We need to get a few things straight. And this is partly for those out there who seem to think that the extent of literature on Modern Monetary Theory (MMT) or the Job Guarantee within MMT is confined to collections of Tweets that allow 280 characters or Unicode glyphs. One doesn’t become an expert on ‘full employment’ or ‘political economy’ because they have suddenly realised there is a major crisis in the labour market and have decided to strategically place their organisations for self-serving purposes to be champions of full employment. There is an enormous literature on the Job Guarantee and I have been a major contributor along with my valued colleagues. This is a crucial time in history and one of the glaring deficiencies in the current crisis and economic management in general is the lack of an employment safety net. This is what MMT has to say about that safety net and stabilisation framework.
On Saturday (July 25, 2020), The Australian published another Op Ed that I wrote in collaboration with Noel Pearson. I understand that many people (mostly abroad) were unable to access the article (as a result of paywall restrictions on certain devices). I am unable to post the final article due to copyright restrictions but I can provide the draft article which was not too different from the final version. It also seems that the faux-progressives have somehow decided that our partnership (Noel and I) symbolises how Modern Monetary Theory (MMT) and the Job Guarantee is actually some sort of far right plot to rid the world of welfare support for the disadvantaged and enslave them in onerous Gulag work camps. It is quite amusing really but worrying at the same time. Our partnership is confusing people who cannot cope with nuance and complexity. The so-called Left have characterised Noel as being somehow on the Right, which leads them to conclude that I am selling out on my progressive credentials by working with him. Conversely, the Right, who think Noel is one of them, are accusing him of being used by a Communist (me). Hilarious. If only they knew!
Here is Episode 7 in our weekly MMTed Q&A series. This is the third- and final part of my discussion on the Job Guarantee with Dr Pavlina Tcherneva and in this episode we discuss the applicability of Job Guarantee to nations that have both fiscal and external deficits and are exposed to international currency markets. While such a nation faces somewhat different pressures from their external sector, the point remains that if they have their own currency, they can always ensure that all the available productive resources at their disposal can be fully employed. The catch is that that level of activity may not deliver a high standard of material prosperity. We discuss examples such as Indonesia, Pakistan, South Africa and Argentina.
The – Report of the Special Rapporteur on extreme poverty and human rights – for the UN was released this week (July 7, 2020). It was Philip Alston’s last report in that role. It is a shocking indictment of the way neoliberalism has distorted our societies and the way the governments with the capacity to ‘move mountains should they wish’ have been co-opted as agents of capital and perpetuate those distortions. The Report is 19 pages of horror. It also resonates with the latest information coming out of Australia’s Closing the Gap campaign, which aims to bring indigenous Australians up to the material level of non-indigenous Australians. The first ten years of the campaign have been an abject failure. And the latest targets don’t inspire any confidence that the outcomes will be any different. A lot of talk. A lot of consultants. But little effective action – for example, like just creating some jobs to reduce unemployment, allow for income security and poverty alleviation. How hard is it for the government to create some jobs?
Here is Episode 6 in our weekly MMTed Q&A series. This is the second-part of my discussion on the Job Guarantee with Dr Pavlina Tcherneva and in this episode we discuss the central role that employment buffer stocks play in Modern Monetary Theory (MMT), a point that is often missed by those who think it is just a job creation program and of secondary (and dispensable) importance to the ‘banking’ aspects of MMT. As you will hear (and see), the Job Guarantee is an integral part of MMT and that status is derived from the elemental insights that MMT offers about the way a currency works. If a person thinks the Job Guarantee is an unnecessary add-on to MMT, then they haven’t understood the basics of MMT. It is as simple as that.
Last Saturday, the Weekend Australian, Rupert Murdoch’s daily national newspaper, had a relative Modern Monetary Theory (MMT) avalanche, with two core MMT-style articles published and two that were supportive rather than hostile. That tells you something about the way the world is shifting. I have received a bit of flack for publishing an Op-Ed piece in that newspaper from those who style themselves as Leftists. It is the same old argument – dealing with the devil. And the same old reply – if you want to influence policy then you have to talk to those who make policy. It is easy plotting revolutions over lunch. There has been a lot of groundwork laid over the last several months to bring people into the conversation. It is quiet stuff. Discreet. And as things unfold I will make some of the developments public. At present, all I can say is that I have a document before the Prime Minister today and there is a lot of behind-the-scenes workshops/briefings going on at state-level. And, while activists spend a lot of time ‘pressuring’ this person and that person on social media, the big shifts that are going on at present, including the publication of Noel Pearson’s piece and my article, are not being helped by aggressive social media confrontations. Sometimes it is better to work in a subtle way and exploit networks where they are available. That is not to say that activism to promote MMT is not appreciated and helpful. But we do need to pick our path. Anyway, a number of people asked me to publish my article here because they cannot get behind The Australian’s paywall. So here is the penultimate version which is a few hundred words longer than the actual article, which I cannot provide due to copyright restrictions. I also cannot provide Noel Pearson’s accompanying and complementary article but it was magnificent.
