I read an article in the Financial Times earlier this week (September 23, 2023) -…
It is Wednesday and so my light blog writing day today. A few interesting things have come up today and yesterday which will promote further research. Also Week 4 of our edX MOOC – Modern Monetary Theory: Economics for the 21st Century got underway today so there is lots of new content and discussions to check out. The most important revelation in a week of shocking news from the Australian government that illustrates their incompetence was the fact that a job scheme that was meant to have created 10,000 jobs by now has only actually recorded – wait – and whisper this – 521 jobs. And the extent to which the Government is going to try to brush that up as good news and avoid obvious questions like why not just create work rather than try half-baked wage subsidy schemes that had no real chance of working is a thing to behold. Ducking and weaving but demonstrating gross incompetence. The pity is that the Labor Party opposition just keep kicking own goals and cannot be taken seriously.
Week 4 of my edX MOOC – Modern Monetary Theory: Economics for the 21st Century
Week 4 started today and this is the final week of the course. This week’s theme is Trade and Global Finance and Contemporary Policy Challenges – which extends the knowledge built up in the first three weeks but remains at an introductory level.
In this week’s material we consider the way that MMT constructs international trade within the income and expenditure model and we learn the ins-and-outs of exchange rates.
We also look at speculative behaviour in global finance and ways in which the government can defend its currency.
We have a special discussion topic on the applicability of MMT to developing nations, which is reinforced by two great interviews with Ndongo Sylla from Senegal and Fadhel Kaboub who works in the US.
Then we move on to discuss two major policy issues:
1. The ageing society debate – we learn about dependency ratios and productivity.
2. The climate change debate – and what MMT has to offer.
We have an interview with Phil Lawn on ecological economics and MMT.
There are discussion opportunities, research tasks to pursue and at the end of the week a big quiz that tests whether you have been paying attention.
Enrolments are now closed (as it would be difficult to catch up now) but the MOOC has been such a success that we will be offering it again in one form or another.
This was the first major effort by – MMTed – and we will be following up with further introductory courses and an advanced course to build on the material presented in the MOOC.
This has been a resource intensive exercise to date and I thank all those who have generously donated to MMTed so far. Your help is very much appreciated.
JobMaker = JobFaker
The Australian government brought in a range of JobX policies at the onset of the pandemic in March 2020. We have JobKeeper, the wage subsidy program that is about to end next week, JobSeeker, the new name for the unemployment benefits, and then they announced – JobMaker – which was formally introduced as the Economic Recovery Package (JobMaker Hiring Credit) Amendment Bill 2020.
It was a “$74 billion” plan that the Australian government claimed was a “key element of the Government’s Economic Recovery Plan for Australia, designed to support a stronger economic recovery and bring more Australians back to work.”
We were told that the JobMaker Plan would:
… support aggregate demand and more jobs in the near term while also starting to deliver the flexible and dynamic economy that we need to unlock Australia’s longer term growth potential.
Effectively, it was a “new incentive for business to employ additional youn job seekers” which gave employers “$200 per week for each eligible additional employee aged 16-29 years old inclusive.” and “$100 per week for each eligible additional employee aged 30-35 years old inclusive.”
Okay not sounding as good.
The scheme was deeply flawed and allowed firms to sack an existing full-time employee and replace them with a couple of part-timers attracting the subsidy for the second part-time worker.
There were incentives built in to the program to encourage a shift to precarious job creation.
The subsidy was low and left about 70 per cent of the total cost of employment uncovered. Why would a firm take on staff if there was little work just because they could get 30 per cent of the ‘loss’ covered?
There were lots of other issues that made the scheme ill-advised.
The government claimed it would create 450,000 new jobs over a 12-month period of operation.
Now, let’s look at some simple arithmetic.
The JobKeeper wage subsidy which ends next week, will mean around 150,000 workers who have been kept in employment will immediately lose their jobs as their firms have not yet recovered their business activity.
This figure was disclosed today in Senate Estimates when the Treasury head gave evidence – see Opening statement – Economics Legislation Committee.
Some have estimated that the figure could be as high as 250,000.
The stupid Labor Party Shadow Treasurer’s only input on this today was:
If they hadn’t wasted hundreds of millions on companies which didn’t need JobKeeper, there’d be room to support those which still do.
