The Albanese Labor government is a relief after the destructive farce of recent Coalition governments. Labor are doing some very good things, and they may even repair a lot of the damage to our governance system.
But what if many of the important policies they are implementing are wrong? What if their beliefs about the economy and what motivates people are wrong? Could that be?
In brief, yes. But that message is apparently so discordant with the dominant political culture that it just bounces off: ‘That can’t be right’. Well, why do you think United States society is in such a mess? They must be doing something wrong. Perhaps we are too. So, regardless, here are a few policies that are wrong, according to readily available evidence.
The ‘trillion-dollar debt’ is a choice. It could be paid off tomorrow. The Federal Government creates money, through the Reserve Bank, and could just spend it into the economy when ‘stimulus’ is required. There is no debt involved. But instead it converts the money into interest-bearing bonds that do comprise a debt, ostensibly to manage the interest rate. It is a gift to the financial sector. This is by now fairly widely known, through Modern Money Theory, promoted by Stephanie Kelton in The Deficit Myth, but Labor has remained impervious to the message.
This convoluted approach gives the government only weak leverage over commercial banks’ profligate money creation (known as ‘lending’) which, incidentally, has inflated the housing bubble. The Government could just restrict their ‘lending’, as Bob Menzies used to do, back in the day when the economy was booming and unemployment was below 2%.
The Reserve Bank is rapidly increasing the interest rate, ostensibly to control ‘inflation’. But a rise in the cost of making stuff is not inflation, it is a real rise in the cost of making stuff. Cranking up the interest rate will further increase costs, slow spending and hurt the poor the most, as even quite a few economists are pointing out.
Upping the interest rate will cause the value of the currency to rise too. This is another gift to the financial sector, at the cost of higher unemployment and many mortgage loan defaults. There is no ‘narrow path’ of Reserve Bank virtue, it is a crude trade-off: save the financiers and let the real economy slow even further.
Unemployment is supposedly at record lows, so perhaps a bit of extra unemployment won’t matter. But every lost livelihood matters. Nor is the current unemployment at record lows, it would have to get below 2% to get anywhere near that. This reveals the rank ignorance of many financial journalists.
Because unemployment has actually fallen below 4% for the first time in the four-decade neoliberal era we are hearing that there is a critical shortage of labour. No, there are hundreds of thousands of people still wanting a job.
Perhaps they should be offered higher wages? That would cause more money to circulate, the economy to pick up and more jobs to become available. You won’t read that in most economics textbooks, but a Nobel prize went to the people who showed it can happen in the real world.
Oh but the unemployed don’t have the right skills, there’s a ‘skills shortage’. Big business figured out some time ago that if they cry ‘skills shortage’ the politicians will jump. The standard remedy is to increase immigration. One minute they want ‘skilled immigrants’ (which steals valuable people from other countries), the next they want fruit-picking backpackers. What they really want is cheap labour.
There is a skills shortage. It’s because the TAFE system was wrecked by privatisation and the universities have been corporatised. We need to re-create a proper education system so our young people are not relegated to being baristas and Uber drivers.
Immigration will stimulate the economy, it is claimed. Well no, each extra person costs us half a million dollars, to build more shops, houses, schools, roads and so on. Jane O’Sullivan showed how to do the calculation. Importing 200,000 extra people every year costs us around $100 billion every year. Perhaps that’s why big-city infrastructures are overcrowded and failing?
It’s a silly idea anyway, claiming we need to import people to keep the economy going. Can’t those of us already here take care of ourselves?
Environmentalists could usefully learn this lesson too. Rapid immigration is bad for the economy. That’s an argument that might catch the ear of politicians, rather than just saying the environment is rapidly degrading and more creatures are going extinct (which is also true). Politicians live indoors and clearly don’t relate much to ‘the environment’ out there. Even though they are intimately connected with it by every breath, every drink, every mouthful of food.
How do you get unemployed people back to work? You give them the barest subsistence payments (only half the poverty level), you make them apply for twenty or so jobs a week and take training courses they can’t afford to get to. They, and all the other ‘leaner’ welfare recipients are contemptible bludgers and you have to crack the whip over them. That is the neoliberal and Liberal Party attitude, and evidently the Labor attitude as well. Never mind that most of the time there have been several times as many unemployed as job vacancies.
In fact most people want to be gainfully employed. They want to take part in society. They also want a liveable income of course. If we put them on unemployment benefits, as they used to be called, at least at the poverty level, support their self-esteem instead of trashing it, and help them to actually find a job (as the Commonwealth Employment Service used to do) instead of just churning them through the privatised unemployment industry, then we’d all be better off. Oh and we should manage the economy so there are more jobs available.
Privatising everything in sight was a bad idea. Here is the second-most dissonant claim I will make: nothing in theory or practice supports the idea that ‘free’ markets will be efficient or deliver desirable results. The practical evidence is all around us in our anaemic economy, dysfunctional services and fragmented society. The economic theory on which that claim is based is a toy abstraction based on absurdly unrealistic assumptions. It is irrelevant to the real world. You have to look at the financial incentives that operate in a market to see if it will do what you want.
If you set up an artificial electricity market then suppliers might figure out they can make more profit by keeping a generator off line so prices spike, then blame blackouts on the weather, or greenies. Perhaps we should give the grid back to the engineers to run.
If an aged-care operator can only increase profit by cutting costs, then you might get aged-neglect: with poor food, insufficient supplies, insufficient staff, insufficiently trained staff, all the things reported and lamented by the Royal Commission into aged care. Perhaps it would be better to subsidise local aged care facilities run by people who know and love their elders. We used to do that.
The neoliberal, social engineering experiment in privatisation has been an economic failure and a social disaster. Underpaid, insecure, fearful people can become desperate. They can look for someone to blame, and someone to save them. If Donald Trump sounds like that person they might rally to him. They might say smash the system that has ground them down while the big shots swan around in all their luxury, like the new aristocracy. Off with their heads.
The most dissonant claim I will make is that we are very close to irreparably wrecking our life support system, planet Earth. The political class has been putting off action on global warming for decades. They clearly don’t get that there is no time left, we must get our greenhouse gas emissions declining very rapidly, starting now. Not in 2050, not in 2030, now. We need to be, and can be, well along to net zero by 2030.
Climate science is uncertain, that has always been acknowledged. Unfortunately global warming has consistently exceeded the best projections. There are alarming signs that some systems are tipping, or have tipped. We don’t actually know if it is already too late. Do you hear that? We don’t know if it is already too late. Let us hope it is not.
In any case we need action everywhere, including in transforming agriculture and forestry, because plants are by far the best and most beneficial carbon capture and storage systems. We could, if our luck holds, live comfortably, but without the extravagance we indulge in at present.
Local sage Richard Eckersley has written that culture, in its broadest sense, is the strongest determinant of the fate of human societies. Our dominant culture at present has us frantically producing more and more stuff, without limit. We have far more than we need, materially. We stress ourselves making all that stuff, our artificial environment makes us sick, and our lives lack meaning.
Perhaps the best thing we could do, for ourselves and the planet, is to slow down, take a walk in the bush, admire the sunset and hug our loved ones. Never mind the GDP. If we remembered the important things in life then we might be less fearful of stepping off the treadmill we have made for ourselves.
Hello Labor? Can anyone hear?