We Treat the Unemployed with Disdain

It’s Thursday and I have decided I will write three posts a week. Tuesday, Wednesday and Thursday. Today’s post continues on from yesterdays Unemployment is a Political Choice which described when, why, and how we started counting the unemployed. How it began in an era of Full Employment where the Australian Government aimed for spending in aggregate to target more jobs advertised than demanded. I described some detail around what was involved in aggregate spending and finally why unemployment is a political choice. Governments with their monopoly on the currency can always purchase what is for sale, including idle labour.


In yesterday’s post I mentioned the recently elected labour governments decision to maintain below poverty unemployment benefits and maintain the pernicious system of ‘mutual obligations’ that penalises those on the unemployment benefit if they fail to complete certain tasks. This ABC article gives you an overview of what is happening with the changes to the system. The system is summarised

….more than 750,000 people will be placed into one of two Workforce Australia streams: an online portal for self-managing job searches, or into the management of a new job provider for face-to-face appointments.

Significantly, those who will be required to complete mutual obligations will also transition to a process where they will earn points for activities in return for income support.

Which may seem ‘fair’. Absolutely we should aim to have those that can work into work. That includes creating workplaces and designing work for people with disabilities so they too can feel a sense of belonging, a sense of contributing to their communities and an ability to feel in control of their lives with enough income to be able to do that. However, our unemployment system doesn’t do any of that. Some of the nastiness pieces of the system are being retained by the ALP. (emphasis mine)

ACOSS acting chief executive Edwina MacDonald said her organisation welcomed some of the changes outlined by Mr Burke, but voiced concern about the continuation of the “punitive” work-for-the-dole program and automated payment suspensions.

The system automates payment suspensions and we require some people to work for their unemployment benefit while they look for work to receive their below poverty line payment.

I decided to look at the number of people seeking work and the number of jobs advertised. This relationship is known as the Beveridge curve named after a conservative member of the House of Lords in the UK, William Beveridge. You can read why the conservatives decided to deal with the rising levels of unemployment in my post Advocating a Right to Work.

Anyway back to the Beveridge Curve. Wikipedia tells us The curve is a graphical representation of the relationship between unemployment and the job vacancy rate which is the number of unfilled jobs expressed as a proportion of the labour force. The ABS says more less the same thing. The Beveridge Curve is widely used to depict the relationship between the unemployment rate and the job vacancy rate. Economists will study this curve and hope that as vacancy rate increases, unemployment decreases. i.e the higher the vacancy rate, the lower the unemployment.

Beveridge Curve – ABS

When you grasp that as a monopolist of the currency – the government chooses the level of unemployment the Beveridge curve becomes somewhat pointless, unless you wanted to measure how much the private sector is contributing to economic activity.

I ran some numbers on the number of job vacancies v the number of unemployed and underemployed workers. As of the March quarter 2022 there is 0.88 jobs for every unemployed worker. This doesn’t take into account skills mismatches or location.

The ABS gives the quarterly figures for job vacancies at a different quarter to the unemployment figures to make comparisons a pain in the arse. Anyway I did it!

The first image is a table of job vacancies and numbers of people who are seeking work. The last column is the number of jobs advertised relative to the number of unemployed people.

The graph is a visual depiction of the table. The blue columns are the number of advertised jobs and the grey and yellow lines are the number of unemployed and underemployed people in the quarter.

To calculate quarterly figures for those two groups I found the monthly data and calculated an average. The data then matched the ABS job vacancy figures. The orange line is the underutilisation rate – which is the unemployment + underemployment rate.

Sadly, our Government thinks it is fine to force people to seek work that does not exist in sufficient quantity for all those that desire it and punish them for not jumping through bureaucratic hoops to receive a below poverty level payment. In some cases asking them to work for it!

