An Economic Blueprint for a Sustained Recovery
In response to the AIMN article, “Unemployment rises with no plans for Growth”, Andreas Bimba outlined a recovery path that provides politicians from both major parties with a blueprint for major industrial, commercial and social reform. His comments warrant a wider exposure.
He writes:
What the Conservatives and also the Labor Party fail to realise is that ongoing government deficit spending can create employment, expand the economy and generate more tax revenue.
The business sector also cannot increase production and investment if wages and consumer demand are static or falling. A growing money supply is needed to harness the labour and talent of the unemployed and the underemployed and to activate dormant economic capacity.
Such deficit spending doesn’t need to be funded by issuing more treasury bonds but should preferably be funded by ‘printing’ or creating money out of thin air in which case interest payments are not needed nor does this money need to be repaid.
If the money is utilised for economic expansion it won’t be inflationary either. Such deficit spending is not black magic and could be thought of as the purchase by the government of shares in the national economy.
The current approach of the banks introducing new money into the economy by providing low interest loans for speculative investment in existing properties and the share market actually harms the economy and increases wealth disparity.
Worthy areas of government expenditure are infrastructure such as public transport, interstate and regional railways, cycle paths, public housing, some roads, redevelopment of cities to reduce energy and water use and renewable energy generation.
Low interest loans and other incentives can also be provided to industry and consumers to improve energy, water and raw material efficiency.
The power of science and technology should be harnessed much more than currently through greater funding of R&D and higher education but with the objective of local industries as well as the wider community being the main beneficiaries.
For example research to reduce the fossil fuel needed for steel and cement production and to improve renewable energy production.
Environmental conservation and health, education and social services are also highly beneficial areas of greater employment. We should also aim to manufacture a significant portion of the materials, appliances and equipment needed for the sustainable economy to meet local demand and for export.
Moderate levels of trade protection will however be necessary in most cases as the rest of the world at the same time will be developing these new industries and aggressively selling on world markets.
A central economic development organisation similar to the Japanese Ministry of Economy, Trade and Industry (METI ) rather than the current destructive neo-liberal Australian Productivity Commission would also greatly increase the chances of success. Singapore is also a good role model for economic development.
Professor Goran Roos, Honorary Professor at Warwick Business School in the UK, has also developed strategies for economic development for the South Australian Government where pillar industries that work closely with government and private R&D organisations and academia are fostered.
Personnel flow freely between business, government, research institutions and academia. These pillar industries aim to eventually attain the critical mass to be world competitive in high value adding, knowledge intensive areas.
New businesses and areas of opportunity are constantly spun off the pillar industries and from the research undertaken but develop in a supportive environment. Renewable energy is a suitable pillar industry. California’s Silicon Valley is an example of this cooperative approach.
Australia’s current neo-liberal preference for low value added commodity export industries will never provide sufficient employment and will increasingly leave us vulnerable to the appalling social costs of global economic recessions.
The most profitable portion of these commodity export industries will however still be important as revenue and foreign exchange earners.
The job guarantee scheme as proposed by MMT economist Bill Mitchell should be implemented to soak up any remaining unemployed.
All of the above economic development must be within the constraints of reducing national CO2 emissions by 6% p.a. as recommended by Professor James Hansen and more generally of reducing our environmental burden.
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With governments lacking the courage to provide solutions, businesses have a large role to play also. Unilever has set the bar high.
Their Sustainable Living Plan has three big goals to reach by 2020:
Help more than 1 billion people improve their health and well-being
Halve the environmental footprint of its products and de-couple environmental impact from growth
Source 100% of agricultural raw materials sustainably and enhance the livelihoods of millions of people
So far, more than 240 factories in 67 countries in its global network have now completely eliminated landfill waste.
More than 55% of Unilever’s agricultural raw materials are now sustainably sourced, reducing the risk to supply – more than half way to its 2020 target of 100%. Unilever is also making significant reductions in CO2 from energy and water in manufacturing, reducing them by 37% and 32% per tonne of production respectively since 2008.
