Inequality and poverty not just an indigenous problem

On Saturday (July 25, 2020), The Australian published another Op Ed that I wrote in collaboration with Noel Pearson. I understand that many people (mostly abroad) were unable to access the article (as a result of paywall restrictions on certain devices). I am unable to post the final article due to copyright restrictions but I can provide the draft article which was not too different from the final version. It also seems that the faux-progressives have somehow decided that our partnership (Noel and I) symbolises how Modern Monetary Theory (MMT) and the Job Guarantee is actually some sort of far right plot to rid the world of welfare support for the disadvantaged and enslave them in onerous Gulag work camps. It is quite amusing really but worrying at the same time. Our partnership is confusing people who cannot cope with nuance and complexity. The so-called Left have characterised Noel as being somehow on the Right, which leads them to conclude that I am selling out on my progressive credentials by working with him. Conversely, the Right, who think Noel is one of them, are accusing him of being used by a Communist (me). Hilarious. If only they knew!

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RBA governor denying history and evidence to make political points

Today, the Australian Treasurer is out in force telling us that the fiscal situation is dire and that they have to start making cutbacks. Meanwhile in the real world, the unemployment rate continues to rise, businesses continue to fail, and the lowest paid workers, are being forced to continue working in dangerous health situations because they cannot ‘afford’ to stay at home like the better paid workers and protect their health. Its doesn’t bear scrutiny. My research centre released an updated report this week that also bears on the situation. The current fiscal stimulus is probably, at least $A100 billion short of where it should be, yet the government is announcing cuts. It will not turn out well. Meanwhile, across town, the Reserve Bank governor has been trying to deny the RBA has the currency capacity to allow the Treasury to keep spending without issuing debt. Already, the Labor party are making political points out of the rising public debt, which just makes them unelectable really, rather than savvy. The RBA governor’s intervention also just proved he is prepared to deny history and evidence to make political points, which had the other consequence of demonstrating how lacking in ‘independence’ the central bank is from the political process. And so it goes on.

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Latest Australian payroll data suggests employment damage from shutdown is worse than thought

The evidence that is mounting is allowing researchers to better assess the damage that is emerging from the way in which we are dealing with the coronavirus. One of the important questions that will determine the future trajectory of our economy relates to how many workplaces have disappeared altogether as a result of the businesses disappearing forever as a result of the flow-on impacts of the compulsory lockdown. Last week (July 14, 2020), the Australian Bureau of Statistics released their latest employment data taken from Australian Tax Office data – Weekly Payroll Jobs and Wages in Australia, Week ending 27 June 2020. They have slowed the release cycle on this data (for reasons they have not disclosed), so it is a month since I have analysed it. The latest data covers the period up to June 27, 2020. The monthly labour force data released last Thursday for June 2020, covers a period that ends around June 12, 2020, so the payroll data provides a more recent snapshot of the state of affairs – an extra three weeks. As the enforced restrictions were eased, payroll employment recovered somewhat and by the end of June is now 5.7 per cent below the March 14, 2020 levels. It appears though that, while part-time work has recovered, full-time work continues to decline. Examining the age profiles of the recovery demonstrates that prime age workers have not enjoyed a commensurate recovery. The two observations are linked and are suggestive of the impacts of the initial damage have now permeated the supply chain and employment losses are spreading outside areas initially most impacted by the lockdown. So my prediction in March that many businesses will disappear because the fiscal support by the government was inadequate and poorly targetted in terms of protecting jobs is looking like being validated by subsequent data. But it now seems that the recovery in employment will be protracted given how many jobs have been lost to date and the renewed lockdowns in Victoria. A much larger fiscal intervention is required and it has to be directed at workers rather than firms and support direct job creation.

