C'est nous qui brisons les barreaux des prisons, pour nos frères, La haine à nos trousses, et la faim qui nous pousse, la misère. Il y a des pays où les gens aux creux des lits font des rêves, Ici, nous, vois-tu, nous on marche et nous on tue nous on crève.

Monday, 19 January 2009

Wading Through Economic Filth

On the political Ozblogosphere, Queensland seems to throw up some fairly degenerate characters. From illiterate stalkers, to ex-Nazis obsessed with 'race theory', the Sunshine state appears to be struggling to produce non-idiotic 'conservative' opinion.

The latest such case is Leon Bretard, who claims to have 'pwned' me. Unfortunately for Leon, he's shot his pwning wad a little prematurely, and now has something of a mess on his hands.

Economic Filth
The crux of Leon's claim revolved around an economic argument, or, more precisely, two economic propositions.

The first proposition concerns what Leon calls the 'pseudo-economic left wing union theories about higher wages helping the economy'. Bear in mind that this article was pilfered from economist Harry Clarke, and Leon appears to have completely misunderstood it. In response to claims that higher wages can help an economy in recession, I said:

His [Harry Clark's] argument is that with reduced demand for labour, increased wages will contribute to unemployment. Fair enough. The other side of the coin is that reducing wages contributes to a decline in aggregate demand. Note that Harry himself does not reject this assumption. Consequently, wage cuts/freezes are no magic bullet to solving the economic crisis, particularly since, being in a global economy, no amount of wage cuts will bring labour costs in line with SE Asian levels, for instance.

This is one of the problems with capitalism. Whilst higher wages might, in theory, produce a higher aggregate demand, the potential for unemployment would offset this. I agree with Harry on this point, and nothng I've said points to the contrary.

However, it doesn't follow from this first proposition that a second proposition, (namely, cutting wages will help an economy is recession), is true. This is equivalent to saying that putting a leg of lamb in the fridge will give you a better slow roast. The myth that cutting wages will fix recession is comprehensively debunked here:

Reducing real wages–and thus reducing the capacity of workers to purchase output–may boost profits in real terms by skewing the distribution of real income further in favour of capital. But it will undoubtedly impact on some capitalists badly–not makers of sports cars perhaps, but certainly those who run supermarket chains–and the aggregate effect is a toss-up.

That is to say, cutting, or freezing wages (which during periods of inflation amounts to the same thing) leads to less spending, which in turn can create deflationary pressures. Furthermore, it is by no means guaranteed that cheaper labour costs will automatically result in an increase demand in labour, since the hiring of staff generally hinges on a range of differrent factors. For every worker or family who falls into poverty as a result of lost wages, additional burden is placed for supports onto either the Government (i.e. taxpayers) or NGOs (who are funded by a combination or private fundraising and taxpayers).

Issues of social justice aside, it is perfectly clear that you cannot 'fix' a recession by the wholsesale cutting of wages. Leon calls this argument 'stupidity', but is apparently unable to provide a single counter-argument in response. Evidently, even he doesn't believe his own bullshit.

The Myth of Prosperity

Imbecility is added upon imbecility when Leon claims that the Howard years in Australia were a period of unbridled prosperity, that all workers are better off, etc. This is nonsense. I've written before that the data suggests that many Australians have actually become worse off during the 'boom', through increased casualisation, additional working hours, increased 'mortgage stress', higher rates of poverty, etc.

Let's take a look at the claim the 'real wage growth' was increased for all Australians. Firstly, recent wage growth has been vastly higher in particular states and particular industries. It should be no surprise that wage increases are almost double in the mining state of WA compared to states such as Victoria and NSW. Miners were clearly the group with the highest wage increases, whilst industries such as communication, hospitality, accommodation, retail, health and community services were either 'very weak' or smallish in terms of wage increases.

One conclusion that we can draw from this is that overall figures for wage growth must be interpreted in view of the fact that wage growth varies widely across industries. A figure showing wage growth overall can mask the fact that negligible wage growth in some sectors is masked by periods of boom in others.

Secondly, to discuss 'real' wage growth, we need to look at the figures for inflation, to be found here. Remember that these figures also conceal some important details, as inflation is calculated by excluding 'volatile' elements, such as the increase in petrol prices during the boom years, and the multiple increases in interest rates under Howard's watch. These figures for inflation minimise the extent to which prices have increased.

