It’s Wednesday and some short items that caught my interest over the last week. The FAO’s latest – Food Price Index – shows that even though food prices fell 8.6 per cent from June (to August), “the fourth consecutive monthly decline”, they are still massive inflated (13.1 per cent higher than August 2020) and the “world’s top four grain traders” are profiting from record sales in the face of supply disruptions. The World Food Program informs us that 345 million people are enduring ‘acute food insecurity’ which is nearly 3 times the pre-pandemic number. The system is not working and I have some things to say about that below. Further, latest PMI data from Europe shows that price pressures are declining, which brings into question those (with vested interests) calling for even higher interest rates. And then some music.
PMI release suggests price pressures continue to fall in Europe
Europe is in a right royal mess and will further have to deviate from its currency architecture (Stability and Growth Pact, etc) if nations are to remain solvent.
The latest Eurozone data released yesterday (August 23, 2022) – Global Flash Eurozone PMI – carried the headline:
Eurozone business activity down for second month running as service sector growth grinds to a near-halt
Households are now cutting consumption expenditure as the cost of living increases bite into their real incomes, which is damaging service sector sales.
But it is the contraction in manufacturing that is undermining overall growth prospects where:
… where production fell for the third month running and at a solid pace …
Manufacturing is getting squeezed on both sides – a fall in demand for goods and the on-going supply disruptions and rising input prices.
The PMI data release shows that:
The overall reduction in business activity in the euro area was mainly centred on the largest national economies. Germany posted the sharpest decline in output since June 2020 as manufacturing production continued to fall markedly and the contraction in services activity accelerated.
Germany simply cannot continue to run its economy along mercantalist lines and must address not only its suppression of domestic expenditure capacity but also its energy dependence on hostile suppliers.
The other relevant fact is that:
… inflationary pressures at businesses have passed their peak, with rates of increase in both input costs and output prices softening across the board …
Alongside signs of inflation at companies waning, there was further evidence that constraints in manufacturing supply chains eased in August.
Once again confirming my assessment that this inflationary episode will be transitory.
So juxtapose that with the claim by a so-called ‘Senior European Economist’ at a so-called ‘independent’ economic think tank in London (Source):
All things considered, the PMI surveys are consistent with our view the European Central Bank will have to press ahead with monetary tightening even as the economy falls into recession.
I am sure his job is not at risk.
His employer just happens to have been partly owned by Lloyds Banking Group, which then sold to a private equity firm that hoovers up assets around the world to make profit from.
It makes no sense to keep hiking interest rates in Europe (or anywhere for that matter) given that the Member State economies are in, or heading quickly into, recession.
The long term damage from recessions are far worse than allowing this inflationary episode to run its course.
None of the advocates of rising interest rates have been able to tell us how that policy shift will end Covid, end the War in Ukraine and stop the rivers from drying up and agricultural crop failures from drought.
The imperative for fundamental change
In later blog posts, I will articulate a view that the way we progressives are thinking about addressing the poly crisis before us is unlikely to be of a scale sufficient to deal with the underlying problem.
Sure enough, wanting to get more funding for health care during an on-going pandemic is sensible.
Wanting to discipline private companies that spew raw sewage onto beaches where workers take holidays is sensible.
Cutting back consumption of plastics is sensible.
Abandoning petrol-driven motor cars is sensible.
Wanting government to help low-income families who have no saving and are now plunging into poverty as a result of the price-gouging going on under the cover of ‘supply disruptions’ is sensible.
I could create a long list of sensible things that would improve the material outlook for workers.
But I am coming to the view that these sorts of initiatives, though sensible and useful, would not disturb the underlying dynamic that is driving all this mess.
I read a report (released August 22, 2022) from the High Pay Centre in the UK – UK CEO Pay report 2021 – which was jointly sponsored by the TUC, which lists facts that are the manifestation of the underlying problem.
We learn that CEOs of the top 100 FTSE companies in the UK on average were paid £4.26 million in 2021, an increase of 35.2 per cent on the 2020 levels.
The highest paid CEO received £16.95 million, which:
… is 539 times the pay of the median UK full-time worker.
According the latest data from the British ONS – Annual Survey of Hours and Earnings time series of selected estimates – the average annual full-time wage in the UK was £38,131 in 2021, which was lower than the 2020 average of £38,552.