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MMTed Q&A – Episode 7

Here is Episode 7 in our weekly MMTed Q&A series. This is the third- and final part of my discussion on the Job Guarantee with Dr Pavlina Tcherneva and in this episode we discuss the applicability of Job Guarantee to nations that have both fiscal and external deficits and are exposed to international currency markets. While such a nation faces somewhat different pressures from their external sector, the point remains that if they have their own currency, they can always ensure that all the available productive resources at their disposal can be fully employed. The catch is that that level of activity may not deliver a high standard of material prosperity. We discuss examples such as Indonesia, Pakistan, South Africa and Argentina.

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MMTed Q&A – Episode 6

Here is Episode 6 in our weekly MMTed Q&A series. This is the second-part of my discussion on the Job Guarantee with Dr Pavlina Tcherneva and in this episode we discuss the central role that employment buffer stocks play in Modern Monetary Theory (MMT), a point that is often missed by those who think it is just a job creation program and of secondary (and dispensable) importance to the ‘banking’ aspects of MMT. As you will hear (and see), the Job Guarantee is an integral part of MMT and that status is derived from the elemental insights that MMT offers about the way a currency works. If a person thinks the Job Guarantee is an unnecessary add-on to MMT, then they haven’t understood the basics of MMT. It is as simple as that.

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We can have full employment again in a green world

Last Saturday, the Weekend Australian, Rupert Murdoch’s daily national newspaper, had a relative Modern Monetary Theory (MMT) avalanche, with two core MMT-style articles published and two that were supportive rather than hostile. That tells you something about the way the world is shifting. I have received a bit of flack for publishing an Op-Ed piece in that newspaper from those who style themselves as Leftists. It is the same old argument – dealing with the devil. And the same old reply – if you want to influence policy then you have to talk to those who make policy. It is easy plotting revolutions over lunch. There has been a lot of groundwork laid over the last several months to bring people into the conversation. It is quiet stuff. Discreet. And as things unfold I will make some of the developments public. At present, all I can say is that I have a document before the Prime Minister today and there is a lot of behind-the-scenes workshops/briefings going on at state-level. And, while activists spend a lot of time ‘pressuring’ this person and that person on social media, the big shifts that are going on at present, including the publication of Noel Pearson’s piece and my article, are not being helped by aggressive social media confrontations. Sometimes it is better to work in a subtle way and exploit networks where they are available. That is not to say that activism to promote MMT is not appreciated and helpful. But we do need to pick our path. Anyway, a number of people asked me to publish my article here because they cannot get behind The Australian’s paywall. So here is the penultimate version which is a few hundred words longer than the actual article, which I cannot provide due to copyright restrictions. I also cannot provide Noel Pearson’s accompanying and complementary article but it was magnificent.

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US labour market reverses direction but for how long?

On July 2, 2020, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – June 2020 – which shows that the US labour market response to the relaxation of lockdown controls gained pace in due, although the question that remains is how long can the governors of the states allow the relaxation to continue given the alarming spread of disease. Already, nations such as Spain are returning to lockdown as their hospital systems become overwhelmed by the ‘second wave’ following easing. And US states such as Texas, Arizona and Florida are approaching the time when they will have to return to some form of lockdown given the health crisis that premature easing has created. The problem is that the lack of economic support from the Federal government makes those decisions difficult to take and extremely damaging for the unemployed. It is almost unbelievable that the Republican politicians are endorsing cutting unemployment support. But, in June, as the economy reopened, the payroll numbers improved as you would expect with a 4.8 million increase in jobs net) and the official unemployment rate rate falling to 11.1 per cent. The numbers filing for unemployment insurance are now falling but now top 49.2 million since March 7, 2020. A further 1.4 million filed in the week ending June 27, 2020. How far the recovery can go depends on two factors, both of which are biased negatively: (a) How many firms have gone broke in the lockdown? (b) Whether the US states will have to reverse their lockdown easing in the face of a rapid escalation of the virus in some of the more populace states. But I do not see appropriate policy responses in place. The US government should have guaranteed all incomes and introduced large-scale job creation programs and a Job Guarantee as an on-going safety net.