Against the ambitious target to help improve the health and well-being of over 1 billion people by 2020, Unilever is nearly 40% of the way (397 million) to reaching it. The Company has also enhanced the livelihoods of over 1 million people so far, having helped and trained 800,000 smallholder farmers since 2010 and provided 238,000 women with access to training, support and skills.
‘Sustainable living brands’, meaning brands that contribute to one or more of the Unilever Sustainable Living Plan goals and have a sustainable living purpose, now represent half of Unilever’s growth and are growing twice as fast as its other brands.
The CEO points out that the cost to the company of droughts, floods, tsunamis and earthquakes was over 200 million euros in 2011. If only we had people like him to advise our government rather than Maurice Newman and his band of merry flat earthers.
We should reward businesses that play their role in the social contract and punish governments that don’t.
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Andrea Bimba’s comment is nothing more than economic gobbledygook. A neocharlatan plan to extend the ponzi fiat monetary system which, will ultimately fail no matter what grandiose plans or ideas economists can come up with. Economists deal in numbers which fail time and time again to translate into the real world of producing physical products which, requires energy and producing more products, economic growth, requires even more energy.
Growing the money supply erodes savings and reduces purchasing power. This is why wages need to constantly grow. It is a never ending game of never catch up.
“The economy operates within a finite world, so at some point, a problem of diminishing returns develops. In other words, it takes more and more effort (human labor and use of resources) to produce a given quantity of oil or food, or fresh water, or other desirable products. The problem of slowing economic growth is very closely related to the question: How can the limits we are reaching be expected to play out in a finite world?”
Once more, it is surplus energy that enables economic growth. You guys just will never learn.
Physical realities trump economic ideology every time.
Why can’t the neo-cons see the opportunities for making money in sustainable technology?
I really don’t get how stupid these people are – I despair, given that we continue to argue (it sure ain’t debate) we will have to settle for greater than 2 degree global warming because the more we delay, the more PPM of carbon increases – we have done nothing (worldwide or locally) to make any difference. Having survived Black Saturday in the Yarra Ranges, I do not look forward to more of these weather events.
What will the planet’s climate be like at +2 degrees?
diannaart
They do see the opportunity for making money, hence quantitative easing (QE) and modern monetary theory (MMT) which, isn’t really modern at all.
If by “sustainable technology” you are referring to “renewable energy”, there is no surplus energy when all energy inputs are factored.
Growth does NOT necessarily equal more resource use. Did you read the Unilever stats? They have grown while cutting their footprint, their energy and water use. Also there are many growth industries like aged care and education that have little impact on resource depletion but contribute significant growth. Stop the well-worn mantra and look at possibilities.
Great article John. Have been following Andreas and completely agree combined with Bill Mitchell’s job guarantee. It is important to realise that public utilities not only bring in capital they also add to the value of the governments balance sheet. Ne-conservatives act as if selling off public utilities and science based research organisations is some sort of benefit when in actual fact the public are losing not only their assets but the income from those assets. The lies fester and are continually reinforced by a complicit media.
The good thing about MMT it does not leave low wage workers behind, those who are not either capable or willing to be involved in higher education. Just another dystopia type of inequality when a necessary evolutionary cohort of individuals are excluded from the economy simply by rejecting them as unnecessary. We must get used to the fact that IQ, as a percentage of population, is not a choice and therefore stop this mean and nasty devaluing of people who do not fit your specific prejudices and needs. Everyone deserves a place in society and the means to a satisfactory life. The right, and to some degree the left, have gotten so used to policies of exclusion through blame and vilification that they are severely damaging our brothers and sisters who have an equal democratic right to a life of security and comfort.
Once again judgment, blame and retribution, based upon ideological dogma and jaundiced opinions of individual value, reinforce a process of elitism and exclusion for no other reason than to strip the wealth from ordinary people with no regard for their rights as human beings. This is not democracy it is economic dictatorship and totalitarian oligarchy.
Automate industry just to send a cohort of decent citizens into poverty and penury to satiate your dogmatic elitist insatiable greed.
Capitalism, as it stands, is a complete failure as we head towards another bust while the only people to boom during the post GFC period has been the financial institutions and executives who are inflating share prices through buy-backs and creaming off the top leaving the shareholders and public to deal with the repercussions of the next financial collapse.
