The time has come to expose the great fraud that has been perpetrated on the West in the last forty years. Once we have even a surface-level understanding of Modern Monetary Theory (MMT), the great lie that is Neoliberalism will come crashing down.
Now, this has been outlined and discussed in detail by far greater minds than my own; this is not original to me. But I thought it might be useful to offer a brief description of MMT, how it works and then use these basics to expose the great Neoliberal fraud.
MMT, Part One: Currency and Its Relationships
In every economy that has its own currency (Australia, the US, the UK etc), every entity in that economy has one of two relationships to that currency. One is either a user or an issuer. Obviously, the federal government is the monopoly issuer of currency (hence counterfeit money laws). So the government issues the currency, and everyone else (including state and local governments and the citizenry) uses the currency.
Currencies such as the Australian Dollar, the US Dollar, the Pound etc are called Sovereign Currencies or Fiat Currencies. This means that when the government goes to do something, it simply goes to the central bank (the Reserve Bank in Australia or The Federal Reserve in the US) and says ‘we need this amount of money to be created’ and the bank, through several keystrokes, brings that currency into existence. Similarly, the relevant bank accounts of the recipients are also augmented using keystrokes. This may seem counterintuitive, but think about it this way. Consider the recent spending of $3.5b on tanks. Are we to believe that the government went to a physical bank vault filled with stacks of $100 notes? In light of the amount of money spent by the government on the regular, this would be impractical. Government spending is essentially EFTPOS on a grand scale.
MMT, Part Two: Tax Does Not Fund the Government
Since the government simply creates (issues) the currency it uses, government spending is not ‘paid for’ in that sense. It does not need tax to fund its spending since it is spending currency it issued itself. Tax revenue, I say again, does not fund the government. This lays to rest the zombie lie that a government has to ‘live within its means’ or ‘has a budget like a household’. Households do not issue their own currency, so this statement is a lie. Government ‘living within its means’ is naught but a lie designed to justify cutting funding for things neoliberals do not like, such as universal healthcare, education, pensions and generally anything that benefits anyone making less than $250k per year.
I should be clear: taxation does not fund federal government spending. It is true that tax does fund state and local government since these entities are still currency users (recall it is the federal government that issues the currency).
MMT, Part Three: The Purpose of Taxation
A natural follow-up might be to ask
If tax does not fund [federal] government spending, why have tax at all?
I think the best answer to this was provided in a New Economic Perspectives article
[Another] reason to have taxes is to reduce aggregate demand. If we look at the United States today, the federal government spending is somewhat over 20% of GDP, while tax revenue is somewhat less—say 17%. The net injection coming from the federal government is thus about 3% of GDP. If we eliminated taxes (and held all else constant) the net injection might rise toward 20% of GDP. That is a huge increase of aggregate demand, and could cause inflation
What this seems to mean is that the act of ‘taxing’ a unit of currency serves to eliminate it from the economy. Taxation seems to have the purpose of being a sort of ‘inflation break’, removing a certain amount of currency from the economy to prevent too much currency from flying around which could lead to inflation.
The Other Great Zombie Lie: How Will You Pay For It?
You have doubtless heard some version of this whenever a policy is proposed that would help the peasants. Any talk of, for instance, raising Newstart is met with loud screams of ‘HOWYIGONPAYFRIIIIIIIIIIT’ (how are you going to pay for it) or ‘we cannot afford it’. It is unclear whether those asking making these asinine statements are not aware of the fiat currency the Australian Federal Government uses, or if they are being deliberately deceptive. I leave that decision up to you all individually.
Not only is ‘how will you pay for it’ a ridiculous statement, but its application is also highly selective. Have you ever heard this question, or some variant of it, asked around, say, the military budget (pick your country, but the Americans are the most egregious)? How about corporate subsidies? How about politicians’ own outrageous perks and entitlements?
It is almost like they know that they have a fiat currency and intentionally lie to the people about ‘debt and deficit’ whenever they do not like something, typically for ideological (or corrupt) reasons. Whether it is funding Medicare (consider Mr Morrison’s recent removal of more than 900 items), investment in renewables or anything else the Liberal National Coalition is (in my opinion) paid to oppose, they become penny-pinchers when their ideology gets in the way. Yet hypocritically when it comes to war, corporate looting of the treasury and their own perks, they are reckless. Enough.
Conclusion: The Great Fraud
Since the advent of Reagan and Thatcher, politics in the west has taken a very selfish, individualistic turn. Pulling yourself up by your bootstraps is a popular Neoliberal mantra. Government has to live within its means is another. MMT shows that the very idea that a government has ‘limited means’ has narrow basis in reality. It is a monopoly currency issuer. It is, in a very real sense, not possible for a government with a fiat currency to ‘run out of money’.
I have said this before, but it is worth repeating
When it comes to helping the people, it is not money these sociopaths lack, it is the will to do it.
Governments with fiat currencies have all the money they could ever need. They could do so many wonderful things to improve society in so many ways. Means is not the issue. Conviction is. MMT, with its focus on fiat currencies, helps to expose the great hypocrisy at the core of the Neoliberal disaster of the last four decades. In an economy with a fiat currency, the use of fear-mongering about ‘debt and deficit’ to suppress policies that could help broad swaths of the population is dishonest beyond measure.
Epilogue: Still Learning
I am very much still learning about MMT, and doubtless, I have gotten some things wrong here. I encourage you to check out this podcast for detailed discussion of the theory and its applications. I hope this piece has provided a basic discussion of MMT and given some insight into the rot that is Neoliberalism.
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Is Modern Monetary Theory (MMT) radical? Yes. It is especially radical if we go to the roots of the word ‘radical’ which itself means ‘from the root’.
Is MMT innovative? Only in the sense that it is a synthesis of different strands of heterodox thought, though not all heterodox economists are on board.
Is it a ‘trap for the left’? No, not at all.
Is it difficult to work out what Modern Money Theory is? Only, it seems, if one has been trained in the ‘New Keynesian’ tradition that forms the so-called New Economic Consensus (NEC) in mainstream economics.
While these New Keynesians are vulnerable to the charge that their ideas are ‘not new and not Keynesian’, they are willing to recycle the line that Modern Monetary Theory is ‘not modern, not monetary and not a theory’. Unlike the New Keynesians, however, the MMTers are in on the joke.
Some may complain about the word ‘modern’, as the term can refer both to Keynes’s joke that money has been a creature of the state for ‘the past 4000 years … at least’, and to the period since 1971 when the Bretton Woods standard began to break down.
The word ‘monetary’ is used in MMT to describe the monetary system, not monetary policy – although it does have implications for the conduct of policy.
The word ‘theory’ is used by MMT in the scientific sense. A theory is a fact-based framework for describing a phenomenon.
As a fact-based framework, MMT can be harnessed by political actors of all stripes. For progressives, MMT can embolden governments to deliver an ambitious policy agenda or Green New Deal over time. The original New Deal or the Reconstruction in Australian parlance took place over more than a decade.
MMT can also appeal to conservatives. The MMT insight that government spending must precede taxation can give rise to the ‘vulgar’ – and incorrect – interpretation that taxation is altogether unnecessary in modern monetary economies. It could be argued that the New Economic Consensus and its derivatives are forms of applied right-wing MMT.
Taxation serves many important functions according to MMT. The most important is to drive demand for government money. Taxes can also be used to discourage undesirable activities or to reprofile the distributions of income or wealth.
Crucially, taxation removes spending power from groups, but it does not place any claim on real resources. Only spending claims real resources. Increasing taxation can make it easier for governments to spend on public policy by freeing up the potential for other groups to claim real resources, but taxes do not directly pay for government spending in the way this is conventionally argued.
Any discussions of how increasing or raising tax revenue is required to facilitate spending are quite misleading and misdirect the public on how to think about public money.
What has been called ‘movement MMT’ is inseparable from ‘academic MMT’ and any so-called schism is a political choice of the critic. MMT advocates do not engage in ‘motte and bailey’ strategies, so much as adherents to NEC models cannot think outside of those models. It is like fitting a square peg in a round hole. If you succeed, you will either be left with gaps or a square peg so warped that it no longer appears to be square. If you succeed in getting MMT into NEC models and there are gaps, you have missed many things MMT says, and if you succeed you have so warped MMT, it no longer resembles MMT.
“a new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.”
MMT is one of those new scientific truths that does not fit into older models.
A major stumbling block for NEC economists is in thinking that MMT has a simplistic view of inflation, specifically that governments can increase spending as much as they like with no need for an offsetting increase in tax revenue if there is little to no risk of politically unacceptable inflation. However, as MMTers have consistently argued, inflation is more a resource distribution issue than a monetary issue. As Modern Money economist Pavlina Tcherneva puts it, when inflation arises, you find the source of inflation and ‘slay that beast.’
If inflation rears its head, look at the source. Is it a production bottleneck? Spec activity in real estate, fin markets? Does it come from other parts of the govt budget? No-bid contracts to firms? Subsidizing near-monopolies with outsized pricing power? Slay that beast. 8/n
Raising interest rates or taxes is a rather blunt distributive tool. It is there Australia erred in trying to deal with stagflation which the result of a battle of cost mark-ups between unions and businesses in response to a supply-side shock – an increase in the price of oil.
The other issue in the eighties, shortly after stagflation was Volcker’s experiment with targeting the money supply, which was copied by many central banks around the world that led to the high interest rates of that period. It only began to settle when central banks began using inflation rate targeting on a narrow band, two to three percent in Australia.
MMT’s emphasis on real resources enables it to focus on ‘the deficits that matter’. In the current economy, the preference of progressive MMT advocates is to put idle resources – which include unemployed and underemployed people – to productive and fulfilling work. The ABS estimates that labour underutilisation is as high as 13 per cent of the labour force, and this excludes discouraged workers who have abandoned looking for work altogether. The National Australia Bank measure of capacity utilisation indicates that the Australian economy has operated with between 15 and 25 per cent spare capacity since 2008.
It is nonsense to say an ambitious policy agenda like the Green New Deal (GND) will reach capacity almost immediately and cause politically unacceptable inflation. Just like the reconstruction after World War II, it will take time to implement recommended policies and should be done within resource constraints. Whilst it is true that we do have finite resources, the human species is innovative. In the transition to green production, some resources (remembering resources include people and their skills) – say, coal workers – can and will be repurposed.
We can also create new productive capacity within available resources, and these include the skills learned by the people on the job in many GND programs building their personal productive capacity.
I started this piece by agreeing that MMT is radical, and it is. It examines modern monetary systems at their root. MMT fits the pieces of economic operations into a coherent and consistent body of knowledge. Once you learn MMT, and think in MMT terms, you know more than most media talking heads on the subject of the economy. How you use that knowledge is up to you.
Darren is a leader in educating people in modern macroeconomics. He played a founding role in educating Australians via social media channels and has engaged some prominent Australians on commentary about Modern Monetary Theory. Darren is a member of Modern Money Australia, Australian Real Progressives and has been involved with the Modern Money Network. You can see more of his work at https://www.darren-quinn.net and https://www.realausprogressives.com
You can find him on Twitter @AusMMT @realausprog @dquinn03
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When treasurer Josh Frydenberg abandoned the Tony Abbott mantra that “you can’t fix the economy unless you fix the budget,” it was clear that something within the mindset of the treasurer and the government, had changed. They realised that the reverse was true.
No longer do they believe that debt is a disaster, or that deficits are bad. Not now, under the current Covid climate. Funny how things you do for the sake of expediency and political advantage, finally catch up with you.
Long gone is the soft target of Labor’s predilection for high spending there to exploit. Not even the Murdoch press can play with that one anymore. Covid has blown that one right out of the window.
No longer will the mantra, “how are you going to pay for it,” work either. Funny how both the conservative press and the ABC are now running spending stories without referring to the levels of sustainable debt.
Economic gurus everywhere are now reviewing and revising their reporting strategies to accommodate the changed circumstances that reflect more closely the MMT reality of sovereign debt…that it isn’t debt at all!
