Restricting population growth is good for local workers

In the aftermath of the 1991 recession, which was the worst economic downturn in Australia since the Great Depression of the 1930s, I wrote a series of articles that we published in academic journals. In part, they were theoretical pieces that conjectured about the impact of rapid population growth on the labour market, which at the time was characterised by persistently high unemployment and rising underemployment (the recession had replaced full-time with part-time work). My conjecture was that high rates of immigration at a time of slow employment growth would lock unemployed workers into long-term unemployment. Of course, I could not test that proposition because the government maintained the relatively high immigration levels and other factors might have been responsible for the rising long-term unemployment. Last week’s Australian Labour Force data showed that unemployment and the unemployment rate has fallen rather quickly in recent months as the economy recovers slowly from the pandemic recession. Historical comparisons show the unemployment response this time has been much larger than in the previous recessions. The other key point is that the working age population has grown at historically low rates as a result of the border closures. It seems that my conjectures in the early 1990s were correct, despite getting flack at the time from mainstream economists who were pushing the line that immigration is always good for the labour market.

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Plenty left behind in a national economy that the Government claims is ‘roaring back’

Today, we have a guest blogger in the guise of Professor Scott Baum from Griffith University who has been one of my regular research colleagues over a long period of time. Today he is continuing his discussions around the uneven regional impacts of job losses since the start of the COVID-19 pandemic. So while I am tied up today it is over to Scott …

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Don’t say its over until its over – MMT is not close to dominating the narrative

Don’t say its over until its over. There has been progress in the macroeconomics narrative since the GFC, which accelerated during the pandemic. Governments have certainly expanded fiscal deficits and taken on more debt and the usual hysteria, which many of those same governments helped to ferment in the public debate, has fallen away. Obviously, for political reasons, a government that has previously been terrorising the population about the dangers of deficits and rising debt as a cover for ideologically-driven austerity programs, has no incentive in continuing those narratives while they have been dragged into maintaining capitalism on life support. The question has been whether these narratives will return once the health emergency starts to fade a little. There is clear evidence emerging that the lessons that the pandemic has taught us are not being absorbed by the economics commentariat, who dominate the public space with their opinions. Two clear examples of this came out this week (already) in the Australian press, which replicates the sort of commentary I am increasingly seeing around the globe. Deeply sad.

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US and UK fiscal stimulus supporting growth while the delays in the Eurozone lead to a double-dip recession

Last week (April 29, 2021), the US Bureau of Economic Analysis published the latest national accounts data – Gross Domestic Product, First Quarter 2021 (Advance Estimate) – which showed that the US economy grew by 1. The following day (April 30, 2021), saw Eurostat announce that the Eurozone contracted by 0.6 per cent in the first-quarter 2021, which means it is now enduring a double-dip recession. The European Union, now without Britain as a member, contracted by 0.4 per cent. In contrast, with Britain now out of that mess and determining its own future, we saw the British economy return a positive GDP growth rate in February as exports rose and government stimulus sustained domestic activity. Why should we be surprised about this. In this post, I examine the US situation in more detail and reflect on some interesting trends in the UK. The Eurozone situation is too depressing to write about on a sunny day!

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Latest IMF data helps us see how political choices impact on health and economic outcomes

The IMF recently updated their – World Economic Outlook database – April 2021 – which allows for quick cross country comparisons. Some of the data series are suspect (like structural deficit estimates) for reasons that I have explained before, but many of the national accounts series are useful. I have been doing work on the relative responses to the pandemic and the impact on economic performance as well as researching the next chapter of one of the current book chapters. So today, I just present some interesting graphs and calculations. Nothing deep but the figures then provoke some deep thinking. The lessons are pretty clear: Covid elimination strategies protect health and the economy better; Austerity is highly damaging; and there is a massive shift in the world order going on and we should be learning from that. And all of the trends I examine are ultimately the result of political choices. That is the important point to keep in mind.

