In an earlier post We need to organise and attack current fiscal policy I wrote about a project I was working on to take a different perspective on what the economy is and our view of government deficits. That framework would then take place for acting on climate change, alleviating poverty and creating a better world for ordinary people. That campaign has now launched as strongertogethernt.com.au. It is early days still but I hope to build the site and campaign to give small social organisations resources to fight back against the economic orthodoxy that dominates treasury departments.
While most of us ignore economics and the technical detail. Flawed social policy whether we realise it or not is a result of a dud economic framework.
me – jengis
The other small project I’ve been working on is one through a small social club The Darwin Workers Club. We have the capacity to begin publishing a quality journal that allows working class voice to permeate. Currently media bias is so strong and dictated by a group of elite, any debate is done within a framework that ensures working people lose. For example the merry-go round we need to tax the rich to fund public services. We know we need to tax the rich for equity purposes. But for public services and public expenditure we need governments to be commanding real resources (mostly labour) to begin delivering public goods (like childcare) and enacting on climate change. Instead ‘the left’ lay blame on multi-nationals not paying tax. The reason we don’t have decent public services isn’t because multi-national doesn’t pay tax, it is because our governments have not provided those services. In any case for fossil fuels companies a progressive agenda shouldn’t want them to pay more tax, it should want to eliminate them so we are don’t releasing carbon into the atmosphere. That’s one example of how the public debate is constrained. We are laying blame on the wrong entities.
In the days prior to the union merges during the 1980’s we had hundreds of unions that were local and grassroots producing material and disseminating information from a working class perspective. I won’t detail how I think the union merges over the neoliberal period broke solidarity from grassroots members here.
The journal will detail struggles of working class and aim to be an educative tool on economics. Economics itself is a broad term that applies to microeconomics, macroeconomics, political economics and multiple other forms and I think it is important we start making that distinction amongst the membership base of trade unions. The first issue will look something like the image below and I am hoping have quarterly issues. I’d note we are using terminology of tropical seasons for when the issues are released.
There are six seasons in Australia’s tropical north. Each indigenous tribe has different names for the seasons, depending on their location and language. The Bininj and Munnguy from Kakadu use the following.
Gudjewg | Monsoon season | Dec-Mar
Banggerreng | Knock ’em down storm season | April
Yegge | Cooler but still humid season | May-mid Jun
Wurrgeng | Cold weather season | mid Jun-mid Aug
Gurrung | Hot dry weather | mid Aug-mid Oct
Gunumeleng | Pre-monsoon storm season | mid Oct-late Dec
I’ve got a lot of writing to do and a lot of things to co-ordinate to make these things happen. If you or you know anyone that’d like to contribute get in touch. email@example.com
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.
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.
I read this article on SBS news today. It is to do with our pernicious system of ‘mutual obligations’ needed to be performed in order to receive the below poverty line unemployment benefit of $46 a day. The ALP is ‘wiping’ the demerits accrued under the previous government and ‘tweaking’ the points based system. The advocacy of the Australian Unemployed Workers Union (AUWU) is highlighted in the article.
But Unemployed Workers Union spokesperson Jeremy Poxon said it was “incredibly disappointing” the new government had maintained its support for mutual obligations, and not removed them completely. *** “The problem is this new system will just immediately start forcing people to accrue demerits again in huge numbers.”
The commentary from the AUWU is juxtaposed against the Australian Council of Trade Unions who said
ACTU assistant secretary Scott Connolly said the union welcomed the Albanese government’s new approach to “helping people get back to work.”
The commentary from the ACTU is more than disappointing. It ignores the frame that unemployment is systemic, a political choice and chosen by the government of the day and places the fault of the unemployment onto the individual who needs ‘help to get back to work’
I don’t deny there are those who need assistance in getting back to work. However, a system that cuts people from a below poverty line payment for not seeking work that doesn’t exist in enough numbers is a sad reflection on how we treat some of the most vulnerable people in society. There is little change in the new governments attitude to the unemployed.
Counting the Unemployed under a Policy of Full Employment
I’ve ordered a copy of Inventing Unemployment by Anthony O’Donnell. Unemployment as we know it is a relatively new concept. In his conversation piece he says;
As I outline in my book, Inventing Unemployment, before the second world war censuses tended to divide the population differently – into breadwinners and dependants.
A breadwinner who wasn’t employed would be recorded as a breadwinner rather than unemployed (with their usual occupation noted).
That’s probably because until the 20th century, irregular work was the norm.
The way we conceive unemployment and count it started in 1947 in Australia and a quarterly survey counting a labour force and dividing it into ’employed’ and ‘unemployed’ started in the September quarter 1959.
It was the post war consensus that gave rise to full employment policies, and albeit under a ‘male breadwinner’ model aimed to ensure
This policy for full employment will maintain such a pressure of demand on resources that for the economy as a whole there will be a tendency towards a shortage of men instead of a shortage of jobs.
The quote above is from the Australian 1945 tax white paper written by H.C Coombs who would later become Governor of the Commonwealth Bank and serve a variety of roles within the Australian public service. His essay From Curtin to Keating is well worth a read to see his views on the demise of full employment policies.