Conclusion

Policy positions a progressive party should be taking;

  • Immediately lift the unemployment (and other support payments) to $88 a day. 
  • Stop mutual obligations 
  • Transition the unemployment benefit (not other benefits) into a voluntary living wage Job Guarantee run under a nationalised unemployment agency.  
  • The new national unemployment agency would form a ‘key pillar’ in a newly established full employment policy – helping those in the JG with education and training and seek employment in the public service or private sector. 
  • Establish a full employment policy with things like expansion of the public sector (childcare, better resourced heath and education etc…)

The labour movement has a history of fighting for ‘the right to work’. I believe this should be at the forefront of any labour movement. The ALP like the Liberal Party are protecting the unemployment industry in Australia – a series of privately owned companies paid to punish those without employment under a system that ensures there is insufficient work.

That is all from me!

*Update: there were minor errors in my spreadsheet and graph. I corrected these and updated accordingly. Update II graph is fixed now. Administrative spreadsheet error.

Unemployment is a Political Choice

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.

https://theconversation.com/how-we-invented-unemployment-and-why-were-outgrowing-it-183545

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.

http://www.billmitchell.org/White_Paper_1945/index.html

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.

https://www.abs.gov.au/articles/historical-charts-august-1966-may-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].

Tcherneva, P., Monopoly Money: The State as a Price Setter, Oeconomics Volume V, winter 2002

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

Conclusion

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.

Advocating A Right to Work

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.

Quirk, The JG of 1848
Working Paper 07-14
http://www.fullemployment.net/publications/wp/2007/07-14.pdf

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).

http://bilbo.economicoutlook.net/blog/?p=12499

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.”

https://neweconomicperspectives.org/2013/08/honoring-dr-kings-call-for-a-job-guarantee-program.html

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.

Modern Monetary Theory and The Job Guarantee

I recently wrote an oped piece for challenge magazine It is difficult to condense what I had hoped to say into 750 odd words, so here is the ‘extended’ edition.

Modern Monetary Theory (MMT) is an incredibly complex body of work that studies macroeconomics. At its most elemental level it says a currency is a social and legal construct. Currency issuers spend via an appropriation bill and are not financially constrained, though they are constrained by real resources. A monopolist of a currency can purchase whatever is for sale in the currency it issues, including idle labour. Thus unemployment is a political choice.

To understand that statement we need to make a distinction between monetary based and non-monetary based societies. The latter doesn’t have employment or unemployment. So what causes people to become unemployed?

It is the imposition of a tax liability that is the coercive mechanism that creates a desire to earn the governments unit of account. There is a paper Monopoly money: The State as a Price Setter that articulates a ‘tax-driven’ currency from when African nations were colonised. Prior to colonisation those communities consisted of subsistence production, internal trades and didn’t have a need to use a currency. Especially a European currency. It was the imposition of a hut tax in Malawi that forced communities to sell produce to the European colonisers or become labourers.

In the absence of having a good or service to sell that the currency issuer desires you need to sell your labour to earn the currency to pay the tax. So the imposition of the tax liability creates unemployment and spending (in the right area) creates employment.

Spending then gets more complicated and we make distinctions between different types of spending, however – the currency issuers spending is the currency users income. That is an accounting statement. If the government deficit over a given period is $X the non-government surplus has to equal $X. It is a question of whether the government has spent enough and directed the spending into the right areas as to whether we have full employment.

Within the body of work that is MMT it uses a Job Guarantee (JG) as a macroeconomic price anchor and stabiliser which I will explain below.

There have been claims that the Job Guarantee is workfare. It is not. It is a voluntary offer of a job to anyone, anywhere paid at a living wage with access to all the National Employment Standards just like every other worker.

The social policy setting of the JG is the policy manifestation of a technical concept to eliminate the tradeoff between unemployment and inflation. Current orthodox economists identify a link between rising employment and rising inflation and use unemployment to discipline the inflation rate.

That link is known as the Phillips Curve and rising employment is supposed to give rise to rising inflation. When the inflation rate rises above the central banks target range they raise the rate of monetary policy to slow aggregate demand (total spending in the economy) to ‘put the brakes’ on the rate of inflation (causing unemployment). There is a theoretical limit known as the natural accelerating inflation rate of unemployment (NAIRU) that theoretically if employment is to fall below inflation breaks out.

The trade-off clearly has not happened for quite some time. And it is questionable whether the NAIRU concept and natural rates of employment exist at all. We don’t very well go down to the river and stare at a school of fish and say ‘look at that pool of unemployed fish’ Employment is a social construct and it is hard to think we have run out of things for people to do.

