I’m not a big fan on the media because of the spin, opinion passed off as news, gatekeeping out important stories, etc – and I used to be a journalist! But this one is a cracker… I’ve edited it but you can read the full story below. Written by the ABC’s Gareth Hutchens.
Why don’t politicians want as many people as possible to be employed?
Economists said the government could achieve it by using its spending power to cover shortfalls in economic activity left by the private sector and to lift investment and consumption to the point where a fully employed economy was maintained.
In Australia, it arrived with the Labor government’s 1945 White Paper on Full Employment, which lay the groundwork for official full employment from 1946 to 1975.
But the idea and practice of “full employment” was never universally welcomed.
In 1943, the brilliant Polish economist Michał Kalecki wrote an essay explaining why. Titled The Political Aspects of Full Employment, it became famous, years later, when its predictions came to pass. Kalecki put the problem this way.
Kalecki said the arguments business leaders used against full employment were as follows:
- They disliked government interference,
- They disliked the idea of governments subsidising consumption and making public investments and
- They were concerned about the social and political changes that would result from full employment.
Employers were worried about an increase in workers bargaining power.
“Under a regime of permanent full employment, the ‘sack’ would cease to play its role as a disciplinary measure,” he reasoned. “The social position of the boss would be undermined, and the self-assurance and class-consciousness of the working class would grow.”
Employers wanted ‘discipline in the factories’ and ‘political stability’. This was published in 1943, so attitudes, rhetoric, and the economic environment were different.
In Australia, economics students in the 1960s and 1970s were well aware of Kalecki’s essay. The “Keynesian consensus” of the post-war years was beginning to fray.
From 1946 to 1975, Australia’s national unemployment rate averaged below 2 per cent as successive federal governments intentionally used deficit spending to maintain full employment.
The economy, like economies in other Western nations, had grown strongly for decades. The number of industrial disputes had increased each decade too.
The share of national income going to workers in the form of wages and salaries had also risen, peaking in the 1970s, but then things came to a head.
Dropping the ‘full employment’ approach
Major advanced economies, including Australia’s, were hit by “stagflation” in the 1970s — slowing growth, rising inflation, and rising unemployment.
The complications metastasised through the decade, and business leaders were desperate to find a solution. Full employment was abandoned as an official policy in Australia.
A new policy was adopted: officials would pursue a level of ‘natural’ unemployment that kept a lid on inflation (i.e. on wages and prices). That policy remains in place today.
Following the reform era of the 1980s and 1990s, which was a direct response to the economic problems of the 1970s, industrial action has fallen to its lowest level in the post-war era, and wages are growing at their slowest pace in the post-war era.
Global systems have been deregulated, fixed exchange rates have been floated, high barriers to global investment and trade have been removed, and union membership has plummeted as unions’ bargaining power has been dismantled.
Even if Australia adopted genuine full employment again, Kalecki’s old analysis wouldn’t be directly applicable, but the political aspects of this labour market policy have never gone away.
As Kalecki pointed out, by the early 1940s business leaders accepted that some form of government intervention would be coming after the war to boost employment. They argued that government intervention should be used to stimulate private investment.
“This may be done by lowering the rate of interest, by the reduction of income tax, or by subsidising private investment directly in this or another form,” he said.
Why does that sound familiar?
Full story: https://www.abc.net.au/news/2020-11-01/why-wouldnt-governments-want-full-employment/12836424