Productivity Commission ties itself in knots

I seldom follow the mainstream news. Most of the time it is discussion around a pressing issue and the analysis tends to amount to what we should be doing about it. The conclusion is usually ‘we (the Australian nation) have no money?’ So we need to rely on the charity of private investment. That plays into a framework of how wonderful it is to have private enterprise supporting our communities. At the opposite end of the debate you have leftists that argue ‘if only those corporations paid taxes’. Which when you understand the Australian government issues currency and must spend first – you see how pointless the debate is. We go round and round in circles and our education, healthcare, care services and public utilities get neglected and as a society we end up poorer for it.

An article in the AFR ‘Gonski reforms to improve teaching never implemented’ takes issue with the declining educational results of Australian students. I’ve always found the Gonski report flawed. David Gonski the chair of the paper on educational reform has no experience or qualifications in education. He is a businessman that sits on countless boards including ANZ bank, Ingeus (one of those private firms that make money by punishing the unemployed), Swiss Re (An insurance company) and multiple other firms that collect billions of dollars in unearned income. The fact the allegedly left ALP Gillard Government chose him to write a report into how to solve issues in Australian public education just shows how closely affiliated capital is with the Australian Government.

The Productivity Commission report into the Gonski reforms says

The Productivity Commission says each year, between 5 per cent and 9 per cent of students fail to pass the minimum NAPLAN reading and maths standards for their age, and that one-third of the children who have fallen behind as eight-year olds are staying behind as 15-year olds.

I work in education and I can tell you that there are many students that are required to take these standardised tests knowing they are going to fail. In a disadvantaged indigenous community I know of students that moved from a level 3 to a level 4 reading level in a year were still required to undergo a standardised test far higher than their ability!! I had a meeting with an education minister in regards to this issue (plus numerous others) and I can tell you it is nods and smiles and honestly I don’t think they could care less. I doubt they were even listening to the words coming out of my mouth.

The focus of the report is on what is wrong and why we have declining standards is thrown onto the teaching profession

“But persistent barriers, including ineffective teacher education in universities and a lack of ongoing monitoring and professional development of the existing teacher workforce, were hindering progress.”

And to some degree that is true. However, teachers are overworked, paid well below other professions (architects, engineers etc…) and have unnecessary administrative duties placed on them that they don’t have time to plan classes. Most of these administrative duties are to do with collection of data, that teachers know of their students, but it needs to satisfy some bureaucratic funding requirement. None of that tends to come into the minds of the powers that be at the Productivity Commission.

And yet nothing in respect to the broader social environment of students is considered. In yesterdays post I citied Eisenberg, P., & Lazarsfeld, P. F. (1938), a study on the psychological effects of unemployment. The study looked at the psychological affects on the children of unemployed adults. It found

One of the effects of unemployment on personality is shown in school work. Busemann and Bahr (13) found that in an elementary school in the poor district of Breslau the children of the unemployed fall from an average grade of 2.80 to 3.15 (1—very good, 5—failing). This bad effect is found more frequently in children of unemployed who previously had good marks than in those who had average and inferior grades. The decline sets in immediately after loss of work, and is to be explained by the lowering of the standards of living. In a better controlled study by Busemann and Harders (14), in which 473 children of unemployed parents were compared with 1,154 children of employed, it was found that there appeared without exception a decrease in the average grades of the former group.

Eisenberg, P., & Lazarsfeld, P. F. (1938). The psychological effects of unemployment. Psychological Bulletin, 35(6), 358–390. https://doi.org/10.1037/h0063426

This is where the economic orthodoxy fails us. An article from a year ago by a typical neoliberal fear monger, Shane Wright ‘Dark clouds ahead’: PC warns about budget debt and protectionism complains of PC warning against debt and deficits.

One of the federal government’s most senior independent economic advisers has warned against accepting large budget deficits and the drive for the country to become self-sufficient across key industries, saying they will leave future generations poorer.

Yet we know a deficit is merely the difference of what a government spends (which as an issuer it must do first) and what it taxes. The result is the fiscal balance. The result is meaningless without a context. On one hand you have the PC stating we need to lift educational outcomes so we can prosper in the future and on the other they demonise government spending by spreading myths of debt and deficits that mean our governments allow unemployment, which leads to children having lower educational outcomes!

Unless we are pushing for economic reform within the frameworks our governments use, we will continue to advance the interest of capital and as a society our public infrastructure degrades, our health systems can’t manage and our educational outcomes decline. This leaves us poorer as a society!

Then debate happens around education funding. Each school has a Student Resourcing Score (SRS) that should be met to ensure schools are resourced appropriately. There are loadings for disadvantage, students with special needs et cetera.

The federal government committed to funding 20% of the SRS for public schools while the states and territories provided the rest. It is reversed for private education with the feds funding 80%. No jurisdiction has met the 100% funding for public schools.

