Socialisation Yadda Yadda

{W}ithin bourgeois society, the society that rests on exchange value, there arise relations of circulation as well as of production which are so many mines to explode it. (A mass of antithetical forms of the social unity, whose antithetical character can never be abolished through quiet metamorphosis. On the other hand, if we did not find concealed in society as it is the material conditions of production and the corresponding relations of exchange prerequisite for a classless society, then all attempts to explode it would be quixotic.)

—Marx, Grundrisse

Hat Tip to Harrison Fluss. 


Taft on house prices

Good blog over at the Irish Left Review on house prices.

Here’s the important and pretty interesting graph:


He takes the data from the the Department of Environment’s Housing Statistics. 

However much of the blog argues that the gap was speculative and this shows that “household debt did not become a crisis because people ‘went nuts’ buying houses”. 

I find this hard to believe. A shift in house prices like this is a transfer of money from homebuyers to homeowners. Now sure, that includes property developers who bought in order to sell and obviously began with owning a lot. But it also involves people who simply owned houses, i.e. ordinary middle aged middle class ‘working people’, to use Uncle Joe‘s phrase.

We can’t explain everything by blaming the ruling class. Sometimes one section of the class gains at the expense of another. In the case of the housing bubble, homeowners gained at the expense of home buyers.

(Obvious objection, home owners still needed to own homes after they sold them. Sure, but lets imagine a couple in their 50s own a three bed family home and sell it for €500,000 to buy a smaller 2 bed for €300,000 now that their kids are grown up. Say the prices have halved so that the 3 bed is now €250,000 and the 2 bed is €150,000. The couple would still be€100,000 better off than they would have been without the bubble.)

German vs Irish Debt/GDP

It is often heard from German polticians that Irish debt levels are the reasons for this problem. While every economically literate Irish person knows that’s not true. 

So here’s the graph:


Ireland is blue and Germany green. Five points:

1. Germany is on a clear, slow but steady upward trajectory throughout the period. Ireland on the other hand is on a clear, slow but steady downward trajectory up until the financial crisis.

2. It is clear that Ireland’s debt problems arose because of the the crisis, they did not cause them.

3. The upper limit for debt to GDP under the Copenhagen Criteria and the Stability and Growth Pact is 60%. That is basically where Germany starts and then rises above. With the exception of 2002, Germany has been in breach of the SGP consistently since 2013.

4. The gap between Irish debt levels and German debt level today is smaller than today than they were before the crisis. German debt was roughly 30-35 percentage points higher than Irish debt before the crisis. Irish debt/GDP is roughly 25-30 percentage points higher than Irish debt/GDP before the crisis.

5. Given all of this, it is clear that Ireland’s debt problems are not because of it’s pre-crisis debt level but rather from the rate of change of Ireland’s debt during the crisis. This is important because the increase in debt, arising largely from transfer payments*, could not have been avoided. Having a lower debt level to begin with would have had no impact here. In fact there if Ireland had entered the crisis with lower debt levels the relative increase increase in its debt would have been higher not lower. Perhaps, this might have been resulted in Irish interest rates increasing higher and faster than they actually did.

Finally, here is Spain (brown), Portugal (pink) and the UK (mustard?) added to the graph.

Again the argument for debt causing the crisis is hard to make. And the interest differential between Spain and the UK is clearly being driven, not by the debt level, but by something else…. I wonder what that could be?**

*Bank debt clearly matters here but its short run implications are actually more ambiguous than supposed.

** The answer is €

All data from Eurostat

Osborne’s supporters don’t support him anymore

This is nearly a year old now. It’s from August but I missed it.

From the New Statesman:

On 14 February 2010, 20 prominent economists wrote to the Sunday Times in support of George Osborne’s deficit reduction strategy. They said: “… in order to be credible, the government’s goal should be to eliminate the structural current budget deficit over the course of a Parliament, and there is a compelling case, all else equal, for the first measures beginning to take effect in the 2010/11 fiscal year.” The Chancellor hailed their letter as a “really significant moment in the economic debate”.