The way the framework for counting the unemployed was devised operated under different policy settings where the Government would ensure spending in aggregate would aim to ensure there were more jobs than needed to match the workforce preferences. Menzies in 1961 match the then opposition ALP promise to increase the deficit and bring the unemployment rate back below two percent.
I have included a historical graph of the participation rate going back to August 1966. The participation rate rate is the number of people employed or seeking work. You can see under full employment policies (and male breadwinner model) the participation rate for males was higher. The rise in female participation rate is a result of changing social attitudes towards women in the workforce. It used to be the case for instance women were no longer allowed to work once they were married. That is why the female rate is lower in August 1966 than 2022.
The way we count the unemployed hasn’t changed but a policy of ensuring more hours of work available than those seeking work isn’t in place today. That change of policy has to do with the way economists view the role of fiscal policy. Within the public discourse today you will hear aims of ‘reducing the deficit’ and needing to ‘pay down debt’. Over the full employment era government ‘budgets’ were referred to as full employment or high employment budgets. The fiscal position was not an aim of itself. I’ve wrote what fiscal policy *should* be about in the below posts and the demise of Full Employment here. Budgets Should Target Socioeconomic Well-Being. What is the purpose of fiscal policy?
What Causes Unemployment?
When economist speak about spending needing to increase they are referring to several aggregates that make up Gross Domestic Product. These are Government Spending (G), Investment (I), Consumption (C), and Exports (X). Reasons are given for why one sector can/ can not increase or what incentives should be made to increase one aggregate over another. However, spending in aggregate is the aggregate of G, I, C, and X and whether it is sufficient with Full Employment.
Depending on your theory of macroeconomics there are different ways of thinking about Government Spending. These are a bit like religions and economists pick and choose different aspects from different schools of thoughts.
Keynesians/Post Keynesians – budget deficit are warranted to maintain full employment but should be balanced over the business cycle. Governments invest in productive infrastructure and grow GDP to shrink debt:GDP ratio over time.
Monetarist/New Keynesians – aims for budget surpluses, strong incentives for private enterprises, governments should eliminate debt, remove fiscal policy as primary tool of economic management, focus on monetary policy.
Modern Monetary Theorist – Governments that issue their own currency face no insolvency constraint. They can purchase whatever is for sale. Fiscal positions are outcomes and shouldn’t be targets. Monetary policy is a poor tool for controlling aggregate spending.
While there is different thinking with the role of government spending and the definition of what constitutes full employment, there is consensus unemployment arises as a lack of insufficient spending.
Enter the MMT Money Story
MMT places the tax liability as the foremost thing a currency issuing government needs to do to have its currency accepted. The tax liability causes unemployment and government spending alleviates the unemployment. It is always within the governments power to increase its spending and purchase what is for sale, including idle labour. Thus unemployment is a political choice.
That is what is meant by ‘tax liability’ creating a demand for a governments unit of account. It is a coercive mechanism.
(2002) where she describes Colonial Africa as an illustration of a tax driven currency.
“Historians of the African colonial experience have often remarked on the manner in which the European colonizers were able to establish new currencies, to give those currencies value, and to compel Africans to provide goods and services in exchange for those currencies.”
Tcherneva cites Sticher (1985) [In Malawi there was an] imposition of a Sh.3 annual hut tax over the whole colony in 1896. This was a high figure for the northern areas. And undoubtedly stimulated further labor migration [to find work paying shillings].
Further evidence of taxation driving a currency can be found during the colonisation of Nyasaland.
It is sometimes forgotten that the plantation sector in Nyasaland dates from as early as the 1890s. During the early years of colonial occupation, most officials shared the opinion of Sir Harry Johnston, the first Commissioner and Consul General, that “the one hope of this, country lies in plantation work and in the cultivation of coffee, tobacco, sugar, etc., for which cheap labour is necessary”.3 Some 800,000 acres were alienated to settlers in the Shire Highlands, the most fertile and densely populated area in the country; hut tax was introduced from 1891 as a means of introducing “the native labourer to the European capitalist”4 and coffee was grown with such success that in 1900 a thousand to exported worth 62,00 making Nyasaland the centre of European agricultural enterprise in Central Africa”
McCracken, J.,Peasants Planters and The Colonial State: The Case of Malawi, 1905-1940; Journal of Eastern African Research & Development, Vol. 12, 1982, pp. 21-35
Unemployment is caused by a lack of spending in aggregate. Currency issuing governments can always hire the unemployed, thus making unemployment a political choice. If the vast majority of the population understood that we could begin to dismantle pernicious unemployment system that punishes people for a failure of our governments to create enough work for all.
Comments from ACTU on ‘helping people get back to work’ are not helpful unless they are backed by a call to abandon targeting of fiscal positions and have a full employment policy. There seems to be little understanding from the ACTU leadership unemployment and underemployment is one of the largest factors that act as wage suppression. As there are more people seeking work, employers have their pick of employees. It is a disservice to the workers they represent. Though workers have come harder to find for some sectors, there are still just under 1.4million under-utilised workers in Australia.