Some Wednesday snippets today. Tomorrow, I will write about what I have been thinking about the Eurozone. There has been a lot of hot air about the Franco-German accord that Emmanuel Macron and Angela Merkel came to recently. Hot air is the operative term. The fault lines in the Eurozone continue to widen and the policy dissonance is becoming more acute as they deal, not only with the health crisis, but also the 19 economies that have been starved of investment and infrastructure development. This Saturday (May 30, 2020) marks the 75th Anniversary of the release of the famous ‘White Paper on Full Employment’, which outlined the responsibilities that the Australian government took on to ensure there were jobs for all workers who were wanting work. This White Paper really defined the Post-WW2 consensus and began a period of low unemployment, upward social mobility, the development of public education and health, declining income and wealth inequality and stable wage shares as real wages kept pace with national productivity growth. It wasn’t nirvana because lots of issues were still in need of solutions (for example, gender attitudes, indigenous inclusion, etc). But it was a blue print for an inclusive society with growing material prosperity. The vision was abandoned sometime in the 1970s as neoliberalism took centre stage and political parties on both sides of the fence gave up talking about full employment. To restore full employment as a primary social goal and government responsibility is an agenda I have pursed all my career. We should all read the ‘White Paper’ and recast it in modern terms and fight like hell for a similar vision that is apposite for the times and crises we now face.
On Friday, we had the extraordinary admission from our Federal government that they had overestimated the injection required to fund their wage subsidy JobKeeper program by some $A60 billion. When the overall program was announced the Treasury allocated $A133 billion to it. So now they are admitting to a 45 per cent forecasting error, which sort of dwarfs the worst errors that the IMF makes, and they sure make some bad mistakes in their projections. Whatever the reason for the mistake, the way the Treasurer has defended it is quite repugnant – claiming virtue out of the incompetence. And while all the Labor Party economists are talking about seeing the error from space, none of them picked it up or had the nous to realise that the figures didn’t add up when the Government originally released them. I am the only economist who wrote that the figures published by the Government didn’t make sense. I did that on April 29, 2020. I also wrote to the Treasury and the Treasurer requesting answers to questions that reflected my concern. They didn’t bother replying. Now everyone is wise after the fact. Anyway, the $A60 billion is a nice round figure. And I outline a plan in this blog post on exactly how the Treasurer can spend it and improve the well-being of more than a million Australians with a stroke of the pen.
Last Thursday (April 30, 2020), the US Department of Labor’s – Unemployment Insurance Weekly Claims Report – showed a further 3,839,000 workers filed for unemployment benefits in the US, taking the cumulative total since March 14, 2020 to 30,589,000. In a labour force of 164 million odd, that implies the unemployment rate is already around 22 per cent. The highest rate endured during the Great Depression was 24.9 per cent in 1933, which prompted the US President to introduce the major job creation program to stop a social disaster – the New Deal. History tells us that the major job creation programs (starting with FERA then morphing into the WPA) were opposed by the conservative (mostly) Republicans in the Congress. As is now! It wasn’t just the unemployment that mattered. Hours of work were also cut for those who maintained their jobs and some estimates suggest over 50 per cent of America’s labour force were underutilised in one way or another (read David Kennedy’s 2001 book for a vivid account of this period). The problem now is that the US has a Presidency that is unlikely to take the bold steps that Roosevelt took in the 1930s, even though the latter was a fiscal conservative and the former does not appear to be so inclined. However, some nations are leading the way – and they put the more advanced nations to shame in this regard.
Tonight (May 1, 2020), I am presenting a live YouTube show outlining how an understanding of Modern Monetary Theory (MMT) helps inform a fiscal intervention designed to minimise the damage from the coronavirus, but also to position a nation favourably for other long-term challenges such as those presented by climate change.