The government balances its books by issuing bonds to cover spending that exceeds taxation revenues, but knows all too well, that those bond sales are no more than a smokescreen to hide the fact that the Reserve Bank provides the money for all government spending, regardless of the outcome of any bond sale. It simply creates the money out of thin air.
There is no difference between a $1 trillion debt and a $2 trillion debt. It’s what you spend it on, that matters.
Now, some in the press, have woken up to that reality too. So, what is the government doing now? They are embracing the reality that full employment is the key to a successful economy. Who would have thought?
Up until now, the thought has been that a certain level of unemployment was necessary to combat inflation. Not anymore. Employment is now the key driver.
Get people back to work, manufacturing, producing, distributing, delivering, servicing, and voilà! No longer does one need to worry about balancing a budget. Over time, that will happen automatically. Who would have thought?
For a government who won an election in 2013 on the flimsy fantasy of a “debt and deficit disaster,” this 180-degree turnaround seems to have been achieved without a scintilla of a backlash. What a stroke of good fortune that has been.
‘’How good is that’,” we could imagine the PM, Scott Morrison saying to his cabinet as they engineered the dismantling of the job keeper program.
There is a certain irony here, that journalists are struggling to address because in doing so, they reveal their own shortcomings.
Notwithstanding the insensitivity the government has shown towards the needs of various sectors within the national framework, they are now happily prepared to dole out the dollars to those very sectors they despise, knowing full well that their hypocrisy in a Covid-conscious electorate, will go unnoticed.
How good is that? And it is all because the conservative side in the political arena has adopted the “don’t worry about the debt” mentality. Why have they done this?
Because they now realise that it is not real debt!
The problem for Labor in this otherwise snippet of good news, is that those who would most likely change their vote and punish the government for their dishonesty, are currently so self-obsessed with their larger bank accounts and wondering what to spend it on, that they are blind to this fundamental policy reversal, or couldn’t care about it anyway.
Comment bon est ca?
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Ministerial phlebotomy: Evasion of the bleeding obvious. Oh no, now we are being told how to think about it – doing the hokey-pokey!
Political leaders, chief medical officers and journalists who think that they can defend the position of giving the same vaccine safely to everyone, regardless of the evidence emerging that people with certain blood clotting disorders (and possible heart conditions, other blood and circulatory disorders and treatment regime interactions) or unknown genetic predispositions by comparing the risk of death in road traffic accidents or contracting COVID-19, need to go back to school and learn about basic human bioethics, if not the process of scientific inquiry itself.
And as for sermonising desperate marketplace or ‘legal eagle’ politicians like Morrison and Hunt, they should just keep their ministerial phlebotomy and mouths shut on the subject, since if you have no empathy for others’ true-life experiences you are not going to learn them in a mandatory training module, just as you won’t learn ethics and how to manage ethical dilemmas from not listening to other people’s including women’s concerns. You just don’t have the goods, the prerequisite character and traits to learn it in the first place, other than pretending you do, yes, Mr Morrison I am speaking particularly to you.
The difference between an RTA statistical probability or a public health COVID-19 risk analysis of death or serious harm/injury and reality, is:
(1) they are statistical probability calculations not individual real life events, assessment of medical risk or causation analysis (not even an RCA we might be familiar with in our public health system). They are politically manufactured probability statistics and guesswork to advise politicians when the facts are not known;
(2) You can choose to drive defensively, carefully or minimise your exposure to the risk and stay at home, use public transport or practice good social distancing, use of PPE and mediate your risk;
(3) if you are in a known or emerging risk group, you can be provided with an alternative risk management strategy like another vaccine, rather than just be told to grin and bear it; and
(4) if by consequence you have no choice on an alternative vaccine which doesn’t expose you to that risk, you have no choice but to continue running the gauntlet, restricting your life choices and freedoms vicariously for everyone else’s benefit or die at a calculated probability much higher than the general population either through a ‘one size fits all’ vaccination program (with 4-20 day blood clots) or heightened exposure to COVID-19 vulnerability (no government acquired vaccinated immunity).
The real problems Morrison and our compliant and captive Chief Medical Officer are facing are:
(a) burying their heads in the sand to start with and maintaining their stance, telling us we are still acquiring the facts when they should know full well that certain facts are already known – There is clearly a problem with AstraZeneca and blood clotting for certain people no matter how small this group may be and initial large sample phase 3 trials comparing clotting and death outcomes to a control group of the general population (unvaccinated) do not eliminate the possibility of cause and effect such as VIPIT (vaccine induced prothrombotic immune thrombocytopenia). To date this is all we have and any decent researcher would know public announcements declaring public safety for all is flawed scientific reasoning, advice and conclusion till we test the relevant variables at play. The fact that the time interval between AZ administration and reports of clotting are consistent is highly significant, not pointing to false conclusions of random probability or unrelated events, which Morrison with his new found medical knowledge and chief buddy have been ignoring. The fact that these events have not arisen or been reported in other common vaccines like Pfizer, Moderna or Johnson and Johnson are also significant. The fact that a host of nations have raised their concerns only with AstraZeneca in the light of this emerging data – these are all facts which a well briefed and responsible Prime Minister would know;
(b) sliding down their explanation from ‘denial’ to ‘defensive rationalisation’ and now ‘we are exploring’ or the excuse ‘the situation is fluid and changing’ over the time it has taken for them to acknowledge there is a problem, is blind arrogance and hypothesising after the horse has bolted, yet still not providing us with a rational or viable provisional risk management strategy, is just morbidly fascinating and unacceptable. Still, they hustle and bustle as one nervously glances to another and the other smiles smugly prattling on about ‘facts’ – actually just one random and irrelevant fact of non-supply; and
(c) constantly telling us or distracting us with an unrelated issue of breakages in supply chain, focusing on blaming the EU for blocking exports when they have nothing to do with this issue. When in fact the real problem is government ordering and procurement – they put all their eggs in one basket and banked their money and investments (with a whiff of corruption, quiescence, incompetence or neglect at least) on AstraZeneca and CSL domestic manufacture. They should have ordered and secured an alternative supply of vaccine a long time ago, even if relatively tiny but hugely practical, Moderna or Johnson and Johnson for instance, or even now dispense a small portion of Pfizer for medical determination, but are too pig-headed to admit or consider it, while still they procrastinate. But choice, biodiversity and intelligence aren’t among Morrison’s marketing strengths, especially when it comes to the horror of empowering others or advancing Australia’s interests.
Let’s face it they both fucked up! Anyone with an ounce of intelligence knows they fucked up, so admit it. But don’t short-change us on ethics and coercion by telling everyone they have a duty to take the AstraZeneca vaccine because it is the only one we’ve got other than those to whom there is close to zero risk, which is most of the population who have little to worry about.
Do not scapegoat the few as ‘anti-vaxers’ or tell them they are jeopardising the national vaccination program or quash their voice because they happen to be a nurse, a woman or just someone who has capacity to show critical thinking, ethical reasoning and empathy with the worried few, and stand up with courage in the crowd – especially when you choose only to face a camera or the Opposition at Question Time, where you can control or dictate the conversation, rather than face that friendly crowd.
Print: Ministerial phlebotomy – John Bull c.1808, British Museum
Do not sweep the tiny ‘unknown’ group under a bus for the sake of the majority for that is not responsible democracy, that is in point of fact a microvariant of medical iatrogenesis and public health neglect – it is the application of poor and flawed scientific and ethical reasoning which the Liberals are so renowned for on almost every issue from climate change, employment, coal, health and disability to MMT. You do not sacrifice the safety of a minority for the majority (or the inverse for that matter which the Liberals do all the time) when there are clear practical mediating social strategies and solutions available. That is just rampant ignorance, populism, propaganda and evasion of the bleeding obvious, not to mention a corrupted interpretation of social ethics, morality and informed government.
But what the fuck would Morrison (or Hunt) know when it comes to medicine, nursing, women, ethics or anything in the universe let alone intelligence or life on earth?… Perhaps Morrison should talk it over with Jen!
Oh no, even journalists and editors are telling us how to think about it, what’s next tourist directors, lawyers and government regulators, bankers and TV celebrities on sunrise telling us how to do the hokey-pokey? Of course, everyone has an opinion on something, it’s all John Bull!
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In a recent Letter to the Editor of the NT News, I mentioned my weekly sessions outside NT Parliament House.
[As an aside, it never ceases to surprise me that most of my letters get published in a Murdoch paper, and it is interesting to see how the resulting complaints about my views on the need for climate change action are slowly reducing, as the reality becomes more and more widely accepted.]
On another contentious issue, Alan Kohler’s Insight in today’s paper (21/10/20) drew attention to the tacit acceptance by international authorities of Modern Monetary Theory (MMT) while, in the same article, reporting ‘“I don’t subscribe to MMT,” Treasurer Josh Frydenberg said last week.”
Anyway – back to the chink of light – our youth!
On session 38 today, I had a visit from a very articulate 20 year old who had noted mention of my sessions and came to see me – expecting a 20 – 30 something year old!
He still stayed, and we had a very lively conversation!
We had a long chat, during which he asked me how I saw us making progress. When I mentioned the need to persuade governments to act, he countered with a plan for people power.
He drew attention to the idea that if everyone with bank accounts with the Big Four, or with superannuation and/or other investments, including shares, in dirty fossil fuel industries, and who wanted change, were to move out into clean investments, the pressure against the fossil fuel entities would be sufficient to completely change the viability of fossil fuels.
That is crudely worded, but I am sure you can see that if shareholders sensed that the winds of change were blowing, they would dis-invest in fossil fuels and – BINGO!
I am sure we overlook the potency of people power – it is the power of many individuals, acting in unison to achieve a common good.
Although not recommended as a perfect model, and I am not a promoter of violence, but the French Revolution worked, because enough people had had enough of being downtrodden and impoverished.
I am not normally a fan of the dirt file mentality but there comes a time when exasperation at people’s ignorance of the deception and downright evil behaviour of those in power has to be highlighted.
Many of us are convinced by science that global warming is really happening, that we must take action on it, but those currently in power appear to have no concern about anything which adversely affects their god – the economy.
Many of us are aware that the longer we wait to take effective action, the less likely it is that rising global temperatures and the resulting and increasingly adverse climate events, will be consistent with a truly acceptable lifestyle for future inhabitants of the planet.
We are, I am sure, all aware that climate disasters to date have done massive damage which is far from having been remedied. And please note – THAT HAS DAMAGED THE ECONOMY!
Those made homeless or having their livelihoods destroyed by last southern summers’ fires are yet to get back on their feet, despite promises from on high!
(I stress the ‘southern summers’ because in the tropics we have the ‘Wet’ – which is not always wet enough to replenish the dams and the groundwater – and the ‘Dry’ – which has been getting both hotter and more humid.)
Does your bank have shares in fossil fuels? What sort of interest rates does it pay? I suspect that for most of them it is next to nothing unless you have really large amounts invested. How about a local credit union? How does it compare?
Many of us have shares in Telstra – suckers! – but if you or your superannuation or pension fund have shares in other investments, do they include fossil fuels?
If we personally cannot be bothered to do our own due diligence, then we are being hypocritical if we complain about others failing to act appropriately.
Perhaps the finance advisers in some of the charity organisations could assist in this one, by doing some research and providing the resulting information to the public.
But – to return to the dirt file – we have all listened to members of the Coalition throw accusation after accusation at the ALP. And we are all resigned to the fact that politics is a dirty game and many politicians are out and out sleazy.
It is a long read, and might have been better constructed, but it reminds us of much that we have – and should not have – forgotten.
Before I close – a reminder: sun and wind and hydro are far from being the only sources of renewable energy. So much of the Australian population live on or near the shore line, yet how much use do we make of tidal power – particularly in the NW of Australia where the tidal range is really significant?
Stop talking about piping water and gas about the continent and start thinking seriously about piping renewable energy!
Start by looking at some of this guy’s ideas and let your imaginations roam freely! And then act to save the only planet we already have!
Please remember – ‘time is of the essence’ is a good legal saying which is very pertinent as we near the end of another year without action!
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The 2020 Federal Budget projects a deficit of some $213 billion – a far cry from the previously projected surplus. An already sluggish economy – hit now by Covid-induced economic collapse – left no option but massive stimulus – lest the nation sink into a Depression.