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MMTed Q&A – Episode 5

Here is Episode 5 in our weekly MMTed Q&A series. And when you are done with the answers you can Zoom some mates and have a dance party to the music that follows. This week we further reduced the length of the Episode and focused on one big issue with a special guest.

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Apparently the government has no money but then has plenty

Things are obviously getting desperate out there in financial media commentary land. If one could express written text in graphical terms then there are a number of financial journalists out there that look – like a rabbit caught in the headlights – that is in a state “of paralyzing surprise, fear, or bewilderment.” A good example of this increasingly observed syndrome is an article in The Australian newspaper today (June 30, 2020) by Adam Creighton – Never forget that governments have no money – it is always ours (subscription required). This sort of journalism is becoming an almost daily occurrence as it becomes obvious that capitalism is now on state life support systems and the extremities of government intervention are demonstrating very clearly what Modern Monetary Theory (MMT) economists have been saying – and the only ones that have been saying it – for 25 years or so. I often note that Japan has already pushed the fiscal and monetary policy parameters beyond the limits most countries have explored in peacetime and mainstream economists have systematically predicted various scales of disaster and have always been wrong. Now all countries are at extremes and still no fiscal disaster. But the mainstream mouthpieces – these financial journalists who seem to think the stuff they read in first-year text books from mainstream economics programs are in same way the basis for expertise and knowledge – are in advanced states of dissonance. Drivel follows.

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Worst is over for Australian workers but a long tail of woe is likely due to policy failure

Today (June 16, 2020), the Australian Bureau of Statistics released their latest weekly employment data taken from Australian Tax Office data. They have slowed the release cycle on this data (for reasons they have not disclosed), so it is a month since I have analysed it. The latest edition came out today – Weekly Payroll Jobs and Wages in Australia, Week ending 30 May 2020 – which covers the new data from May 2, 2020 to May 30, 2020. The monthly labour force data to be released on Thursday covers a period that ends around May 12, 2020, so today’s data provides a more recent snapshot of the state of affairs. At the beginning of May, the data was suggesting that the worst of the job losses were over. The severity of the lockdown has eased a little since then, although the pattern of easing has been quite different across the states and territories. So we might have expected some variations to arise from that. And today’s data shows just that. In the Accommodation and food services sector, where some easing has occurred, jobs are returning, albeit at a slow rate. But in the Arts and recreation services sector, where little change in lockdown restrictions has occurred to date, there has been very little employment growth. The question is how many businesses will go to the wall before we get a more usual scale of operation and interaction. My prediction is that many will disappear and so the recovery in employment will be protracted given how many jobs have been lost to date. A much larger fiscal intervention is required and it has to be directed at workers rather than firms and support direct job creation. The problem now is that the Government is starting to reassert its neoliberal ideology and withdrawing the inadequate stimulus far too early. The future is not looking good. We might be virus free but there will be massive unemployment remaining into the distant future.

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US Labour Market – cheering but it is too early to break out the champagne

On June 5, 2020, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – May 2020 – which shows that the US labour market has responded to the relaxation of lockdown controls in a modest way. I cannot believe that in Donald Trump’s words the US is “largely through” the Pandemic and it remains to be seen whether lockdown rules will have to be reintroduced when the infections rise again. But, for the time being, the payroll numbers improved as you would expect when shops reopened and people went back to work. But I stress this was a modest improvement. The numbers filing for unemployment insurance continue to rise and now top 43.2 million since March 7, 2020. A further 1.9 million filed in the week ending May 30, 2020. There were also some discrepancies noted by the BLS in the survey responses this month which adds to the uncertainty. Overall, the US labour market is in crisis and it remains to be seen how many jobs have disappeared and how many will emerge once the lockdowns are ended. Some 2.6 points of ‘unemployment’ lie outside the labour force (workers giving up looking), and as employment growth increases, those workers will come back into the recorded labour force and be classified as unemployed rather than not in the labour force. So how deep this catastrophe is remains a but uncertain. But I do not see appropriate policy responses in place. The US government should have guaranteed all incomes and introduced large-scale job creation programs and a Job Guarantee as an on-going safety net.