Two and a half years later, the UK is mired in a double-dip recession and Osborne is set to borrow £11.8bn more than Labour planned. For this week’s issue of the New Statesman (out tomorrow), we asked the 20 whether they regretted signing the letter and what they would do to stimulate growth. Of those who replied, only one, Albert Marcet of Barcelona Graduate School of Economics, was willing to repeat his endorsement of Osborne. Nine urged the Chancellor to abandon his opposition to fiscal stimulus and to promote growth through tax cuts and higher infrastructure spending, while others merely said “no comment” or were “on holiday”.

Kalecki on Fascism

Michal Kalecki on Fascism in ‘Political Aspects of Full Employment’:

“1.  One of the important functions of fascism, as typified by the Nazi system, was to remove capitalist objections to full employment.

The dislike of government spending policy as such is overcome under fascism by the fact that the state machinery is under the direct control of a partnership of big business with fascism.  The necessity for the myth of ‘sound finance’, which served to prevent the government from offsetting a confidence crisis by spending, is removed.  In a democracy, one does not know what the next government will be like.  Under fascism there is no next government.

The dislike of government spending, whether on public investment or consumption, is overcome by concentrating government expenditure on armaments.  Finally, ‘discipline in the factories’ and ‘political stability’ under full employment are maintained by the ‘new order’, which ranges from suppression of the trade unions to the concentration camp.  Political pressure replaces the economic pressure of unemployment.

2.  The fact that armaments are the backbone of the policy of fascist full employment has a profound influence upon that policy’s economic character.  Large-scale armaments are inseparable from the expansion of the armed forces and the preparation of plans for a war of conquest.  They also induce competitive rearmament of other countries.  This causes the main aim of spending to shift gradually from full employment to securing the maximum effect of rearmament.  As a result, employment becomes ‘over-full’.  Not only is unemployment abolished, but an acute scarcity of labour prevails.  Bottlenecks arise in every sphere, and these must be dealt with by the creation of a number of controls.  Such an economy has many features of a planned economy, and is sometimes compared, rather ignorantly, with socialism.  However, this type of planning is bound to appear whenever an economy sets itself a certain high target of production in a particular sphere, when it becomes a target economy of which the armament economy is a special case.  An armament economy involves in particular the curtailment of consumption as compared with that which it could have been under full employment.

The fascist system starts from the overcoming of unemployment, develops into an armament economy of scarcity, and ends inevitably in war.”

Clément Méric declared brain dead

Clément Méric, an 18 years anti-fascist activist and student syndicalist activist, was declared brain-dead this morning. He was attacked in the  heart of Paris by extreme-right skinheads.

A very rough translation of the statement by his union, Solidaires, is below.

On Wednesday, June 5, 2013, leaving a clothing store near the Saint-Lazare, our comrade Clement, a unionist in Solidaires Etudiant-e-s and Antifascist Action Paris-Banlieue activist, was beaten to death by members of the extreme right. The death of our comrade takes place in the context of the development of a violent fascist movement in France and elsewhere in Europe. Clement is in a brain dead state Pitié-Salpêtrière Hospital due to his injuries. 

His loss overwhelms us. Our pain and anger are compounded by the certainty that there are very many, antifacist activists and people exposed to homophobia and/or racism, who could and can still be victims. 

Today all our thoughts are with his family, his loved-ones and his comrades in Solidaires Etudiant-e-s with whom we express our solidarity. 

This heinous act is inseparable from the increase in racist attacks by homophobic right-wing extremists over the past months and the creation of a climate of hatred, which is maintained by political speeches condemning not exclusive of the National Front and fascist factions.

Beyond the police and judicial action, it is time to strengthen the anti-fascist movement. With Solidaires Etudiant-e-s, the Solidaires union calls on all those who condemn this heinous act and refuse to tolerate the  extreme right vermin to participate massively in many rallies today and in the coming days in Paris and in the provinces. This includes the demonstration tonight Thursday, June 6 from 17 h in front of the passage of Havre Saint Lazare metro and then join the Saint Michel 18 H 30. 

Paris, June 6, 2013.