Inflation is a continuous rise in the general price level. Which is different to a price rise. A price rise can lead to inflation if a conflict ensures and eventually you need a way to ameliorate the conflict.

Imagine all the workers on a small island. And they work producing widgets. At the end of the year you measure the widget output as X. The X is just the measure – whether it is one million or one billion doesn’t matter. The questions are; Is there enough widgets to satisfy everybody’s needs? Does everyone have access to all the widgets they need? How do we ensure equitable access to widgets?

The general price level itself is an abstract concept. There is a curiosity in saying that total output is X but the general price level compared to one year or ten years ago is higher or lower.

Imagine labour and capital fighting over those widgets. As one increases the price, the other seeks higher wages. Inflation gets more complex than that but the point is that labour or capital will end up with a higher share of GDP as a result of inflation.

It is a question as to whether total output is enough to satisfy our domestic needs, whether we are producing that output in an environmentally and socially sustainable way and whether we have equitable access to all the real resources we need. Are we as workers getting a fair share of our productive output?

I can appreciate there is a politically unacceptable level of inflation because people don’t like it. MMT economists say you can achieve a stable rate of inflation by using a ‘buffer stock of employed’ rather than a ‘buffer stock of unemployed’. This is what the Job Guarantee is.

The reason for the fixed wage in the JG is the anchor. It sets the general price level for an economy. We as a society set a floor for wages that says one hour of labour is equal to $X and guarantee it.

All prices within an economy are a function of government spending. The initial spend determines the price level.

The automatic spending triggered by those entering the JG mean the governments spending is directed when and where it is needed most – the unemployed. It allows for the governments fiscal position to float ensuring that we remain at the very least at ‘loose’ full employment and price stability.

The Government via its legislative powers has the ability to command real resources as well (such as what it did with private hospitals over the initial covid period and make childcare free) The latter took away a financial cost for households contributing to deflation.

The ABS writes;

The most significant price falls in the June quarter were child care (-95.0%), automotive fuel (-19.3%), preschool and primary education (-16.2%) and rents (-1.3%). 

https://www.abs.gov.au/AUSSTATS/abs@.nsf/mf/6401.0?opendocument&ref=HPKI

Free childcare, cheaper fuel, cheaper education, and falling rents are advantageous to the working class.

The JG chooses to use employment as the anchor for the general price level. If the rate of inflation is deemed politically unacceptable more workers would move into the JG pool. If the rate of inflation was lower than the politically acceptable rate of inflation there is scope to have the pool smaller.

In the event of accelerating inflation the cause of inflation can never be the wages of the JG workers because by definition they are purchased from the bottom and released from the pool when a better offer is made. It is only a small part of a broader full employment agenda.

Ideally you want the pool to be as small as possible. It is not there to replace existing skills based employment. It is there to sit alongside a national skills development framework to assist those that need it in finding future employment.

Similar to the wool price stabilisation scheme in Australia, The Australian Government guaranteed the purchase of excess wool and stored them in redbrick sheds to sell when the demand picked up again. The difference being is that people won’t work to produce excess labourers.

The JG ensures ’loose’ full employment as workers are drawn in and out of the JG pool rather than ending up unemployed. It can be thought of as a trasintionary arrangement for those that need it.

In a similar way to how the Commonwealth Employment Service worked, the unemployed person would have a case manager that held their CV and attempted to match that person to a job but rather than having that individual lay idle, they have the opportunity to maintain and enhance their skillset while seeking better employment working actively with their case manager to match them with an appropriate job.

A Job Guarantee is designed to create work to suit the individual. It is administered at the local level but funded by the federal government. The workers within this program are free to unionise and advocate whether something should be classed as a JG job. They are free to take part in determining what the living wage should be.

The work would be of public benefit and assist the JG worker in up skilling and finding work in the private or public sector. It is there to enhance the individual’s well-being and provide a public purpose. It is not used as a punitive system of punishment.