In a way it is encouraging that the government has thrown away the book on neo-liberal orthodoxy to some extent. A contractionary budget would have been disastrous. A notable amount of the stimulus (about $6 billion) comprises wage subsidies aimed at the young – with the aim of supporting some 450,000 jobs. The plight of the older unemployed – thrown onto the Jobseeker scrapheap – is another question. In the largest single measure over $26 billion in tax breaks will be delivered to business to write off the value of new investment by June 2022. There will also be a $4.9 billion “loss carry-back scheme” enabling businesses “to claim refunds or offsets on taxes in previous years.” Importantly, the third round of tax cuts – aimed at high income earners – has not been brought forward – in a win for Labor and the Greens. But the business sweeteners are not consistently tied to job creation and job retention – so for all that money there are no guarantees for workers. According to ACTU President, Michelle O’Neil, the government also projects zero wage growth even if there is economic growth in the coming years.
In Aged Care, $1.6 billion will provide 23,000 home care packages. But this is below demand, and there are no big plans to reform residential care. Perhaps this will come with the final findings of the Aged Care Royal Commission and the next election: but the need is urgent and ought not be put off. In fact it is dubious the Conservatives will find the money for comprehensive Aged Care reform: Home Care and Residential packages to meet demand; with quotas for Aged Care Workers and registered nurses, a winding back of user pays, exercise and GP visits for all residents, and an emphasis on quality of life. It will be up to Labor and the Greens to put up a fight, though disappointingly Labor has known about these problems for over a decade, and is only making the right noises now with the focus provided by the Royal Commission. We are talking many billions of dollars annually to make a difference over the long term.
‘The Age’ reports that “about 11.5 million workers will get up to $2745 more in their pay packets this financial year.” Though the raising of the threshold of 32.5 per cent to $120,000 from $90,000 is arguably badly targeted. And support for pensioners and the unemployed is insufficient, with a total of $500 in payments to Aged Pensioners meant to bring relief and fuel spending. More for those on low incomes and welfare would have a greater stimulatory effect, and would contribute to fairness. On the other hand the low income tax offset will rise from $445 to $700 in a modest but welcome measure.
Importantly, of the new spending measures only $6.7 billion is going to the states for new infrastructure. Including other infrastructure measures the figure is closer to $10 billion extra over ten years. The government’s main emphasis is in providing support and incentives to ‘kickstart’ business as opposed to measures directly supporting consumption at the low and middle ends; although increased business confidence would support jobs. The Budget measures emphasise the ‘supply side’ but neglects the ‘demand side’ when it comes to low income earners, the unemployed and pensioners. The opportunity to permanently raise Jobseeker appears to have been neglected, and many jobs will be lost with the premature withdrawal of JobKeeper.
Of most concern, stimulus is not a ‘black hole’. Getting people spending and back to work is part of a ‘virtuous cycle’ which can restore growth and rejuvenate the government’s balance sheet. With record low interest rates the time has never been better for investment, and the Government could have done more here.
The economy’s pre-existing weaknesses have not helped; but a Labor Government could not have avoided a Covid recession. As Labor has argued it will be putting the case for ‘better bang for our buck’ in the stimulus. This should mean more emphasis on those on low incomes and welfare, and providing support where it will grow spending and investment in jobs most vigorously. Too many businesses will be pocketing these ‘sweeteners’ without necessarily creating jobs.
In response to the Budget, Anthony Albanese has committed to further child care subsidies and half a billion to refurbish public housing. We need wage subsidies for child care and early education workers as well however. And also subsidies for consumers of child care and early childhood education. Both as a matter of fairness (for child care and early education workers – and women workers more generally); to get more women working, and to attract talented educators into the field. Also with housing out of reach for so many people a big investment (into the billions) in public housing now could both stimulate the economy and promote affordability.
Modern Monetary Theory supposes government can issue currency to ensure a ‘full employment guarantee.’ Such stimulus is part of the picture, but can be limited by inflation and currency devaluation. Though inflation seems unlikely in the current environment. Redistribution can’t be done properly and fairly without tax; but MMT has something to contribute to this debate. The government’s projections on unemployment are nowhere near ambitious enough.
If Labor was in government this kind of stimulus would be derided as an ‘irresponsible’ ‘cash splash’. Consensus that stimulus is part of the way forward in times of economic weakness is at least a good thing in itself. It sees Conservative arguments against the Rudd stimulus of the Global Financial Crisis (GFC) blown metaphorically out of the water. Labor governments of the future will be able to point to the current effective consensus on SOME form of stimulus to help justify their own efforts when governing in times of downturn or stagnation. Which will inevitably come as part of the capitalist cycle. But this government’s emphasis on the ‘supply side’ of the equation is nowhere near discriminatory enough.
I was reminded of this old adage, when I heard it reported this morning, on ABC radio, that the new approach to mental health should be to prepare people to cope better with the adverse effects of the present stressful situation, as compared with treating those who have already developed mental health issues.
Then, later in the day, I read Alan Kohler’s Insight article on page 33 NT News, (12/08/20), Covid-19, needs inquiry, fiscal fix – which should be compulsory reading for anyone with any involvement in economics. (I am sure this article can be easily obtained from other News Corp publications, even though it is probably pay-walled for non-subscribers.)
If I were to be unkind, I would suggest that Scott Morrison is deliberately waging war on universities because he thinks he knows all the answers and does not want to admit that there might be – let alone really are – many people who are far more knowledgeable than he is, on the areas which are vitally important in establishing a new order which might deliver us from the current crisis situation.
To a large extent, since everyone has grown up knowing that doctors know more about the human body than do most laypeople, expert medical advice has been accepted in relation to the COVID-19 pandemic.
Because it is caused by a novel coronavirus, approaches to controlling the pandemic have changed as knowledge has grown. To wear or not to wear a mask has become a contentious issue, partly because of the reasons put forward for doing so.
An infected person wearing a mask is less likely to infect others if wearing a mask. And people can be infected without showing symptoms.
Wearing a mask will reduce the probability of becoming infected – but not guarantee total success.
PPE is worn by most health care workers, yet even some of those become infected, sometimes because removing PPE carelessly can enable the virus from infected patients to be transmitted.
It really is a silent enemy.
Look at what has happened in New Zealand after 100 days of no infections!
It is hard to change the habits of a lifetime. In many cultures, greeting a family member or friend automatically involved making contact. Yet this is the quickest way to pass on an infection.
Human beings, by their very nature, mostly enjoy company, yet one person in a group may be infectious and pass on the infection to all within the group. The larger the group, the greater the number of infections.
Then we come to the issue of needing to be concerned about others, not just ourselves.
If you unwittingly get infected, before any symptoms show – if they ever do – you can pass that infection on to everyone you spend time with.
Without a mask, every time an infected person breathes out, they send a spray of microscopic particles which can be inhaled by anyone in their vicinity – or land on their skin, clothing or nearby surfaces and find their way into the bloodstream of those nearby.
Insisting on having fun, in company, risks spreading a virus which not only might kill someone, particularly but not exclusively an older person, or it might infect someone who goes through a nightmarish illness from which full recovery is not guaranteed.
And that is just the medical side.
In order to reduce the extent of infection spread, the Commonwealth government closed down many business and social activities and tried to persuade mortgagors and landlords to allow mortgagees and tenants some latitude in relation to payments due.
Not all states have necessarily followed up on necessary directions and legislation and not all mortgagors or landlords have seen fit to comply.
Given the thousands who are currently out of work or struggling with a reduced income, I do not know who gains anything if mortgages are foreclosed or tenants evicted.
Hold it!
Remember how reducing taxes and allowing millionaires to pay minimum tax has led to a massive wealth gap?
Millions – probably billions or even trillions are stashed away in tax havens, ready to be poured into buying property in a market where house prices will be dropping, at least initially.
The buyers can still make use of negative gearing and can afford to sit on their property empire as long as it takes.
They will recoup little in the short term, but that is no problem as they have more than enough to ride out the crisis.
Government MUST intervene to ensure this currently hidden wealth is put to better use than further impoverishing the already poor!
Alan Kohler’s article is important in at least two regards.
One is the point about re-thinking the whole economic approach and the other is the issue of Modern Monetary Theory.
We are hearing too many horror stories about debt and disaster without realising that the solution is in our hands.
When I studied economics, two early units were microeconomics and macroeconomics – simplistically the household and business aspects vs the issues affecting countries and governments.
I am fortunate in being retired, with an adequate pension from a secure source which is topped up by a portion of the Age Pension.
When I received my two $175 relief payments, I was not in desperate circumstances and I understood that the money was intended to go back into the national economy to stop the wheels from grinding to a stop.
So I passed it all straight on to the Asylum Seeker Refugee Centre.
Kon Karapanagiotidis, CEO of the ASRC, and his valiant group in Melbourne are struggling to help many who have no other means of support, having been continuously ignored and ill-treated by government…Every cent I sent will have already been well spent!
I tell this story, not to make myself out as a do-gooder, but because the government desperately needs people to spend, while the stagnant wage issue, preceding people’s losing their jobs, means that people can barely afford to buy necessities, let alone spend up big to boost the economy.
I do not doubt that some, not necessarily all, of the really wealthy, are also philanthropists, but there is a mass of wealth – in property and tax havens – which will not get back into circulation, unless the government persuades those holding it, that now is the time to invest in the country’s future.
We have accepted medical advice.
We need to accept advice from climate scientists, because, while a reduction in travel (including by aircraft) and industrial has serendipitously reduced greenhouse gas emissions, it is not enough to allow us to postpone action to further reduce levels.
Gas is a fossil fuel. It might pollute slightly less than coal but fools rush in!
Alan Kohler has provided a very valid suggestion as to how to get some effective economic advice – which is incredibly important at this stage of the crisis.
To be talking now about reducing support payments, without first analysing the impact on rent and mortgage payments, and making more certain arrangements with the banking industry, would be negligent to a possibly criminal extent.
What good are empty houses which people cannot afford to live in?
Get real!
Some of you, reading this, might agree with the underlying theme but assure me that it will never happen.
I am maybe a foolish optimist, but I cannot see any government brazenly pursuing policies that will end in the destruction of society.
If enough people with appropriate expert knowledge can show them that investment for the future, using money held by the already wealthy, plus using MMT approaches to issuing bonds, in order to ensure people can receive enough to survive AND enable the economy to recover, then the government might even survive the next election – perhaps the message might get through!
I end as always – this is my 2020 New Year Resolution:
“I will do everything in my power to enable Australia to be restored to responsible government.”
Like what we do at The AIMN?
You’ll like it even more knowing that your donation will help us to keep up the good fight.
Chuck in a few bucks and see just how far it goes!
COVID-19 has hit the Australian economy hard. By some estimates the Australian economy will shrink by approximately 7 per cent in 2020. Maybe more. That’s a virtually unprecedented recession.
Shutting down workplaces: hospitality and tourism, higher education and some manufacturing: comes at an enormous cost.
We can’t put a price on peoples’ lives and peoples’ health. But many people will need to sacrifice to ‘spread the burden’ of funding recovery.
Some have suggested a ‘HECS-style loan’ for those unemployed as a consequence of this crisis.
Because this discriminates, it is unfair. Richard Denniss – speaking on ABC radio – is correct about this. Though I think he is wrong about HECS more broadly. Income contingent loans to pay for government support of individuals during the crisis would mean a veritable ‘labour market lottery’ as to who was left with debt. Denniss agrees with this much. But also ‘income contingent loans’ have a longer history of losing their progressivity as governments reduce thresholds to help pay for other endeavours – such as ubiquitous corporate welfare.
Also, will the government temporarily increase corporate tax during the recovery period to service debts incurred supporting the private sector during the crisis?
The government’s stimulus has provided a lifeline for many.
But one rational assumption is that the economy won’t simply ‘snap back’ at the end of a six month period; and as a consequence the government cannot afford to ‘step back’ and just let the private sector ‘fill the breach.’ The real economy doesn’t work like this.