Now, if we look at the figures above, we see that the inflation for the year 2008 was consistently well above 4%. In particular, inflation increased by almost 1.5% for the quarter between late 2007 and early 2008. (Inflation continued to rise for the rest of the year, getting as high as 4.9%). During this same period, according to the ANZ data, only the mining and education sectors had wage increases above or around this level, which is to say that the workers of every other industry lost wages in real terms, as any pay increases they received did not keep up with the rate of inflation.

Whilst the RBA attempts to keep inflation with the rang of 2-3%, it has often been outside this range during the Howard years, peaking at 6% during 2000 and 2001. Since 2000, there have been 4 years when the annual rate of inflation was above the RBA's 3% boundary. Leon the Lamentable seems to ignore the fact that anyone whose wages did not increase above and beyond this rate of inflation did not experience real wage growth. Whilst this clearly wasn't the case in a small number of highly prosperous industry sectors (such as mining), growth was hardly universal across the board.

The Case for Wage Claims

Some unions in Australia have argued for wage increases for their members. In this, such unions are only acting in accordance with their member's wishes. We should remember that it was only very recently that workers were asked for 'wage restraint' for fear of alleged inflationary pressures. (NB: Whilst inflation has decreased in Australia as a result of the GFC, it hasn't disappeared altogether).

This is particularly pertinent as '1.2 million workers reliant on award wages have experienced a decline in the real value of their wages in the three years since the introduction of the Howard Government’s new minimum wage setting arrangements.' (i.e. since 2005). 96% of low paid workers actually experienced a loss of real wages in 2007, contrary to the claims of the Orwellian-named 'Fair Pay Commission'.

The thesis that Australia's lowest-paid workers have lost wages in real terms is supported by data from Catholic Social Services, who say that at best, wages for low-paid workers have merely kept up with inflation, and in many (if not most) cases, they have failed to achieve even that.

Once again, we have further evidence of Bretard's economic illiteracy. Not only do low-paid workers have, at the very least, an argument for wage increases, but many other industries have not kept pace with inflation. The Victorian public service, for instance, has not had wage increases higher than 3% at any time over the past few years, meaning that in high inflation years, real wages were actually lost. Calls for workers in these industries to cut wages is therefore a clear example of class warfare, and there is no evidence that any such cuts would miracously lift Australia out of impending recession in any case.

And the rest

Leon makes a variety of other nonsense claims against, most of which are so peurile and inaccurate as to be not even worth acknowledging. He asked why 'the Left' have staged demonstrations in response to Israel's demolition of Gaza. I indicated that this was, among other reasons, to influence Australian Government policy. In turn, he says:

What a lame excuse! Does anyone believe that far-left protests make any difference to Israel's actions? Many people think Israel must be doing something right when extreme lefties are foaming in the mouth over its actions.

Leon can add 'English' to his list of illiteracies, since I never made the claim that protests in Melbourne or elsewhere would directly influence IDF policy. Grassroots politics has many forms, and many functions. One is to influence the positions of one's own government; another is to draw attention to alleged injustice. Bretard must have mistaken blogging for activism if he thinks that such grassroots activism makes no difference. Workchoices was, in large part, overturned by activism, since parliamentary measures were utterly ineffective (given the Coalition's Senate majority). The widespread unpopularity for Australia's invasion of Iraq did not actually prevent the war, but it may well have influenced the use to which Australian troops were put, and the manner in which war policy was handled (i.e. troops were used in training rather than combat roles, conscription for the war was virtually unthinkable, etc).

Leon claimed that leftist criticism of IDF policy is 'undoubtedly' a consequence of anti-Semitism. I asked him for evidence of this claim, and he provided only links to his other posts, all of which are equally lacking in evidence. He must live in a room full of mirrors.

I mentioned, mockingly, in view of Bretard's supposed legal credentials, that maybe 'the Left' had been defamed by Leon tarring them with the brush of anti-Semitism. With his characteristic lack of irony, Leon responds:

THR, there's no such thing as defamation inside a court. Duh!

Another self-pwning. You are having a really bad year, 'comrade'.

If you feel you have a case against me in defamation, you are more than welcome to sue me.

The stupidity here is breathtaking, as if I (or anybody else) would seriously be proposing that 'teh Left' would initiate a class action against blogger, whose only tools are smear, and whose only sources are right-wing talking points. He probably thinks Springsteen's 'Born in the USA' and Neil Young's 'Rocking in the Free World' are pro-US anthems.

Anyway, I've wasted enough time and space on this cretin. When he can mount an honest and intelligent argument grounded in evidence, I'll be happy to engage with him further. Until then, he is merely a troll, and his cartoonish 'arguments' have been refuted again, for the umpteenth time.