The types of work that can be done are limited only by our imaginations. We could pay musicians to give workshops on band dynamics, pay them to create and assist in the organisation of community festivals, we can have arts programs where artists can paint murals in public spaces and aid others in their own skill development. Surfers could be paid to pass on surf life safety skills and teach others how to identify and avoid rips. They could take part in sand dune rehabilitation. There is massive potential to enlist thousands of unemployed in ecological restoration and plant trees along with other flora to mitigate against climate change while they undergo study in a related area.

The advantage workers have, particularly those at the bottom who often hold little, if any bargaining power is that the JG sets the floor for wages. Private employers would be forced to compete with what we as a society determine to be the absolute minimum socially inclusive wage. It allows us to redefine our concepts of productive employment by including jobs that currently go unrecognised but provide value to our communities.

Most importantly the JG allows the most disadvantaged in our society an opportunity to engage in paid employment which would lead to recognition in the community, and vastly improved self perceptions and a more prosperous society.

Understanding Value

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

http://www.levyinstitute.org/pubs/wp_732.pdf

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.”

https://ijcis.qut.edu.au/article/view/532/704

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.

Conclusion

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.

Job Guarantees aren’t all the same

There’s been a number of articles I’ve read over the last few days on what we should do and what has been done in regards to people’s employment and well-being.

This article on giving rooms to the homeless reported by the BBC has shown the power governments hold and that it is not a lack of capacity to solve these issues but a political and collective will.

With reports that unemployment could reach more than 2 million people as a result of covid-19 lockdown and corporations standing down staff in the 1000’s we have calls for basic incomes and ‘jobs guarantees’ that lack commitment to an understanding that unemployment is a structural issue caused by a lack of spending in aggregate and a system of full employment as envisioned under the UN Charter of Human Rights, which states Article 23 states (1) Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment, and what the Civil Rights movements fought for, a Job Guarantee. It is concession to the neoliberal orthodoxy that Full Employment would be desirable but it is not possible. The orthodoxy has conceded that ‘financing’ such a goal is not an issue, with governments in many countries doubling the unemployment benefit despite calls of it being unaffordable and announcing other spending measures. It is clear currency issuing Governments face no insolvency constraint and financing of all currency issuer spending is an appropriation bill through the relevant legislature. Even CNBC admits it.

There’s a number of macroeconomic arguments and social arguments we can use in favour of a Job Guarantee. The term has recently been used to characterise something that it is not.

The United Workers Union recently called for

A jobs guarantee to be upheld by all employers; no layoffs during this time even if shifts are unavailable. Workers to resume work when shifts are needed again.
– An income guarantee payment of $740.80 per week (minimum wage) to everyone except those covered by the jobs guarantee, or others who have not been financially disadvantaged by COVID-19.

The latter is essentially a basic income for anyone with out employment while the ‘jobs guarantee’ call is a commitment that nobody is laid off. A call to continue to have these wages subsidised is conceptually the equivalent of paying an unemployment benefit at someone’s income or percentage there of. For the purposes of this crisis, it is a call to avoid income loss for workers that are stood down and hopefully they have employment to return too.

The call for wage subsidies is a sensible idea, especially during the cover-19 crisis as spending retracts. I would conceptualise it differently and call it a jobseeker payment (accessible to workers who have been stood down) at a replacement wage, for those on low incomes there would have to be a minimum payment. I would advocate that after the crisis anyone unemployed and seeking work should receive an unemployment payment at their replacement wage for a period of time while they sought another job.

Taking note of the basic income proposed, in the absence of a full employment policy, it is effectively a subsidy for low paid , shitty work. If you can only manage to scrounge a few hours a week and the rest of your income is ‘topped up’ by a welfare payment, we as a society are forgoing Full Employment and allowing capitalists to profit from precarious working conditions and low underpaid work. Where will jobs come from for those on a subsistence living that desire to work?

The phrase ‘jobs guarantee’ is not the same as a Job Guarantee which is an unconditional offer to anyone and able willing to work at socially inclusive living wage.

I’ve written about Full Employment and The Right to Work movement in the linked blog posts and here I hope to further explain a Job Guarantee as envisioned within a Modern Monetary Theory framework and further expand on the linked posts.