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More privatisation myopia

Australia was established a federation in 1901 after being a collection of colonies after the British consficated the land space from the indigenous population that had been here for more than 30,000 years. In 1916, the Australian government as one of the important early initiatives in establishing Australia as a nation under white rule created the – Commonwealth Serum Laboratories – as a national manufacturer of vaccines. Its early priorities was to produce antivenom to deal with snake bites, insulin and tetanus vaccines, and, later, vaccines for diptheria, whooping cough, and polio. It became a leader in manufacturing blood products for HIV and more. It was a jewel in Australia’s crown, guaranteeing that we could deal with the dangerous human conditions with our own capacity and without being held ransom by profit-seeking corporations. In 1994, the Labor government privatised the public body, claiming it did not have sufficient funds to update some equipment. The Government has now contracted this private corporation (CSL) to the tune of $A1.7 billion to supply the AstraZeneca vaccine, while at the same time, refusing to provide pandemic support to workers in the arts and university sectors.

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European Union is destroying the future for its citizens

One of the problems of neoliberalism is that it is anti-people. This makes it hard for governments to actually impose austerity and so they work out ways to lessen the visibility of their pernicious policy choices, except if you are in Greece that is. The ways they deflect the political fall out are many and include use the depoliticisation strategy – like appealing to TINA demands from external bodies such as the IMF (circa British Labour Party 1976), claiming central banks are independent, and hacking into expenditure items that delay recognition in the public eye that damage is being done. This blog post focuses on the latter. I have been studying the shifts in government spending in the European Union since the GFC and it is apparent that final consumption expenditure and outlays on social benefits have not been the focus of the austerity to the same extent as government spending on capital formation (public infrastructure). It is much harder politically for governments to cut recurrent spending because it usually impacts on people straight away. Cut a pension and the hurt is visible. Cut lots of pensions and there is a political problem. But cutting back on public infrastructure is less visible and the damage takes time to manifest as the depreciation process sets in, maintenance delayed and additional new capacity is lagging. But make no mistake – cutting capital spending undermines the future productivity of the nation and paves the way for a diminished future for our grandkids, the very ones, mainstream economists claim they are protecting by advocating austerity.

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Alas, the window seems to be closing

My MOOC is in full-swing (over 3000 participants) and I am quite busy getting Week 2 up and running and then Weeks 3 and 4. So, today, we have our regular guest blogger, Professor Scott Baum from Griffith University who has been one of my regular research colleagues over a long period of time. Today he is examining the creeping tendency in the political debate and media to start to focus on questions like when will the debt be paid back. Journalists have been asking me to estimate the quarter when Australia can return to fiscal surplus, as if that is a target to aspire to. Anyway, over to Scott …

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Unemployed in Australia forced to live in abject poverty and the business sector thinks that is fine

Last week (February 1, 2021), the Australian Chamber of Commerce and Industry, which represents the business lobby, demanded the Australian government cut the unemployment benefit back to less than $A40 per day but at the same time it also demanded the Government extend wage subsidies to businesses. It is repugnant that the business culture in Australia is so impoverished, that the key business lobby group wants unemployed workers who cannot get a job because there are not enough jobs on offer to be forced to live at income support levels that are well below conventional poverty lines. But, at the same time, it supports businesses putting their own hands out to government for more. It is also stupid. They don’t seem to realise that providing an environment for strong wages growth produces the best conditions for profits. Yet these characters just want to accelerate the ‘race to the bottom’ which is a self-defeating strategy.

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Central bank at odds with Australian treasury – again

It’s Wednesday and a blog-light day as usual combined with some great jazz. But it is worth commenting briefly on yesterday’s monetary policy decision, which saw the Reserve Bank of Australia hold its policy rate at the record low of 0.1 per cent. That was no surprise. Mildly surprising given all the hype about the size of the public debt at present was the RBA’s decision to expand its asset purchasing program by an addition $A100 billion. In effect, the RBA is doing what many central banks are now doing – buying up the debt that has been issued to match (not fund) the expansion of fiscal deficits by governments as they try to deal with the negative consequences of the pandemic. While all this has helped the Australian economy record the disastrous economic impacts of the virus the state of affairs is still very poor. And the RBA knows that and is urging extending fiscal and monetary policy support until “at least” 2024. Yet, the Federal government is starting to talk about cutting fiscal support next month. This tension in aggregate policy was evident before the crisis. And it has been a global tension. The neoliberals haven’t disappeared. Austerity is in the wind. More struggle is necessary.

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