One of the stark facts about the academic economics discipline is its insularity and capacity to deliver influential prognoses on issues that affect the well-being of millions with scant regard to the actual consequences of their opinions and with little attention to what other social scientists have to say. The mainstream economists continually get things wrong but take no responsibility for the damage they cause to the well-being of the people. A 2015 paper – The Superiority of Economists – published in the Journal of Economic Perspectives (Vol 29, No. 1) by Marion Fourcade, Etienne Ollion and Yann Algan is scathing in its assessment of the economics discipline. They say that mainstream economists largely ignore contributions by other social scientists and consider them inferior in technological sophistication, have a “predilection for methodological and theoretical precision over real-world accuracy”, largely ignore”the basic premise of much of the human sciences, namely that social processes shape individual preferences”, and parade an arrogance and superiority that masks the sterility of their analysis. In this context, I thought the 2015 Report from the Joseph Rowntree Foundation – Sociological perspectives poverty – was a breath of fresh air in its approach to understanding poverty. The empirical base it presents refutes most of the major assumptions and conclusions of economists who work in the field of poverty. A mainstream professor who was supervising my economics graduate program once said to me: “Bill you are a bright boy but you should be doing sociology”, which was an example of the negative control mechanism designed to weed out dissidents (like me). It didn’t work. But I always considered the disciplines of sociology and anthropology (not to mention psychology, political science, social welfare etc) to be important in my journey to become ‘well read’. Most economists, however, do not think that. Perhaps that is why I was able to be part of the development of Modern Monetary Theory (MMT).
Some years ago, I was a panel speaker at an event in Sydney covering the topic of wage developments. I shared the podium with a young woman who was something like NSW Youth of the Year. It was at a time that employer groups were lobbying the conservative government to abandon penalty rates for workers in low-wage industries (hospitality, tourism, etc) and strip powers from trade unions. I spoke about how that agenda was designed to advance their class interests and fitted squarely with the neoliberal intent to redistribute real income away from workers towards profits. The young woman followed and announced that class was dead and that there was no such thing as a worker anymore – she said “we are all entrepreneurs now!”. Prior to that, as our national government was privatising our public companies such as Qantas and Telstra, our prime minister announced “we are all capitalists now” referring to the idiocy of people buying shares in the companies that we collectively ‘owned’ anyway while they were in public hands. The more recent manifestation of this delusion that class is dead and we are all entrepreneurs is the so-called ‘gig economy’. It seems that we now have millions of people (first young but increasingly older) who think that entrepreneurship is about buying a cheap scooter and tearing around streets delivering pizzas in all weather to earn a few dollars while the companies that ’employ’ them (or rather contract them) walk away with millions. These workers, sorry, entrepreneurs, face a bleak future. When there are no pizzas being ordered they have no shifts. When they are sick they have no pay. When they go on holidays they have no pay. And when they get old they will have no superannuation. Sounds like a plan to make someone rich.
It is Wednesday and just a short blog post today (short is relative I know). There was a proposal published recently (April 2019) by the British-based Autonomy Research Ltd – The Ecological Limits of Work. Autonomy pushed basic income and shorter working weeks with a healthy the ‘robots are coming’ agenda to boot. In its most recent ‘report’, Autonomy is claiming we have to dramatically cut working hours – like dramatically – but seems oblivious to the link between nominal and real. I think we will make more progress if we construct Green New Deal solutions within the current institutional realities. And, I just got my flame suit out of the cupboard where it sits on constant standby!
Apparently the British Left is “fizzing with ideas for a smarter economy” according to the UK Guardian article (May 12, 2019) – The zeitgeist has shifted. Now the left is fizzing with ideas for a smarter economy – written by Will Hutton. I can’t say I sensed an outbreak of fizz. But in the colloquial language from where I come from, the term fizzer means “Something that promised excitement but instead was a disappointment”, Yes, Hutton’s fizzers include promoting the insights of a long-standing (pun intended) critic of employment guarantees, who prefers people to be propped up as consumption units by a UBI, and, yes, surely, if Hutton is involved, reversing the “tragedy” of the democratic choice the British people made to exit the EU. Apparently, “Remain” is the “great progressive social force of the moment” and if Britain was to leave the EU it would “stand in the way of any of it ever being implemented”, where “it” refers to all these ‘left’ fizzers. It is hard getting one’s head around this logic. A restoration of democracy and sovereignty apparently disables the elected government from using its currency-issuing capacity to deliver a progressive program aimed at advancing well-being. But, staying in a corporatist cabal which has embodied neoliberalism in the core legal structure of its existence and allows corporations to sue governments which threaten their profits and is unaccountable to the people is the exemplar of progression. This stuff is in the world of the pixies!
I am doing some work on the way technology can be chosen to maximise employment in the pursuit of advancing general well-being. This is in the context of some work I am doing on advancing what is known as ‘relative pro-poor growth’ strategies in Africa via employment creation programs and draws on my earlier work in South Africa on the Expanded Public Works Program. In the current work, I have been assessing ways in which the Labour Intensive Public Works program in Ghana has been deployed to serve this purpose. The problem one confronts when working as a development economist in less well-off nations is that the institutional bias promoted by the IMF and the World Bank is towards advancing, at best, what we term ‘absolute pro-poor growth’. But that sort of agenda typically fails to strengthen other aspects of a strong civil society because it is almost always accompanied by rising inequality which continues to concentrate power and influence at the top and leads to resources being disproportionately expropriated by the wealthy (and usually foreign) classes. Institutions such as democracy, justice, law and order and causes such as environmental sustainability are then compromised.