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May 30, 2020 – we remember the release of the 1945 White Paper on Full Employment

Some Wednesday snippets today. Tomorrow, I will write about what I have been thinking about the Eurozone. There has been a lot of hot air about the Franco-German accord that Emmanuel Macron and Angela Merkel came to recently. Hot air is the operative term. The fault lines in the Eurozone continue to widen and the policy dissonance is becoming more acute as they deal, not only with the health crisis, but also the 19 economies that have been starved of investment and infrastructure development. This Saturday (May 30, 2020) marks the 75th Anniversary of the release of the famous ‘White Paper on Full Employment’, which outlined the responsibilities that the Australian government took on to ensure there were jobs for all workers who were wanting work. This White Paper really defined the Post-WW2 consensus and began a period of low unemployment, upward social mobility, the development of public education and health, declining income and wealth inequality and stable wage shares as real wages kept pace with national productivity growth. It wasn’t nirvana because lots of issues were still in need of solutions (for example, gender attitudes, indigenous inclusion, etc). But it was a blue print for an inclusive society with growing material prosperity. The vision was abandoned sometime in the 1970s as neoliberalism took centre stage and political parties on both sides of the fence gave up talking about full employment. To restore full employment as a primary social goal and government responsibility is an agenda I have pursed all my career. We should all read the ‘White Paper’ and recast it in modern terms and fight like hell for a similar vision that is apposite for the times and crises we now face.

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Dear Treasurer, I have a plan for your $60 billion

On Friday, we had the extraordinary admission from our Federal government that they had overestimated the injection required to fund their wage subsidy JobKeeper program by some $A60 billion. When the overall program was announced the Treasury allocated $A133 billion to it. So now they are admitting to a 45 per cent forecasting error, which sort of dwarfs the worst errors that the IMF makes, and they sure make some bad mistakes in their projections. Whatever the reason for the mistake, the way the Treasurer has defended it is quite repugnant – claiming virtue out of the incompetence. And while all the Labor Party economists are talking about seeing the error from space, none of them picked it up or had the nous to realise that the figures didn’t add up when the Government originally released them. I am the only economist who wrote that the figures published by the Government didn’t make sense. I did that on April 29, 2020. I also wrote to the Treasury and the Treasurer requesting answers to questions that reflected my concern. They didn’t bother replying. Now everyone is wise after the fact. Anyway, the $A60 billion is a nice round figure. And I outline a plan in this blog post on exactly how the Treasurer can spend it and improve the well-being of more than a million Australians with a stroke of the pen.

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Never trust a NAIRU estimate

It is Wednesday, so only some snippets today as I have deadlines and some travel to deal with. We have been finalising a Report on our latest estimates of the investment required to introduce a full-scale Job Guarantee in Australia. As part of that work, I have been going back through my NAIRU (Non-Accelerating Inflation Rate of Unemployment) estimates and updating data. I am also going to talk about that a bit in my presentation to the Economic Society of Australia tonight. That talk is about ultimately aimed at explaining the inflation fighting mechanisms inherent in the Job Guarantee, which is a centrepiece of Modern Monetary Theory (MMT). But to understand why that option is superior in efficiency terms, one has to know what the alternative buffer stock mechanism is. And that, of course, is the NAIRU orthodoxy. Also today, I am announcing some more detail about our plans to launch MMTed Q&A, as a weekly live program that will help people interested in our work to achieve better understandings. And some RIP style music with a suprising inflation result! Who could ask for more on a Wednesday. Tomorrow, the ABS release the Labour Force data and we will see how bad things have become in the Australian labour market over the month (more or less) just gone.

