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.
Here is the link to Noel Pearson’s article – The case for a government jobs guarantee.
Here is the unedited text. The final version was cut a bit but didn’t lose anything in substance or flavour.
Text begins ….
Japan embraced the neoliberal excesses in the 1980s. In 1991, the excessive private debt caused a massive commercial property collapse. The government’s response pushed economic policies to the extreme of conventional limits – continuously high deficits, high public debt, with the Bank of Japan buying much of it. Modern Monetary Theory (MMT) tell us this was the correct response.
Most economists recycled predictions of high interest rates, accelerating inflation and bond market revolts. None came to pass. Japan has maintained low unemployment, low inflation, zero interest rates and strong demand for government debt.
Undeterred, these economists continue to promote their ‘fictional’ world, keeping citizens in the dark about the true capacity of government and the consequences of using that capacity to sustain full employment.
They manufacture fear about public debt and deficits, predict government insolvency, use the words – Weimar or Zimbabwe – to invoke fears of hyperinflation. They rehearse false moral arguments about today’s government spending burdening our grandchildren.
None of their predictions ever materialise for they were lies to begin with.
Which is why we are hearing more about MMT. It has an impeccable record of prediction and offers answers that the economic orthodoxy fails to provide.
Renowned British journalist Martin Wolf, commenting on MMT, recently wrote: “In my view, it is right and wrong. It is right, because there is no simple budget constraint. It is wrong, because it will prove impossible to manage an economy sensibly once politicians believe there is no budget constraint.”
MMT exposes these fictions but some still think it is better for the public to be kept in a state of ignorance.
In the real world, currency issuing governments have no intrinsic financial spending constraint. They can purchase whatever is for sale in their own currency including all unemployed labour desiring work.
Mass unemployment is a political choice. Imagine if all Australians understood that, rather than labouring under the current deception.
It was not too long ago when full employment was official government policy.
The 1945 Government White Paper on Full Employment begins with a commitment to the Australian people “Full employment is a fundamental aim of the Commonwealth Government. The Government believes that the people of Australia will demand and are entitled to expect full employment” This commitment was abandoned when the Whitlam Government changed course in 1975.
Australians knew it was government’s responsibility to maintain spending sufficient to sustain full employment. The purpose of fiscal policy was not to achieve a surplus or deficit. Rather, they judged government on how low unemployment was.
Unemployment was a policy target, not a policy tool.
Menzies nearly lost the 1961 election because unemployment rose above 2 per cent.
Australian used to maintain a buffer of public sector jobs that always provided easy employment access to our least skilled workers.
So when and why did Australians become so tolerant of systemic unemployment and its attendant ills – the accumulated human wreckage to use my friend, Noel Pearson’s term – that goes along with it?
The answer lies in the political and economic developments we now call neoliberalism. They were supported by a series of powerful but interconnected myths – promoted by economists to distort our thinking about money, the capacity of government, and our economy.
Politicians on both sides now claim that employability (preparing people for jobs) rather than full employment is the proper role for government. They claim the ‘market’ will take care of the jobs.
As a result. we have endured elevated levels of unemployment and underemployment, suppressed wages growth, massive household debt, and rising inequality.
The unemployed are ‘managed’ within Australia’s newest ‘industry’ – the unemployment industry – and churned through pointless training programs divorced from paid-work. They receive below poverty line income support and are coerced by pernicious work tests when it is obvious there are not enough jobs to go around. The Robodebt scandal obliges.
The victims of this policy failure are scarred with accusative nomenclature – cruisers, bludgers, job snobs – as a divide and conquer strategy aimed at creating social divisions – them (bludgers) and us (hard working Australians). Lifters and leaners.
Even in the last few we days there have been absurd claims that the JobSeeker scheme discourages the unemployed from seeking work. In May 2020, unfilled job vacancies declined by 43.4 per cent. On a national scale, there were 3 persons for each unfilled vacancy in February. Now it is 7.2. Adding in the 600 odd thousand that have ‘left’ the labour force after giving up looking as employment opportunities collapsed, gives 12 job seekers per job vacancy.
Any reasonable person knows this is a systemic lack of jobs.
MMT exposes these fictions and provides answers to support a new vision of collective prosperity and an environmentally sustainable future.
The current government crisis response has been massively inadequate. I estimate that Australia has over 25 per cent of available labour underutilised in some way.
The waste of human potential is staggering.
There was no reason for unemployment to rise.
The government should introduce what I have termed a Job Guarantee by making an unconditional job offer at a socially-inclusive minimum wage to anyone willing and able to work.
The buffer of jobs would normally be small and would shrink as private sector activity recovers.
No inflationary pressures arise because government would not be competing for labour at market prices. There is no market bid for the unemployed.
I know all the criticisms – painting rocks – and the like. They simply reveal a lack of imagination.
Research at the Centre of Full Employment and Equity (University of Newcastle) over 25 years has addressed these issues. We can articulate hundreds of thousands of productive jobs that would add meaning to peoples’ lives and add value to society.
The Job Guarantee would replace the ‘unemployment industry’. Productive replacing the unproductive. A guarantee of employment replacing a guarantee of unemployment.
Treasury said JobKeeper would require an investment of $70 billion over 6 months to reduce unemployment rate by 5 points (585 thousand jobs). Our modelling shows that a Job Guarantee that reduced the unemployment rate by 6 points would require net investment of just $53 billion over a year.
A no brainer!
It is, as they say, a no brainer.
The JG does not solve all societal ills, but it would be a significant improvement on the current suite of policies.
The scale of this disaster is so large that Australians will have to get used to very large fiscal deficits for a decade or more to support income and employment growth, so that households can reduce their astronomical and unsustainable debt levels.
Any attempt at ‘paying down the public debt’ or ‘getting into surplus’ will be catastrophic and undermine the opportunities of our current generation and those that follow.
And when we wake from the health crisis, the on-going climate crisis will occupy our fears and challenges.
We need a grand vision to replace the impoverished world that neoliberalism has created for us.
We can have full employment again. We can choose a Just Urgent Sustainable Transformation (JUST2030) that will future proof our economy and give all Australians the opportunity to develop and put to use the knowledge and skills we need today and in the years to come.
Noel Pearson has written a powerful accompanying piece today calling on government to take responsibility for the unemployment crisis and the social damage it causes.
We are working together now, economist and lawyer, academic and indigenous leader. And we will be writing regularly to expand on the JUST2030 vision that we believe is not only grounded in economic reality but also in basic human decency and care for the natural world.
Watch out for more action under our JUST2030 project.
That is enough for today!
(c) Copyright 2020 William Mitchell. All Rights Reserved.