Australia is currently being shocked on a daily basis with the revelations in our Royal Commission on Banking, which show that our financial services sector (banks, insurance companies, financial planning, etc) is deeply corrupt, with criminal behaviour clearly rife. Hopefully, many of the top executives and board members of these firms will be prosecuted and do time. Another ‘bank’ that has totally lost any sense of moral compass, not to mention effectiveness, is the World Bank. Its behaviour over the years has been scandalous. Earlier this year we learned that its so-called ‘Doing Business’ strategy deliberately manipulated its reporting to undermine a democratically elected government (Chile). And, last week (April 26, 2018), the World Bank released the Working Draft of its upcoming – World Development Report 2019: The Changing Nature of Work – where it attempted to pressure governments into widespread labour market deregulation, which if carried through would further disadvantage workers and further redistribute national income towards profits. The World Bank has outlived its purpose. It is now a seriously dangerous international institution and progressive governments should set about defunding it.
In advanced nations, poverty used to be a thing of old age, once income had stopped due to retirement and savings depleted. Old-aged pension systems were intended as Welfare States emerged to prevent that fall into poverty. The pension systems reduced the incidence of extreme poverty and the full employment era that followed the Second World War, where governments committed to using their fiscal capacities (spending and taxation) to ensure there were sufficient jobs for all, allowed workers to improve incomes and saving. Research in the early 1970s (particularly from the US, where the pension systems were less generous and working conditions less regulated) started to disclose the incidence of the ‘working poor’. In more recent times, the concept of the working poor has spread from the US to most advanced nations. In this modern era of renewed real wage repression, rising energy costs and housing costs, workers are not only facing increased risk of poverty but also of homelessness. Welcome to Australia – the nation with the second highest median wealth per adult in the world. Yesterday (February 21, 2018), the Australian Bureau of Statistics (ABS) released the – Wage Price Index, Australia – for the December-quarter 2017. Private sector wages growth was 1.9 per cent in the December-quarter continuing the seven consecutive quarters of record low growth. However, with the annual inflation rate running at 1.9 per cent, real wages growth was static. And with real wages growth lagging badly behind productivity growth, the wage share in national income is now around record low levels. This represents a major rip-off for workers. The flat wages trend is also intensifying the pre-crisis dynamics, which saw private sector credit rather than real wages drive growth in consumption spending. And now, the latest data shows that workers are experiencing increased homeless. It is not just a problem of the ‘working poor’ now. Welcome to the ‘homeless’ working poor – a new neoliberal KPI.
An enduring myth among mainstream economists is that so-called ‘structural’ impediments in the labour market prevent aggregate spending initiatives from government being an effective solution to mass unemployment. According to this view, if the government attempts to reduce the unemployment rate below some ‘natural rate’ then accelerating inflation will be the only outcome. The ‘natural rate’ can, in turn, only be reduced by structural policies – attacks on trade unions, welfare state retrenchment, cutting the minimum wage, and the rest of the litany of neoliberal policies. And, in this view, the unemployed are to blame for their own state – a lack of effort on their part to adequately present themselves to the labour market. The prior view that mass unemployment is a systemic failure to create enough jobs is rejected. A piece of this fiction is that one of long-term unemployed (and other disadvantaged workers) are not capable of being absorbed into employment without extensive re-training and other personal rehabilitation and this also prevents the unemployment rate from falling quickly. The problem with all of these related propositions is that reality interferes and generates outcomes that contradict the assertions. It is quite obvious that if the economy is run at high pressure then firms are forced to scrap prejudice for disadvantaged groups and offer on-the-job training to them to ensure they can maintain market share. In other words, the long-term unemployed do not present an impediment to growth. Events in the US labour market at present are demonstrating this reality.
During my postgraduate study years I read a 1954 article by American economist Clark Kerr entitled – The Balkanization of Labor Markets – which attacked the mainstream labour market views that there was mobility within labour markets such that poverty arising from low-pay was a function of workers’ preferences for low education and more leisure (that is, unemployment). As such, there was no reason for the government to intervene to improve wages or job security. Kerr’s thesis was that there was not a ‘single’ labour market accessible to all, where individual mobility would result from personal investment in education and skill development. Instead, he argued that the US labour market was “segmented” by institutional arrangements, which trapped some demographic cohorts into low-pay and insecure jobs. Poverty could arise from these traps. The idea morphed into the segmented labour market literature of the late 1960s and early 1970s. The applications were mostly Anglo because in non-Anglo countries there appeared to be more resistance to institutional arrangements that undermined the chance for workers to enjoy job security with decent pay. However, in recent years (decade) the trend towards precarious work where certain groups (women, youth, migrants) are trapped in low pay and frequent spells of unemployment has spread, with devastating consequences. The largest European economies – Germany and France – are now bedevilled with this issue and with a bias towards fiscal austerity, the path for workers out of the trap is limited.
Here is a summary of another interesting study I read last week (published March 30, 2017) – Happiness at Work – from academic researchers Jan‐Emmanuel De Neve and George Ward. It explores the relationship between happiness and labour force status, including whether an individual is employed or not and the types of jobs they are doing. The results reinforce a long literature, which emphatically concludes that people are devastated when they lose their jobs and do not adapt to unemployment as its duration increases. The unemployed are miserable and remain so even as they become entrenched in long-term unemployment. Further, they do not seem to sense (or exploit) a freedom to release some inner sense of creativity and purpose. The overwhelming proportion continually seek work – and relate their social status and life happiness to gaining a job, rather than living without a job on income support. The overwhelming conclusion is that “work makes up such an important part of our lives” and that result is robust across different countries and cultures. Being employed leads to much higher evaluations of the quality of life relative to being unemployed. And, nothing much has changed in this regard over the last 80 or so years. These results were well-known in the 1930s, for example. They have a strong bearing on the debate between income guarantees versus employment guarantees. The UBI proponents have produced no robust literature to refute these long-held findings.