Sarah Palin = farked

Mark Green today:

"America will elect people from different parties but what Reagan, Bush 41, Clinton, Bush 43 and Obama all had in common was that they either ran on or in fact were unifying figures who didn't hate others. Palin is the most divisive national political figure of my lifetime. Because she has not shown any of the experience, intellect, character or temperament to be a serious presidential contender -- and because Republican leaders are not politically stupid -- she has now officially been destroyed as a serious candidate not by the "lamestream" media but by herself. She's her own worst enemy."

Labor Force Data

A quote from Prof. Bill Mitchell:

"At present, my summary is that the recovery that is occurring in the Australian economy is not providing any significant opportunities for our youngest workers. These workers are our future. We talk of the inter-generational demands on public spending and rising dependency ratios. But then we allow 25 odd percent of our active youth to remain idle and outside the skill development process. This waste ensures our future productivity growth will be lower than it otherwise could be.

How can we be happy about an economy that shuts out our youth from the recovery?"

Dropouts higher for students who work

Not really surprising:

"Study authors Cain Polidano and Rezida Zakirova, from the Melbourne Institute of Applied Economic and Social Research, drew on data from the Longitudinal Surveys of Australian Youth research program, which follows people between the ages of 15 and 25. They found that full-time students who worked between eight and 16 hours a week were 5 percentage points less likely to finish their courses than those who did not work at all.

Those who worked more than 24 hours a week were 14 percentage points less likely to complete their studies than those who did not work, the researchers said.

For those studying part-time, full-time work reduced their chances of completing their qualifications by about 12 percentage points."

I think this research is highly concerning, if not highly surprising, and demonstrates yet another aspect of unequal outcomes in our society. It goes without saying that kids from a poor background who have to work to finance study will not have as good academic prospects as those from a more wealthy background. It also points to the fact that these hard working people may be locked out of the upper end of the jobs market. I think this calls for a policy response that allows kids from a poorer background the opportunity to focus on their studies whilst at university.

Fannie and Freddie

The reason they failed as told by William Black:

"Fannie and Freddie caused such horrific losses because they were private institutions run by officers who obtained a “sure thing” – great wealth through booking high yield in the near term without establishing meaningful loss reserves. OFHEO and the SEC had blocked Fannie and Freddie’s prior accounting scam (abusive hedge accounting) and limited Fannie and Freddie’s growth. Fannie and Freddie’s officers’ optimal remaining strategy, given OFHEO’s imposition of a constraint on growth, was to maximize reported short-term accounting income by purchasing very high (nominal) yield mortgage paper and not provide adequate loss reserves. Liar’s loans offered the best nominal yield (many subprime loans are also liar’s loans). Fannie and Freddie’s officers profited through the quintessentially private sector method of looting a corporation – executive compensation based on short-term, fictional, reported income followed by catastrophic losses and insolvency."

Interesting Comments on BASEL III

Lot's of comments from a collection preeminent financial economists arguing that the Basel III reforms don't go far enough. These are very much "mainstream" types as well. So there is lots of pressure coming on at the highest levels of the economics profession at the moment for more stringent, simpler banking regulation.

Economic Reform

Like this line from today's Australian from Swanny:

"There's a strange paradox in Australian political life where those who call loudest and most often for economic reform are those most likely to criticise any attempts to carry it out."

I'm just happy that Swanny has decided to get on the front foot in the new year. The post election period has been marked by navel gazing, a shocking state election campaign in Victoria, and a whole lot of nothing on the Federal stage.

If you have a good story to tell- get out there and tell it. For all Keating's weaknesses, this is one thing he was good at- getting the good news out there. People may not like you, but they will respect you if they are reminded of some of the results you are achieving.

What's more there is no point trying to hide from the conservative press. They're always banging on about economic reform, you give it to them and they are still unhappy. What do you honestly expect? Labor should get stuck into the conservative press. Pulling the pin on stimulus measures, the ETS, and the Human Rights Act will not win over the conservative nay sayers- the response will be (1) see we were right all along; and (2) Labor has lost the strength of its convictions. Lose lose.

It's good to see that Swanny has woken up to this paradox, and has the strength of his convictions to get out there and spread the good news in the new year. Although it does remind me somewhat of Shaun Carney's recent article about the decline of support for Labor in the community. There is no rush to Labor's defense from a dwindling grass roots supporter base, or the disillusioned new left that has moved to the Greens. The fortunate few careerists of the parliamentary party have to make the case for themselves these days.

More on Austerity

Stiglitz today:

"It has become fashionable among politicians to preach the virtues of pain and suffering, no doubt because those bearing the brunt of it are those with little voice – the poor and future generations. To get the economy going, some people will, in fact, have to bear some pain, but the increasingly skewed income distribution gives clear guidance to whom this should be: Approximately a quarter of all income in the US now goes to the top 1%, while most Americans’ income is lower today than it was a dozen years ago. Simply put, most Americans didn’t share in what many called the Great Moderation, but was really the Mother of All Bubbles. So, should innocent victims and those who gained nothing from fake prosperity really be made to pay even more?

Europe and America have the same talented people, the same resources, and the same capital that they had before the recession. They may have overvalued some of these assets; but the assets are, by and large, still there. Private financial markets misallocated capital on a massive scale in the years before the crisis, and the waste resulting from underutilization of resources has been even greater since the crisis began. The question is, how do we get these resources back to work?...

Banks never wanted to admit to their bad loans, and now they don’t want to recognize the losses, at least not until they can adequately recapitalize themselves through their trading profits and the large spread between their high lending rates and rock-bottom borrowing costs. The financial sector will press governments to ensure full repayment, even when it leads to massive social waste, huge unemployment, and high social distress – and even when it is a consequence of their own mistakes in lending...

So this is my hope for the New Year: we stop paying attention to the so-called financial wizards who got us into this mess – and who are now calling for austerity and delayed restructuring – and start using a little common sense. If there is pain to be borne, the brunt of it should be felt by those responsible for the crisis, and those who benefited most from the bubble that preceded it."

Can't agree more really.

What do bosses do? Part II

Just knocked off the second installment of the "what do bosses do?" series from Stephen Marglin:

"Whatever qualifications may be necessary to explain deviations from the norm, my hypothesis remains that capitalists as individuals, like workers, save principally when their incomes rise faster than they can manage to spend them. On a statistical basis capitalists may save a significantly larger portion of their disposable incomes than do workers, and for many purposes there may be adequate justification for reflecting this statistical regularity in the postulate that saving propensity is a matter of income class. But this does not in itself contradict the disequilibrium hypothesis: successfull workers become capitalists and failed capitalists become workers; the differences in savings rates are thus accountable in terms of income changes. In my view the significant dichotomy with respect to savings rates is not based on differences in individual incomes, but on the differences between individuals and organizations. It is not the size of the capitalists' income or a special set of attitudes, a drive towards accumulation, that matters. It is rather capitalist control of the production process that gives this class a dominant role in determining the rate of saving."

What do bosses do?

I've been reading an interesting article today from Stephen Marglin of Havard challenging the notion that the benefits of industrialization lie primarily in the technological efficiency of the factory:

"A due regard for the role of economic power and the institutional constraints on the use of power are as important to understanding socialist economic development as to understanding the development of earlier economic systems. Under socialism (at least in its Soviet strain), no less than under feudalism and capitalism, the primary determinant of basic choices with respect to the organization of production has not been technology -- exogenous and inexorable -- but the exercise of power -- endogenous and resistible."