The Federal Families Minister and that altered transcript

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1. “…we do everything possible to do everything we can to help people get into work…”

   A double do. Another lie.

2. Bill, just to be pedantic, I doubt that babies and children under about 15 years (the usual age of some political awareness) could meaningfully respond to the poll, or even respond at all. But I reckon you would get close to 100% of persons of voting age who are aware of the issue to agree that the Minister’s Office is lying.

   Why can’t Ministers be honest and back down, admit mistakes and apologise? Oh hang on, I know why. Because that then exposes their policy for what it is, totally heartless, impractical and economically unsound.

3. LOL. You could probably hear that across the street from her.

4. Interesting article in the Brisbane Times (and I guess this is syndicated across the Fairfax papers): http://www.brisbanetimes.com.au/opinion/politics/how-the-poor-are-shunted-into-deeper-poverty-just-for-political-capital-20130103-2c74b.html

   Not the kind of voice you often here in the Australian press.

   It’s stunning that the Labor Party enacts the same heartless policies it slammed the Liberals for. It’s impossible to imagine how our political process can ever have good outcomes when the two major parties are competing to see who can more slavishly serve the rich and punish the poor.

5. Both of the major party groupings have been captured by the neoliberal view of the world and the neoliberal agenda. Both are obssessed with the objective of reducing deficits and producing budget surpluses. Both are committed to a course of hitting “soft” fiscal targets. And both are in the habit of lying to the citizens who elected them. Politics as a while has degenerated into little more than organised lying. And they can only get away with it only to the extent that society has been dumbed down by the mass media and the presstitutes who serve the agenda of powerful vested interests.

6. John Hermann, you are 100% correct. I despise both major parties in Australia and even have little time for the Greens because they too (as Bill has pointed out) now subscribe to all the neocon myths about economics, especially the budget surplus fetish (crude version) or Govt Budget Constraint fetish (slightly more “intellectual” version).

7. I think you have to ask why though. It’s one thing to say that they have economic policy aims that lead to destructive policy outcomes and another to think about whether the destructive policy outcomes are the point, and the economics they choose to accept is acceptable to them because of the ends it implies. It’s hard to believe that so many smart people across so many countries really are so unable to retain beliefs that are so often contradicted by evidence.

   I say that though but the tenor of Wayne Swan’s announcement of abandoning the surplus was that he was aware that the automatic stabilisers would tend to drive the economy into deficit, but he was willing to apply “spending restraint” to try to outrun that process. I was quite shocked that he seemed to be boasting of his efforts to do it. He seemed to be saying “I am proud of my attempts to cut spending more quickly than the effects of cutting spending could provide me with less revenue to spend” and only stopped because there was no politically viable target left to put the boot into.

8. Macroeconomics can be reduced to five words.

   Utilise dirigisme and public spending.

9. Dr Zen, what end are they after? The destruction of global civilization and human extrinction? That will be the endpoint of current economic policies. I mean that quite literally because their policies are leading directly to;

   (a) 6 degrees C or more of global warming.
   (b) resource depletion.
   (c) mass species extinctions.
   (d) breakdown of the nitrogen and phosphorous cycles.
   (e) breakdown of food security.
   (f) wars, disease and famine.

10. Utilise dirigisme and public spending.

    I love the smell of central planning.

11. “Full employment is the main macroeconomic objective of any Government.”
    I do not disagree with this statement. The only real question remains, namely whether this is achieved by central planning or by a free economy (within the limits of the rule of law).

    Linus, what you are calling “a free economy” is a kind of centrally-planned economy – if you mean an economy with any government at all. There is no conceivable alternative to “central planning” – that just means “the government, like all governments, everywhere, plans to do stuff and does it.”

    If you agree that governments have the responsibility for full employment, then to be logically consistent you MUST be for “central planning” – of who to pay the government checks to. A Job Guarantee is the least amount of government spending to attain full employment at a set wage. It could be as decentralized as possible, but the money-issuer has to write the check, because that is what unemployment is – people who want to work for money, but can’t find work.

    And to reply to your concern “May it be the politics of unsound money that is at the core of this situation.” and that “the devaluation of currencies will over time have a subversive and negative result for society at large.” the thing to realize is that this kind of money-issuance is not inflationary, it is not “devaluing the currency”. There is no reason to think it is. There is tons of logical evidence and experience that it is not.