The loadings that are meant to assist in closing educational gaps between rich and poor aren’t enough to cover the labour of someone needed to assist in the classroom. So casual work is offered and employees are left in precarious situations while there isn’t the funding to deliver what students actually need in extra assistance.

The appropriation bills are written in such a way that rather than deliver funding for the required skilled labour, a hypothetical amount of money is ‘put aside’ and the funding flows to ensure it doesn’t exceed that limit. Complete and utter nonsense when you issue a currency.

When you have students with disadvantage that need extra assistance and you have underemployed workers that want more work, as a society we should be able to ensure we lift hours for those workers to help the students that need help. That is logic.

But instead of that frame taking the forefront of public debate we get nonsense that the federal government should lift its funding commitment 5% (to 25%) of the SRS.

Well, why wouldn’t the federal government fund a 100% of the SRS? Why not write appropriation bills that ensures funding flows to meet the needs of the required labour and other resources needed? Why limit ourselves by a hypothetical amount of money? We face serious challenges in terms of a labour force that is exiting education, a lack of skills development given to those that need to assist in the classroom, and chromic underemployment issues.

Unless we seriously begin looking at the real resources needed to rectify the issues, that is things like teacher:student ratios, the additional support for disadvantaged and students with special needs, looking at the broader social environments students live and ending the dysfunction and poverty that unemployment brings, our public education system will continue its decline.

We need to be designing the funding structures to co-ordinate the resources we need instead of placing limits on amounts of dollars to spend. Otherwise we will go round and round in circles and achieve nothing.

Work is Intrinsic to our Identity

As people start to grasp the power of a currency issuer thoughts lead to the idea of a universal basic income. Rejections against it are based on ‘not wanting to give money to millionaires’. Then there are those that advocate for a basic income. An income for people that choose not to work.

The first step in understanding why currency has ‘value’ (why we use it) is because of the coercive nature our governments use demanding the currency they issue back in taxes. In order of operations a tax liability comes first, then the spending, then the taxes.

In helping to understand that concept I use the story of ‘the hut tax’. When the British colonised Malawi, to create labourers they needed a mechanism to coerce the locals into needing to accept the colonisers currency. They placed a hut tax on the dwellings and if the tax wasn’t paid they were removed by force. (source) There are other examples of tax liabilities to drive a currency. The colony of New South Wales had liquor licensing to quell the unruly behaviour that stemmed from the production of spirits (the rum trade) In 1824 an act was set up introducing the ‘Spanish dollar’ as a currency and liquor licensing brought in to drive its acceptance. note: the early colony didn’t have a means to mint their own coins. Spanish pesos with holes drilled through the middle were used.

The first reason why I disagree with basic incomes, universal or otherwise, is it undermines the coercive nature of the tax liability. This is a contrived example but it is to emphasis a point. Imagine a society where most people chose to remain on a basic income but we are short of nurses. What coercive mechanism would we use to drive people off basic income into work. The payment of an unconditional income after the tax liability undermines the reason for the tax liability in the first place. That is an error many people make.

The second reason is that ‘work’ however defined is intrinsic to our own identity.

When we try to formulate the psychological effects of unemployment, we lose the full, poignant, emotional feeling that this word brings to people.

Eisenberg, P., & Lazarsfeld, P. F. (1938). The psychological effects of unemployment. Psychological Bulletin, 35(6), 358–390. https://doi.org/10.1037/h0063426

The study cited above is from 1938. I chose that study to demonstrate that the effects of unemployment have been studied for quite a while now. The paper discusses unemployment leading to an increased instability and lowering an individuals moral. We create social networks through work, use it to develop and improve skills and create a sense of purpose for ourselves. Not only in terms of a self-identity but through social networks we develop and the sense of contributing to something bigger than ourselves. There are also issues with respect to children and youth growing up in unemployed households. You witness lower self-esteem and declining grades amongst children in unemployed households and of course poverty as a result of insufficient income.

Redefining Work

Another point basic income advocates miss is the idea we need to redefine the definition of productive work. The definition of what constitutes productive work was part of the debates happening around the 1930s. It was deemed anyone working and creating a profit was ‘productive’.

Overtime we’ve advocated for social services and provisioning of education, healthcare and utilities to be provided as public goods. This is often seen as a ‘cost’ to society under flawed framing of ‘tax and spend’. Though we would say that workers in those sectors are productive. However, overall ‘work’ as we define it today is viewed as needing to be earning a profit or it is otherwise ‘subsidised’ by taxes.

Work can be defined as something much broader. We can include parenting, the arts, cultural and indigenous knowledge, community work. The list is endless. Basic income advocates use arguments that ‘someone should be allowed to create and develop their art’ and I am all for that. Though there is an idea of reciprocity. We could develop a Job Guarantee where someone can choose a job to develop their artistic skills, undertake courses and provide work of community benefit. They may be required to assist in designing the artwork for a community festival and working with others to discuss ideas and theory. Art isn’t created in a vacuum. There is a social context and artworks often reflect social upheavals and social movements from the era they were created.

