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The Forum > Article Comments > How to get the fair go most of us want > Comments

How to get the fair go most of us want : Comments

By Geoff Davies, published 23/8/2017

It is claimed the neoliberal, free-market regime has resulted in unprecedented prosperity, but it has not.

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Geoff,

If you had an ounce of economic nous you would know that Keynesian economics is based on a free market economy and deals largely with times of higher unemployment and government funding to boost the economy. Keynes was the first to declare that in times of high employment that the economy should be run in surplus. As the situation post war was of devastated European economies and a US economy that was winding back its war effort. Huge expenditure was justified to stop an impending recession and rebuild infrastructure.

Monetary policy deals with times of high employment when government spending simply displaces private spending and generates inflation. As employment in Aus is roughly 5.6% nearing full employment and growth is about 2% Stimulus is not called for.
Posted by Shadow Minister, Monday, 28 August 2017 10:03:22 AM
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Dear Shadow Minister,

ďThe biggest increase over a decade in real income of the lowest 25% of the country occurred from 1996 to 2006 due entirely to free market economics. That an economic pinhead wants to cherry pick and rewrite history to shine a positive light on failed socialist policies is symptomatic of the general amnesia shown by left whinge politicians.Ē

What a crock!

In 1949 China and India were about level pegging in terms of their economies, both countries having been victims of plundering colonialists for many many years. India, being very much a willing adopter of British capitalism, never really developed a sense of the 'common good' which became so ingrained within China. The differences in the trajectories of the two countries has been sobering and reveals just how superior a socialistic foundation underpinning any form of capitalism really is.

Unfettered laisse fare capitalism is a blight on any nation. Its biggest exponent, the USA, has to jail its citizenry is world record numbers just to contain the deprivations it causes.

Socialist policies like Medicare are vital to this nation and the fact they come under constant attack should be of concern to any thinking person.
Posted by SteeleRedux, Monday, 28 August 2017 11:21:03 AM
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SR,

Actually, the reverse is true. Pre 1990 the socialist Chinese economy was moribund, the death of Mao, the scrapping of the iron rice bowl and the wholesale adoption of the free market changed everything. China is far closer to unfettered capitalism than any OECD country. It is capitalism without democracy.

Want to build a factory? get your party mates to evict families with little to no compensation. Complain and you go to a work camp or get a bullet in the head. China is Orwell's animal farm on steroids where the new elite are party members and the people haven't risen up because capitalism has boosted their standard of living and the consequences of protest.

India since the liberalisation of its economy in 1990 has also grown in leaps and bounds with growth generally between 5% and 10%, even recently overtaking China's growth which is slowing in spite of huge stimulus packages.
Posted by Shadow Minister, Monday, 28 August 2017 12:05:28 PM
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Shadow,
"Keynes was the first to declare that in times of high employment that the economy should be run in surplus."
He certainly wanted the economy to be run in surplus in the boom times. However ITYF he wanted all times, not just the boom times, to be times of high employment!

Nowadays, with a floating currency and therefore zero danger of running out of money, we don't even need to run surpluses in the boom times, though IMO doing so is good policy because it keeps interest rates low.

"Monetary policy deals with times of high employment when government spending simply displaces private spending and generates inflation."
Government spending NEVER EVER SIMPLY displaces private spending. If it did, it wouldn't generate inflation to any significant degree.

Instead, government spending competes with private spending for workers and commodities. That competition drives up wages and prices, creating inflation. To prevent this, monetary policy is used to reduce private sector demand.

"As employment in Aus is roughly 5.6% nearing full employment and growth is about 2% Stimulus is not called for."
On the contrary - lots of stimulus is needed. We are VERY FAR from full employment. The 5.6% figure is just the people who Centrelink deals with. But there are plenty more who would work if they had the opportunity but don't meet Centrelink's eligibility criteria or don't think the payments are worth completing Centrelink's requirements. Plus there's a lot of underemployed people.

The last time we were anywhere near full employment was 2008. And at that time there were problems caused by its uneven distribution - in some areas a shortage of workers was causing inflation, while elsewhere there was still a shortage of jobs. A great advantage of using fiscal policy rather than monetary policy alone is that it allows government spending to be targeted to where it's least inflationary and most effective at increasing the employment rate.

As for the 2% growth, that's coming off a low base. We should easily be able to sustain that rate at any time, but right now we could do much better.
Posted by Aidan, Monday, 28 August 2017 8:56:22 PM
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Aidan,

Everyone wants full employment always just as everyone wants world peace always.

Nothing in economics is entirely simple and one does not need CAPITAL letters. The closer you get to full employment, the less that public spending creates jobs or boosts the economy, and considering that full employment to be 4%-5%, 5.6% is fairly close, considering that most of the OECD countries have roughly 10%.

The other major factor in reaching full employment is labour flexibility so in countries where unions make it very costly to employ or fire people unemployment is 9.5% even when the economy is growing, whereas, in the UK where the unions are weaker and the labour market freer, employment is 4.4%
Posted by Shadow Minister, Tuesday, 29 August 2017 9:15:56 AM
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