crucial. That is far more important than fiscal austerity.

In the absence of external adjustment, the fiscal cuts imposed on fragile members will just cause prolonged and deep recessions.

Dean Baker provides a simple truth…..

The NYT had a good piece on Ireland’s effort to get back on a solid growth path. At one point it refers to a 5.4 percent rise in exports as an encouraging sign:

“driven by gains from Pfizer, Intel, SAP and other multinational companies that were drawn to Ireland in the 1990s and 2000s by its low taxes, well-educated English-speaking work force and access to the European market.”

Actually, this picture is less clear. Many of the exports associated with these companies are likely to be associated with increased imports as well. For example, if Intel is exporting more microprocessors assembled in Ireland it is also importing more components. The net gain to Ireland’s economy might be very small since most of the value added may take place elsewhere.

Gary Younge | Indifferent elites, poverty and police brutality – all reasons to riot in the UK

Four months later the absurdity of the official response to the riots is painfully clear. It took a while. Given the spontaneous, geographically diverse and inchoate nature of these disturbances, there was never a credible single cause. Even if there had been, there were few among the rioters who would have been in a position to articulate those grievances. The journey from the margins to the mainstream is a perilous one, which few make intact without losing their voice.

The government’s narrative may have been ridiculous, but in the absence of a counter-narrative, many believed it plausible. The impression of unclaimed chaos and the shots of burning cars, devastated shopkeepers and hooded youth lent credibility to claims that this was nothing more than young hooligans running amok. “A riot,” said Martin Luther King, “is the language of the unheard.” Now, thanks in no small part to a study undertaken by the Guardian with the London School of Economics, we’ve had a chance to listen.

It’s Official - Austerity isn’t Working

Michael Burke has some interesting things to say about the 2012 Estimates published over the weekend. Ultimately, the real indicator is not the Estimates, but the General Government Balance which shows that the deficit will be higher next year. Considering that the effect of last year’s austerity budget can be clearly seen to have failed in its objective of correcting government finances, why is the FG/Labour government following the same course again? More to the point “is there actually some other, unstated aim of policy?”

“These Estimates, indeed the very name Exchequer, are a relic of colonial history which was to account to for how much Britain was kindly granting this country (and not at all including the private sector looting which was the purpose of the project). A similar process still takes place in the North of this island and it is a mark of how little the official outlook has changed here in the last 90 years that they are still used.
Instead, the EU insists on a definition of the General Government Balance which actually includes all aspects of government finances, not these ‘Estimates’ which are just a part of central government expenditure and income. In particular it includes, where the Estimates do not, the payments and receipts of the Social Insurance Fund, the National Pension Reserve Fund, Local Authorities and other items. The projected outcome for government finances on the GGB measure is shown below. This shows the deficit on the GGB rising in 2012. This was after €6bn was taken out of the economy in fiscal tightening in last year’s Budget, and an entirely new (and regressive) tax introduced in the form of the USC. The verdict is clea: the deficit is rising, not falling. The deficit as a proportion of GDP is projected to stabilise, but only because of a growth forecast which may, or may not be realised.”

300 economists give support for the Occupy Wall Street movement

On November 13th 2011, economists from the University of Massachusetts Amherst issued an open statement pledging support to the Occupy Wall Street movement. Since then about 300 economists have added their names. Below is the statement of support and the alphabetized list of economists who have signed it.

We are economists who oppose ideological cleansing in the economics profession. Equally we oppose political cleansing in the vital debate over the causes and consequences of our current economic crisis.

We support the efforts of the Occupy Wall Street movement across the country and across the globe to liberate the economy from the short-term greed of the rich and powerful one percent.

We oppose cynical and perverse attempts to misuse our police officers and public servants to expel advocates of the public good from our public spaces.

We extend our support to the vision of building an economy that works for the people, for the planet, and for the future, and we declare our solidarity with the Occupiers who are exercising our democratic right to demand economic and social justice.

Among the signatories: Stephen Kinsella / University of Limerick

Here’s a video

Occupy Economics from Softbox on Vimeo.