Solidarity with under-utilised workers would call for an end to mutual obligations, an abandoning of fiscal targets, lifting the unemployment rate to at least $88 a day, a full employment policy that guaranteed more hours of work available than demanded and the implementation of a Job Guarantee.
I discussed in this post a history of the right to work and an advocate of ensuring a legislated right to work of UK member of Parliament from the Independent Labour Party, Keir Hardie. There were similar attempts at employing idle labour in 1848 in Paris via a politician Louis Blanc.
Blanc established Ateliers Nationaux (National Workshops) where Parisians would show up and be guaranteed work and a minimal income. The program was contentious and often there wasn’t work organised. The program was eventually dismantled and ended in the June Day Uprisings where capitalist sent in the National Guard to quell the uprising. Some 6,000 workers were killed many more injured or deported to Algeria.
The withdrawal of the proclamation of the ‘right to work’ provoked the workers of Paris to erect barricades and challenge the authority of the government of the National Assembly, an authority that was now backed by the National Guard and the new militia, the ‘Guard Mobile’(Moss, 1985: 546). It took four days (June 23 – 26) of intense street warfare to suppress this rebellion, leaving 6000 workers dead.
You can read more about the program, and the politics in the referenced working paper. I found learning about these events and the alternate forms of socialism such as Saint-Simonianism that this program stemmed form a huge lea in understanding the early development of trade unions and their rise.
In 1886 unemployment riots on Trafalgar square had the unemployed demanding the Government create them jobs.
Unemployment riots in Britain in 1886 prompted parliamentary debate featuring widespread condemnation of any suggestion of a ‘right to work’, drawing on the Paris experience, yet the early British Labour Party of the 1890s and 1900’s still championed the principle alongside universal suffrage and the Eight Hour Day. The popularity of Keir-Hardie’s 1907 Bill, and Ramsey MacDonald’s 1911 abandonment of the policy (in return for parliamentary salaries), marks a crucial turning point in the evolution of employer tactics to preserve unemployment despite the power of working people to elect governments of their choice.The capitalist ideology viewed the threat of unemployment as a productivity driver.
Quirk, V., 2010, The Preservation of Labour Under-Utilisation as an Instrument of Social Domination (unpublished PhD)
The view that unemployment should be used as a productivity driver is documented through political economic thought of the 18th century. I’ve been reading The Invention of Capitalism by Michael Pellerman, (2000) and in it he documents this type of thinking.
A political economist William Temple in 1758 wrote;
If mankind employed themselves in nothing but the productions absolutely necessary to life, seven in eight must be idle, or all be idle seven eighths of the time. And yet they might indulge in intemperance, and sink into the beastly vices of slovenly gluttony and drunkenness.
Pelerman, M., 2000, The Invention of Capitalism, Duke University Press p97
In a similar vein a Reverend Joesph Townsend in 1786 wrote in ‘a Well Wisher to Mankind’
The poor no little of the motives which stimulate the higher ranks to action-pride, honour, and ambition. In general it id only hunger which can spur and goad them on to labour; yet our laws have said they shall never go hungry.
Pelerman, M., 2000, The Invention of Capitalism, Duke University Press p97
The above comments are not so different to the views expressed today. The unemployed are ignorant, lazy, uneducated. Poverty payments are called ‘an incentive to work’. This view stems from a psychopathic ideology that the working class need fear to drive productivity.
The Trafalgar Square riots and London Dock strikes* of the 1880s led to the election of Independent Labour Party members being elected to UK Parliament of which Keir Hardie was one (1889). The union movement surged with membership after successful strikes in 1889 of the London Dock workers and trade union councils sponsored parliamentary representatives within the Liberal Party. Records show that by 1884 ten liberal-labour candidates were elected and by 1892 a further sixteen were elected, including three socialist labour candidates independent of the liberal party, hence the Independent Labour Party. (ILP)
*The Dock Workers were successful thanks to the assistance of Dock Workers from Melbourne who sent £22,000 in support for the striking workers.
Hardie breathed life to the unemployment debate. In 1907 after frustrations at a politician John Burns to use powers given to him under the 1905 Unemployed Workman’s Act, Hardie tabled a Right to Work bill before the UK Parliament.
A number of liberal party MPs had crossed the floor to vote for the bill. Churchill ‘feeling the heat’ had William Beveridge and member of the house of Lords devise an unemployment insurance scheme and this was the ‘birth’ of the UKs unemployment insurance scheme. A concession to a legislated right to a job.
In Australia a right to work was a goal of the early Australian Labour Party with their 1898 program calling for organising the unemployed and giving them jobs. (I am in the process of verifying this source but am confident it is correct)
This almost became a legislated guarantee when in 1919 Queensland Premier Edward Theodore presented a bill to parliament the ‘Unemployed Workers Bill’ that would ensure a government job and mechanisms that would force private employers to hire idle labour. It resulted in a four year financial blockade on the colony of Queensland from London Finance and a banker Otto Niemeyer. It was settled that a scheme of unemployment insurance be implemented instead.