    MMT is Functional Finance, and Functional Finance is sounder than Sound Finance (= worrying about balancing budgets, scaring yourself about devaluing currencies rather than unemployment). As Keynes said “Take care of the employment, and the budget will take care of itself.”

    The idea that MMT spending is inflationary is absurd. I believe you have criticized “artificially low interest rates” before. There are no artificially low interest rates. There are artificially high ones, which are higher than zero, which is the natural rate of interest on government debt.
    E.g. Austrians, criticizing low rates are saying: “Give money to (rich) people for doing nothing.”
    MMTers say – “Give money to (poor) people for doing something.” And this is supposed to be inflationary, devaluing money? A something for nothing deal preserves the value of money, while something for something destroys it? Yes, I know it can seem to marginally work the first, higher interest disinflates, way for a while in some situations – but that should be called a perverse effect.

    In other words, MMTers are for sound money, while opposing it is opposing sound money.

12. If you agree that governments have the responsibility for full employment, then to be logically consistent you MUST be for “central planning” .

    I agreed to the statement that it is the government’s objective but it cannot be its responsibility. There is quite a gap between those two perspectives. But the real question in which manner this goal is tried to be achieved.

    I do not really know the details of MMT’s idea of money supply growth but what I read is that government debt is of no consequences. In my opinion, growth in money supply (basic plus credit) in excess of economic growth is an inflationary policy that creates all the known negative side effects. It is further most interesting that increases in the price level of the consumer price index in the range of 2% is mostly associated with statements of having no inflation or stable prices. When looking back over the past e.g. 30 years, I do have not only no doubt but certainty that the value of money, no matter what currency, has been deteriorating. Real stable prices are achieved when the currency maintains its value even after 30 years. The reasons for it are manyfold but loose monetary policies are certainly part of the problem.

    When a currency is simply for the purpose of manipulation by decision makers, it produces exactly these problems we have arrived at over the past 10 years. Many studies exist that clearly demonstrate the negative aspects of this manipulative monetary politics that turn more and more into some kind of central planning. And it obviously is completely reasonable that once you cannot trust the decision makers to maintain the value of a currency that you put your nest egg into e.g. properties etc. producing these distortions (bubbles and busts). Studies also deliver evidence that present monetary policies redistribute wealth from the middle class to the upper class.

    It always sounds morally and ethically positive to propose policies that seemingly benefit the “poor” people. But longterm resilient and sustainable policies are those that will rejuvenate an economy after long periods of anti growth and status quo policies. Of course, the idea is always the same, to avoid immediate pain and the future be damned.

    The state should distance itself from trying to manipulate directly economical outcomes but should simply provide the strong legal frame work in which the free and enterprising individual can flourish. The state should focus on defending the individual’s freedom and not become some kind of mother for all and his pet.

13. Government is the collective will of the nation in a democracy. It is all of us acting together for the betterment of us all.

    If you want to taste real individual freedom, then Somalia awaits your immigration application.

14. Neil, that sounds like a good system. Can you name a country where it’s in practice?

15. @ Neil

    I do not remember having mentioned to anyone that they should go to the Sovjet Union of the past to live in. It always sounds great to have a system in place that ensures the welfare of everyone and his pet but is it achievable with central planning and probably the dictate of the majority? This is the real question. Derogative comments playing on the person do not count as very constructive comments.

16. I wish to reply to Linus Huber’s long post of Monday, January 7, 2013 at 0:02.

    Linus you wrote: “If you agree that governments have the responsibility for full employment, then to be logically consistent you MUST be for “central planning” .”

    This does not follow, at least not to the extent and in the strong or absolute sense in which you meant the statement. In a mixed economy of private and public sectors (Australia and the U.S. have mixed economies) the private sector typically employs about 75% to 85% of the workforce. The Gallup Economy site gives a figure which shows Federal, state, and local governments employed 17% of U.S. workers nationally in 2010. In Australia, “in August 1997, 22% of all employees in Australia worked in the public sector. This was a decline from 30% in August 1987.” – Source, Australian Bureau of Statistics. I am sorry but a quick search of the net did not get me more recent figures but I suspect that the percentage has declined a little further.