The Job Guarantee is a voluntary transitional program that is designed to create employment to suit the individual and work is there to fulfil a public purpose. It works alongside a national skills framework and the aim is to aid the JG worker to find higher paying employment. It allows statisticians to assess what skills are in what areas and assist policy makers in creating industry policies. It is not there to take away work from the mainstream public sector.

Inflation

A Job Guarantee is first and foremost a replacement for the Phillips Curve. In short the Phillips curve is the trade-off between unemployment and inflation and there is a conjecture that as unemployment rate falls, the general price level will increase. Today that is discussed as the Natural Accelerating Inflation Rate of Unemployment (NAIRU).

MMT looks at the Phillips Curve and identifies the unemployed as a buffer stock of unemployed to discipline the rate of inflation. It replaces it with a buffer stock of employed as an inflation anchor. Once in operation the JG pool would serve the same function as a NAIRU but without the social and health consequences unemployment brings. It is effectively a Non Accelerating Inflation Buffer Employment Ratio (NAIBER)

There’s a lot of misunderstandings to inflation and its causes within the public discourse (and even amongst academics) This is an attempt to give inflation an understanding to lay person terms and how a JG serves to discipline it.

When I say inflation I am talking about something very specific, that is a continuous increase in the general price level. The JG serves to discipline demand-pull inflation, so for the purposes of this discussion we will ignore cost-push. You can think of demand pull as spending ‘pulling-up’ the price. One off price rises are not inflation but they may lead to inflation if something does not ameliorate the conflict between wages and profit.

You need to appreciate that there is a distributional struggle [Conflict Theory of Inflation] over national income (GDP) between labour and capital.

We can view this conflict as perhaps leading to wage-price or price-wage spirals. As workers bid for nominal wages, capital seeks to maintain its profit and may increase prices and/or lay off workers to decrease costs as prices increase workers bid for more wages until the conflict is ameliorated.

Any Marxist will tell you, as well as an offical in the RBA that we cause unemployment to discipline the inflation rate. (NAIRU approach) The RBA would use wanky terms like adjusting aggregate demand (total spending) and they morally justify it to themselves by adhering to natural rates of unemployment and fear mongering over (alleged) a threat of inflation.

The JG is a buffer stock of employed that releases the JG worker when a better offer is made. It serves as a mechanism to ameliorate the conflict while maintaining price stability and full employment. It can not be inflationary as there has been no counter offer made once the worker is released. Purchasing workers from the bottom of the market can not be the source of inflation either as they have been rejected by the market. What purchasing the unemployed does is set a floor for wages.

The JG is an automatic stabiliser that adjusts spending levels to ‘loose’ full employment and it targets directly where the spending is needed (the unemployed) . It is described as ‘loose’ because ideally you want the JG pool as small as possible as we seek better employment opportunities for those workers.

The JG sets a floor for wages. If you think about the current floor for wages, it is $0. If you’ve been rejected by ‘the market’ the bid for your labour is zero. We then have pernicious welfare regimes that punish people into forcing them that take the shittiest job and the lousy wage and often risk their own lives! A JG, set at a socially inclusive wage, eliminates this as well as eliminating underpaid socially exclusive wage levels, it matches the desired number of hours demanded by the labour force and sets a living floor for wages. It effectively becomes the minimum wage and private employers are forced to compete with the JG.

Once the JG is in operation as workers leave the JG pool total spending increases (but government spending declines) as they leave the JG pool for better work. The reserve happens when workers enter the JG pool. Total spending decreases (Government spending increases)

The Social aspect of a Job Guarantee

There has been literature since the 1930’s on the ill effects that involuntary unemployment brings on the individual. This includes:

– loss of income
– impacts on mental and physical health
– deteriorating skills and loss of skills
– lack of motivation/self esteem
– family/relationship breakdown
– poverty for those reliant on workers income
– results in other social issue (e.g homelessness, increased crime etc…)

A Job Guarantee is designed to create work for the individual, rather than find a job that doesn’t match the skill set of the unemployed. The work would be of public benefit and assist the JG worker in up skilling and finding work in the private or mainstream public sector.