The upper house was a major obstacle in ensuring the bill never became legislation. The ALP had opposed an unelected legislative council and when they had the numbers in 1921, Theodore introduced the Constitution Act Amendment Bill to abolish the Legislative Council, the fifth attempt to do so. The Bill was given royal ascent in 1922. Though the goal of a guaranteed ‘right to work was unsuccessful’
The narrative of a right to work was changing because of the radicalism of the labour movement. The unemployed were literally protesting and being physically killed in their pursuits for guaranteed work. They were successful in seeking political representation (unlike the sham representation of labour/socialist politicians around the world today) and were controlling the narrative on the political discourse. A vast contrast to today were ‘progressives’ reinforce neoliberal narratives and myths on economics.
I am currently looking into Australia’s monetary arrangements in the hope to demonstrate that unemployment always has been a political choice. This political choice began to be articulated as the political push for Full Employment began to take traction. In Australia, John Curtin’s National Campaign Speech said:
“We approach the unemployment problem from the national economic standpoint and our policy, with the nation’s credit as backing, will not only remove this ugly blot on Australia’s economic life but will so advance the nation that it will contribute substantially to the nation’s defence programme. Wealth production is limited by manpower. The non-employment of manpower means the reduction of the power to produce wealth. Doles and starvation rates of relief pay sap the moral and mental fibre of those who are forced by circumstances to accept them. Industrial armies engaged in the construction of homes, roads, schools and other permanent works are sustained, just as our military armies, by production and transport armies in the rear. They are fed with the energies of field workers; they are clothed, shod and equipped with the energies of workers in factories. No hocus pocus about banking and currency systems can alter these fundamental facts. The Labor Party therefore is determined that no group of private bankers, no coterie of vested interests and certainly no instrumentality set up originally by the people for the people shall stand in the way of bringing industrial emancipation to Australia’s unemployed army (Curtin, 1937).
Where in the past we had the vested interest of private bankers and industrial capital desiring unemployment under a sickening ideology as described above, the labour movement and the mass of unemployed began to change the narrative. This included changing narratives about money.
We can go back to 1893 with an act to implement Queensland Treasury notes. In the 1890s a series of financial crises rocked the established colonies of Australia, resulting in the now well-documented liquidation and/ or reconstruction of numerous banks across the English colonies on the continent. In Queensland, the predominant form of circulating money was, prior to the crisis, the banknotes of privately owned banking institutions present within the territory at the time. The financial crisis that enveloped the colony saw 8 out of the 11 existing banks suspend the convertibility of their promissory notes to English gold coins simultaneously, rendering their notes worthless.
This legislation was a precursor to the implementation of Australian Notes in 1910 with objections of a Senator Nelson in noting;
‘Under this Bill, the persons in the Old Country to whom we have hitherto gone for the purpose of raising money with which to develop our resources will find themselves deprived of a certain amount of profit, and their agents also may have cause for annoyance.’
We can begin to see efforts to wrestle control of the ability to issue money and thus command real resources, including the employment of idle labour was and still is resisted by the capitalist class. Fear mongering around insolvency and inflation are paraded today just as they were back in the late 18th, 19th and 20th centuries. We can see vested interests of capital thwart attempts at legislation in efforts to end the Great Depression.
The linked post above deals with changes to Australia’s monetary system from federation but I want to provide more detail over Treasurer at E.G Theodore’s attempts to create a central bank and a fiduciary note bill which will form part of the paper.
It was these events that led to the 1931 split of the ALP as Joesph Lyons (who formed the UAP) was leaking information to London financial interests, specially Otto Niemeyer a central figure in the financial blockade of Queensland in 1919 and the Unemployed Workers Bill.
In April of 1930 the Labor Government with treasurer E.G Theodore tried to establish a central reserve bank in Australia. During the second reading of the house of representatives Theodore in regards to central banking stated there were ‘three outstanding exceptions being Australia, Canada and the Argentine’ The bill’s aim was for ‘a new system for the control and organization of credit in Australia’ (House of Reps Hansard No. 18, 1930)
This was the principal aim of the creation of a central bank. It forced the private trading banks to hold accounts with the central bank and thus gave the government control over monetary policy (interest rates) and regulated the credit the private banks could issue.
