The Australian Bureau of Statistics released the latest data today – Labour Force, Australia, July 2019 – which reveals a labour market with where employment growth is not strong enough to absorb the increasing labour force as participation continues to creep up. As a result, unemployment rose again, albeit modestly. The disturbing trend in this rather weak environment is that underemployment rose by 0.2 points) to 8.4 per cent further and the total labour underutilisation rate (unemployment plus underemployment) rose as a consequence to 13.6 per cent. Both the unemployment and underemployment rates are persisting around these elevated levels of wastage making a mockery of claims by commentators that Australia is close to full employment. The unemployment rate is 7 percentage points above what even the central bank considers to the level where inflationary pressures might be sourced from the labour market. This persistence in labour wastage indicates that the policy settings are to tight (biased to austerity) and deliberately reducing growth and income generation. My overall assessment is the current situation can best be characterised as remaining in a fairly weak state.
Wednesday and a short blog post. I regularly work for unions as an expert analyst/witness in their struggles to achieve wage justice with employers who are intent on paying as little as possible. Often these are private employers but at the moment I am helping a union with their campaign to win a reasonable wage increase against a state government. The logic deployed by the government in relation to their fiscal affairs and their wage setting behaviour is a classic demonstration of how neoliberalism has distorted any sense of reason and created self-fulfilling problems. So today, I will just introduce this issue – given how fascinating it is.
Last week (August 9, 2019), the British Office of National Statistics (ONS) – GDP first quarterly estimate, UK: April to June 2019 – told us that the UK economy contracted by 0.2 per cent in the June-quarter 2019 after having grown by 0.5 per cent in the March-quarter. The UK Guardian pundits and the Remain cheer squad all screamed Brexit and were heard to be walking around in circles saying “see, we told you so”. Meanwhile (August 7, 2019), not far away (according to the Remain crowd’s much-loved gravity trade models), Germany’s Statistisches Bundesamt (Destatis) press release – Production in June 2019: -1.5% seasonally adjusted on the previous month – told a sorry tale. In annual terms, Germany’s industrial production has contracted by 5.2 per cent. We also learned that Germany is probably in recession. According to the Remain-logic, that must be Brexit too, n’est-ce pas? Meanwhile, just a bit further south, Italy is in turmoil. Obviously, Brexit uncertainty. I jest of course (well a bit). But in a real sense, this is all tied into Brexit in one way – and it is not the way the Remain camp would like us to believe. In fact, what I have in mind gives more weight to the Leave position and reflects on how intransigent the European Union elites are in dealing with the Member States.
The dissonance in mainstream economics and the political debate about policy settings is getting deeper and more public. We now have examples of central bankers ‘throwing their hands up in the air’ and nearly begging governments to abandon their obsession with fiscal surpluses, and, instead, use fiscal policy to stimulate waning economic growth. What I think is happening is that we are entering a period of fiscal dominance, which will represent a categorical rejection of the mainstream macroeconomics consensus that has dominated policy making since the 1980s – the neoliberal era. In turn, this shift will ratify the main precepts of Modern Monetary Theory (MMT). We are observing paradigm shift occurring as the dominant neoliberal paradigm fails at every turn. There is a long way to go though before the practitioners acknowledge that such a shift has occurred. But there is progress.
Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.
Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.
I was coming through the streets of inner Melbourne the other night after playing in my band. I couldn’t believe how many little scooters with those big boxes on the back were buzzing around, in and out of traffic, turning here and there, presumably, delivering food to people who preferred to stay in from the cold weather. I had sort of noticed these ad hoc cavalcades of cheap scooters before but never really assessed the extent of the proliferation. It represents an amazing and highly disturbing trend in our labour market. Okay, that sounds like something someone from another (older) generation might say. He who grew up when there was secure employment and wages and conditions were more tightly regulated. And I have seen Tweets from young people telling us ‘oldies’ to step aside. But what the scooter riders don’t realise is that they will get old themselves one day. And secure, well-paid work coupled with a broad spectrum of high quality public services is what makes that transformation liveable. In mapping out what I think are the essential aspects of a social transformation that we might call a Green New Deal, eliminating precarious work is one of the priorities – it is intrinsic to creating a more equitable society in harmony with nature. This aspect also calls in question the role of a Job Guarantee. Note the capitals – there is only one Job Guarantee but many jobs guarantees. I will explain today why the Job Guarantee will be an intrinsic part of the Green New Deal but by far a minor player in terms of the job opportunities that will be created by the socio-economic shift. Many commentators seem to think the Job Guarantee is sufficient for a Green New Deal. It is not and we need to understand its role in a monetary system to understand why.
It is Wednesday and my blog post-lite day. A few topics – thugs in Britain. Mindless ‘progressive’ journalism trying to tell readers that while Gordon Brown could use fiscal policy tools (spending and taxation) to advantage to stimulate the British economy, Boris Johnson cannot. Piffle and the lies from the UK Guardian are getting more desperate by the week. And some notes on guns. Then a nice bit of guitar playing. Tomorrow, I will be extending my ideas on the Green New Deal.
I am working on a manifesto (‘White Paper’) linking Modern Monetary Theory (MMT) with a Green New Deal (GND) concept. I will announce an important strategic coalition I am forming to advance this agenda in the coming period and some great events to present the framework. As part of that process, I have been sketching some of the important guiding principles that I consider to be essential if a massive socio-economic transformation like the Green New Deal (or whatever we want to call the strategy) is to be successful. Lessons from history are a good starting point to understand why things go awry. In that respect, the largest national infrastructure project that Australia has embarked on for decades – the National Broadband Network (NBN) – is a object lesson in how not to conduct government policy when nation building. The Green New Deal is about nation building – creating a framework of infrastructure, education, skills development, employment, distributive mechanisms and more to take nations into the next century while reversing the environmental degradation that industrialisation and mass consumerism has wrought. The central role of the government as the currency issuer will be paramount. The whole transformation will not be successful while policy makers hang onto mainstream macroeconomic views about government financial capacities, which manifests into obsessions about achieving fiscal surpluses. This is why an understanding of MMT is central to any proposal to advance a GND. Without that understanding, we will always encounter the nonsensical issues that have plagued the NBN development and left it in a state of chaos and near-redundancy, when it should have underpinned our technological network for decades to come.
Last week’s (August 2, 2019) release by the US Bureau of Labor Statistics (BLS) of their latest labour market data – Employment Situation Summary – July 2019 – reveals a steady labour market with month-to-month volatility. The US labour market is still adding jobs, albeit at a slower pace than last year. The unemployment rate remains low (at 3.71 per cent) and the participation rate has moved up a tick, which is a good sign. It is also clear that there is still a substantial jobs deficit remaining and considerable scope for increased participation. Significantly, the bias toward jobs in below-average pay sectors being produced in the recovery has intensified during 2019.