Kaye Lee
“aged care and education” are growth industries only because of population growth. They do not manufacture or produce physical products and therefore do not contribute to economic growth. They can contribute toward a better society but, are actually a drag on the economy.
Cheers.
To say education does not contribute to economic growth is just ridiculous. And you are neglecting the value of having people employed in these industries. Producing physical products is a small aspect of growth. The services industries and tourism are far greater contributors.
Kaye Lee
Now you are being ridiculous. Without viable industries to pay wages, tourism and services are out the door.
Also, it is not worth educating someone if the resources are not there for them to put their skills to good use.
The past has seen exponential growth in energy consumption which has enabled these things. Those days are coming to an end and printing money can only temporarily mask it.
Harquebus,
You have had quite a bit to say here. However, I for one have had some difficulty in understanding what you are trying to tell us.
For example, you say: “Physical realities trump economic ideology every time.” So does that mean that you have no economic ideology?. What, then, are you trying to teach us if not an economic ideology?
You write of the “real world of producing physical products which requires energy, and producing more products, economic growth, requires even more energy.” So what is this energy – of which we can have more – to create economic growth?How do you measure it if you have no numbers? Is it coal which provides this energy? But we know that burning more and more coal is not a good idea at this time.
According to you, numbers fail. Yet you use numbers, apparently, when you say “…there is no surplus energy when the energy inputs are factored.” For you, there is no gain in the use of renewable energy? This needs more explanation.
And I see that you do not value aged care and education very much because they “can contribute towards a better economy but are actually a drag on the economy.” So are you saying that it is less of a drag on the economy if people are unhealthy going into old age and are uneducated? I fail to see how that works, especially if your aim is to produce more products.
I see also that you would have to use numbers to decide that the resources of the Earth are finite, and so the use of resources is finite as well. This must have an effect on the growth of the production of products – which in turn will have an effect on population. But of course there are plenty of people employed in jobs other than the production of goods; aged care and education employ some of them.
To have no economic ideology seems rather reckless; to have an economic ideology which promotes growth at any cost is clearly unsustainable. Somewhere there is an economic ideology which takes all the difficulties into account. I am not sure your ideas have the answer either.
““The economy operates within a finite world, so at some point, a problem of diminishing returns develops. In other words, it takes more and more effort (human labor and use of resources) to produce a given quantity of oil or food, or fresh water, or other desirable products. The problem of slowing economic growth is very closely related to the question: How can the limits we are reaching be expected to play out in a finite world?”
http://ourfiniteworld.com/2015/08/10/how-economic-growth-fails/”
Just somebody’s hypothesis based entirely on looking at Oil consumption. No data to back it up at all. From diminishing returns on Oil extraction we generalise to diminishing returns on everything! Actually productivity is increasing so this generalisation is contradicted.
I won’t spend more time on debunking the rest.
“A neocharlatan plan to extend the ponzi fiat monetary system which, will ultimately fail no matter what grandiose plans or ideas economists can come up with.”
Grandiose pronouncement. Any evidence to back it up?
The MMT people have hard data, sometimes from the past hundred years, to back up some of their claims. I know who I would trust more.
Guest.
It is the production of goods that enables services like education and luxuries such as tourism.
When factoring physical externalities, that is things like the environment and finite resources, the equations used in economics do not produce the required result so, they are ignored. This is why our environment is suffering, resources depleting and economies are struggling for growth which, is only required for corporations to maintain profits and for governments to reduce their proportion of debt to GDP. Unfortunately, governments can never resist the urge to amass ever greater debt in order to provide ever more promised public services.
Quoting numbers is irrelevant when basic economic equations are flawed.
These might help, especially the first two.
Dr Albert Bartlett: Arithmetic, Population and Energy
h ttps://www.youtube.com/watch?v=e_VpyoAXpA8
“The Ultimate End, whatever it may be, cannot be growth.”
http://www.greattransition.org/publication/economics-for-a-full-world
“Our richness is very much tied to surplus energy availability”
http://physics.ucsd.edu/do-the-math/2015/03/bbc-questions-indefinite-growth/
“By modeling the economy as a closed and circular system, neoclassical economists have encouraged themselves to operate in a methodologically enforced state of denial about the physical roots and ecological consequences of our wealth-creating activities.”