In March of 1931 the Treasurer presented to The House a bill relating to the issue of a fiduciary currency. These fiduciary notes were to be called Treasury Notes as opposed to an Australian Note (notes issued under the Commonwealth bank act 1920 in pursuance of the Australian Notes Act 1910-1914) and differed in that there was no need to hold gold reserves in relation to their note issue. The Bill specially stated ‘Treasury Notes shall not be deemed to be Bank notes within the meaning of the Bank Notes Tax Act 1910’
The bill also made provision for Treasury Note issuance of £18million, six million of which was for the purposes of the Wheat Act 1931 and the remaining twelve million on providing employment for reproductive works. These ‘reproductive works’ would be made by appropriations of any Acts or by means of loans to the States, local governments or other corporations approved by the Governor General. (A Bill for an Act relating to the Issue of Fiduciary Notes, 1931)
During the second reading of the Bill Australian Labor Party member for Bendigo, Richard Keane stated ‘This Government has made endeavours to obtain money, but has been thwarted in its attempt by the Commonwealth Bank and other authorities’ (House of Representative Hansard, No.13, p.577, 1931)
The Commonwealth Bank Act in 1924 had put in place approval of note issuance (and thus the ability for Treasury to spend without borrowing) to a seven member board. With The Depression and many unemployed the Labor Government was looking for a means to directly decrease unemployment. ‘In this country we have an army of unemployed totalling about 300,000; loan expenditure has been reduced from £43,000,000 to £14,000,000, and the Government last year made a grant of £1,000,000 for the relief of unemployment.’ (House of Representative Hansard, No.13, p.578, 1931)
Keane makes mention ‘We on this side of the House take the view that, orthodox methods having failed, it is necessary to adopt what may be regarded as unorthodox proposals.’ and points to ‘…the fact that for many years Great Britain has had Fiduciary issue of £260,000,000’ (House of Representative Hansard, No.13, p.577, 1931)
Eichengreen and Temin summarise that there is agreement amongst economists that The Depression although a complex event, it was the gold standard that was the key element in the collapse of the world economy. As identified above, there were political obstructions that sought to block Theodore’s attempts and create the legislative power that would allow the government to directly employ people.
The Bruce-Page Government had introduced amendments in 1924 that had note issue (and thus the Australian Governments ability to spend without ‘borrowing’) placed in the hands of a seven director board, all representatives of business interests.
Niemeyer who was an offical of the Bank of England was sent to Australia who tabled The Niemeyer Plan (Parliamentary Papers 1929-31, vol.2, No. 81, p. 45) that called for 1. Budgets to be balanced at any cost in human suffering. 2. Cessation of overseas borrowing until the then short-term indebtedness had been dealt with. 3. No public works, which would not pay for interest and sinking funds on loans, to be put in hand. 4. All interest payments to be credited to a special account in the Commonwealth Bank, to be used only in favor of the bond-holders. 5. Monthly accounts to be published in Australia and overseas, showing summaries of revenue and expenditure, also state of short-term debt and loan account.
Theodore’s efforts, just as the efforts of Hardie with a legislated Right to Work and the National Workshops of Parisian workers implemented by Louis Blanc were thwarted or dismantled my capitalist interests looking at preserving a reserve army of labour. It was clear to these unionists understood the monetary systems and notions that unemployment was a political choice were taking hold amongst the working class.
Today the debate on what is politically possible is being suppressed by the likes of not only neoliberal think tanks such as the IPA or right wing political parties but alleged ‘progressive’ institutions.
Any discussion on Modern Monetary Theory is ‘underground’ while the executives of these institutes push nonsense balanced budgets or the government needing to ‘borrow’, wage subsidy schemes that don’t address the full scale of unemployment and frameworks that benefit the top 10 percent of income earners, such as Australia’s superannuation system.
When I attend economic/jobs/environment conferences this ‘underground’ talk for those of us in our thirties and under is on MMT and why it isn’t being used as a frame.
Why are we not pushing for a legislated right to work and a system of full employment? Why aren’t we using it as a frame to articulate guaranteed housing, regulating credit to make homes affordable, cancelling student debt, instituting universal free childcare? The list could go on…. We know this is possible.
In Australia we saw the government introduce temporary free childcare and the reason for the deflation stated by the ABS was that the free childcare was the cause!
Fear-mongering about debt and deficits and the inflation bogeyman isn’t cutting through. No youth is worried about any of that.
They are worried about the fact they can’t afford houses, insecure work, a lack of jobs, they are worried that their parents have insufficient savings to retire and many are thinking of selling their homes to be able to do so.
It is increasingly clear the narratives on ‘the economy’ we have been sold are false.
The young don’t want forced systems of savings under a lie that a government is financially constrained. We want decent aged pensions. We don’t need to be solved a narrative that unemployment is part of life and we need to ensure we are multi-skilled and continuously retrain to work in various industries.
We want a policy of full employment and a Job Guarantee. We want free tertiary education, universal childcare, affordable housing, crisis accommodation, social housing. We want the opportunities to settle where we choose and not have to live on the other side of the country because of secure work.
This thinking is now taking hold in the United States that equally has their own history on a push for guaranteed work. The civil rights movement in the United States called for a guaranteed right to work. (a term that is now used to refer to anti-union laws)
In a 1965 interview, Dr. King said “we must develop a federal program of public works, retraining, and jobs for all—so that none, white or black, will have cause to feel threatened. At the present time, thousands of jobs a week are disappearing in the wake of automation and other production efficiency techniques.”
His wife Coretta-Scott King carried on this work after his passing. Today modern day ‘Justice Democrats’ are using the frame that unemployment is a political choice, governments that issue currency can always purchase idle labour and are calling for a legislative right to a job.
I don’t understand the complexities of US history and in fact understand very little of it (I don’t live there) Though I can see they are using a framework that currency issuing governments spend first, and tax after the fact and thus can always ensure full employment.
In the same way Australia has a history of labour activists pushing for a guaranteed right to work, The USA has a history of civil rights activist pushing for a guaranteed job.