All those who are doing the edX MMT MOOC would immmediately be able to discern the stupidity in that statement.
Yes, some companies did well during the pandemic and pocketed the wage subsidy when they actually didn’t need it in hindsight. But the design of the program allowed them to do that – which just tells you that the scheme was not very well constructed.
But to tell the Australian people that the government has to cut the JobKeeper subsidy because it has run out of money, which is effectively what he is saying, is irresponsible and renders the Labor Party unelectable in my view.
The Australian government could keep JobKeeper going forever if it wanted to.
The decision to scrap it has nothing to do with not having the pennies and everything to do with trying to get back to their austerity ideology.
But, let’s get back to the arithmetic.
In the last few days, the Treasurer has admitted that the JobMaker scheme which should have already created 10,000 jobs (in the first 6 weeks of operation) has only generated – wait for it – a whole 521 jobs.
The media is now full of stories of leading firms saying they won’t go near the scheme.
The question is this: If the Government was serious about creating work, why not just introduce a direct job creation program supplemented with a Job Guarantee, and then link them to eligibility for unemployment benefit.
The guaranteed job becomes the work test, which also ensures there are the jobs required to be created.
JobMaker is just a way for the government to avoid taking responsibility for generating sufficient jobs.
Paradigm tension in Particle Physics
I have been following an interesting story about the latest findings emerging from CERN and its Large Hedron Collider (LHC).
You can find a summary of the discussion from this BBC News story (March 23, 2021) – Machine finds tantalising hints of new physics.
Now let me make it clear, I am no physicist. But I am interested in things that happen at CERN because they are, well, interesting.
The latest stories are about their beauty quark experiments, which have been observed recently to behave in aberrant ways.
Aberrant, that is, if the so-called – Standard Model – is valid.
The SM is the current orthodoxy in particle physics and has been so since the 1970s.
Various developments since the 1970s (Top Quark, Tau Neutrino, Higgs Boson) have all seemingly reinforced the dominant status of the SM.
Okay this is an Modern Monetary Theory (MMT) blog and so I won’t go into the physics issues, not that I could anyway.
But the latest work of the LHC, which is a 27-km circular tunnell that “smashes together beams of proton particles” to see how they behave has come up with mysterious behaviour not consistent with the SM.
One scientist told the BBC that:
We were actually shaking when we first looked at the results, we were that excited. Our hearts did beat a bit faster.
Another scientist said:
This new result offers tantalising hints of the presence of a new fundamental particle or force that interacts differently with these… particles.
Why I am writing about this is not to talk about the actual results but to make a point about paradigmic change and new evidence.
My reading of this instance is that the current orthodoxy may well be overturned if the scientists can work out why these mysterious results have arisen.
They may be an anomaly that fits into the random category – but they may completely rewrite the theory and practice in the physics discipline.
Think about the response of the scientists – excitement, anticipation, tantalising, etc.
Think about what a mainstream economist says when MMT is introduced to them, which does a much better job of explaining the reality around us.
We then get – dangerous, stupid, crazy, grotesque, nothing new, we knew it all along, etc.
There is no anticipation among the mainstream economists in the academy that MMT has actually pushed the discipline into new frontiers that would change their work.
Only carping and vilification.
One paradigm is alive and vital. The other is dying and riddled with Groupthink.
Music – Brooklyn Funk Essentials
This is what I have been listening to while working this morning.
One of my favourite albums is the 1995 album by the American music collective – Brooklyn Funk Essentials – Cool And Steady And Easy.
Their song – Take The L Train (To 8 Ave.) – is about my favourite from the album, but that doesn’t say much because all the tracks are great.
I always think of New York (of course) when I put this track on – but only in the sense that it is such a contrast to the reality of the place.
With the lack of international travel in the last year, I have missed many of my usual destinations (Paris, London, Helsinki, Maastricht, and more).
But I can’t say I have missed going to the US given what has been going down there. And another massacre by gun yesterday.
Anyway, this is a very mellow piece of acid jazz and I love the drumming on this track above all.
That is enough for today!
(c) Copyright 2021 William Mitchell. All Rights Reserved.