The average is skewed by a few very high annual incomes, so the median is used.
The median full-time wages were £31,285 in 2021, down from £31,487 in 2020.
Occupations that actually do things to benefit humanity had median full-time incomes of £20,468 in 2021.
These are cleaners, personal care staff, etc who help us avoid infections etc.
Meanwhile the bankers, brokers, management consultants who do very little to advance humanity are at the top of the distribution.
The top-end-of-town also get a range of other benefits (Long Term Incentive Plans, etc)
The High Pay Centre report notes that:
The fact that pay levels for FTSE 100 CEOs raced away from the average UK worker between the 1980s and the 2000s, mirroring the widening gap between the super-rich and everybody else over the same period, demonstrates how CEO pay is a useful exemplar of wider societal inequality.
This is a global problem.
The average CEO pay is 109 times the average annual wage in Britain. In 2020 it was 79 times higher.
Think about what we are being told about the cost-of-living crisis. This CEO pay binge is being covered by their companies by pushing higher prices onto workers, who are going backwards.
What can be done about this?
Well here we get to the nub of the problem.
Progressives such as the TUC in Britain want CEO pay ‘reined’ and rules that force companies to have worker representatives on the boards etc.
Get the drift.
All manner of tinkering with board structures and other ‘around the edges’ policy approaches might do a little but will not solve the problem.
Executive pay is way too high.
Solution: eliminate the executives.
Which then requires eliminating corporations.
Which then requires eliminating capital.
Which would eliminate the ‘profit motive’.
Which then means we are talking about system change – moving beyond capitalism and individualism where we tolerate some person taking a salary ‘539 times the pay of the median UK full-time worker’ to a system where cleaners and nurses are celebrated and moral incentives become the normal way of activating behaviour rather than material incentives.
We need to activate rugged and connected communities that will be able to make the necessary shifts in consumption patterns (that is, much less) as a response to the climate emergency, while preserving the right to work and seek fulfillment.
The question then is what are the chances of that happening?
The answer is: gloom.
I started noting some years ago in my talks that if the climate scientists are correct then were are doomed.
That is because I doubt the necessary socio-economic changes that will be necessary can happen quickly enough.
All the CEO pay goes somewhere – excessive consumption clearly. But also to reinforce the system that generates it. Lobbying, media control, and all the rest.
We are up against a mountain and can only suggest moving it with a hand trowel.
These are the issues I am working on and will address in my next book.
MMTed update
I can announce that we will offer the edX MOOC – Modern Monetary Theory: Economics for the 21st Century – again this year.
The free, 4-week course will begin on September 14, 2022 and run until October 12, 2022.
Enrolments are now open.
There is a lot of video and written content to study, a Game Show for some light entertainment, things to do, research tasks, script writing opportunities, and interviews with many MMT people.
Further Details:
https://www.newcastle.edu.au/study/online-learning/modern-monetary-theory-economics-for-the-21st-century
https://www.edx.org/course/modern-monetary-theory-economics-for-the-21st-century
Following on from that in November will be a new course on Monetary Sovereignty. More details soon.
MMTed is also helping with a new feature film with some leading global film makers and I hope to have some details soon.
Finally, MMTed is applying to be a partner in a community radio program in Melbourne on current affairs from an MMT-perspective. This will give us a great opportunity to broaden our audiences.
So, quite a bit happening on the MMTed front and we thank all those who have helped us with your small donations. Our scale of operations is only limited by our funding, which is why it takes time to get these initiatives happening (funds limited!).
If you can help please send me a message and I will send you further details.
Music – Brooklyn Funk Essentials
This is what I have been listening to while working this morning.
One of my favourite albums is the 1995 album by the American music collective – Brooklyn Funk Essentials – Cool And Steady And Easy.
Their song – Take The L Train (To 8 Ave.) – is about my favourite from the album, but that doesn’t say much because all the tracks are great.
I always think of New York (of course) when I put this track on – but only in the sense that it is such a contrast to the reality of the place.
This is a very mellow piece of acid jazz and I love the drumming on this track above all.
That is enough for today!
(c) Copyright 2022 William Mitchell. All Rights Reserved.
