I have a posting up at The Conversation into which I was very happy to join. It’s been titled, Rudd’s Job Plan Misses the Mark which pretty well says what it says. I have received two emails from possibly the only two people who have read it which I will reprint here, the first very nice, the second not so. But let me start with the more positive of the two. He begins with a quote from the article:
“There was a time when the idea of a job was related to some piece of work that someone wanted done. A job was not a thing in itself but related to the creation of value within some enterprise. One therefore didn’t create jobs as such. What one did was create an economic environment in which one of the limits on production was the amount of labour available.” Correct. And such a time shall come again: this Saturday.
I think that myself. A long hard slog but the repair will begin almost immediately on Saturday night. But then there was another email, not as positive and upbeat as the first.
You have to wonder what happens to the well-studied and diligent Keynesian-leaning student at the RMIT economics department. I think perhaps they are aiming for the ‘Melbourne’ school to take a bronze medal behind Austria and Chicago. The problem is the quality of their ‘research’ versus the aggressive muscularity of their conclusions. We seem to go from assertion to conclusion without the need for any messy, you know, tested hypotheses. Today’s instalment is case in point – lots of assertions without any empirical evidence that a slightly higher uptick in unemployment has anything to do with industrial relations policy. Of course business wants more skilled workers at a lower cost, but when have they not wanted this? For years we have heard dire warnings from the Melbourne Austrians – stagflation, hyperinflation and economic depression. A strike out on all 3. I have said it before – a fund manager investing on the basis of their predictions would be in the street selling pencils from a cup about now. And for all their failures, we continually hear their platitudes as if it’s the dernier cri – not as proven and miserable failures.
A Keynesian-leaning student in my hands, if they understood the theory, would get an A, if they also understood the rest. We do not indoctrinate unlike those who are part of the C+I+G faith-based community. But I must say that anyone who can still think Keynesian economics has anything to offer in the current environment really is not into evidence-based policy making it would seem to me. The point I have made all along is that given the way we have tried to engineer an upturn through deficits and higher public spending, the labour market will never gel and recovery will never become self-sustaining. But he at least did think we were the bronze medal holder after Austria and Chicago. I’d take that.
But as for selling pencils on the street, my walk to work takes me past my own high street and then along Swanston Street. The empty shops for rent make a dismal sight and we have had a continuing increase in public spending and debt since our present government took office. None of this is a surprise to me although I find it deeply depressing. I wonder if it’s a surprise to my correspondent and the rest of the Keynesian brigade who make up 90% of the economics profession, or do they not even notice how badly their economic advice has turned out to be.
Another Comment: And now there is this:
This article seems to assume we are a manufacturing economy, which we aren’t. In fact, only about 8.6% of people are employed in manufacturing, and we are basically an importing economy and we export raw materials. If everyone’s wages were cut, it is unlikely to increase manufacturing job numbers much at all, although it might reduce consumption per person. In terms of overall consumption, we are basically consuming ourselves to death by growing our population through immigration.
Did I say cut wages? It was the farthest thing from my mind. What I want is unregulated wages so that no one is ever priced out of a job because of some arbitrary minimum imposed on the labour market. We have a minimum wage of something like $35,000 a year. Really, how insane is that! It cuts out of the job market all of those people who could be productive at say $30,000 who if they were working would add to our output and make the economy stronger as well as themselves somewhat better off. On those immigrants, however, if they are coming in and absorbing our productivity without contributing anything back, then he has a point although to say we are consuming ourselves to death is going too far. But that immigrants without workplace skills who contribute less than they consume are a drain on our wealth, this is obviously true almost by definition. Only a Keynesian who thought that their adding to demand without adding to supply promotes growth could believe such nonsense, but there are no end of such people and you find them everywhere.