    To recap, in a mixed economy, the private sector employs about 75% to 85% of the workforce (in employ) and this varies both country by country and over the business cycle. The remainder are either employed by government or unemployed. The MMT Job Guarantee proposal is that the Government soaks up the cyclical unemployed (typically 5% to 8% currently in countries like Australia and the US respectively) as well as the usual 15% to 25% of the workforce it employs in any case.

    These may not be percentages of quite the same base but let’s compare them anyway. If government at all levels employs 20% and needs to soak up another 5% then that’s a 25% increase in the number of government emplyees but only a 5% increase overall (of the whole base) in government employees versus total workforce. That is not such a radical increase and the need would vary over the business cycle. Given that Australia cut government employees from 30% to 22% of the workforce in a decade from 1987 to 1997, a move in the other direction from say 20% to 25% to soak up all unemployment is not all that radical.

    You assert that ” you MUST be for “central planning” ” in a way which clearly implies that you think ANY and ALL central planning is BAD. You further seem to imply that only the two extremes exist, either a “centrally planned” economy or a “free market” economy, as if no central planning at all occurs in a democratic mixed economy. This view (of extremes but no continuum in between) is idealised and unrealistic. It is an unempirical stance and it is not valid to argue from this false viewpoint. The plain fact of the matter is that governments exist in nations with representative democratic systems and these governments do some things and plan some things.

    Planning is unavoidable if you want to want give an order to things (the opposite being anarchy or chaos) and to create complex, interacting structures and systems. On the macro scale, a modern democratic nation state is nothing if it is not an integrated set of complex, interacting structures and systems. Thus the argument is not about absolute central planning and control (which did not in reality occur even in Soviet Russia even if they attempted it) or total laissez-faire which also has never occurred anywhere in national history in a pure form (which would be anarchy or chaos), rather the argument is about the degree of government command and control compared to the degree of “freedom within limits” which is accorded to citizens in their economic and personal lives.

    I am arguing that the MMT Job Guarantee is simply an incremental adjustment to correct market failure. It is not greatly radical in the overall context of democratic governance of a mixed economy. If you argue that the government should take NO responsibility for unemployment are you also arguing that government should take NO responsibility for the unemployed? That is, are you arguing that the unemployed should be left to starve or turn to crime? If not this, then what is your position?

17. “Derogative comments playing on the person do not count as very constructive comments.”

    Neither does calling representative democracy central planning. If you want to scrap democracy and replace it with anarchy you should say so.

    Most people quite like representative democracy, so you’re onto a loser.

    Somalia and much of Africa are essentially anarchic systems. Yet even though free marketeers like to bang on about freedom of movement of capital, goods and labour you see very few of them putting their money where their mouth is.

    If the majority tyrannise you then you are welcome to leave. It’s a free country.

18. @ Ikonoclast

    Thank you for your comprehensive reply. I value the fact that you argue on a factual basis and do not divert from the subject at hand.

    I may be implying with my prior comment that you are for “Central Planning”. My main focus is always monetary policy as in my opinion the manipulation of a country’s currency is of paramount importance in as far as those policies produce longterm effects that do not register on the scale of most economic models. It is a slow, grinding and hardly recognized process that takes place when we undermine the value of a currency in order to manipulate people’s behaviour. Just a few days ago, Mr. Claudio Borio at the Bank of International Settlement issued a working paper in this regard (http://www.bis.org/publ/work395.pdf) that confirms my long held views. Mr. Borio was one of those who warned Greenspan in the time frame of 2003/04 of the danger of his policy and was certainly not surprised by the bursting of the bubble in 2008. I am happy to find always new economists that realize the effects and importance monetary policy has on longterm economic outcomes.