Richard Denniss of The Australia Institute thinks the Economy will not simply ‘snap back’ after the COVID-19 Crisis. A long term government role is required (Image from thenewdaily.com.au)
In hospitality and tourism, the structural effects on the economy could last quite some time. We don’t know whether there will be a ‘second wave’ or whether we will ‘break the back’ of the spread in this country. But global travel will take years to ‘get back to normal’, and the US and the UK are still deep in crisis. The ACT and Northern Territory also understandably want to reap the benefits of wiping out the virus, and don’t want it reintroduced from interstate.
On the other hand, the crisis provides an opportunity to broaden and deepen the public sector to create the ‘economic infrastructure’ around which recovery will occur. Make strategic infrastructure investments, as well as structural improvements in public services; unemployment services; in Health, Aged care and disability services; in welfare, transport, communications, arts. The NDIS needs to be more accessible, with ‘consumers’ interests protected more vigorously. The CES (or ‘Centrelink’ these days) should be refunded as a ‘one stop shop’ for job-seekers – but without the usual harassment and humiliation. Homelessness could be addressed ‘head on’ with a big investment in public housing. Fix the NBN with ‘fibre-to-the-home.’ A big public investment in renewables. And coming out of the crisis: Have an active industry policy which strategically supports and invests in high wage manufacturing.
This is also an ideal opportunity to progressively reform welfare across the board; and lift job-seekers out of poverty.
On ABC radio high speed rail was inferred as perhaps a ‘dubious investment.’ But it could drive growth in the regions, with a flow on of jobs and affordable housing. As well as containment of urban sprawl and the transport crises that ensue from that.
The simple truth is that the public sector might have to pick up the slack on the economy for some time to come if there is to be any chance of a recovery. And if we navigate this in the right way it can present an opportunity.
Modern Monetary Theory (MMT) holds that as the issuer of the currency the government can create money at will to invest and ensure a ‘full employment guarantee.’ Though this is limited by real economic constraints concerning the scale and nature of goods and services actually produced in the economy at the end of the day. In some instances there might also be inflation; and you cannot ‘create money’ to fund an infinite influx of imports.
But full employment is in everyone’s interests: so long as there is an ‘efficiency dividend’ which provides benefits for all; and so long as consultation with unions ensures there is no endless ‘wage-price spiral.’ Higher employment has a ‘multiplier effect’ on the broader economy that also makes debts easier to service. At the same time, the wage share of the economy has been falling for decades; and long term there is a need for a structural correction which could also create extra demand in the economy.
As part of this picture there should be reform of the labour market improving compensation in low-paid jobs – either with regulation, or through the social wage (or both). Modern Monetary Theory has been somewhat skeptical of the role of taxation, claiming it ‘takes money out of the economy.’ But this need not be the case if all that money is spent; if indeed there is a stimulus. Taxation also allows for a much more finely targeted redistribution of wealth: which should be desirable for progressives.
As MMT theorists also recognise, state governments in Australia cannot issue currency.
The current public health crisis is going to cause much more pain before it is overcome. But the right kind of policies on investment, industry policy, welfare and stimulus can minimise that pain, and even help ensure in the end we come out of the crisis stronger.
Socialistic sentiment can be traced back to the slave revolt of Spartacus and Peasant uprisings in Europe; for instance that led by Thomas Muntzer in Germany. But ‘modern socialism’ began with those labelled as ‘Utopians’ by Karl Marx. Figures like Robert Owen – who personally wanted to convince the bourgeoisie (and nobility) of an egalitarian, communal society based around the means of production (specifically communes of up to 3,000 people). And all those others who depended on a ‘socialist vision’ to convince people of the desirability of a socialist order; as opposed to Marxists who based their approach on ‘the fact of class struggle’.
Generally, socialists preferred equality; an end to exploitation; extension of democracy to the economy. Marxists wanted to socialise the means of production to end both exploitation and the destructiveness and wastefulness of capitalism and its boom-bust cycle.
But Marx had another criticism of capitalism; and that was the way in which the division of labour and demanding nature of much work traumatised workers. This was his theory of Alienation. Today in Australia for instance we are a world away from the working conditions of the 19th Century. But in call centres, offices and factories the division of labour can still exclude creative control and work fulfilment. Indeed, work conditions can still be traumatising.
In Germany where the class struggle was advanced the Social Democrats arose as a combination of the Marxists (Eisenachers) and the Lassalleans. Lassalleans (led originally by Ferdinand Lasssalle) believed in industry-wide co-operatives with state aid. Eventually Marxism became dominant. But by 1914 in Germany right-wing ‘socialists’ had come to predominate in unions and the parliament, and those people eschewed internationalism and supported the First World War.
Before World War One both the European and British socialists supported the class struggle and the fight for universal suffrage to advance workers’ rights. But Britain was relatively liberal; and this resulted in less emphasis on revolution and more emphasis on incrementalism.
Fabianism arose in the 1880s; and came to represent a movement to influence opinion in liberal and progressive circles. Especially in the Labour Party in Britain. Beatrice and Sidney Webb (prominent British Fabians) expressed sympathy with the achievements of Soviet Communism – but that view did not last. Some Fabians would focus on practical public policy; others on the more radical aim of incrementally replacing capitalism. Again: Generally Fabians were gradualist rather than supporting a ‘sudden rupture’.
Modern Australian Fabianism shared the British Fabian principles and was formed organisationally in 1947. The height of Fabian influence was in the Whitlam Labor Government.
After World War One the broad Left was generally divided into Communist, Social Democratic and Labourist Camps. Although pockets of Social Democracy remained highly radical – as in Austria in the 1917 to 1934 period. (Austro-Marxism). These sought a ‘middle path’ between Bolshevism and ‘mainstream’ international social democracy. And there were anarchists and anarcho-syndicalists – who were significant in the Spanish Republican forces and the fight against the Nazi-backed fascist insurgency of Franco in the Spanish Civil War.
From the 1940s through to the 1980s Swedish Social Democracy enjoyed remarkable success (replicated to various degrees in other Nordic countries) with full employment, active industry policy, strong unions, and a strong welfare state. For the overwhelming majority of this period Social Democrats held government. Basically workers received social security in return for a ‘corporatist settlement’ including wage restraint. The full employment achieved under the ‘Rehn-Meidner model’ also made a stronger welfare state possible. Though Walter Korpi conceived of the Swedish situation differently: as a ‘democratic class struggle’, involving mobilisation of ‘Power Resources’ and compromise depending on the balance of class power. But in the 70s and 80s Sweden also had to respond to the Oil Shocks and devalue the Krona. The ‘Meidner Wage Earner Funds’ plan sought to compensate workers for wage restraint by giving them collective capital share. But this implied a radical redistribution of wealth over time. Also – because it appealed only to workers and not to citizens, it could be argued that the funds could have included a wider base (which is democratically preferable anyway).Capitalists went on the offensive: socialists on the defensive. And there has been a slow retreat since.
Up until and including the 1970s and 1980s there remained strong pockets of radicalism in many Labourist and Social Democratic Parties. But the Oil Shocks of the 70s and the drive to restore profits divided the Left and led to Socialist retreat. Also the Soviet Collapse during 1989-1991 had an enormously demoralising effect on the Western Left; despite the fact the Western Left had long distanced itself from Stalinism. It’s not unreasonable to see the Gorbachev reform movement as a window of opportunity; and a missed opportunity.
From Hawke and Keating onwards Australian Labor has broadly internalised neo-liberal ideology. Small government, privatisation, free trade, limits on the liberties of organised labour, trade agreements which give capital an effective ‘veto’ on regulation and public sector expansion. Marxism used to have a strong base in the Socialist Left. But increasingly the factions have lost ideological cohesion; and have been subsumed in the mainstream political discourse.
Indeed, the experience of Hawke and Keating inspired Tony Blair and Antony Giddens with their ‘Third Way’ or ‘Radical Social Democratic Centre’. In the 19th and early 20th Centuries ‘Centrism’ had been a largely Catholic phenomenon including limited support for trade unions, labour market regulation and welfare. Since Giddens and Blair the ‘Third Way’ has come to represent ‘neo-liberalism with a human face’. Punitive welfare on the one hand, but also the principle there should be an economic and social ‘floor’ below which no-one should be allowed to fall. Blair also marginally increased tax (will Australian Labor still consider tax reform for the next election?) But he would not retreat an inch in opposing any re-socialisation – no matter how badly privatisation had failed (eg: of railways). In Australia more recently ‘Centrism’ as epitomised by the ‘Centre Alliance’ struggles to maintain a credible liberalism – let alone any kind of social democracy. For instance there is conditional support for the ‘Ensuring Integrity’ union-busting legislation. Today ‘Centrism’ in Australia can mean a shallow populism cashing in on broad disillusionment with the two party system. Significant parts of the ALP Right consider themselves ‘Centrist’ after the Blairite model. Blairites also generally accept capitalism as a given.
Fast-forward to 2019 and ‘What is to be done?’
Capitalism remains more vulnerable than people think. There is much focus on public debt, but private debt is a ‘ticking time bomb’ that could lead to loss of confidence, panic and collapse. In Australia, the US and much of the world private debt is many times the level of public debt. The Australian economy especially has come to rest on the housing bubble. Millions are locked out of home ownership; but sudden and radical devaluation would cause panic and collapse. The boom-bust cycle remains a fact: but governments focused on public debt are less likely to engage in counter-cyclical measures. This could one day mean recession (or Depression) as the ‘solution’ to indebtedness. Modern Monetary Theory (MMT) has it that government can ‘create money’ at will ; but this is not without limits. It involves a degree of redistribution which capitalists hate – but also inflation. Progressive tax is still more effective at redistributing wealth in a targeted and progressive way. But certainly the MMT crowd are on to something.
The Labor Party today is probably inclined to want to ‘save capitalism from itself’. The welfare state and higher minimum wages can assist by boosting expenditure and demand. A return to a meaningfully mixed economy can help by reducing cost structures via natural public monopolies. This could flow on to the private sector as well. As well, this could counter oligopolistic collusion – for instance in banking (actually promoting competition). Higher government expenditure can also add money to the economy; increase demand; and ameliorate the explosion of private debt – which is a ticking time-bomb for the economy (here and globally).
An expanded social wage, welfare state, collective consumption and social insurance – can also provide social justice and social security. Think reformed pensions – easing means testing and increasing payments. Public housing. Better-funded schools and hospitals. More money for the Pharmaceutical Benefits Scheme. More efficient public provision of infrastructure (because of a better rate of borrowing and a ‘public interest test’ rather than share value and dividend maximisation). Also consider National Aged Care Insurance and a withdrawal of regressive user-pays mechanisms. As well as a retreat of user-pays in Education.
These are ameliorative reforms that can improve peoples’ lives. But Australia is still captive to the global economy and will suffer along the rest of the world in any ‘general downturn’ or ‘collapse’.
Over the long term we still need to think about an alternative to capitalism. Sub-Prime and the Global Financial Crisis did not only reveal instability – It also revealed the gap between Use Value and Exchange Value as Marx would put it. That is: there was an abundance of housing amidst widespread destitution and homelessness. This is a real capitalist failing and vulnerability.
Marx’s weakness was that he did not propose any concrete alternative vision to capitalism. He assumed ‘the class struggle would take care of things’. So maybe in part the ‘Utopian Socialists’ were on to something? The context of class struggle had to be engaged with; but also concrete visions for the future. Today perhaps we need ‘provisional utopias’. We cannot afford to be ‘a force of pure negation’ with no vision for the future. Especially after the real historical experience of Stalinism.
But capitalism is a globally-reinforcing system. You can’t just ‘go it alone’ in revolutionising the entire economy. There are economic andpolitical constraints.
But what can be done is to begin a process of ‘revolutionary reforms’. Say in the spirit of the interwar Austrian Social Democrats. Even today in Austria there is a legacy in Vienna of 60% public housing – and overwhelmingly high quality public housing. A ‘democratic mixed economy’ would stabilise capitalism (through strategic socialisation and redistribution) while at the same time advancing towards an alternative. As in Austria this would also involve a counter culture: a rebuilding and reassertion of the labour movement; but also a coalition with other social movements. What Gramsci would have called a ‘counter-hegemonic historic bloc’. That also involves establishing online presences; other publications; public meetings; progressive radio and television; social events of various kinds; plays; workers’ sport; radical music etc. Establishing footholds where-ever possible.