The types of work that can be done can include work in the arts. We could pay musicians to give workshops on band dynamics, pay them to create and assist in the organisation of community festivals, we can have arts programs where artists can paint murals in public spaces and aid others in their own skill development. Surfers could be paid to pass on surf life safety skills and teach others how to identify and avoid rips. They could take part in sand dune rehabilitation. There is massive potential to enlist thousands of unemployed in ecological restoration and plant trees along with other flora to mitigate against climate change. There are activities we consider community engagement that become paid employment. Running and participating in community gardens is one example.

By having a direct employment program we target money directly to the areas that need it (the unemployed/underemployed) and it has profound social transformative effects. It is a vehicle that begins to transform some of the structures and norms that produce and reproduce poverty and gender disparities.

Work matters, however broadly defined. Work empowers, enhances individual worth, and allows one to lead a richer life, gain new knowledge and skill, and contribute to self, family, and society. Work is life-affirming. While certain pursuits are solitary and individual, even they deliver benefits when performed as part of a greater community.

Tcherneva, P. What do poor women want?, 2012, Levy Economics Institute of Bard College
http://www.levyinstitute.org/pubs/wp_705.pdf

In the Paper by Tcherneva on the effects of a direct employment program, the Jefes program in Argentina. (A program targeted at poor women) she states

[paying] special attention to poor women’s narratives [we] showed that their first exposure to paid work significantly boosted their self perceptions, promoted collective and individual empowerment, and made important qualitative changes to their lives. Found that the socialization of women’s work increased the respect and recognition women received in their own families and in the community at large.

Tcherneva, P. What do poor women want?, 2012, Levy Economics Institute of Bard College
http://www.levyinstitute.org/pubs/wp_705.pdf

Conclusion

We need an understanding that unemployment is structural. It is caused by a lack of spending in aggregate. As a monopolist over the currency, the Australian Government can always purchase anything for sale in the currency it issues. It is a policy choice. The Government of the day chooses the rate of unemployment.

Basic incomes (and even Universal Basic Incomes) are an admission that full employment is no longer possible and if we were to have it we would be dealing with inflation.

The JG crushes that argument, argues full employment and price stability is possible and the broader literature shows work is important for a sense of self, recognition in the community, and leads to vastly improves self perceptions.


Thinking About A Green New Deal

This post follows on from the post ‘(Not) A Green New Deal being Proposed in Australia’. In that post I outlined the origins of the original New Deal, gave a brief overview of what the original New Deal was and followed on with a summary of what a Green New Deal is in the USA, it’s intellectual underpinnings and how that informs policy options.

I critiqued The Australian Greens proposals of their version of a GND (Which to date don’t seem to exist so I critiqued their policy page) and how their flawed macroeconomic understandings lead to flawed policy proposals. For example The Greens concept for support for coal workers isn’t specific, there is mention of a future work commission and looking into how technological change will impact jobs. Unlike the GND that outright says;

Ensure a just transition for communities where the fossil fuel industry holds significant control over the labor market. This includes not only training and wage replacement programs for fossil fuel workers themselves, but also investment in the businesses and workers that previously served them.” [emphasis added]

Reading further about the GND, it draws parallels that the mobilisation required is on a similar scale to WWII.

“In fact, as the U.S. prepared to enter World War II, our economy lacked the capacity to build the ships, tanks, airplanes and other armaments and munitions that would be needed, or to produce needed inputs like steel, aluminum, rubber, concrete, and other essential materials in adequate quantities. Many were skeptical whether the country could “gear up” fast enough to avoid losing a war that it had neither sought nor prepared for.”

And very forthright answers the how will you pay for it question as follows;

What a nation can do and can build is ultimately limited only by the size, skills, and creative energies of its population; the capacities of its companies, organizations and governments; and its available natural resources.” 

There is nothing in the GND that links any of the expenditure required to taxation. Unlike most political parties that say “If everyone paid their fair share of tax, we’d all get a fair go at living a decent life.”

Modern Monetary Theory will tell you limits to spending at the Federal level, by the currency issuer, is constrained by available real resources (including labour) and ecological constraints. All Federal Government spending is new dollars and taxation removes spending power. It is not a proposal for unlimited spending.

Often when we think about ‘the economy’ we define it as an abstraction to our own reality. An entity that we need to serve in order to prosper. Terms like ‘cost’ are applied to public spending. When your mind is buttressed by the analogy ‘a currency issuing government is like a household’ – you think in terms of taxes needing to ‘pay for’ a particular public service.

