What is particularly obvious is how inane modern economic theory is

I only look at Ross Gittins to find out just how far off the beam economists are, and once again he does not disappoint: Now we’re trying Plan C to end wage stagnation:

It’s a tacit acceptance of an obvious point many economists (and I) have been making for ages, but the government and its advisers haven’t been prepared to acknowledge: since consumer spending accounts for well over half of gross domestic product, and growth in wages is the chief source of growth in household incomes, without real growth in wages economic recovery simply isn’t sustainable.

The key to rising real wages is rising value added per employed person (ie higher productivity). That many economists (including Ross) think buying things will create value only shows to go you what a primitive subject economic theory remains. Come and see the billion dollar station they are building at the Shrine of Remembrance in Melbourne to see why real wages are going nowhere. If you build what no one is going to buy – a government speciality – you will not only fail to create growth you will diminish it.

Why isn’t that obvious? And it won’t matter a bit whether every single worker on every single project spends all of their income to the last dollar.

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20 Responses to What is particularly obvious is how inane modern economic theory is

  1. FlyingPigs says:

    Plan Z would be repealing every single Parliamentary Law and Regulation in every Australian Parliament so we could start again.

  2. Squirrel says:

    It’s bad enough when this crap is spouted by people who are too young to have lived through what it took to get inflation under control in this country – but there is no excuse for those who are well and truly old enough to remember all of that.

    Happily, though, we need not worry about making our services sector even more expensive and uncompetitive, because Straya is going to capture all the high-skill, high-wage, high-tech manufacturing jobs (shhh! no other countries could possibly think of such a genius idea) and that will pay our way in the world.

  3. rich says:

    It’s bad enough when this crap is spouted by people who are too young to have lived through what it took to get inflation under control in this country – but there is no excuse for those who are well and truly old enough to remember all of that.

    The govt already has a vote on lysenkoism and all the toadies sing from the same hymn sheet

  4. mh says:

    Come and see the billion dollar station they are building at the Shrine of Remembrance in Melbourne to see why real wages are going nowhere.

    Really? The shrine they didn’t want anyone to visit?

    Victoria Police Dogpile on and Arrest Lock Down Protestor at Shrine of Remembrance

    https://www.youtube.com/watch?v=OnTT6NeJxN8

  5. win says:

    Ross Gittens an Economist????? You really have surprise me ,I gave up reading Gittins 30 years ago.

  6. Lrp says:

    Ross Gittins has been spouting this rubbish for ages in the Marxist propaganda rag smh.

  7. Petros says:

    It’s so obvious that Gittins has never run a successful business. Why does Nine persist with clowns like him and Philip Coorey?

  8. Bruce of Newcastle says:

    And it won’t matter a bit whether every single worker on every single project spends all of their income to the last dollar.

    That project is built with tax money. Taxes are taken directly out of the pocket of people who would otherwise spend or invest it. So the government is taking their money and using it for something they don’t even want. That’s supposed to be “investment”?

    And the high taxes the people pay act as a disincentive. Why work hard when the government just takes it off you after you’ve earned it? Why work your guts out on a small business only to pay imposts, fees, payroll tax and one of the highest corporate taxes in the world?

    You want growth and prosperity, the answer seems obvious. Like when Trump reduced corporate taxes, leading to the lowest ever unemployment rate for black Americans.

  9. Matt says:

    Ross Gittens and his side kick Jessica wouldn’t pass economics 101 at university in my day.

  10. Dot says:

    Ross Gittens is not, and has never been an economist.

    He’s a fat, old, retired auditor with uber bogan fashion sense, a gaping maw for free food who just shills for higher taxes.

    All he is, is a barking mad Fairfax Journalist, like Elizabeth Farrelly, Justine Cullen, Clementine Ford or Nick O’Malley.

  11. Mother Lode says:

    I did economics in year 11 (dropped it in Yr 12). We were taught Keynesianism. (The teacher also encouraged us to read The Git.)

    I came away from it all with accepting the Y=C+I+G+(X-M) as reasonable – although I had not realised how spurious the ‘G’ was. We had been taught how fiddling with ‘G’ could offset undesirable trends in ‘C’ and ‘I’. In fact the most important part was ‘Y’. Didn’t matter what happened to consumption and investment. Increased government spending to make up for investment was reasonable. To increase government spending further to increase ‘Y’ was an improvement even.

    And the idea of pushing money around to increase GDP. Everything was about money. Minimal if any mention of the goods and services flowing in the opposite direction of transactions that were the real motive force in an economy. Without cars and books and food and plant etc the transactions would not take place and no one would be satisfied.

    Tax and spend was a worthy strategy.

  12. Shy Ted says:

    Never fear, the wymmins are here – ABC 12.30 today
    NATIONAL PRESS CLUB ADDRESS – Women In Economics: Pre-budget Panel
    In a Women in Economics: Pre-Budget Panel, Dr Sarah Hunter, Gabriela D’Souza and Dr Leonora Risse discuss some of the big economic issues facing Australia in a forum ‘A Budget for the Times’.
    We’re saved!

  13. tgs says:

    FWIW Gittens is actually not an economist, he is an accountant by training and a journalist. Never actually studied economics.

  14. Spurgeon Monkfish III says:

    Y = C + I + (X – M) – G

    Corrected.

    The Git is not, and has never been an economist

    If he was, he would be one of those economists who are wrong about everything all the time, as opposed to the other type of economist, those who are wrong about everything 91.3% of the time.

  15. Primer says:

    Every comrade has an economic plan until it punches him in the face.
    Remarkably, the plan is then rinsed and offered as new goods again and again.

  16. rich says:

    Tax and spend was a worthy strategy.

    And so you were taught in school. IS it any surprise that if we send our children to Rome to be educated, they come back Romans? Believing that Y = C + I + (X – M) + G is part of the Pax Romana?

  17. Roger says:

    The key to rising real wages is rising value added per employed person (ie higher productivity).

    Productivist!

  18. dopey says:

    Often see Ross up at Glebe shops. Quite rare to see him spend any money.

  19. John A says:

    without real growth in wages economic recovery simply isn’t sustainable

    He doesn’t think this through (maybe he can’t?).

    What he should have said is Steve’s point:
    “…without growth in real wages, economic recovery simply isn’t sustainable”

  20. Graham Young says:

    Gittins will tell you that “trickle down” economics doesn’t work. Neat marketing trick to misrepresent and brand with the misrepresentation what you are opposing. So perhaps we should call his form of economics “boot strap” economics. The idea that we can increase net worth just by paying ourselves higher salaries (along with higher taxes).

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