In the last few days I have seen more calls from commentators for policy makers to take new initiatives to generate jobs and growth. Some of these calls have come from commentators and research centres that sit on the “progressive” side of the macroeconomic debate. Unfortunately, their proposals are always compromised by their demonstrated lack of understanding of how the monetary system operates. In my view these proposals actually undermine the need to advance an understanding that sovereign governments can create true full employment and should do so as a matter of urgency. By playing ball with the conservatives and choosing to focus on deficit outcomes these progressives divert the policy focus away from the real issues. In short, the federal budget deficit outcome should never be the focus of policy.
Two related articles in The Economist last week (November 7, 2009) caught my attention. The first article – Battling joblessness – Has Europe got the answer – was about how the Continent may be a guide to all of us in tackling unemployment. The second article – Faring well – was extolling the virtues of India’s National Rural Employment Guarantee Act (NREGA). They provide a further basis for discussing employment guarantees.
I was a speaker at the Sydney Greens Forum yesterday and today I am on a panel with Bob Brown at the Greens National Conference in Adelaide. Regular readers will know that in the past months we have been engaging with the Greens after I wrote – Neo-liberals invade the Greens. The initial reaction towards me was hostility but that soon gave way to a more reasoned engagement which I have found to be extremely beneficial. That is why I accepted invitations to speak at their functions. While there is a long way to go in fully articulating a modern monetary paradigm within the context of the generally sophisticated social and environment policy that The Greens have already developed I think the possibilities are now there. One issue that does emerge in my discussions is that of whether a person should have to work under a Job Guarantee approach to full employment. That is, should the Job Guarantee be compulsory?
There was a story in The Australian newspaper today entitled RED schemes are good written by a former minister in the Whitlam government in the early 1970s. He was extolling the virtues of the old Regional Employment Development scheme, which was a public works direct job creation scheme. He was suggesting such schemes may again find favour as the recession deepens. The RED scheme was a less generous version of the Job Guarantee and suffered as a result of its modesty. It was never based on any fundamental understanding of a modern monetary economy as as such was always a “defensive” program. Defending itself continually from the conservative, soon-to-be, neo-liberal critics. That made me recall my favourite conservative “put down” term – boondoggling and raking – which is used whenever direct public job creation is mentioned as a possibility. Then I recalled a letter that was written by the previous Federal Employment Minister explaining in 2004 why my Job Guarantee proposal was a crock. One thing followed another …
In the current edition of the German weekly Magazine Der Spiegel (“The Mirror”) there is an article about a “new idea to keep unemployment down” entitled Germany Mulls ‘Parking’ Unwanted Labor in New State-Funded Firms. The thrust of the proposal is that Germany is now examining a proposal to set up government-funded “transfer companies” for workers who lose their jobs as a means of keeping unemployment in check. A reader wrote to me saying that it sounds a bit like the Job Guarantee that I have been advocating for years! Closer examination suggests that while the Germans are starting to come to terms with how bad their economic situation is, they are still a long way off understanding how to get out of it. In that respect, they share the ignorance with most governments. However, being a Euro zone member, the German government has voluntarily lumbered itself with even more constraints that will make it harder to insulate its people from the ravages of the recession.
Direct job creation is in the air. Yesterday, the Federal government announced its Jobs Fund yesterday which will allocate (sorry: a measly) $650 million to “support and create jobs and improve skills, by funding projects that build community infrastructure and create social capital in local communities.” However, I estimate a maximum of 40,000 jobs will be supported by this initiative. Put together the $42 billion and the $650 million, and you have a maximum of 140,000 jobs being protected if all the modelling is correct. Not a good dividend from the scale of public outlays. But … at least direct job creation is now on the table … finally. Now to scale it up to an appropriate level!
I am in a quandary … as usual! I thought along the same lines when Australia was stricken with drought recently and there was a national urgency to provide both government assistance and support from the private sector (national appeals and such). At present the world’s media is focused on the events following the natural disaster in the Indian Ocean. Not without some justification given the extent of the calamity. Nation’s (some) are rushing to provide aid and our Prime Minister John Howard quickly committed $35 million in aid and has said more funds will be made available. He is quoted on ABC news today as saying “The amount will be added to significantly in the time ahead … We have a moral obligation on the basis of pure humanity to help and we will help.” Say that again John: “We have a moral obligation on the basis of pure humanity to help and we will help.” But try this logic out: the citizens who have been ravaged by the earthquake and subsequent tsunamis could have taken steps to avoid their exposure. Why didn’t they educate themselves enough to ensure they knew about the dangers and why didn’t they build better houses and why, why, why?
In the New York times article (December 26, 2004), from Larry Rohter – Argentina’s Economic Rally Defies Forecasts – it is reported that the Argentinian economy has made a surprising comeback. Rohter writes “When the Argentine economy collapsed in December 2001, doomsday predictions abounded. Unless it adopted orthodox economic policies and quickly cut a deal with its foreign creditors, hyperinflation would surely follow, the peso would become worthless, investment and foreign reserves would vanish and any prospect of growth would be strangled. But three years after Argentina declared a record debt default of more than $100 billion, the largest in history, the apocalypse has not arrived. Instead, the economy has grown by 8 percent for two consecutive years, exports have zoomed, the currency is stable, investors are gradually returning and unemployment has eased from record highs – all without a debt settlement or the standard measures required by the International Monetary Fund for its approval.”