[OPE] Steve Keen in the Sydney Morning Herald with Marx

January 30, 2009 - 1:44PM

Australia faces a decade of weak economic growth and double-digit unemployment because it failed to heed the warnings of Karl Marx, an academic says. University of Western Sydney associate professor of economics and finance Steve Keen said Marx's words, published in 1894, predicted the damage big banks would cause to the economy. Dr Keen said that like Japan, the Australian economy would be afflicted with a long run of recessions or flat growth because of high debt
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"It's a similar sort of story with massive levels of private debt and a massive speculative bubble,'' he said. "The government stimulates the economy out of a crisis and the financial sector stimulus is not enough to turn the economy around, and it's adding to government debt rather than solving the problem.'' Dr Keen said the Australian unemployment rate would climb to "at least'' 10% by late 2010 and stay around that level for the next decade.

But Melbourne Institute research fellow Michael Chua says the jobless rate will stay in single digits as federal government stimulus and interest rate cuts spurred economic activity. Dr Chua says he expects the jobless rate will rise to 5.1% by September, up from 4.5% at present. "Job losses were inevitable, particularly in full-time employment,'' Dr Chua said. "However, the unemployment rate is unlikely to be in the double digits as the fiscal stimulus packages and the easing in monetary policy will go some way towards supporting economic activity.''

Most economists are tipping a recession and rising unemployment this year, but even the most bearish major banks see an economic recovery in 2010. Dr Keen says he is not expecting capitalism to collapse but that Marx's words, published in the 1894 volume The Process of Capitalist Production as a Whole, had sounded a warning note about money lenders. "The credit system, which has its focus in the so-called national banks and the big-money lenders and usurers surrounding them, constitutes enormous centralisation, and gives this class of parasites the fabulous power, not only to periodically despoil industrial capitalists, but also to interfere in actual production in a most dangerous manner - and this gang knows nothing about production and has nothing to do with it,'' Marx's words published 11 years after his death said. AAP http://business.smh.com.au/business/they-should-have-listened-to-marx-20090130-7tlk.html

We'll have to see who is right about the unemployment figs (BTW Steve K hits back with his own analysis at http://www.debtdeflation.com/blogs/ ). Presumably the difference in unemployment forecasts has something to do with the possibility that Australia's buoyant foreign trade with "emerging economies" like China sporting higher growth rates, plus greater prudence in Aussie domestic financing, could "cushion" the effects of the global credit crisis. Australian unemployment stands at about half a million or 4.4% of the labour force of 11.3 million. The Aussie government expected it to rise to about 6% at the end of 2009. Steve Keen is basically saying that this is not an "ordinary recession", because the financial structure underpinning global trade is seriously shot, and therefore things are unlikely simply to "bottom out" in 2010, at least as far as unemployment is concerned. Among other things, once unemployment has fairly rapidly risen to about 10% of the labour force, this has cumulative economic repercussions, and it is difficult to reduce it again very quickly.

Jurriaan

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Received on Fri Jan 30 21:52:46 2009