I wish to acknowledge the work of Victor Quirk who wishes to turn his PhD into a book and thus it isn’t publicly available. I am thankful he shred it with me. I have learned so much from his work. I should also acknowledge colleague Joshua Dalton who is a far better researcher than I and found so much information on the precolonial monetary system of Australia. The 1893 Qld legislation is his work.
I’ve been neglectful of this blogging project as my mind has been pre-occupied with other projects. I finally have one space to get back into writing.
A little while ago I did an interview with US based podcast macro ‘n cheese on a general chat about MMT and an understanding on how we understand and perceive value.
The podcast spoke about value in the sense of valuing forms of employment tied to cultural customs, particularly around different groups of people. I used my experiences of my own observation with my family and some lateral thinking that a similar concept could be applied into a formal Job Guarantee structure.
For example in the podcast I discussed ways family members interacted with each other at a social level and how that interaction brought meaning and provided for their families. I recall my grandmother would pick broadbeans with friends and prepare them for dinner but this activity was done as a social task amongst a group. The labour input required brought about other socially beneficial outcomes. Conversations were had, food was prepared, people felt a sense of purpose and meaning.
That sort of activity and outcome is similar to the lived experiences from the Jefe’s program in Argentina. The income aspect was a secondary benefit by the participants who valued the sense of self and community the employment program brought about. Many of the participants then used those skills to develop further projects such as bakeries, textiles – making clothes etc…
The program has allowed local and municipal governments who are most familiar with the economic needs of their communities to administer the program. In addition, it has recognized certain kinds of activities as socially useful, thereby helping redefine the meaning of work –
If we use some lateral thinking the sorts of tasks described above that this communities value, such as agriculture/permaculture, cultural services – such as crocheting and sewing can be brought into a JG structure alongside a skills development framework and can be used to create ‘public value’. Things like community gardens, arts workshops etc…
Adapting that thinking to bring about employment to communities that are heavily disadvantaged (such as indigenous communities in Australia) a voluntary JG – democratically run at a local level, could have those communities deciding what they consider productive employment.
I draw that from the paper The Uluru Statement: “A First Nation’s perspective of the implications for social reconstructive race relations in Australia.”
“…we believe that Aboriginal people and Torres Straight Islanders will be able to refocus their energies on the everyday requirements for self-determination. Importantly this will include participation in the labour market and, for many, forms of employment that occur on Country in ways that strengthen and add contemporary value to Indigenous forms of knowledge.”
That understanding of value that contributes to our well-being is neglected when studying economics. It’s not really something you can measure. How do measure the social impact children gain by seeing a parent go to work each day? How do you measure the social and community relations people develop by going to work? How do measure the impact employment brings on someone’s sense of self?
In today’s societies a sense of self is largely tied to employment and the institutions you belong to. I use the sociological definition of the term institutions. An institution in this context is an entity that a collective belongs to. For example education, law, family, religion, politics, economics all are institutions or contain institutions within them.
What it means to be a person is anchored in your belonging to an institution. An institution is lasting. (e.g A widow belongings to the institution of marriage even though her partner has passed away. They’ve participated in an institution that has approval of the collective consciousness and this forms part of their identity.)
Using that same structure our identities are intrinsically linked to our occupations. We already know the devastating effects unemployment and underemployment brings on an individual’s physical and mental health and the social implications that not being able to provide for yourself or family and participate in society brings.
The institutions we belong to bring about a ‘social solidarity’. Durkheim outlines this in his Division of Labour that “being imbedded in a group that provides cohesion, a sense of participation, togetherness” is how societies provide for integration and regulation. By virtue of being employed it brings about a sense of self identity and being gainfully employed allows one to participate in a meaningful way in society.
By implementing a Job Guarantee with an emphasis on changing the definition of productive employment we can bring about valuing different forms of cultural knowledge and practice that currently go unrecognised or unpaid.
By way of example I’ll recite my examples above, activities such as community gardens, arts workshops, flora rehabilitation, surfing can all be included within a JG framework provided they allow for a public purpose.
It may be that a group of people participate in a community garden and sand dune rehabilitation while studying horticulture with an goal of becoming a Ranger for a National Park. Indigenous forms of land management can be incorporated into this program. Out on country it may be that a community wishes to teach the ways in which they care for country. Learning about this cultural practice and partaking in the program can be a Job Guarantee. It is our imaginations that are the limit to what type of activities are included.
There is a lot more I wish to write and a lot more research I wish to delve into. I should conclude by saying a JG is not there to replace work to lower wages in the public sector. It is there to value forms of work that currently go unrecognised in our society.
Below is something I wrote in 2018 for my own reference as I grappled to apply modern monetary theory into my broader thinking and apply it as a lens rather than think of it within an abstract theoretical framework. I hope this might help those that are trying to to the same.
A public purpose is what a society deems desirable for it’s citizens to have access to. A public purpose creates a society that we deem desirable to live in. Citizens negotiate their desires through their agent, The Government and their political representatives. It is up to all of us to determine a ‘collective will’ on what we wish our society to achieve.