“Economics doesn’t tell us that we need to cut taxes for the rich or cause climate change if we really want to help the poor. And “the markets” don’t tell us that either. Those are the sentiments of some wealthy people, and some politicians who represent them. But they say it in econospeak because it sounds so ridiculous in plain English.”
http://www.themonthly.com.au/issue/2015/july/1435672800/richard-denniss/clowns-and-treasurers
“That this is what the “natural” wages of retail workers should be, and to pay them more would cause unemployment. Somehow, they neglected to mention that when they cheered on deindustrialization thirty years prior. If a service economy leads to a poorer population overall, then why was deindustrialization so good for us back in the 1980’s? Economists are silent.”
“So taxing wealth and distributing it to those below is stealing and immoral. But taxing those below and giving it to the wealthy few is wealth creation. Got it.”
http://hipcrime.blogspot.ca/2015/06/economics-is-fraud-redux.html
“The endless pursuit of economic growth is making us unhappy and risks destroying the Earth’s capacity to sustain us.”
“we’ve all been so effectively sold the line that endless growth is essential to maintain and improve our quality of life. This couldn’t be further from the truth.”
“GDP has nothing to do with economic progress. It is a flawed statistic that imperfectly summarises the money-value of selected transactions over a given period. The fact it is usually positive is a reflection of the temporal difference between monetary inflation and the lagging effect on prices, and has nothing to do with economic progress.
http://www.zerohedge.com/news/2015-06-13/fallacies-gdp
I have lots more if you are interested.
Oh, I forgot. As for a monetary system, I advocate gold, silver and bronze coins or an accountable currency backed by bullion.
Coins or currency can not then be made from thin air.
totarum
Gail Tverberg of ourfiniteworld is not just anybody and has even contributed to this site. I know who I would trust.
“Grandiose pronouncement. Any evidence to back it up?”
Greece, Ireland, Spain, Portugal, Italy, massive amounts of quantitative easing by the U.S. Federal Reserve and the ECB, inequality, economic migrations, the current financial bubble, the bond bubble, massive amounts of government and global debt, China’s horrid pollution and stock market and manufacturing downturn…. The Asian Century?
Want me to go on?
Someone has even recently resurrected “green shoots”. Yeah right!
Harquebus:
As evidence of why fiat currencies will fail you offer:
“Greece, Ireland, Spain, Portugal, Italy, massive amounts of quantitative easing by the U.S. Federal Reserve and the ECB, inequality, economic migrations, the current financial bubble, the bond bubble, massive amounts of government and global debt, China’s horrid pollution and stock market and manufacturing downturn…. The Asian Century?”
Utter tosh! The four countries you have named do NOT issue their own currency and THAT is why they have problems. QE by the federal reserve has not led to any problems that we can see. QE by the ECB solely props up certain banks, just like the QE by the Fed.
And China’s horrid pollution is because they have a fiat currency? Seriously?
“Massive amounts of government and global debt”. So? You are just parroting the neo-liberal “debt-and deficit-disaster” nonsense. Please read something about MMT before making ignorant claims like these.
I have satisfied myself that your grandiose claims are based on ignorance of MMT and a “gold fetish” of the Austrian School, which was properly described by B. Russell : “they take gold out of one hole in the ground and put it into another hole in the ground and say they have become richer.”
totarum
Er, um, you’d better think again mate. There are German euros, Greek euros, Irish euros, Italian euros, Portuguese euros and more. All fiat and Europe is an economic basket case as is the U.S.
https://en.wikipedia.org/wiki/Euro_banknotes
Permission to print the euro currency was, from memory, withdrawn for Greece.
“QE by the federal reserve has not led to any problems that” you “can see.”
