\t\t\t\tWhen Kevin Rudd was faced with the threat posed by the unfolding GFC in late 2008 his government became very pragmatic and immediately ditched the narrative they had been pushing out throughout that year about inflation being a threat and the need for tighter fiscal policy and surpluses. They introduced, in two rounds, a fairly significant fiscal stimulus (around 4.2 per cent of GDP) which effectively saved the Australian economy from entering a recession. A significant part of that intervention was that it had various temporal properties – a cash handout in December 2008 designed to get spending power into the hands of consumers just before Xmas (the famous ‘flat screen’ payment – there were a lot of TVs purchased), which obviously was an immediate focus, and, a longer term component, which included their plan to put insulation into every home. This was aimed at job creation clearly, to address the cyclical needs, but, it was also intended to address the longer term climate crisis, that were beyond the GFC cycle. When appraising what government’s should be doing now – to deal with the socio-economic consequences of the medical crisis – that style of thinking is essential. The questions that need to be asked are: 1. What can be done now to avert an economic collapse? 2. What do we want to change about the pre-structure of the economy into the future? 3. How can we use the stimulus intervention to make those changes, while addressing Question 1. In this blog post, I go through some of that style of thinking. I also provide some specific estimates of the investment needed to introduce a Job Guarantee in Australia.
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Recall that on November 19, 2008, the recently-appointed chief of staff for the Obama Administration (Rahm Emanuel) spoke at at “Wall Street Journal conference of top corporate chief executives” and said (Source<\/a>):<\/p>\n \nYou never want a serious crisis to go to waste. Things that we had postponed for too long, that were long-term, are now immediate and must be dealt with. This crisis provides the opportunity for us to do things that you could not do before.\n<\/p><\/blockquote>\n As this New York Times article – On Language A Terrible Thing to Waste<\/a> (July 31, 2009) – notes, Emanuel used an earlier quote by Paul Romer, who had varied an earlier quote from some marketing agency, who ….!<\/p>\n While Emamuel is not someone we should revere, his sentiments are not without some sense and relate to the second question I posed in the introduction.<\/p>\n The problem is that the way in which governments ‘take advantage’ of crises is usually to fast track the existing agenda.<\/p>\n So, the Australian government, for example, is making noises that they want to ensure there are significant structural changes that come out of this crisis – including wage cuts, work protection, reduction in consumer protection laws, reduction in regulations relating to urban planning and development processes, and more.<\/p>\n In other words, they want to take advantage of the fragility of the economy – the massive rise in unemployment and lost businesses – to create an even more undesirable future than was in place at the onset of the coronavirus.<\/p>\n They are already on the way to doing that. Without much of a whimper, the trade unions and the Australian Labor Party seem to have accepted their wage cutting plans already by agreeing to the JobKeeper.<\/p>\n You can trace back through my blog posts under the – Coronavirus<\/a> – category, to see what I have written about the wage subsidy program. It is too small in terms of outlays, invoves wage cuts for most, excludes at least a million of the most vulnerable workers in the nation (casuals with less than 12 months continuous employment with the same employer), and, by the Treasury’s own estimates, still leaves at least 680 thousand workers jobless.<\/p>\n There is no virtue in workers accepting wage cuts and thinking they are doing the ‘right thing’ in the crisis. All progressive groups should be demanding the government pay the entire wage bill of workers who they have forced into idleness to protect the community.<\/p>\n But, the principle that we use the massive government intervention at present, not just to shore up the short-term economic spending needs, but, also, to create new investments and structures that we will need to fight that other crisis, which has fallen into the background at present – climate change.<\/p>\n Only a month or so ago, progressives were all talking about green transitions and decarbonising the economy amidst the rather dire projections that we have about a decade to get it right.<\/p>\n Act now was the message before it is too late!<\/p>\n I am not sure we even have time to prevent irreversibility in our climate. But I am no climatologist so I read the research literature and glean an understanding that we can do some things to change our future in this regard for the better.<\/p>\n And, I was driving home the other afternoon and was listening to the radio where an expert was talking about the dramatic improvements in our natural environment after just a short period of lockdown.<\/p>\n So in thinking about what the Government has already done and what it needs to do, these are some of the considerations that I think are important.<\/p>\n What the crisis and the official intervention has demonstrated so far is that the ‘how to pay for the interventions’, ‘where is the money coming from’, and all the rest of the ridiculous barriers that typically prevent progressive policy making from being implemented can no longer be seen to be credible.<\/p>\n The important questions then relate to what we want the nation to look like if and when we get through this medical crisis?<\/p>\n On April 8, 2020, the Australian Senate established “a Select Committee on COVID-19 to inquire into the Australian Government’s response to the COVID-19 pandemic”.<\/p>\nLatest labour market data<\/h2>\n