Our limits are us and what we are able to produce. It is obscene that in a society that can produce more food than we can consume, people go hungry, in a society that can build more housing than we accommodate, people go homeless, in a society that has overcrowding classrooms, teachers are placed in precarious insecure work conditions.
Stuart Chase in his book ‘A New Deal’ posed the question
‘What is the economic system for?’ Is it primarily to be manipulated for some individuals profit, power or amusement? …..It is to provide a means, without excessive waste and loss, whereby those who live under it may eat. It has a function, and the function is to provide food, shelter, clothing and comforts in as dependable and adequate quantities as natural resources and the state of technical arts permit. 1
Far from critiquing the capitalist system, Elmer Altvater argued that the state must intervene to secure conditions inductive to continuing capitalist accumulation, performing what he called a ‘general maintenance function’ These were:
(i) The provision of general infrastructure; (ii) The capacity to defend militarily a national economic space regulated by the state and to preserve an administrative boundary within which the state is sovereign; (iii) the provision of a legal system that establishes and enforces the right to possession of private property and outlaws practices potentially damaging to the accumulation of capital; (iv) Intervention to ameliorate and/or regulate the class struggle and the inevitable conflict between labour and capital. 2
These ‘general maintenance functions’ were evident during the post war years, often refereed to as the ‘Keynesian- Fordist’ era of economics. The post war era is categorised by Government policy on full employment, Government commitment to a strong social wage and a greater intervention in the economy based on extensive industrial policy with the creation and expansion of a vast array of state owned firms in strategic industries, key infrastructure and natural monopolies. 3
In 1943 Michael Kalecki wrote;
A solid majority of economists is now of the opinion that, even in a capitalist system, full employment may be secured by a government spending programme, provided there is in existence adequate plan to employ all existing labour power, and provided adequate supplies of necessary foreign raw-materials may be obtained in exchange for exports. 4
If The Australian Government and the private sector direct labour resources to mining activities and the burning of fossil fuels, this is the society we will live in. If the Australian Government and the private sector direct labour resources into creating renewable energy, this is the society we will live in.
Similarly, unless we ensure more job vacancies advertised than demanded, we will not have enough work for all those that desire to work. As a society we can not achieve equality, fairness and a public purpose unless that is what we set out to do.
Precarious work conditions exist because we have laws in place that allow such conditions to exist. Students begin their lives with debt because we have placed that burden upon them. Housing is unaffordable because, as a society, we have chosen to have a system that incentivises speculation and does little to regulate how credit is created.
It is often overlooked that a Governments spending is representative of a socio-economic agenda. For as long as a society has the real resources to implement its desired policy objectives, these objectives are achievable.
Let us take the healthcare system as an example. My grandfather needed an operation on his cataracts. He had a choice, he could use the public system, which was free of charge for him, though he would have to wait 6 months, or he could pay $2000 and have the operation done immediately under the private system. This is system where those that have the ability to pay are given preferential treatment over those that do not.
It is not that, as a society, we don’t have the capacity to perform the operation, the capacity to do so is there. It is that we choose to create a two tier system where those that benefit are those that already have. The capacity is there to perform the surgery. Rather than state we have the available resources to perform the operation and do so, we argue on who should pay the bill and those without the means to pay are forced to wait for no reason other than they can not afford to pay.
It is the publics understanding of our monetary system limits their understanding of what is achievable. I do feel that many on the progressive side of politics have a failure to grasp the power a sovereign government that issues its currency by legislative fiat has.
Too often ‘economic’ debate is framed in terms of the Government needing to ‘raise revenue’, or ‘borrow’. The economy is viewed as a separate entity to the social relations citizens embed themselves in. Karl Polyani summed it up in The Great Transformation (1943)
‘The control of the economic system by the market is is of overwhelming consequence to the whole organisation of society: it means no less than the running of society as an adjunct to the market. Instead of the economy being embedded in social relations, social relations are embedded in the economic system’ 5
We run our society in pursuit of government budget goals with the assumption that unless we tax more than we spend, we will riddle the future generation with debt. It seems few people stop and ask, where does currency come from and how can we use it to benefit all of us?
There have been shifts in the way currencies operate throughout history. We have moved on from a gold standard, where Governments pegged the amount of currency on issue to gold supply, to the ‘Bretton Woods System’, a currency pegged system where Governments defended their currencies in relation to the US dollar, which was exchangeable for gold. This required Governments to have foreign currency in order to be able to purchase their own currency to defend an exchange rate.
The system we have today is known as fiat currency. Fiat currency is by decree. Its value is derived from the tax obligation imposed upon citizens. Under a fiat currency a government doesn’t need gold in order to spend and currencies are left to fluctuate against each other, according to trade movements. All spending is appropriated by the Government. 6
What is money?
In 1943 Abba Lerner wrote;
The modern state can make anything it chooses generally acceptable as money and thus establish its value quite apart from any connection, even with the most formal kind, with gold or with backing of any kind. It is true that a simple declaration that such and such is money will not do, even if backed by the most convincing constitutional evidence of the state’s absolute sovereignty. But if the state is willing to accept the proposed money in the payment of taxes and other obligations to itself the trick is done. Everyone who has obligations to the state will be willing to accept the pieces of paper with which he can settle the obligations, and all the other people will be willing to accept these pieces of paperbecause they know the taxpayers etc., will accept them in turn. 7
The currency issuer places a tax obligation on the currency user, taxation is what gives a currency value. It is nonsense to assume the currency issuer will become insolvent. It is a monopolist of the currency and will always be able to meet payments denominated in its own currency.