The U.S. housing bubble, the bond and financial bubbles, sub prime auto loans and unpayable student loans as well as massive unfunded liabilities and the decay on a large scale of their infrastructure you will not hear about on your telly. The U.S. and Europe are headed for collapse and nothing can stop it and it will bring the global economy down with it if, the collapse in the Chinese economy doesn’t do it first.
http://www.zerohedge.com/
Something else not seen nor heard about on the telly. Why is that? A glimpse of our own future perhaps.
http://www.businessinsider.com/venezuelas-crisis-is-nearing-a-tipping-point-2015-8?IR=T
http://news.yahoo.com/looting-violence-rise-venezuela-supermarkets-171116699–sector.html
http://www.naturalnews.com/050695_Venezuelan_farmers_socialist_government_food_supply.html
http://panampost.com/fergus-hodgson/2015/08/04/venezuelan-inflation-soars-to-800/
I have read enough about MMT to know that it is rubbish. You on the other hand, are gullible and like most, have been lulled into a false sense of security.
Here is something for you. I have offered this link to John Kelly and it is quite obvious that he has not seen it.
http://hiddensecretsofmoney.com/videos/episode-1
When, the global economy returns to growth and prosperity which, it won’t, it will concede. Otherwise, I suggest that you refrain from making comments that you know nothing about. It would be better for you if you appeared to be ignorant rather than to write your rubbish and remove all doubt.
Harquebus:
As I said before: give us a time-line for all your dire predictions, so that they are falsifiable. Otherwise they are just gumph. Just some probabilities will do. OK?
As for Greek Euros etc. -please!! They can only be printed on permission of the ECB which Greece doesn’t control. You are either stupid or being disingenuous.
I understand now why you keep repeating your rubbish here and everyone else ignores it. I shall do the same. Have a nice night!
I think you understand. About the ignorance on display, at least.
But give him his due. He does provide links. Not that anyone reads same.
His ‘insights’ re the Euro explain why.
And the sky will fall tonight.
totarum
Anytime between now and 2017 and thanks, I will.
The main consensus amongst economic doomers is September this year. The reality is, no knows for sure when exactly nor what will be the catalyst.
Ignore me if you like, that’s fine. I have done my duty and can not be blamed.
http://www.zerohedge.com/news/2015-06-20/meanwhile-greece-quietly-printing-billions-euros
“Therefore Syriza faced with empty bank vaults could just command the Greek Central Bank to start printing Euros without ECB authorisation, which would instantly result in a devaluation of Greek Euros that would be marked down in value against other nation Euros.”
http://www.marketoracle.co.uk/Article51289.html
“Though the exact path to the next financial crisis is still unclear, there are a host of possible trigger events that could send the system into a tailspin in rapid fashion.”
http://www.shtfplan.com/headline-news/dollar-vigilante-warns-of-september-2015-crash-there-are-a-lot-of-things-going-on-a-lot-of-crazy-things_04272015
http://michaelsnyder.mensnewsdaily.com/2015/06/the-economic-collapse-blog-has-issued-a-red-alert-for-the-last-six-months-of-2015/
http://www.silverdoctors.com/marshall-swing-global-economic-collapse-coming-in-september-get-ready-now/
Matters Not
It might help if you did read a few of my links. It always pays to understand your enemy which, is me apparently. I do not restrict myself to pure doom and gloom when reading through my daily list. The news that I regularly read from MSM is, in my informed opinion, mostly misinformation and distraction.
Harquebus, what happened to your vow that you wouldn’t read my posts?
As for:
This ‘duty’ notion – is it internally or externally driven?
BTW the advice:
is exactly the same advice you gave me sometime ago. Perhaps you have a ‘macro’?
Seek help!
Matters Not
I don’t recall making that vow however, I’ll take your word for it. I read most articles at theAimn and those that I do, I read the comments including yours but, do not always respond.
Laugh it up. My family and friends used to think the same until things that I was saying came to pass. Now they take my advice. They do not have the time to do the reading and research that I do.
I am a qualified systems analyst and my opinions are formed by listening to and reading articles and reports from various experts in their fields as well as various blogs and other informed sources, except for Keynesian economists. I do read their rubbish and they are a consistently wrong and are a blight on humanity.
My record is good and accurate and I see no reason why I should change my message just to satisfy the delusions of wishful thinkers and techno utopian dreamers.
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