I prefer to think about a cost in terms of the real resources required to implement a particular policy. The NBN is a good example. All manner of numbers where thrown around in order to justify a reason to roll out an inferior network, and the justification was the government would save dollars and needed make a commercial return.

The cost in rolling out a broadband network isn’t financial, it is the real resources. We need fibre, labour and IT infrastructure. The NBN isn’t a cost, it is a tremendous benefit. It provides employment in the construction phase and gives Australian households and industries huge opportunities.

The ridiculous notion that a government needs to make a commercial return is based on the notion that profit is a means to measure efficiency. The Federal Government is the only entity that never needs to be concerned with insolvency, savings is the act of forgoing current expenditure to spend at a later date. It applies to a user of a currency.

Last week I was listening to a lawyer speak at some training and he was speaking in relation to assisting people with disabilities and he said something along the lines of ‘it is the idea we give up something to help somebody else less fortunate’ the implication is he was referring to taxation. I thought to myself, ‘well we don’t have to give up anything’. Provided we have medical professionals, a system in place to help people, and the ability to build the equipment needed, everyone else doesn’t have to sacrifice anything. I haven’t lost anything as a result of the NDIS being in place. The issue becomes if we didn’t have sufficient physical resources (including labour) and then needed to make choices about who got assistance.

You can apply that thinking to our education system, the energy sector and our healthcare system. The issues facing private healthcare is a good example. It’s being billed as a ‘crisis’ by private insurers. In the story linked to we see a health insurance representative stating:

“Now, my idea is I should be able to opt out of Medicare, take the pressure off the public system and taxation as a funding mechanism and take care of my own lifetime healthcare costs.

I believe I should have that option and I think inevitably, that Medicare, as an insurance scheme, is retained for the vulnerable and those who would otherwise not be able to take out appropriate levels of cover.

This is a strategy in place to drive more people into the for-profit healthcare industry as customers decline. The industry associates public spending as a cost. Any government committed to public healthcare, would look at the data of declining private health insurance, realise as citizens we’ve made a decision to be covered by a public healthcare system, and use this opportunity to employ the medical professionals made underemployed and unemployed in that sector and boost the resources in the public system.


Orthodox economics is full of language and metaphors that try to convince us that despite having sufficient real resources we can’t deploy them for a public purpose.

Ultimately we do have limited resources and need to make choices, For what purpose do we deploy our labour power, what is the most efficient way to use our real resources to provide the services our society desires? What do we leave for the public sector and what do we allow as an activity in the pursuit of profit? Limits to spending from any source, are inflationary which depends on the nations productive capacity.

The GND proposal for dealing with inflation is;

“Were inflation to return as a threat for the first time in half a century, furthermore, there are time-honored ways of preempting it. These include not only taxes and bond issuances, but also “macroprudential” limits on bank over-lending and financial market speculation.”

Macro-prudential rules are the rules that banks lend under. Like all western countries, Australia has a system that benefits the finance industry and has placed our households amongst the most indebted in the world.

A GND in regards to finance would mean understanding loans create deposits, giving private financial institutions the ability to create credit gives bank an incomparable power over the rest of the economy. Banks should be publicly owned an democratically controlled. The public banking sector should not replicate the profit seeking model of the private sector. The only functions a bank should perform is to facilitate payments and provide loans to credit worthy customers. A strong public banking sector needs to be instated that adheres to the below mentioned rules:

  1. Financial Institutions should only be permitted to lend directly to borrowers. All loans would have to be shown and kept on their balance sheets. This would stop all third-party commission deals which might involve banks acting as “brokers” and on-selling loans or other financial assets for profit. They should not be permitted to speculate as counter-parties with other banks.
  2. Banks should not be allowed to accept any financial asset as collateral to support loans. The collateral should be the estimated value of the income stream on the asset for which the loan is being advanced. This will force banks to appraise the credit risk more fully.
  3. Banks should be prevented from having “off-balance sheet” assets, such as finance company arms which can evade regulation.
  4. Banks should never be allowed to trade in credit default insurance. This is related to whom should price risk.
  5. Banks should be restricted to the facilitation of loans and not engage in any other commercial activity.
  6. Banks should not be allowed to contract in foreign interest rates nor issue foreign-currency denominated loans.There is no public sense achieved in allowing them to do this.
  7. Social, labour and environmental criteria should be introduced to determine how the banking system allocates credit. 