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US labour market data – we have never been here before!

Last month’s analysis of the US labour force data – Tip of the iceberg – the US labour market catastrophe now playing out (April 6, 2020) – presaged what was to come. We now know more about the size of the iceberg. It is unimaginably large. Words fail really. This is one of those all-time historical events that make the severe crises of the past (early 1980s, 1990s, GFC – look like blips). On May 8, 2020, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – April 2020 – which shows that the US labour market has collapsed into territory never before recorded. And, given that the data released was drawn from samples that went up to April 12 (establishment survey) and April 18 (household survey), and so doesn’t fully capture the extent of the unfolding catastrophe. More recent data released by the US Department of Labor (unemployment insurance claimant data) shows the situation worsened in the last two weeks of April. In the last two weeks of April 2020, more than 9 million extra workers registered unemployment insurance claims. All the aggregates are demonstrating dramatic shifts to the point that graphs are becoming rather binary – the rest of history and now. The employment-population rate plunged 8.7 points to 51.3 per cent, which is the largest monthly fall since the sample began in January 1948. The U6 measure of broad labour underutilisation increased by 14 points to 22.8 per cent. This is the largest monthly rise in this measure since it was first published in January 1994. The situation will get worse. Its already catastrophic and it demonstrates a massive policy failure from the Federal government. Instead of directing trillions into the top-end-of-town, the US government should have guaranteed all incomes and introduced large-scale job creation programs and a Job Guarantee as an on-going safety net. Instead it is watching over people dying and people’s material prosperity being destroyed.

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Latest employment data for Australia exposes Federal government’s wilful neglect

I reported in this blog post – Policy failure – Australian unemployment rate probably already around 10.9 per cent (April, 2020) – that the The Australian Bureau of Statistics has started publishing weekly employment data on a two-week cycle. The data is drawn from a new series made available as a result of the Single Touch Payroll data provided by the Australian Tax Office and provides researchers like me with much more timely data than the monthly labour force survey. The latest edition came out today (May 5, 2020) – Weekly Payroll Jobs and Wages in Australia, Week ending 18 April 2020 – which covers the new data from April 4, 2020. The results are shocking. The conclusion from my analysis of the latest available data is that some sectors in the Australian labour market have experienced a sudden and catastrophic contraction – like nothing we have ever seen in the data. Both employment losses and major wage losses are underway and the policy response is totally inadequate for the task. A much larger fiscal intervention is required and it has to be directed at workers rather than firms and support direct job creation.

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The European Commission non-stimulus is a waiting game before new austerity is imposed

Things are a little odd when a Minister for Finance & Public Expenditure and Reform of a nation (Ireland) informs the press that if his government isn’t cautious in its fiscal response to the largest medical and economic crisis in a century then the “bond vigilantes” will turn on them. And this is in the context of governments around the world issuing long-term debt at negative interest rates and the relevant central bank is buying billions of government bonds with its currency-issuing capacity. But that is what the Irish Finance Minister did last week ((Source). Fear of God strategy Number 1. That still works in god-fearing places. He referred to the “the fiscal architecture we are anchored in within the euro area” which will ultimately impose Excessive Deficit Procedures as the medical crisis eases (see his April 23, 2020, Speech on Stability Programme Update). Code for a renewed bout of austerity once people have stopped dying. A wonderful prospect. And while currency-issuing governments around the world are introducing variously large direct fiscal stimulus packages (that is, spending going into the economy immediately), the European Union is once again demonstrating their inability to respond to crisis. Nothing has been learned from the GFC.