Work is about giving back

I chuckle at the idea that if someone chooses not to work we should support them in that endeavour. There are various migrant communities were work is essential in terms of defining their place within their communities and contributing to the survival of those community.

I am a generation removed from subsistence living. My grandparents with their children grew up in a rural village with no electricity. They produced most produce themselves. They would make the bricks to build their houses, locals (usually family) taught in the school and each family took turns in producing various agricultural products. Fruit trees, vegetables, chickens, goats, cheese, olives were all part of the mix.

My grandmother tells me her street, which was made up of her brothers, would take turns in milking the goats to make the cheese. One week it was her turn and it would move up and down the street until it came back to her house. Imagine within that setting you refused to make a contribution. You would be ostracised by the community and not allowed to share in the rest of the produce that was grown.

Conclusion

The basic income undermines the coercive nature of the tax liability that is implemented to create workers in the first instance. That is just a technical fact.

Work is responsible for more than just an income. It allows for social mobility, a setting that allows personal and skill development, it gives us a social standing within our communities, it assist in the development of social networks, and allows for children to grow up in households were they see value in what their parents create in a broader community. This stuff is immeasurable.

There is an idea of reciprocity. I find it difficult to comprehend that someone that expects a high level of social services and public goods feels that they can choose to opt-out of work and be provided with a subsistence living. That wouldn’t fly in a small rural village and I don’t see why it is a valid argument in our modern societies.

The idea should be to redefine productive work and include things that have public purpose and enhance our communities making them better places to live.

If you demand a high level of public services and want our government to ensure enough work for all the other end of that bargain is contributing to your potential to make our communities desirable places to live.

We Need to Organise and Attack Current Fiscal Policy

I’ve been busy working on a project that tries to bring progressive organisations together and critique Governments fiscal policy from an MMT perspective. It focuses on two key points. The first is the Australian Government issues currency. It spends with an appropriation bill and the RBA uses a computer to mark up the size of the relevant account. There is no ‘printing’.

Printing money is one of those divisive terms that gets used to invoke a fear of inflation. The reality is there is no alteration to the way the government spends. Whether it runs a deficit or a surplus; Or the conduct of any operation by its central bank. The issuance of bonds and taxes by matter of logic needs to come after the fact the currency issuer has spent! There is a history lesson on monetary operations I wrote about in this post.

The second part of attempting to change the narrative is too redefine how we view the economy. One of the most idiotic questions that has always bothered me is which party is better for the economy and which is better for society? One of the most successful aspects of the neoliberal era has been to have the masses believe ‘the economy’ is something that sits above us and we are reliant on profits and taxes to fund our public infrastructure.

So I’ve developed my graphic design skills to try and redefine that.

It is obvious to many people we now face a poly-crisis. Climate change, rising inequality, a housing crisis, job insecurity and a lack of enough work for many. We look at our aged-care, disability and child care systems and see that they’re directed toward profit over doing what is best to help those in need.

We really need to be breaking the orthodox economic framework by attacking our elected representatives and treasury departments for targeting balanced budgets which avoid funding and skilling people in the areas we need to prosper into the future! Surely at some point in the future we will look back at the 2020’s at think ‘how could people be so stupid to think government insolvency was a risk’ That is the aim of what I have been working on.

The project will have two components;
1. what is fair? and;
2. why it is possible.

The fair will start looking at ecological sustainability and working within our ecological limits as well as a strong focus on worker rights and falling real wages. The issues of climate change and workers rights are intertwined. To build a sustainable future we need drastic action and we need well paid workers to do it!

Why it is possible will be the MMT aspect with a slogan ‘People Go Broke! Governments Don’t.’

Then of course you always get arguments regarding inflation. This has been the most difficult to come with simple explainers to help redefine. I don’t think within the general public inflation is very well understood at all. I’ve settled on describing it as a conflict.

The project will attempt to redefine how we talk about fiscal policy.

We need to view fiscal policy in respect to what it is doing to mitigate against climate change and restoring greater equity. We shouldn’t be targeting balanced budgets!

Government’s and capitalist institutions use the fear of debt and deficit and nonsense about inflation as excuses to stop public expenditure. It has led to privatisation of previous public goods. The nonsensical neoliberal economic framework is so set in that we see what should be public goods set up for profit! Think the unemployment industry, childcare, aged care and disability services. These are set up as industries that allow vulnerable to suffer all while a few make handsome profits from government spending.

Then we’ve the nonsensical framework applied to renewable energy. There is this madness where I live about building a sun cable to export renewable energy to Singapore. Solar panels will be built in Tenant Creek and energy moved along a cable several thousand kilometres to export to Singapore. It is framed with the belief the Northern Territory Government needs to reduce its dependancy on the Federal Government for its source of revenue. These arguments can be dispelled with an understanding the Australian Government issues the currency! Taxes aren’t a funding mechanism.

That’s all from me!