    Now, let’s get back to your comments with regard to government and the proposal of job guarantees. As I explained before, such proposals seem to advance the idea that government is going to take care of us and our well-being. This raises the question of the government’s function in this regard. It is simply not feasible that the government determines what is best for people but only the individual him/herself should make such a decision. As more and more rules are implemented, one has to examine those rules in their purpose of enhancing personal freedom or reducing such. I am most certainly for a construct of the rule of law, especially in regard to the protection of the individual’s freedom (less so for economic entities, like firms). This will enhance the creative forces within society and produce a better life for all. Today, most new rules (laws) are not really in favour of people but in favour of economic entities (due to their successful lobbying etc.) that allows them to achieve their competitive advantage by fostering a climate that tries to maintain the status quo. Therein hides a very negative aspect that may be associated with fascism. In order to free ourselves from such an already very developed situation, I do not consider a more repressive policy as the correct answer but rather to dissolve such arrangement in the long run. We have to find a way back to creative destruction.

    Of course, you are right, no idealised system exists/existed in pure form. I am not implying to achieve a perfectly working system with my ideas but I am looking for the path and direction we take and establish for the future. We do not move with regard to economic issues towards an environment of extended governmental control only but especially also with regard to the so called aspect of security and safety. Based on these developments, governments accumulate more and more information of their subjects. It is not necessary for a government to issue specific warnings about such and such behaviour or talk but the fact that those information might be available in case of an individual’s disagreement with the government, produces on a subversive level an indirect influence that slowing changes attitudes regarding freedom of speech etc. The more power, influence and information we provide the government with, the higher the potential abuse.

    With regard to job guarantees by the government, I have a slightly different perspective. Most certainly the government has a duty to ensure that the subjects are provided with the basic items as food, clothing and shelter. But anything outside those basics for survival, I do not share the idea of the government taking over. There are several aspects with the idea of jobs guarantee that disturb me without having to dig, e.g. – What exactly will happen to those that do not like to have a job? – If a jobs guarantee is provided, how exactly do you motivate people to perform well, as they are not eligible to get fired. – Who will administer and manage all those people. – Who will know what kind of activities are economically viable and useful for society? There are many questions that all will most probably be resolved by creating a vast horde of government employees.

    I enjoy the exchange if ideas and although I may sound very convinced of my ideas, I repeatedly suffer from doubt in many areas.

19. just a couple of examples how government policy or central planning if you prefer are needed
    to deal with the failures of the free market
    where in the world can the bottom 50% earners afford comprehensive private health insurance
    or a private education?
    where in the world is mass transportation needed to get private and public workers to their jobs
    not regulated or subsidized by central planning?
    and because of a failure of governments to centrally plan
    where in the world is their the investment to insure that future generations have
    sustainable sources of energy?

20. @ Linus Huber

    I think we are going to have to agree to differ. I doubt either of us will be able to change the other’s mind by argument.

    Each person’s political-economic stance, as well as being affected by parental and peer group views when growing up, is affected by powerful personal experiences when young. I will give some examples.

    1. I know and have known people of my parents’ generation who went through the great depression as young persons in very poor households. Some still bolt their food very rapidly right into old age and seem unable to relax and savour it properly. A little encouragement to tell “growing up” stories of the old days soon reveals that a sparse meal at a table of hungry siblings had to be eaten very rapidly or said hungry siblings would snatch the food off one’s plate. These same people who grew up in the depression are very thrifty, hoard and keep anything that might be useful and virtually refuse to take on any debt outside perhaps the one home mortgage they took on at very modest interest rates when they first married. Of course, being ultra-cautious about personal debt is no bad thing.

    2. People who have experienced, in certain countries, periods of high inflation and or hyper-inflation have a horror of all inflation and a strong obsession (there is no other word for it) with monetary policy being used to maintain the value of currency. They are willing to sacrifice many other principles (and other people to unemployment) to the “god” of currency stability. I am not saying this is the reason for your strong interest in currency stability but it certainly accounts for some people in this camp.

    3. I experienced, as a young worker, some difficult periods of unemployment. Unemployment was then just picking up and becoming a problem in Australia especially for the youth segment. I also experienced exploitation as I saw it (and still see it) in being given very difficult, dirty and sometimes dangerous work at very low wages. At times my wages were below award; that is they were illegally low wages. As I was a thinker, I began to wonder why all this was so. I could see my bosses (the owners not the overseers) were not bad people per se but they were clearly greedy, selfish, self-centered and callous people (either by nature or development) who enjoyed their own wealth and power and did not care how I experienced the entire unequal and unjust situation. This somewhat radicalised me over time and made me a strong unionist and ultimately a quite left wing person with considerable interest in the labour movement and even Marxism. Later my life got better but to this day I abhor laissez faire capitalism, the capitalist ownership system, the oppression of workers and the theft of the workers’ surplus value by fat, lazy, self-justifying, non-productive owners. Gina Reinhart springs to mind as an extreme example in this context.