Importantly the decline of industrial labour (with ‘deindustrialisation’) has widely meant a decline in class consciousness. Service sector workers can be just as exploited; but are more likely to think themselves ‘middle class’ or lack class consciousness. We can and should fight this. But the industrial working class might not any longer be seen (in the Marxist sense) as a ‘finally redemptive’ ‘universal historic subject’. The labour movement is central: but the modern Left also needs alliances.
And should another Global Financial Crisis occur the big finance houses should not be ‘bailed out at the public’s expense’. Where the public sector steps in (if that occurs) it should retain a share in ownership.
Of course when it comes to advanced socialist transition bourgeois economic and political resistance has to be expected.
The ‘democratic mixed economy’ should be the short to medium term model. That includes a key place for natural public monopolies, strategic government business enterprises, consumers and workers co-operatives of various sorts (including multi-stakeholder co-ops which bring workers, governments and regions together), mutualist associations. As well as ‘collective capital formation’. (The Meidner Funds were such; In Australia superannuation was a very pale imitation which may actually endanger welfare into the future by narrowing its base). ‘Multi-stakeholder co-ops’ are an important idea – as they could enable expansions of economies of scale to retain competitiveness under capitalism. All these are part of a concrete alternative.
There is also a need to restore and consolidate industrial liberties; to increase organised labour’s power; its ability to deliver; and hence its coverage, strength, and ability to contribute to change.
Furthermore: how do we tackle ‘alienation’ today in Marx’s sense? Even with deindustrialisation, workers still find themselves alienated in modern professions – for instance call centre workers. The ‘post-industrial utopia’ has so far failed to emerge. At the least we can improve wages and conditions for the most exploited and alienated workers with low-end labour market regulation (and maybe government subsidies where the market will not bear higher wages). Perhaps enabling a reduction of the working week for many (though others would crave longer hours). ‘Free time’ is perhaps one alternative (for now) to Marx’s vision of a communism where workers regained creative control; and labour becomes ‘life’s prime want’ (a quote from Marx). But ‘alienation’ is a feature of broader Modernity and not only capitalism. The rise of co-operatives could at least facilitate worker control – also ameliorating alienation.
In the final instance we need to think of where improvements in productivity could lead. Either to greater equality, plenty and free time for everyone. Or in the capitalist context only the intensification of growth, profit and exploitation. And possibly greater inequality if we do not socialise much of the gains of productivity. What Marx called the ‘coercive laws of competition’ means that competition forces a focus on productivity for capitalist profit and short term economic advantage. The problem is finding a way out of this ‘circuit’ (as well as the intensification of exploitation; and a ‘lagging behind in wages’ in labour intensive areas where productivity improvements are hard to come by). We need to think where free trade and internationalism fit in to this problem. There are environmental implications as well. Capitalism by its very nature will trend towards the ‘endless growth’ option. Perhaps if the emphasis is on information and service industries it could be more environmentally sustainable.
But Sweden is also a warning. Again: there has been retreat since the Meidner Wage Earner Funds. The ‘corporatist consensus’ delivered for several decades in Sweden. But since the bourgeoisie ‘got cold feet’ and organised more overtly against Swedish social democracy – there has been a retreat. Swedish social democracy now has to work with Swedish Liberalism to keep the right-wing parties out; and the price has been a retreat of the Swedish welfare state and progressive tax. In short: Socialists and social democrats have to be ready for capitalist backlash.
Class struggle creates change. That remains true. But so too do broader coalitions, cultural and electoral strategies. The Fabian Society in Australia is placed to mount cultural interventions; and hence influence the electoral strategies of the Labor Party and the broader Left. We won’t get all that we want all at once. But we need a critique of capitalism. We have to be prepared for future crises. We have to think what a transition would look like: under what circumstances and what time frame? But all the time considering the reality of power – economic and political ; including the power of the State. And all in a global context: where global progress remains limited without global consciousness and organisation. Which is something the Fabians also need to be thinking about. Building ties with Democratic Socialists of America, for instance, could be a fruitful endeavour.
The Fabian Society re-embracing its place as an organisation of democratic socialism means engaging with these problems. For the short to medium term it is to be hoped we have an important strategic place in developing a ‘democratic mixed economy’; critiquing capitalism; and imagining ‘revolutionary reforms’ which could decisively shift economic and political power over the long term.
(Much of the material in this page is drawn from the work of La’o Hamutuk, the Timor-Leste Institute for Development Monitoring and Analysis, which has monitored and campaigned for Timor-Leste’s rights for two decades. For more detailed information on this and related issues, see www.laohamutuk.org. Current and updated information on the maritime boundary dispute with Australia is at https://www.laohamutuk.org/Oil/Boundary/18ConcilTreaty.htm).
It has been calculated that, since 1999 and up to the end of 2015, Australia has received nearly US$5 billion in government revenue from oil and gas fields in Timor-Leste’s territory from Laminaria-Corallina, Kitan, Bayu-Undan and Elang-Kakatua. During the same period, Australia provided military aid – through Interfet (International Force in East Timor) and I.S.F. (International Stabilisation Force) – costing US$0.6 billion, and another US$1 billion in ‘bilateral assistance’. Timor-Leste has thus given Australia more than US$3 billion.
Planning Minister Xanana Gusmão reiterated Timor-Leste’s position when he received an honorary doctorate from Melbourne University on 7 December, 40 years after Indonesian invaded Timor-Leste with Australian diplomatic support: “The Government of Timor-Leste has made the permanent delimitation of maritime boundaries a national priority as it is the final step in our long struggle for full sovereignty.
Indonesia and Timor-Leste have commenced maritime boundary negotiations and have agreed to abide by the principles set out in the 1982 United Nations Convention on the Law of the Sea and international law. Australia on the other hand has refused to negotiate a maritime boundary with Timor-Leste and Timor-Leste cannot refer the issue to be determined by an independent umpire. This is because in 2002, on the eve of Timor-Leste’s independence, Australia withdrew from the compulsory dispute mechanisms set up under the United Nations Convention on the Law of the Sea for any disputes relating to the delimitation of its maritime zones.
Like your new Prime Minister Malcolm Turnbull, I am an optimist. And so, I look to the new Australian Government to recognise that it is in Australia’s national interest to have a clearly defined permanent maritime boundary in the Timor Sea. From the Timorese perspective we are fighting for justice in the Timor Sea so that we can finish the work of our struggle for independence and achieve our rightful sovereignty under international law. We are continuing to be idealists.” (Democratic Republic of Timor-Leste, Acceptance speech on the award of an honorary Doctorate of Letters from the University of Melbourne by His Excellency, the Minister for Planning and Strategic Investment and former President and Prime Minister of the Democratic Republic of Timor-Leste Kay Rala Xanana Gusmão, Melbourne, 7 December 2015).
On 8 December the Australia Timor-Leste Business Council reported on their meeting the previous day with Australian ambassador to Timor-Leste Peter Doyle, whom they had asked to reduce sovereign risk by agreeing to a permanent maritime boundary. Their press release prompted comments from Asia Pacific Analysis (‘Regarding talks between East Timor and Australia’, 11 December 2015).
On 4 April Timor-Leste’s Parliament unanimously resolved to support the negotiation process for maritime boundaries. (RDTL National Parliament, Draft Resolution n. 26 / III (4), Support for the negotiation process for the maritime boundaries of Timor-Leste, 4 April 2016).
On 11 April Timor-Leste announced that it had just notified Australia that it was initiating “compulsory conciliation proceedings under the U.N. Convention on the Law of the Sea, U.N.C.L.O.S., with the aim of concluding an agreement with Australia on permanent maritime boundaries.” (‘Timor-Leste launches United Nations Compulsory Conciliation Proceedings on Maritime Boundaries with Australia’, Media release, 11 April 2016).
The action, explained by a government fact sheet, raised complex legal issues as it involved, interalia, U.N.C.L.O.S. dispute resolution provisions, Australia’s unilateral 2002 withdrawal from U.N.C.L.O.S. processes for maritime boundary disputes, and the ‘gag rule’ in C.M.A.T.S. Article 4, especially paragraph 6. Nevertheless, as a spokesperson for Timor-Leste explained on Australia’s RadioNational, Timor-Leste is frustrated with Australian intransigence for the past 14 years, concerned that ‘provisional’ arrangements could evolve to become permanent, and seeks to look toward the future and accelerate the eventual settlement of the maritime boundary as foreseen in the existing revenue-sharing agreements. Timor-Leste’s initiative, which is the first time ever that this process has been invoked, was reported by the press and the A.B.C. (T. Allard, ‘East Timor takes Australia to UN over sea border’, The Sydney Morning Herald, 11 April 2016).
The Australian Government sharply criticised the move, and announced that there would be no further discussions. However, the Australian Labor Party and the Greens Party welcomed Timor-Leste’s action, promising to negotiate a new and fair maritime boundary with Timor-Leste, and Special Broadcasting Service compared contrasting party policies. (H. Sinclair, ‘Contrasting party policies emerge over maritime boundary with East Timor’, 14 April 2016).
On 13 April former Prime Minister and Chief Boundary Negotiator Xanana Gusmão brought the issue to the attention of the Secretary-General Ban Ki-Moon at the United Nations in New York. Xanana Gusmão issued a press statement there, and the Government issued a press release in Dili (‘H.E. Kay Rala Xanana Gusmão meets with UN Secretary-General Ban Ki-moon as Timor-Leste initiates Compulsory Conciliation under UNCLOS’, Media release, 14 April 2016).
Several Australians with long connections to Timor-Leste, including academics, journalists and geologists, wrote articles to place the current dispute in historical context. Timorese veterans, diplomats and negotiators reached out to people in Australia and the region. Former President Jose Ramos-Horta wrote “Australia needs to negotiate not litigate with neighbours” in major Australian newspapers. (Jose Ramos Horta: Australia needs to negotiate not litigate with neighbours, The Sydney Morning Herald, 24 April 2016).
When Timor-Leste filed for Compulsory Conciliation on 11 April, it named Judge Abdul Koroma (from Sierra Leon, who had sat on the International Court of Justice from 1994 to 2012) and Judge Rüdiger Wolfrum (from Germany, who had been on the International Tribunal for the Law of the Sea since 1996) as their chosen members of the panel. On 2 May Australia selected Dr. Rosalie Balkin (an Australian, and a retired Assistant Secretary-General of the International Maritime Organization) and Professor Donald McRae (a Canadian/New Zealander who was teaching law at the University of Ottawa) as its two representatives. These four were to elect a fifth member to chair the Conciliation Panel.
Still, Australian continued its scare tactics, suggesting that Indonesia “may be drawn into Timor talks”, yet conveniently forgetting that, in Article 4 of the 1972 Australia-Indonesia Seabed Boundary Treaty, the signatories agreed to “cease to claim or to exercise sovereign rights with respect to the exploration of the seabed and the exploitation of its natural resources beyond the boundaries so established.” Furthermore, Indonesia had ceded what became the J.P.D.A. and the area east and west of it to Australia through that treaty.
Whistleblower Witness K, who exposed Australias bugging of Timor-Leste’s Government offices during the C.M.A.T.S. negotiations, was recognised at the ‘Blueprint Prize for Free Speech’ awards in London (‘Witness K gets international recognition’, Crikey, 9 May 2016).
In May 2016 Mr. Marc Moszkowski published an updated version of his map presentation ‘Maritime boundaries of East Timor: a graphical presentation of some historical and current issues’. Mr. Moszkowski is highly qualified for the position. He is the President of Deep Gulf Inc. of Florida, USA; an engineer and master mariner with superior experience in the Timor Sea and has led projects for the first detailed bathymetric survey of parts of the Timor Sea, as well as surveys commissioned by the Secretary of State for Natural Resources of strategic parts of the southern shore including Beaco and Suai for the Tasi Mane project of the Government of East Timor. He updated his Timor Sea Maritime Boundaries with a presentation for the ICJA/ILA Colloquium, held at University of New South Wales, on 16 August 2014.
