"it would seem that self interest policies have not delivered for the social interest."

On the contrary, self-interest policies have delivered enormous wealth and increasing amounts of freedom and choice. During the last eight years alone, adjusted per capita GDP in Australia has risen by around $400 per annum.

There is nothing sacred about employment. Most of us already work a good deal less hard than our parents of grandparents did, and although time at work is increasing, the circumstances under which we work are generally far more pleasant than they were in the past. Part-time and casual work is much more common, and plenty of Australians have discovered they don't need full time employment to secure the kinds of lives they want to lead. The average number of years in healthy retirement is increasing and the number of years spent in school before starting employment is also rising.

The main reason people are unemployed is because manual labour is no longer widely used, and many of them don't have the skills to do anything else. We can retrain some of them, but others will never be able to do a job which will earn them the minimum wage. If it's important for these people to work, then their work will have to be subsidised by the taxpayer; we will, in effect, be paying people to waste their time doing useless things.

The main reason that unemployment has slipped as an issue is that until fairly recent months the unemployment rate in this country was barely above 5 per cent. In public policy terms, shortages of labour, particularly skilled workers became a bigger issue.

I think the author's chronicle of unemployment as an issue over time is also a bit narrow. Increasing welfare and income tax rates since the 1970s have been a big influence. Effectively work incentives have been reduced, and many (particularly married women) prefer to work part time.

The abolition of the CES and expensive labour market programmes (which don't seem to have been missed) would also have been worth a mention.

of course the system has 120,000 jobs available with 700,000 looking for them, the system is failing to provide sufficient employment, its simple....the system has failed over time, and there is no point punishing the unemployed, for being unemployed!

It is recorded that youth unemployment is at 15% today, by anyones measure this is failure. I get it that change is constant, and some is for the better, but still if we assume income derived by employment is the altimeter income distributer then we are failing.

If you think that 5 or 6 % is full employment then those who occupy the ranks of that % should not be beaten up for entrenched policy failure.

Its the policy that needs to change.

Its time for change, as one other polly may have said when he changed direction

Anyone who alleges a dislocation between the supply and demand for anything, without a consideration of the price, seems to be talking economic incoherence. Unless you can explain, Ben? Either there’s something super-basic I’ve missed, or you have?

Also you don’t explain anything about the issue of morality you allege. But perhaps you could explain:
1. If the problem is poverty, or relative poverty, why should the state be the decision-making collective?
2. How can the state be more moral than an employer? The relation of employment is consensual, whereas the state is a monopoly of aggression and this is the basis of all its inputs and outputs.
3. Would your proposal be voluntary? Or backed by aggression?
4. What if people don’t agree to sacrifice their values to pay for your scheme considering that
a. you yourself aren’t willing to fund it voluntarily what you want to force on others, and
b. it’s economically incoherent?

I immediately become suspicious whenever I hear a politician or an industrialist say the word “jobs”.

“Jobs” is now used as a bait, to con people into doing what the politician or industrialist wants.

Do what I want, or agree with what I want, and I will give you a "job”.

But what type of “jobs” are being created?

I recently came across a group of workers who are working 11 to 12 hours a day 7 days a week.

They have no day off at all, week after week.

The “job” is often physically demanding, and requires them to lift heavy slabs of concrete and do a lot of jack hammering and shovelling.

I asked if the company had a Safety Committee, or a Work Place Health and Safety Officer or a Fatigue Management Policy.

Their answer was “NO”.

The company was operating illegally, but the workers could not do anything about it or they would lose their “job”.

They said they could not afford to lose their “job”, because employment was so hard to find.

The group of workers were being contracted by a government department, and members of this government department were quite aware that the men were never being given any day off, and were working 7 days a week for months at a time.

So next time a politician uses a communication cable or a fibre optic cable, they can feel relieved that laying the cable had given people a “job”.

Although the “job” involved working about 80 hours a week for many weeks at a time with no day off at all.

For a farmer's writing, this piece sounds very much aimed for academic consumption. Not a practical word in it, & too many references indicating the author is well read.

I was recently following an internet discussion between a couple of potential Pommy migrants, & expat Poms working in Perth, in the mining & mining support industries. These were all office staff, none ever got dirty producing anything.

The consensus among them was that you needed at least $140,000 a year to live in Perth. It appeared that there were still a large number of these jobs looking for staff.

This indicates to me that it is not a lack of employment opportunity, but a surfeit of people who could not be bothered to get an education sufficient to gain much of the employment available. Hell in Perth these days you're more likely to hear a Pommy accent than an Ozzie one.

As unemployment & parenting handouts became more generous we developed an increasing population whom not even the man from Snowy river, his hardy mountain pony, or his stock whip, could drive to do an honest day's work.

I wonder if he has thought the answer may be to make unemployment, parenting & academia somewhat less comfortable?