Today Governments spend by crediting private bank accounts with an electronic transaction. This spending creates currency, taxation deletes it. It no longer must watch its gold supply, or defend an exchange rate. Spending is a merely an accounting entry that a Government can use to command real resources and achieve a desired public purpose.
Unless the currency issuer spends, currency can not exist for the rest of us to save and spend. The Australian Government is the sole monopolist over the Australian dollar, unlike countries in the Eurozone, who gave up their monetary sovereignty, it does not tax or borrow in order to spend. First it must spend so we can earn. It is under this paradigm one has to think in relation to being able to afford a public purpose.
The Government, as a monopolist of its currency, can ALWAYS meet payment obligations in its own currency. Its limits are the skills the labour force posses and the real resources it controls. The Australian Government can not claim something is unaffordable, unless the physical resources to implement it are not there. As it issues the currency it can always meet payment obligations in Australian dollars, including spending on labour.
This is not say spending has no constraints. It does. That constraint is inflationary and that occurs when spending exceeds the productive capacity of the economy.
The terminology surrounding Government fiscal and monetary operations needs to change to more accurately describe their impacts on the non-government sector.
Just as peoples understanding of money needs to change, peoples understanding of employment also needs to change. A job should not be defined in relation to a businesses ability to turn a profit, this is important to a business, but it is not important to a currency issuer.
Employment to has other benefits, not only income. It is important to an individuals self worth, it aids in defining a sense of character, and your occupation often has social standing within a community. 8
The idea that we must engage in destructive behaviour, such as coal seem gas mining, in pursuit of profit underscores the point we are running society as an adjunct to the economic system rather than embedding social relations within our economic structure.
‘the form of digging holes in the ground known as gold-mining, which not only adds nothing whatever to the real wealth of the world but involves the disutility of labour, is the most acceptable of all solutions……If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.‘ 9
Keynes was discussing this in relation to spending adding to aggregate demand. He proved unemployment was a result of deficient spending and argued quite correctly a Government needed spending on employment if it wished to create full employment.
Jobs are a social creation and we need to define them according to what we constitute to be socially desirable and what constitutes societal well-being, rather than a job being in pursuit of profit. That is not to say a person can not work for a private employer. They can for as long as socially desirable minimum conditions are met. A job isn’t always about an ability to turn profit there is often a public purpose.
To help set minimum conditions and stimulate demand there is much literature around the Government acting as an employer of last resort. This is described as federally funded, locally administered, job guarantee programme.
These jobs are not there to substitute existing government jobs or private employment but are there to contribute to societal well-being. JG workers can contribute to urban renewal projects, environmental schemes (e.g dune stabilisation, river valley erosion, reforestation), they may constitute music, art and sport. Citizens partaking in a government programme can help organise a local street festival, musicians paid as peripatetic performers, artists can aid in the creation of painting murals on public buildings or performing. Previous community activists role can become paid employment, for example running a community garden. 10
An underemployed surfer may choose to partake in the employment programme and choose to undertake study to achieve their bronze medallion and first aid certificate, with the eventual goal of becoming a surf life saver. As part of the programme they may be required to teach children about surf safety. The possibilities are endless and only limited by imagination.
The programme is their to enhance the communities we live in and avoid the ills unemployment brings. It has the participants working alongside training having them ready for the private market when demand picks up again.
Conclusion This is just part of some of the notes I kept as I was self studying. Much of it needs tidying and it isn’t anything you can’t find anywhere else. But I might put more up here.
Chase, S. 1943., A New Deal, Macmillan pp 21-22
Altvater, E., 1973 ‘Notes on Some Problems of State Interventionism” Kapitaistate, No. 1. pp 97 – 108
Mitchell, W., Fazi, T., 2017, ‘Chapter 10: The Case of Renationalisation’ ’Reclaiming the State, Monetary Sovereignty: A Primer, Pluto Press, Archway Road, London. pp 248
Polyani, K., 1944, The Great Transformation, Beacon Press; Boston, Massachusetts. pp.60
Mitchell, W., Fazi, T., 2017, ‘Reclaiming the State, Monetary Sovereignty: A Primer, Pluto Press, Archway Road, London. pp 179 – 192
Lerner, A., 1947 “Money as a Creature of the State, The American Economic Review, Vol. 37, No. 2, Papers and Proceedings of the Fifty-ninth Annual Meeting of the American Economic Association. pp. 312-317.
Blustein, D., 2008., The Role of Work in Psychological Health and Well-Being, Boston College.
Keynes, J.M., 1936, The General Theory of Employment, Interest, and Money., Chapter 10 – VI.
CofFEE., 2008., Creating Effective Local Labour Markets: A New Framework for Regional Employment Policy. University of Newcastle, NSW.