The very complex and highly documented work contains an interesting slide reproducing the boundary claimed by the East Timorese Government on 29 February 2016.
In the slide a median line between Timor-Leste and Australia is drawn. The median lines with Indonesia are not shown. Several I.C.J. case examples were provided (Libya v. Malta, Romania v. Ukraine, Bangladesh v. Myanmar, Nicaragua v. Colombia, and Peru v. Chile).
In June several feature articles, actually too many to list, tried to explain the context and analyse Timor-Leste’s and Australia’s perspectives. Most of the articles were quite unflattering. (T. McDonald, ‘Australia row hampers East Timor’s oil ambitions’, B.B.C. News, 13 June 2016; T. Iltis, ‘How Australia is screwing East Timor’, GreenLeftWeekly, 25 June 2016; Rob Wesley-Smith asked some important questions, re various conferences on Timor Sea matters, 30 June 2016).
Before the Australian Parliamentary election on 2 July 2016 the Foreign Minister and shadow Foreign Minister debated Australia’s policy toward Timor-Leste. Both women were re-elected to Parliament, but neither party had an absolute majority, so the composition of the new government in Canberra remained unclear. Two weeks later, it was agreed that Malcolm Turnbull would continue as Prime Minister.
International lawyers analysed ‘The Shifting Sands below the Sea, The landmark decision on the South China Sea, and it implications for Australia and Timor Leste’, by Gilbert & Tobin, 13 July 2016, while the Timor-Leste Government reaffirmed its commitment to U.N.C.L.O.S. (‘Government reaffirms commitment to UNCLOS as the ‘constitution of the sea’ ’, Media release, 15 July 2016).
The next hearing was to be held on 29-31 August on “the background to the conciliation and certain questions concerning the competence of the Commission.” As announced by the P.C.A. and echoed by Timor-Leste and Australia, the opening statements were web-streamed live, 29 August 2016.
TheSaturday Paper published Hamish McDonald’s interview with José Ramos-Horta who said that Xanana Gusmão “was never very supportive of the 2002 and 2006 treaties.” (H. McDonald, ‘Q&A with international pacemaker José Ramos-Horta’, TheSaturdayPaper, 30 July 2016).
As the opening of the Conciliation Process drew near, Timor-Leste’s Government announced its delegation: the Minister of Planning and Strategic Investment and Chief Negotiator for Maritime Boundaries, H.E. Kay Rala Xanana Gusmão, and the Minister of State and of the Presidency of the Council of Ministers, H.E. Agio Pereira. (‘Members of Government to attend Conciliation Commission hearing next week’, Media release, 23 August 2016).
The Government also presented a policy paper to the Council of Ministers. The 92-page paper was announced by the Government and launched by Prime Minister Rui Araùjo in Dili just hours before the Conciliation process opened in The Hague. (‘Speech by His Excellency the Prime Minister of the Democratic Republic of Timor-Leste, Dr. Rui Maria de Araúio, at the launch of the Timor-Leste policy paper on maritime boundaries’, Dili, 29 August 2016).
The Timor-Leste’s Government Maritime Boundary Office prepared a Fact Sheet on the conciliation process: ‘Timor-Leste Conciliation with Australia on Maritime Boundaries.
Australia’s position on the upcoming conciliation was confused when Foreign Minister Julie Bishop stated that Australia accepted rule of law for boundary disputes, but reversed that position in relation to this process. (M. Skulley, ‘Aus govt defends status quo in Timor Sea’, 29 August 2016) However, But Professor Ben Saul pointed out that the conciliation was a new opportunity for Australia to do the right thing. (B. Saul, ‘On Timor, Australia looks it’s denying an impoverished neighbour its birthright’, 29 August 2016). The A.B.C. News put the upcoming hearing in context. (‘East Timor-Australia maritime border dispute to be negotiated at the Hague’, 29 August 2016).
On 28 August Timor-Leste and Australia made their opening statements to the Conciliation Commission. (Permanent Court of Arbitration, Case No. 2016-10, Conciliation Proceedings between the Government of the Democratic Republic of Timor-Leste and the Government of the Commonwealth of Australia, pursuant to Art. 298 and Annex V of the U.N. Convention of the Law of the Sea, Opening Session, Monday 29 August 2016, Commissioners: H.E. Mr Peter Taksøe-Jensen (Chairman), Dr. Rosalie Balkin, Judge Abdul G Koroma, Professor Donald McRae, Judge Rüdiger Wolfrum).
Timor-Leste urged Australia to negotiate a boundary, while Australia rejected the Commission’s power to engage in this issue. (D. Flitton, ‘Australia rejects jurisdiction of East Timor’s bid to broker maritime dispute’, The Sydney Morning Herald, 29 August 2016).
The map is a demonstration of the dispute of the contending parties according to maps prepared by Timor-Leste and Australia at the opening of the Conciliation process in August 2016
The Commission met in closed session for a few days, issuing a press release on proceedings. (Press release, ‘Conciliation between the Democratic Republic of Timor-Leste and the Commonwealth of Australia’, The Hague, 31 August 2016, Commission Holds Public Opening Session in Conciliation Proceedings).
The conclusions of the process were reported by the Australian press. (D. Flitton, ‘Special commission quizzes Australia and East Timor in bid to broker sea dispute’, The (Melbourne) Age, 2 September 2016), which emphasised that East Timor deserves a fair hearing. (‘East Timor deserves a fair hearing on maritime boundary’, The (Melbourne) Age, 5 September 2016).
The positions of the parties on the conciliation process were amply commented upon. (Prof. D. Anton, ‘Right but wrong: Australia is using a legalism to delay resolution of the Timor sea boundary dispute’, WAtoday, 31 August 2016; H. McDonald, ‘Timor-Leste backing oil development before Hague ruling’, The Saturday Paper, 3 September 2016).
On 9 September the Permanent Court of Arbitration adopted Rules of Procedure for the arbitration case under the Timor Sea Treaty which Timor-Leste had initiated in April 2013. (P.C.A. Case Nº 2015-42, in the matter of the arbitration under the Timor Sea Treaty of 20 May 2002 between the Democratic Republic of Timor-Leste and the Commonwealth of Australia case concerning the meaning of Art. 8(b) – Rules of procedure).
On 26 September the Conciliation Commission released its 41-page unanimous ‘Decision on Australia’s Objections to Competence’, affirming that it did have jurisdiction and would have continued to hear the case over the following twelve months. The decision was applauded by Timor-Leste (‘Timor-Leste welcomes Conciliation Commission’s landmark decision to proceed’, Media release, 26 September 2016) and accepted by Australia (‘Timor Sea Conciliation’, Joint media release, The Hon. Julie Bishop, Minister for Foreign Affairs Senator the Hon. George Brandis QC, Attorney-General, 26 September 2016) It was widely covered in the international media.
On 13 October the Permanent Court of Arbitration announced, on the Conciliation Commission’s behalf, that Optimism Pervades Recent Meetings with Conciliation Commission, saying that both Australia and Timor-Leste delegations are actively participating and consider the meetings “very productive,” although confidentiality prevents either party from commenting publicly. (P. C. A., ‘Conciliation between the Democratic Republic of Timor-Leste and the Commonwealth of Australia’, Press release, Optimism pervades recent meetings with Conciliation Commission, Singapore, 12 October 2016) Yet the process would continue in 2017.
When António Manuel de Oliveira Guterres was elected U.N. Secretary-General, the former President José Ramos-Horta explained that Guterres could not use his new position to tilt the playing field towards Timor-Leste in the boundary dispute. Horta later appealed to Australia’s sense of a ‘fair go’. (T. Moore, ‘Nobel laureate calls on Australia to show ‘fair go’ over $40b Timor Sea oil’, The Sydney Morning Herald, 27 October 2016).
In November The Australia Institute released the results of a poll of Australians conducted he previous August. Of the 10,271 Australian residents polled, 56.5 per cent supported establishing a maritime boundary according to international law, while only 17 per cent opposed this change.
On 9 January 2017 Timor-Leste, Australia and the Conciliation Commission issued a joint statement. The two countries agreed to terminate the 2006 C.M.A.T.S. Treaty in its entirety, including the “zombie clauses” which would have kept parts of the treaty alive after “termination” and resurrected it when Sunrise production began. The termination was to be effective as from 10 April, three months after Timor-Leste legally would notify Australia that it was exercising its right to terminate under the treaty. The 2002 Timor Sea Treaty would expire on its original date (April 2033), rather in 2057 as defined by C.M.A.T.S. The two governments also committed to negotiate permanent maritime boundaries, and the C.M.A.T.S. ‘gag rule’, that Timor-Leste had been defying for the previous three years, was no longer in effect. (‘Joint Statement by the Governments of Timor-Leste and Australia and the Conciliation Commission constituted pursuant to Annex V of the United Nations Convention on the Law of the Sea’).
By the decision both governments had finally agreed on the following points: 1) Any bilateral treaty could be changed or voided at any time by mutual agreement of both countries; 2) The ‘gag rule’ which prevented recourse to diplomacy, advocacy or international mechanisms was ill-considered and bad for Timor-Leste; 3) A permanent maritime boundary, rather than temporary revenue-sharing agreements, would more likely respect the sovereignty and national interests of both countries.
Unfortunately, the joint statement did not address another key point: that a binding ruling by an impartial third party – through arbitration or a judicial process – is the only fair way to settle a boundary dispute between two very unequal countries. Since Timor-Leste restored its independence in 2002, closed-door bilateral negotiations had produced results biased towards Australia, which has far more wealth, experience, flexibility, resilience, oil and gas, and economic and political resources. Timor-Leste would continue to urge Australia to return to the binding dispute resolution mechanisms under the International Court of Justice and U.N.C.L.O.S. from which it withdrew two months before Timor-Leste became a sovereign nation.
The 9 January joint announcement was widely reported by international media. (D. Flitton, ‘Spying fallout: East Timor to tear up oil and gas treaty with Australia’, The (Melbourne) Age, 9 January 2016).
On 10 January Timor-Leste’s Parliament resolved to cancel the C.M.A.T.S. Treaty, and President Taur Matan Ruak promulgated Resolution 01/2017 six days later. (Jornal da República, Série I, N.° 2A, Página, 2 Segunda-Feira, 16 de Janeiro de 2017, Resolução do Parlamento Nacional N.º 01/2017 de 16 de Janeiro) Prime Minister Rui Araùjo told local journalists that oil and gas exploration in the Timor Sea would be temporarily suspended until the boundary was settled.
According to the A.B.C., Woodside was hopeful that a boundary settlement would allow its Sunrise project to move forward, while another A.B.C. report cited economic opportunities for Timor-Leste. (A.B.C., E. Stewart, ‘Woodside Petroleum [was] waiting on Australia-East Timor maritime deal to develop Greater Sunrise’, 10 January 2017; A.B.C., K. Gregory, ‘East Timor to capitalise on economic opportunities’, 10 January 2017).
However, a few days later, a contributor to the A.B.C. explained that Sunrise would have faced a long road, with political and economic hurdles, while TheAustralian Financial Review discussed the problems for Darwin LNG caused by “fresh uncertainty.” (A. Macdonald-Smith, ‘Timor Sea turmoil complicates life for Darwin LNG’, The AustralianFinancial Review, 12 January 2017).
It was back to the drawing board for a maritime agreement between Australia and Timor-Leste.
On 18 January Al Jazeera’s The Stream hosted a half-hour TV programme on the issue, with José Ramos-Horta, Tom Clarke, Juvinal Dias and Mark Mozkowski. The Australian government declined to participate. (On The Stream: The Stream takes a look at Australia and East Timor’s long-standing maritime boundary dispute, The Stream – Maritime row in the Timor Sea’, Al Jazeera English, published on 19 January 2017).
