Today is Wednesday, and there were some short projects that caught my interest last week. The latest news from FAO – food price index – Shows that despite an 8.6% fall in food prices from June (to August), “the fourth consecutive month of declines”, they are still significantly inflated (13.1% higher than in August 2020), “The world’s top four food trade Traders” profited from record sales amid supply disruptions. The World Food Programme tells us that 345 million people are suffering from “severe food insecurity”, almost three times the pre-pandemic figure. The system is not working and I have something to say below. Also, the latest PMI data from Europe shows that price pressures are easing, calling into question those (with vested interests) demanding higher rates. Then some music.
PMI release suggests European price pressures continue to decline
Europe is in the right royal mess and countries will have to deviate further from their monetary architecture (stability and growth pact, etc.) if they are to remain solvent.
The latest Eurozone data released yesterday (23 August 2022) – Global Rapid Eurozone Purchasing Managers Index – Title:
Euro zone business activity falls for second straight month as services sector growth nears a standstill
Households are now cutting back on consumer spending as the rising cost of living hits their real incomes, hurting service sector sales.
But it is the contraction in manufacturing that undermines the overall growth outlook, with:
…production fell for the third month in a row and at a solid pace…
Manufacturing has been squeezed on both sides – falling demand for commodities, ongoing supply disruptions and rising input prices.
PMI data release shows:
The overall decline in business activity in the euro area was concentrated in the largest national economies. Germany’s output fell by the most since June 2020, as manufacturing production continued to fall significantly and services activity contracted at an accelerating pace.
Germany simply cannot continue to run its economy along mercantilist lines and must address not only its ability to restrain domestic spending, but also its energy dependence on rival suppliers.
Another related fact is:
…Inflationary pressures in business have passed their peak, and the growth rates of input costs and output prices have slowed across the board…
In addition to signs of weakening corporate inflation, there was further evidence that constraints in the manufacturing supply chain eased in August.
Reaffirming my assessment that this inflationary event will be temporary.
So juxtaposing it with the claims of the so-called “senior European economists” of the so-called “independent” economic think tanks in London (resource):
Taken together, the PMI survey is in line with our view that the ECB will have to continue to tighten monetary policy even if the economy slips into recession.
I am sure his work is not at risk.
His employer, which happened to be partly owned by Lloyds Banking Group, was then sold to a private equity firm that bought assets around the world to profit from it.
There is no point in continuing to raise interest rates in Europe (or anywhere else) given that member economies are in or about to fall into recession.
The long-term damage from a recession is far worse than allowing this inflationary episode to continue.
No one in favor of raising interest rates can tell us how this policy shift will end the Covid-19 pandemic, end the war in Ukraine and stop rivers from drying up and droughts leading to crop failures.
The need for fundamental change
In a future blog post, I will articulate the view that the ways we progressives are considering addressing the pluralistic crisis before us are unlikely to be of a scale large enough to address the underlying problem.
Sure enough, it would be wise to hope for more healthcare funding during the ongoing pandemic.
It would be wise to expect disciplinary action against private companies that dump untreated sewage onto the beaches where workers are on vacation.
It is wise to reduce plastic consumption.
It would be wise to ditch gasoline-powered cars.
It would be wise to hope that the government will help low-income households who have no savings and are now impoverished by price gouging under the guise of “disruption of supply”.
I could list a long list of sensible things that improve the material prospects of workers.
But I think these moves, while sensible and useful, don’t disrupt the underlying dynamics that have led to all this chaos.
I read a report by the UK’s High Pay Centre (published 22 August 2022) – UK CEO Salary Report 2021 – Co-sponsored by TUC, which lists the facts as a manifestation of potential problems.
We understand that the CEOs of the top 100 UK FTSE companies will be paid an average of £4.26 million in 2021, an increase of 35.2% on 2020 levels.
The highest paid CEO received £16.95m, of which:
…is 539 times the median wage of a full-time worker in the UK.
