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.
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.
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.