On Friday, ACT’s Stephen Berry wondered if the New Zealand government’s spending splurge will create “the most popular economic depression in history”. Berry echoed what has become mainstream economic argument: rather than “ending the Depression”, Roosevelt’s New Deal extended and deepened it.
Berry also pointed to one of the most curious aspects of the NZ government’s stimulus package: cash payments for welfare recipients. “There is no rational economic argument, in an economy with less than 5% unemployment, for paying those who don’t work more money to not work.” While it might be thought to be just another Ardern socialist stunt, the supposedly economically conservative Morrison government in Australia had already announced a similar package the week before. The Trump administration is outspending them both.
Economists in Australia are also starting to wonder: are we all communists, now?
Macquarie Wealth Management, an arm of the beating heart of Australian capitalism, Macquarie Group, has warned that “conventional capitalism is dying” and the world is headed for “something that will be closer to a version of communism”. In a series of notes sent to investors on Wednesday, Macquarie analysts and researchers said a number of policies announced overnight, including cash payments to US residents, credit guarantees for businesses in Germany, and a Swedish stimulus worth 6 per cent of the Nordic country’s economy to keep banks lending to companies, were a sign that governments were shifting towards “neo-Keynesian” and Modern Monetary Theory policies, including a universal basic income guarantee.
The EU is also desperately trying to prop up the already critically endangered Euro.
The European Central Bank also announced a €750 billion asset purchase program as President Christine Lagarde said “extraordinary times require extraordinary action” and that there would be “no limits” on the central bank’s commitment to protecting the single-currency union.
What was widely regarded as a joke just a few months ago is suddenly being touted by supposedly conservative governments, panicked by the Chinese Virus.
Modern monetary theory, which has gained prominence in the US led by advocates such as Bernie Sanders and Alexandria Ocasio-Cortez, argues that unemployment is the result of governments spending too little while at the same time collecting taxes.
Instead, governments should spend to subsidise wages and embark on national programs, while raising taxes on incomes to keep inflation lower if needed.
Part of the theory could include a universal basic income, in which every citizen regardless of work or wealth, would receive a set stipend from the government.
In the spirit of never letting a good crisis go to waste, the embiggeners of neo-Communism are shouting that they have the economic cure. But are they just so many Pied Pipers leading spooked governments down the primrose path to “Socialism with Chinese Characteristics”?
Macquarie Wealth said the amount of government assistance was growing at an “exceptionally rapid pace” as credit markets froze, companies stared into oblivion and as workers were laid off, and would likely exceed the $US1.7 trillion spent in the first round of the GFC.
[…COVID-19] is also forcing closer co-operation between fiscal and monetary arms that overtime will fuse into one (a la China). New world of nationalised capital & MMT is beckoning.
At the same time, governments are imposing strict curfews and restrictions on movement. In France, citizens are being asked to “show their papers” for the first time since the Occupation. Spain is using drones to spy out curfew-breakers.
While there is a good public health argument for restricting cross-border movement and enforcing quarantine of infected or possibly-infected individuals, wholesale lockdowns of societies seem far more ominous.
Governments are also notoriously averse to surrendering any mile, once they’ve been given an inch.
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