I would go further and advocate “All Australian deposits should be guaranteed and private banks should NEVER be bailed out through public expenditure but instead have assets taken over by the Federal Government and nationalised.” Credit issuance should be seen as a public good.


A Green New Deal in the USA also recognises;

Where the original New Deal kept people of color — particularly Black people — subordinated as a servant class vulnerable to economic exploitation and instability, the Green New Deal will bring the employment, business ownership, and wealth- generating opportunities that these communities need in order finally to have full and unfettered access to our economy and our political processes.

The civil rights movement in the USA fought for Guaranteed Jobs. Martin Luther King’s infamous ‘I have a dream speech’ was at “The March on Washington for Jobs and Freedom

This article about Coretta Scott King outlines why she fought for a system of guaranteed employment.

“Four days after her husband’s murder on April 4, 1968, Scott King returned to Memphis to support the city’s striking sanitation workers. She marched with an estimated 50,000 people before concluding at a rally at the Memphis city hall. Amidst drizzling rain, she reminded her audience of the terrain they had traversed and the journey ahead: “We moved through . . . the period of desegregating public accommodations and on through voting rights, so that we could have political power. And now we are at the point where we must have economic power.”

In 1974 Scott King co-founded the National Committee for Full Employment/Full Employment Action Council (NCFE/FEAC) to fight for legislation that guaranteed jobs for all Americans. Guaranteed jobs for all who wanted them—regardless of race or gender—had long been a goal of Scott King’s and the black freedom movement.

The GND looks at indigenous rights issues;

Where indigenous rights have been previously neglected or pushed aside, the Green New Deal will affirm treaty rights and respect the claims that Native Americans have to tribal lands as sovereign peoples.

This is an opportunity for an Australian framework to recognise the rights of its Indigenous peoples. Which not only includes recognition of their voices but active participation and an ability of self-determination.

“…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.”

Flea, J et al. The Uluru Statement: A First Nation’s perspective of the
implications for social reconstructive race relations in Australia, International Journal of
Critical Indigenous Studies, Vol 12. No. #1, 2019
https://ijcis.qut.edu.au/article/view/532/704

The GND in the USA also recognises;

Where the New Deal often excluded or underpaid women in ways that kept them financially dependent, the Green New Deal will expand economic security and opportunity for women, so that they have the means to support themselves and their families, even into retirement.

This within an Australian context requires to look at enhancing maternity leave provisions, include stay at home parenting with a paid salary, and reviewing our superannuation system. A system that has skewed wealth to a relative few, has not provided for many Australian retirees (We have the highest rates of pensioners living in poverty in the OECD) and set up under the non-sensical notion that a currency issuer needs to save when it can always spend.

It is why we should look at enhancing the aged pension and scrapping our system of superannuation.

It fails to meet the standards of a retirement income system. It is costly and inefficient, unnecessary, and incredibly unfair. The age pension system is by far the most economically efficient retirement income system. Scrap superannuation. Expand the age pension. Boost the economy.

Conclusion

The Green New Deal (or whatever else you choose to call it) is a mammoth undertaking that within the USA is not only about a transition to a zero emission renewable energy sector. It is about a redistributive agenda that brings power to the most marginalised within their society.

I’ll close with a quote from Noam Chomsky in the book Understanding Power.

“Look, part of the whole technique of disempowering people is to make sure that the real agents of change fall out of history, and are never recognized in the culture for what they are. So it’s necessary to distort history and make it look as if Great Men did everything – that’s part of how you teach people they can’t do anything, they’re helpless, they just have to wait for some Great Man to come along and do it for them.” 

Any political and economic transformation is going to require a movement willing to take action to bring in that change. That means political demonstrations, strikes, being able to refute ‘junk economics’

and movements that use a coherent framework to bring about a working class, unified agenda.