There followed another statement by the two countries, in which the two countries “reaffirmed their commitment to work in good faith towards an agreement on maritime boundaries by the end of the conciliation process in September 2017.” (‘Joint Statement by the Governments of Timor-Leste and Australia and the Conciliation Commission constituted pursuant to Annex V of the United Nations Convention on the Law of the Sea 20 January 2017’). The statement was reported by the international media. (D. Flitton, ‘East Timor dumps spying case against Australia for ‘good faith’ oil, gas boundary talks’, TheSydneyMorningHerald, 24 January 2017).
Timor-Leste had dumped its spying case against Australia in the international court, raising hopes of an eventual end to the bitter stand-off over $ 40 billion in oil and gas fields. Two months later the arbitration panel formally ended the process. Specialized international publications explained the issue to their constituencies.
Dr. Venturino Giorgio Venturini devoted some seventy years to study, practice, teach, write and administer law at different places in four continents. He may be reached at George.venturini@bigpond.com.au.
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It signals quite clearly that government spending, not monetary policy (RBA interest rate management), is the more effective tool to bring about full employment and maximise the use of Australia’s available resources.
For nearly 30 years now, the Bank of Japan, the nation’s central bank, has been buying government debt (deficit spending), to the point where its current holdings are now greater than the country’s GDP.
However, despite massive injections of ‘created money’ into its monetary base, Professor Mitchell says, “inflation (in Japan) remains low and despite low interest rates, economic activity is hardly booming.”
Mainstream economists seem unable to connect this reality with their more dire predictions that Japan’s fiscal policy over this period, must lead to hyperinflation. It has done nothing of the sort.
For the past 30 years, mainstream macroeconomists the world over, have been predicting the demise of the Japanese economy, claiming it will slip into the sea, that its debt burden is unsustainable, that there are limits to the amount of assets the Bank of Japan can buy.
What has happened is that, “the Bank of Japan continues to demonstrate the categorical failure of mainstream macroeconomics and, conversely, ratify the core principles of Modern Monetary Theory (MMT).”
Each time their predictions have been proved wrong they have been forced to invent excuses, such as closed markets and cultural peculiarities. It’s all hogwash!
What these Economists are really concerned about, is that by buying government debt and keeping interest rates low, the Bank of Japan is effectively preventing the commercial banks using the bond market to make profits.
By not issuing bonds to offset government debt, it is depriving the commercial banks off a risk-free asset from which they can make money. The BOJ has “effectively killed regular trading in the once lucrative bond market.”
It has defied claims that currency-issuing governments like Australia, are captive to the yields in play on secondary bond markets.
How terrible is that?
Australia currently has 5% of the workforce, or 700,000 people looking for work with a further 800,000 working less hours than most would prefer. This represents a huge underutilisation of available resources, yet our government and the media, via their economic “experts” claim our economy is humming along nicely. More hogwash! Our economy is underperforming.
By way of comparison, Japan’s unemployment rate as at September 2018 was just 2.3%
To the further detriment of our underperforming economy, it is just what our government wants. It might appear that they are concerned at the slow rate of growth and the low wages growth, but deep down, captive as they are to the demands of the big end of town, they do not want full employment, or any significant wages growth.
Such economically beneficial activity would impact on the profits of commerce and industry, the source of their political funding. It is corporate welfare by stealth. The state of the Japanese economy, proves that decades of deficit spending and huge injections of money into what was a stagnant economy, does not risk inflation when the injection is correctly targeted.
There is no reason why we, in Australia, cannot do this and achieve full employment, a higher GDP, which itself will attract further private investment and in the process, improve living standards for all Australians.
We can do this, if we can change the mentality that dominates current mainstream economic thinking. But, at the moment, our prime minister is so intent on fuelling an outbreak of anti-Islamic sentiment, for no other reason than to attract votes, that our economy is destined to continue underperforming.
As Bill Mitchell says, “All those commentators who claim that accelerating inflation would result if governments abandoned debt-issuance but continued to run deficits, have been repeatedly shown to be wrong.”
What will it take to get this simply message across to those in treasury who have the power to change government thinking?
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As a committed advocate of Modern Monetary Theory and one who thinks it should be renamed, Modern Monetary System, for reasons I will explain, there have been occasions when I have felt a sense of futility, trying to explain something so simple, but finding myself unable to convince even those who should know better.
Firstly, MMT should be referred to as MMS because it is no longer a theory. It is the way our fiat economy was set up to operate and does operate today. Its implementation took place in 1983 and the fact that it has never been used as it was intended, does not mean it is theoretical.
The fact that we still fear deficit spending, strive to balance budgets, lust for surpluses and consider bond issues as debt, is a hangover from a past era, that of the gold standard.
The fact that we fail to fully utilise our available resources, consider 5% unemployment near full employment, shy away from providing the necessary infrastructure for our industries and neglect our national health and education needs, when each of these represents real jobs and growth opportunities, is a travesty of mismanagement and failed leadership.
Last night’s Q&A which highlighted the difficulties experienced by those reliant on the NDIS, gave us a clear indicator that the government is not even spending its own budget allocation on this vital piece of infrastructure. The NBN rollout is just another example of this failed leadership.
And it seems that no matter how clear and concise we are in explaining the economic reality of MMT, successive governments still cling to the gold standard mindset. Why?
Michael Pascoe’s article in ‘The New Daily’ today, sheds some light on the truth of the matter. In discussing the latest on the never-ending tax debate, something the entire country is heartily sick of hearing, he points to what the government is really doing in pursuing this matter.
He writes, “In the short term, it’s a formula in keeping with the Institute of Public Affairs’ prescription for a new Australia – an Australia with less government, richer rich and fewer controls on markets – especially the labour market.”
He goes on to say, “The IPA has emerged as not just the favoured right-wing think tank, but the government’s guiding light. It is too tempting to not again repeat one of John Kenneth Galbraith’s many golden quotes: “The modern conservative is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.””
We have known from the beginning of the Howard years, and perhaps from some of Paul Keating’s decisions, that it is the rich who run the country. They run it for the rich and they get the best results by supporting conservative leaning parties and their politicians.
Trying to establish a tax system, using confected figures to present fairness and equality, as Scott Morrison has done suggesting average workers are expected to earn six figure sums in a few years’ time, displays a height of arrogance as bold as his government’s self-serving aspirations.
It is a disgrace. But, we know that if you tell a lie, big enough and often enough, people who don’t know any better, will be inclined to believe it. And therein lies the difficulty with people like me who are trying to explain MMT to the average person in the street. How could anything so simple be right. It must be more complicated than that, surely. No, actually it isn’t.
As Michael Pascoe says so eloquently in his article, “In the longer term, flattening our progressive tax system is a tiny part of one of history’s repeating cycles: wealth and power being used to entrench and extend wealth and power until it becomes unsupportable.”
Notwithstanding the difficulties of explaining MMT, there is progress. But it is painfully slow. Much like the NBN. However, one day we will get there, even if it is only a partial implementation. The alternative is the status quo, which, for those who haven’t yet worked it out, is all about keeping the average worker at arm’s length from the rich.
Normally around this time of the year over at The Political Sword we write an article that discusses some of the themes and issues that we looked at through the year that has nearly finished. In 2017, we’re going to do something different.
You may remember in March this year, we announced with great sorrow of the passing of our fellow conspirator, good friend and (there is no other way to say it) really nice bloke, Ken Wolff, who was a regular writer on this blog. Ken’s last article was entitled ‘Watch this Space in 2017’, first published on 15 January 2017.To demonstrate his acute awareness of the political system in Australia and globally, as well as how well he wrote about it, we’ve decided to revisit the article and see how accurate his predictions were. Ken’s words are in italics throughout this article and it has been edited for length. After a preamble, Ken got straight into the subject.
Will the Australian economy improve or continue to stagnate?
In December [2016] we had the news that the Australian economy had contracted by 0.5% in the September quarter. Most of the pundits do not expect that to be repeated in the December quarter, which means we would avoid a recession (which requires two consecutive quarters of contraction).
Australia formally didn’t enter a recession in 2017, however the economy is still not strong due to flat wages growth and low inflation.
The end of car manufacturing will lead to increased unemployment, not only in the car industry but in the companies that previously relied on providing parts to that industry. Couple that with the lack of wages growth (the lowest since records have been kept) and the government will be losing more in income tax revenue, and paying more in unemployment benefit, making it that much more difficult to achieve its stated aim of bringing the budget back to surplus.
Holden and Toyota have now finished manufacturing vehicles in Australia, (the last Australian Ford rolled down the production line in 2016) and while all three companies did and continue to support their ex-employees with employment assistance, the large number of people involved and the necessity to discover new skills has caused significant dislocation.
The economy did not go well in 2016 and the prospect for 2017 isn’t all that good. Even in his MYEFO in December, Morrison lowered the estimated rate of economic growth for both financial year 2016?17 and 2017?18. The new forecast rate of growth isn’t even enough to absorb new entrants into the workforce (usually accepted as about 3%) and that is without considering that the economic growth forecasts for the past few years have proven optimistic. Certainly don’t expect a boom year but how bad it may be, we will have to wait and see.
Well – that’s pretty accurate.
Will Scott Morrison ever understand the budget?
Ever since the Abbott/Turnbull government was elected, and returned last year, the government’s budget deficit has continued to grow. Low commodity prices, over which the government has no control, and slow wages growth, which government policies have actually promoted, have not helped.
Morrison, however, continues to focus on government spending rather than revenue raising. Although he has backed away somewhat from his earlier statement that the government had a spending problem not a revenue problem, his actions have remained focused on reducing spending. (I won’t get into the MMT argument here.)
The government has ignored the opportunity to borrow money at historically low interest rates to fund infrastructure. Although it is now talking more about infrastructure,
To his credit, Morrison did change track to an extent in the 2017 budget with an increased spend on infrastructure such as the Western Sydney Airport. Shane Oliver from AMP Capital reviewed the budget, delivered in May, here. Although Oliver concludes with
The 2017-18 Budget has a sensible focus on housing affordability and infrastructure. The main risks remain around the revenue assumptions and when we will get back to surplus.
It appears it may be at a time when interest rates could be on the rise again — US interest rates are certainly likely to rise during 2017 which may force some other countries to raise theirs in order to maintain their currency.
The US interest rate went up to 1% during March 2017, with further upward movement predicted. However,
The Federal Reserve left the target range for its federal funds rate unchanged at 1 percent to 1.25 percent during its November 2017 meeting as widely expected.
Our Reserve Bank still has capacity to reduce interest rates (although such reductions have done nothing to stimulate the economy so far). If it does reduce interest rates, and the US increases rates, the Australian dollar is likely to drop in value. The government will claim that helps exporters but it will increase the price of imports which may not help our ‘terms of trade’ and will also potentially lower our living standards by making imported consumer goods more expensive at a time when wages are barely growing — not something that would enhance the government’s electoral appeal.
Australia’s interest rate remained steady all year – here’s part of the RBA’s February announcement
At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent
At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.
Will Morrison and Turnbull finally concede that they also need to raise revenue in the next budget? That will be one to watch although I expect that, if so, they will do their best to obscure the fact.
Did Morrison and Turnbull concede – according to Greg Jericho the answer is a qualified ‘yes’
Will there be a new conservative party?
Cory Bernardi is creating a nation-wide conservative movement but not yet formally a new conservative party. It will be interesting to watch where that goes in 2017 and whether it turns into a fully-fledged political party.
The Liberal party will no doubt do its best to stop it happening as it would further split the conservative vote, although that may not be an issue until the next federal election. If such a party comes into being during 2017, it could have serious implications for the government because it has only a one seat majority in the House of Representatives. Even if only one or two Liberal or National members in the House were attracted to the new party, that would create a situation where not only does the government have to negotiate with crossbenchers in the Senate but also in the House to have legislation passed. Although the conservatives already seem to wield considerable influence in the Liberal party room, if they held the balance of power in the House, that could actually increase their influence. That may even be a consideration in the formation of such a party: if they wish to create Australia in their conservative image, having a couple of members in the current House could help them achieve that, or force Turnbull to another election earlier than he would wish.
The electoral implications are that the conservative vote could be split between the Liberals, One Nation, the Nationals and the new party, leaving open the possibility that Labor would lead on first preference votes in more House of Representative seats and have an improved chance of winning them. And it is likely that a proportion of the preferences for a new conservative party would flow to One Nation (and vice versa) before they flowed to the Liberals, so it would be very interesting.