    Thus it is no wonder that I see unemployment and inequality as a crucial problems which absolutely must be solved and are central to the whole business of being a just social-democratic society.

21. Comprehensive private health insurance

    Especially the market for health care is rich in regulations and manipulation by governments. Where the government gets involved, prices rise as a general rule. Looking at the cost of health care in most countries, one can see how prices rose much faster than in other areas. Administrative costs take a big share. Another aspect are the pharmaceutical companies who are masters of lobbying and are great in promoting sometimes questionable products when considering their costs in relation to their effectiveness. Further protection they achieve with the licensing and protection of market segments. This area is extremely polluted with all kind of regulations that ensure great profits to the big players. The insurance business is definitively not far behind in influencing policies as well. The combined effect of all these aspects produce enormous costs to the simple user of health care.

    I of course cannot offer a ready recipe on how this mess can be resolved. But when we simply promote a situation that creates as close as possible a direct contact between the care taker and care giver and cut out the countless levels of interference, I am certain, that costs would come down by at least 50%. If there would not be insurance (except maybe for the real heavy stuff), care givers would have to compete in a market and find (together with the care taker) the most cost effective way to resolve a health problem. An insurance scheme within a village and or a district within a city may cover extraordinary and extremely expensive aspects whereas there would automatically be a control of reasonable cost effectiveness as the community involved in the insurance scheme is rather close knitted. Well, this is simply a suggestion that has not been subjected to rigorous examination.

    Mass transportation

    Mass transportation is an area that may definitely have great benefits to an economy. It is common that the government gets involved in this aspect of the infrastructure and I basically have no problem with that as it benefits all members of society. It is an investment where the return on investment can be comparably easy calculated. The members of an economic area may decide to make this investment via the government or by employing the service of the private sector. Both are viable solutions and as I pointed out have generally a great return on the invested capital. Here, like in any other investment, it is important that the price for capital is not subjected to manipulation. If capital is too cheap (money close to free) many investments will seem to be a profitable proposition. If the price for capital is higher, some of these projects may be considered questionable with the result that they may be abundant. This example demonstrates well, that the manipulation of the rate of interest does produce distortions in the economy that can lead to malinvestments. I do not adhere to the idea of complete elimination of government but rather like to avoid the situation when governments take over all our personal responsibilities. It therefore may be reasonable to invest in an infrastructure for the benefit of all citizens concerned as it reduces the costs to the economy as a whole. But to use this aspect of reasonable activities by a government to justify many other areas of unnecessary and damaging regulation in the area of wealth redistribution is, in my opinion, not legitim. There is no reason to have to subsidise such a project but to let the costs occur where they occur. A subsidy may indicate that the project is not really viable and other solutions may have produced a better result. Never underestimate the mental and problem solving capacity of a free human spirit.

    Sustainable sources of energy for future generations

    Sustainability is one of the most neglected aspects of today’s governmental interference when examining monetary policy, fiscal policy and many of the government programs that function to redistribute wealth. Many of these programs are closer to a ponzi scheme and do not show longterm sustainability. A system can be tested in this regard by simply introducing the effect on it from negative economic growth or from a declining population. A sustainable system will function in such an environment as well. I had to mention this aspect as it is important to be able to differentiate to the above mentioned problem of sustainable sources of energy.

    As everybody else, I am well aware of the theorie of peak oil. It may obviously be the case that we have consumed a large part of “cheap” and easy to transport energy and that it will be harder for future generations to obtain such abondance. Alternatives will be found but may claim a higher share of a nation’s wealth. Cooperation in this field to unleash the ingenuity and innovative spirit of concerned entrepreneurial talent is probably a good idea. Still, I do believe that when the situation become dire enough, new ways will be found. It is not all gloom but we may slowly convert to another life style. The human race is very well suited to changes in the environment when required.

    I may very well have missed an number of points in my above explanation and do not claim to have used the correct arguments in all aspects but do think that the drift of my thoughts are recognizable.