According to the latest figures from the Office for National Statistics – Annual Survey of Selected Estimated Time and Income Time Series – The average annual full-time salary in the UK in 2021 is £38,131, down from the 2020 average of £38,552.
The mean is influenced by some very high annual income, so the median is used.
The median full-time salary in 2021 is £31,285, down from £31,487 in 2020.
By 2021, the median full-time earnings in occupations that truly benefit humanity will be £20,468.
These are cleaners, personal care workers, etc. who help us avoid infections, etc.
Meanwhile, bankers, brokers, management consultants who have done little to advance human progress are at the top of the distribution.
The top end of town also gets a range of other perks (long-term incentive plans, etc.)
The High Pay Center report states:
FTSE 100 CEO pay levels drifted away from the average UK worker between the 1980s and 2000s, reflecting the widening gap between the super-rich and everyone else over the same period, showing how CEO pay can be a useful example of broader social disparity equality.
This is a global problem.
The average CEO salary is 109 times the average annual salary in the UK. 2020 is 79 times.
Consider what we’ve been told about the cost of living crisis. Their companies are making up for this CEO pay binge by pushing up prices on workers who are going backwards.
What else can be done about this?
Well, we get to the crux of the matter.
Progressives, such as the UK’s TUC, want CEO pay to be “controlled” and to create rules that force companies to have worker representation on boards, among other things.
get drift.
Various tinkering with board structures and other “fringe” policy approaches may help a little, but won’t solve the problem.
Executive pay is too high.
Solution: Eliminate executives.
This requires eliminating companies.
This requires eliminating capital.
This would remove the “profit motive”.
This means we’re talking about system change – beyond capitalism and individualism, we tolerate someone being paid “539 times the median UK full-time worker’s salary”, and instead celebrate cleaners and nurses, moral incentives become a system. The normal way of activating behaviors rather than material incentives.
We need to activate rugged and interconnected communities that will be able to make the necessary shifts in consumption patterns (that is, let alone) in response to the climate emergency, while preserving the right to work and seek fulfillment.
So the question is how likely is this to happen?
The answer is: depression.
A few years ago, in my talk, I started pointing out that if climate scientists were right, they were doomed.
That’s because I doubt that the necessary socioeconomic changes can happen fast enough.
All the CEO’s compensation goes somewhere – obviously overspending. But also strengthen the system that produces it. Lobbying, media control, and more.
We were in the mountains and could only recommend moving it with a hand trowel.
These are the questions I am working on and will address in my next book.
MMT update
I can announce that we will offer an edX MOOC – Modern Monetary Theory: Economics in the 21st Century – again this year.
The 4-week free course will start on September 14, 2022 and run until October 12, 2022.
Registration is now open.
There’s lots of video and written content to learn, some light-hearted game shows, things to do, research assignments, screenwriting opportunities, and interviews with many MMT folks.
More 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 November, there will be a new course on monetary sovereignty. More details soon.
MMTed is also working on a new feature film with some of the world’s leading filmmakers, and I hope to get some details soon.
Finally, MMTed is applying to become a partner in a Melbourne community radio show, looking at current events from an MMT perspective. This will give us a great opportunity to expand our audience.
So there’s a lot going on at MMTed, and we thank everyone who helps us with small donations. The scale of our operations is only limited by our funds, which is why it takes time to implement these initiatives (funds are limited!).
If you can help, drop me a note and I’ll send you more details.
Music – Brooklyn Funk Essentials
Here’s what I’ve been listening to this morning at work.
One of my favorite albums is the American music group’s 1995 album — Brooklyn Funk Essentials – cool and stable.
their song- Take the L train (to 8 Ave.) – is my favorite on the album, but that doesn’t mean anything because all the tracks are great.
When I play this song, I always think of New York (of course) – but only because it contrasts so sharply with the reality of the place.
It’s a very soft acid jazz, and I like the drums the most.
Enough for today!
(c) Copyright 2022 William Mitchell. all rights reserved.