Queensland went to the polls last weekend. While Bernardi’s Australian Conservatives movement has become a Political Party, it did not run in the Queensland election. One Nation ran in over 60 of the 93 seats in the Queensland Parliament at the election and at the time of writing, they have been successful in one seat while the LNP self-immolates over giving them preferences but accepting One Nation preferencing most sitting members (ALP or LNP) last.
In a major organisational blunder, Hanson’s One Nation ‘forgot’ to register for the March 2018 South Australian state election in time. Xenophon’s SA Best and Bernardi’s Australian Conservatives are expected to have candidates.
Will Turnbull remain prime minister?
Personally I think he will in 2017 but 2018 may be a different story — unless he voluntarily decides to toss in the towel, deciding it is just too difficult to govern his fractious coalition and cope with the constant negotiation with the Senate crossbenchers (and potentially House cross benchers) to have legislation passed.
As indicated above the earliest an election can be called is August 2018. I doubt he would dare have another double dissolution before then as that would not go down well with the electorate (but if he loses members in the House to a new conservative party he may be forced to).
Unfortunately Ken didn’t live to see the brouhaha over Section 44 of the Constitution. There are two by-elections already scheduled for December in the seat of New England (‘held’ by Nationals’ Leader Barnaby Joyce who was duly re-elected as he has apparently renounced his New Zealand citizenship and increased his already healthy margin) and Bennelong (‘held’ by the Liberals’ John Alexander on a much slimmer margin, with a high profile ALP candidate and in Sydney, which makes him much less certain to be returned after renouncing his inherited UK citizenship). There are also a number of other MPs and Senators under a citizenship ‘cloud’ although all MPs and Senators have a 1 December cut off to demonstrate their citizenship. This saga still has a long way to go.
With Turnbull’s federal Coalition no longer having a majority of members in the House of Representatives thanks to the ‘dual citizenships’ of Barnaby Joyce and John Alexander in late November, he prolonged the House of Representatives for a week in fear of losing the vote on establishing a banking enquiry on Monday. Turnbull announced a banking industry enquiry on Thursday after a number of National Party members threatened to cross the floor to ensure one was established regardless.
The various claims and counter claims of dual citizenship would have been great fodder for another one of Ken’s specialities, his humorous take on the completely absurd. Ken was the writer behind the backyard bigot, ‘Tiny Napoleon O’penmouth’ and ‘Mal C’od-turn-a-bull who all made appearances (to paraphrase an old commercial) ‘when only comedy would do’
Abbott has spoken against the rise of a new party and will some in the Liberal party see Tony Abbott as the one who can provide a bulwark against defections to a new conservative party or even its creation? Although perhaps not intended, the pressure created by threats of a new conservative party may well enhance the chance of an Abbott return to counter it.
Abbott is still ‘not being destructive’ by outlining his visions to his conservative rump using every media opportunity he can muster. Despite pitiful polling numbers by Turnbull, there seems to be no real appetite in the Coalition to return to the days of a Prime Minister who was ‘relaxed and comfortable’ in brief red swimming trunks (thankfully; due to the fashion statement if no other reason).
Will Trump really threaten the world as we know it?
While Trump may cause problems for the US with his apparently contradictory promises to halve the company tax rate, spend billions on infrastructure and improve the US budget bottom line, their impact on Australia will play out indirectly through the international financial system. Of more direct consequence to Australia could be his trade and foreign policies, particularly relating to China.
Trump may wish to be more friendly with Putin and Russia but he will have to remember that China and Russia are still close, if not as close as once they were. He also sees North Korea as a threat but will have little scope to do anything about it without Chinese support although he thinks that using trade as a lever may also force China to act. He may think he is a good negotiator but he and his appointees will run up against expert negotiators and some, like the Chinese, are certainly willing to play the ‘long game’, something which Trump and his ilk seem unable to do.
The US and North Korean leaders have had an interesting relationship this year. From Trump claiming the threat of North Korea using nuclear weapons ‘won’t happen’ early in the year, through Trump attempting with some success to pressure China to reduce trade with North Korea, to Trump calling Kim Jong-Un ‘rocket man’ with Jong-Un responding with a spray that included the phrase ‘mentally deranged U.S. dotard’. That all happened before the North Korean media sentenced Trump to death in November for the crime of posting a tweet saying ‘Why would Kim Jong-Un insult me by calling me ‘old,’ when I would NEVER call him ‘short and fat’? Who would have though this might have apparently insulted Jong-Un?
Australia may continue sitting on the fence and use ‘diplomatic speak’ to suggest that differences should be resolved diplomatically but that may become more difficult under a Trump presidency. Will Australia be forced to side with either the US or China on some key issue? That will be a difficult position for Australia given that they are our two biggest trading partners.
North Korea certainly had an opinion on Australia’s claimed support for the U.S., suggesting the actions were suicidal, however on the surface Australia seems to be able to discuss issues with both the US and China.
On trade, Trump is keen to scrap US involvement in the TPP which will effectively be its demise. Turnbull has consistently insisted that the TPP is essential to Australia’s future, so what will its demise mean for that future? It will be another piece of Turnbull’s economic plan that fails to materialise — which in the case of the TPP may not be a bad thing.
Correct again but Canada not signing as well was a bit of a surprise (especially to the leaders of the other APEC Countries that had turned up to the signing ceremony in Vietnam!)
The main concern is a potential trade war between China and the US. If the US becomes more protectionist and imposes tariffs on Chinese imports, that may reduce Chinese production which in turn will reduce demand for Australian resources, with all the economic consequences that implies. It could also mean that China sends more cheap goods to Australia that formerly went to the US and that could further undermine what manufacturing we have left unless we also declare that they are ‘dumping’ goods in Australia and impose punitive tariffs which will essentially be biting the hand that feeds us. If this scenario unfolds, Australia will be in a difficult place economically and in how to respond to the challenges it throws up.
In turn, it may also mean that China pays more attention than it already does to developing nations in Africa and the Pacific and that will have foreign policy implications for Australia. We have been cutting our foreign aid budget but if China redirects its effort, we may be forced to do more in that area or accept further growth of Chinese influence in the region — which way will we go?
China announced its ‘One Belt, One Road’ (OBOR) program during 2017, the subject of a briefing note issued by the Parliament of Australia which concludes
Regardless of the credence which one assigns to the various interpretations of the OBOR initiative, progress thus far makes it clear that as Australia becomes increasingly tied economically with China, there is a need to maintain a close watch on the progress of the OBOR initiative globally. It also suggests that Australia needs to adopt a more economically and strategically prudent attitude in determining how the Australia-China economic relationship is to further develop.
Conclusion
The above are just a few of the questions that could arise during 2017. It may prove to be an interesting year both here in Australia and internationally.
All in all, Ken was pretty accurate with his predictions. The related posts for this article are chosen to demonstrate the expanse of knowledge and understanding Ken demonstrated in his writing (and the private emails that help run this site). We said last March we’d miss Ken – and we do.
There is also a personal Facebook page: Ad Astra’s page – Send a friend request to interact there.
The Political Sword also has twitter accounts where they can notify followers of new posts: @1TPSTeam (The TPS Team account) @Adastra5 (Ad Astra’s account)
The neo-liberal right and left in Australia are stagnant, moribund and self-serving though Labor will shift the deck chairs nominally if elected. Nevertheless neo-liberal injustice and inequality will remain entrenched. The economic boom/bust cycle will make sure of that.
My disillusionment and frustration is palpable. Corbyn and the debacle in the US is putting a spotlight on the corporate oligarchic nature of neo-liberalism and its descent into unbridled injustice and inequality. Democracy be damned when they own the media and both parties lose any sense of perspective or critique of a thoroughly discredited paradigm.
Methinks the storm will come before the hopeful calm but unfortunately many will suffer for no reason other than the self-interest of the elites. The clock is ticking, not only for us, but for the whole world as the US war machine and its fawning acolytes, such as Australia, encourage chaos across the planet. The global reach of neo-liberalism is deeply disturbing.
Corbyn, at the moment, seems to be our only real progressive hope. Who in this country will rise to the challenge?
Modern Monetary Theory (MMT) offers a serious non-disruptive alternative however, even though it has strong academic support, the political will to embrace change seems all but non-existent. One thing MMT does is prevent excessive boom/bust cycles and is therefore the architecture around which a party can build stability.
We progressives share this frustration and unfortunately a true leader demands a broad set of skills that require a thoroughly well honed intellect and broad understanding of a whole range of imperatives and most of all parliamentary experience. We can only live in hope. The alternative is deeply disturbing.
With the Australian Federal Budget coming in a month or so, what can we expect from our government and opposition parties which are both fully committed to the false neo-liberal concepts of fighting budget deficits and accepting unnecessarily high levels of unemployment/underemployment? My answer is “Not much”.
At the same time, I see and admire so much thought and effort being given by a handful of activists and thinkers associated with Modern Money Theory (MMT). And then I receive several new messages and memes from other activist groups such as GetUp who it seems are actively working against these very people that I admire so much. I joined GetUp and donate to them because I wanted to help everyday Australians have their voice over the noise and alt-truths of the mainstream media.
How disappointing it is for me to see GetUp continuing to push the same neoclassical economic bullshit in its own campaigns. They complain that the LNP have increased the “national debt” without considering how much worse things might be if spending on welfare and services were cut to reduce that inconsequential number. They fight hand and nail against tax cuts for the middle class and corporations without considering that taxes do not fund government spending. By giving honour to the stupid “deficit” lies they undermine everything they say they are fighting for. They continuously compare the LNP´s claim of “better management” to their apparent inability to control debt levels, without considering that the increasing debt is a result of the automatic stabilizers (Newstart etc) which are the only things keeping us out of a serious depression.
I can understand that MMT is not yet a platform supported by GetUp, but surely they can gain a little education in the matter of economics and stop fighting against us. They can stop supporting the false, orthodox neoclassical bullshit and speak honestly and truthfully about the necessity for budget deficits in appropriate times (like now).
These are the policies GetUp have launched as part of their Brighter Budget campaign: 1. Reform negative gearing. 2. Reform superannuation tax concessions. 3. Introduce the ‘Buffett Rule’. 4. Scrap the capital gains tax discount. 5. Cut fossil fuel subsidies. 6. Impose a super profits tax on banks. 7. Introduce a ‘Tobin Tax’ on high frequency financial transactions. 8. Place a duty on wealthy estates.
All of these policies seek to increase tax revenues, although (to give credit to their wording) the reasons given are mostly to increase fairness and combat inequality. But by making the campaigns lopsided against wealthier taxpayers and corporations, they almost guarantee the creation of a strong opposition against their implementation and their ultimate defeat.
A far better and more effective campaign would surely be to educate everyone, including activists, journalists and politicians, that taxes do not fund government expenditure. And that the concept of a “national debt” and similarities to household budgets are totally meaningless when applied to our fiat currency issuing federal government. As long as terms like a “balanced budget” are given power, force and meaning within our community there can never be fairness or honesty in any budget from any Australian government.
By ignoring Modern Money Theory (MMT), the GetUp organisation is playing directly into the hands of the neo-liberals who are clearly in charge of both LNP and ALP fiscal policies. Not even the Greens acknowledge the total failure of neoclassical economics to manage, describe or make reasonable predictions for the real world we live in.
Not even the glaringly obvious benefits and desirability of a federal Job Guarantee are mentioned anywhere in GetUp´s literature. The horrors and costs of involuntary unemployment (or underemployment) do not seem to exist as a policy worth consideration or mention.
Darren is a leader in educating people in modern macroeconomics. He played a founding role in educating Australians via social media channels and has engaged some prominent Australians on commentary about Modern Monetary Theory. Darren is a member of Modern Money Australia, Australian Real Progressives and has been involved with the Modern Money Network. You can see more of his work at 
Dr. Venturino Giorgio Venturini devoted some seventy years to study, practice, teach, write and administer law at different places in four continents. He may be reached at 