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A 10 per cent unemployment rate is not a “tremendous achievement” – it is a sign of total policy failure

It’s Wednesday, and a quiet day for writing blog posts for me. But I want to comment briefly on the latest economic news that sees the IMF claiming the Australian economy will contract by 6.7 per cent in 2020 and the Treasury estimates that the unemployment rate will rise to 10 per cent (double) by June this year. While this all sounds shocking, the emerging narrative in the media and among politicians is that this is sort of inevitable given the health crisis and the Government’s Job Keeper wage subsidy, which the Treasury claims will constrain the unemployment rate rise to 10 per cent rather than 15 per cent without it is a jolly decent thing for the politicians to have done and keeping the unemployment rate down to 10 per cent is a “tremendous achievement”. Well, apart from the wage subsidy leaving a million workers outside of any benefit and cutting wages for thousands who will receive the support, I fail to see why the unemployment rate should rise at all. The government has options: (a) wax lyrical about achieving a disaster – 10 per cent unemployment; or (b) create jobs via a Job Guarantee and see the unemployment rate fall to 2 per cent or so. For the neoliberals who run the place and their media supporters, a 10 per cent as a “remarkable achievement” and that is the TINA narrative they are pumping out to assuage the population. For the likes of yours truly, a 10 per cent unemployment rate is not a “tremendous achievement” – it is a sign of total policy failure. The government can always intervene and create sufficient jobs that will be of benefit to the society, can be designed to be safe in the current health context, and maintain the connection for most of us with paid work? Even if some of them would require the workers stay at home while being paid. For me that is a no-brainer.

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Be careful not to get ahead of ourselves – hard-edged class struggle will be necessary

It is Wednesday and just a collection of snippets today. I am trying to finish a major piece of work and so that is what I am mostly doing today. And learning to program Geojson formats in R, so I can overcome the decision by Google to abandon their fusion table facility, which my research centre has relied on for some years to display map layers. And I have some press interviews to deal with. But today we consider the claim by the Financial Times editorial the other day that “Radical reforms are required to forge a society that will work for all”. It was an extraordinary statement from an institution like the FT to make for a start. But it reflects the desperation that is abroad right now – across all our nations – as the virus/lockdown story continues to worsen and the uncertainty grows. But I also think we should be careful not to adopt the view that everything is going to change as a result of this crisis. The elites are a plucky bunch, not the least because they have money and can buy military capacity. Changing the essential nature of neoliberalism, even if what has been displayed by all the state intervention in the last few months exposes all the myths that have been used to hide that essential nature, is harder than we might imagine. I think hard-edged class struggle is needed rather than middle-class talkfests that outline the latest gee-whiz reform proposals. The latter has been the story of the Europhile progressives for two decades or so as the Eurozone mess has unfolded. It hasn’t got them very far.

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Flattening the curve – the Phillips curve that is

I did an extended interview over the weekend and during that interchange it became obvious that when a newcomer encounters the concept of the – Job Guarantee – for the first time, they may only see it in a narrow way, as a job creation program and fail to see it the way that the concept was developed as an integral part of Modern Monetary Theory (MMT). When I started talking about the era in which I had first started thinking about using buffer stocks to maintain full employment, it became obvious that the sort of considerations that went into the concept of the buffer stock employment model (the Job Guarantee) had not been fully appreciated by the interviewer. That is no criticism. It is just an observation and a reflection of how long we have been pushing this MMT barrow. At the moment, all the talk is of ‘flattening the curve’ and that is exactly the function that I saw for the Job Guarantee as I toyed as a young postgraduate student and nascent academic with new ways of thinking about macroeconomics that would fight the Monetarist scourge that was dominating in the late 1970s. It was a different era and the challenges from a economic theory perspective were different. I think it is important to understand this context because, as the interview demonstrated, new ‘light bulbs’ go off when the concept of a Job Guarantee is put within the historical exigencies that were dominating when I came up with the idea. So the Job Guarantee flattened the curve long ago – the Phillips curve and that was, in my view, a highly significant development in the context of macroeconomics and makes MMT very different (in addition to a lot of other aspects). Unfortunately, while we knew how to flatten the curve back then, the Monetarist viral infestation continued and we have suffered the shocking consequences ever since.

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