Nailed it in one Ben!
We went from a model that created unprecedented general prosperity to one that clearly didn't!
And in the process set in train an economic vehicle with one only, possible destination.
The GFC, or worst economic crisis since the Great Depression.
And given we retain this fundamentally flawed focus on supply, seem to have made ourselves completely dependent on foreign capital?
That unfortunately seems always to include problematic operators, who strip away once only assets/value/wealth, and destroy iconic industries?
Then having done so, move on look for new more palatable victims.
The tiny teeny NBN is already creating more real wealth for Australians, than the entire iron ore industry!
We who once owned all cash cow essential service, a bank, a telco, an airline, with the world's most enviable reputation; and were once the third wealthiest nation on earth; and a creditor one at that!
Have descended to where we were around number 30 the time the GFC kicked in. And as nothing to write hone about, have just not risen, but have been passed by others sinking far further!
And to give credit where credit was due, were saved by the mineral boom and extremely healthy trade with a booming China!
Who seems to have based their extraordinary growth, on largely Keynesian economic policy/principles.
Pragmatism should tell us if it ain't broke don't fix it!
And if it is, throw it out and return to the tried and not found wanting model; and or, something new and visionary, if only to win back our economic sovereignty and complete/real independence!
Rhrosty.

The author overlooks one crucial point about the abandonment of old-style Keynesian demand management in the 1970s. The theory was not supported by the evidence.

Demand-side management was based on the assumptions of the Phillips Curve – that there is a trade-off between unemployment and inflation. Policy makers could achieve a lower unemployment rate if they expanded demand, but the price would be somewhat higher inflation.

This theory was blown out of the water by the “stagflation” of the 1970s, when Australia and many other economies recorded high and rising levels of both inflation and unemployment.

Friedman’s insight was that workers and employers take into account expected inflation when negotiating wages. If inflation is expected to be high, wages demands will be set at a level that matches or exceeds expected inflation to maintain the “real” value of wages. So there may be a short-run trade-off between inflation and unemployment, but in the longer term, inflationary expectations adjust.

Abandoning Keynesianism was not a sign of moral turpitude, but recognition that the theory did not fit the facts. Striving to reduce unemployment by expanding demand is futile and economically destructive.

Incidentally, monetarism in the sense of controlling the growth of the money supply was only briefly in vogue and is no longer advocated by any central bank.

It's time for change.

The stagflation of the seventies was a direct result of jettisoning the gold standard.
Followed closely by fundamentally flawed Thatcherism and Reganism, and already disgraced trickle down theory.
Rather than creating and spreading wealth, this model just concentrated more and more of our finite wealth in fewer and fewer hands; thereby guaranteeing the subsequent GFC!
Simply put, we cannot build wealth with ever increasing debt levels!
None higher than current foreign debt, that is reportedly as large as China's foreign reserves, four odd trillion!
What gives anyone the idea, we can pay this money back!?
Instead, after servicing it with premium prices all over the place; we seem to be asking for more of it as foreign debt, merely masquerading as foreign capital.
Not only that, but most of this money comes replete with foreign operators, repatriated profits, and quite massive tax avoidance!?
For we Australians, that's just more of the same insane lose lose, mad hatter's tea party politics, or an economy that is run the way the inmates would run the asylum?
Probably the place that created impressively sounding terms like a patently meaningless Philip's curve. Or should that read, hockey stick.
Growing unemployment coupled to increasing inflation, is just not possible when simple pragmatism replaces all the flawed theory currently in vogue!
If these people like their theories so much, let them accept personal responsibility for outcomes, like the current foreign debt!
Or the current record domestic debt.
Made worse by equally asinine policies that allow foreigners to speculate in our real estate market!
Where were these people when Spain and or Ireland went to the wall?
Out buying up as much real estate as their privileged political positions, high salaries would allow?
And then we wonder why we seem to be experiencing a housing bubble, or try to understand why we are the only nation on earth with obtuse negative gearing!
The real reason why we now have the highest median house prices in the english speaking world!?
And some want more of the same?
Unbelievable!
Rhrosty.

Rhosty

Australia abandoned the gold standard in 1932. It is a very long bow to blame this for stagflation in the 1970s.

Thatcher was elected in 1979, and Reagan in 1980. Again, a bit hard to blame them for what happened in the early and mid 1970s. Thatcherism and Reaganism were reactions to stagflation, not its causes.

Wealth is not finite. In 1970, the estimated total wealth of Australian households was $104 billion. By 1999, it was $2,254.3 billion.
http://piketty.pse.ens.fr/files/capitalisback/CountryData/Australia/Other/TreasuryWealthSeries/1960-2007.pdf

More recent estimates from the ABS show real average household wealth increasing from $585,264 to $728,139 between 2003-04 and 2011-12

Australia’s net foreign debt is $858,896, or about 55% of GDP. This is more than it should be, but by international standards is pretty modest.
http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/5302.0Mar%202014?OpenDocument

Australia’s net foreign debt is $858,896, or about 55% of GDP. This is more than it should be, but by international standards is pretty modest.
Rhian,
Wow ! Are there any countries that don't have a debt ? Is the whole world in debt & to whom ? Where is that money ?
Ah, I know the money is tied up in incompetence, inefficiency & social services, failed education, a health bureaucracy in tatters & quite a lot is in the futility of defence.

When the entire thrust of a piece on "unemployment" is contained in historic economic theories, you know for a fact that no solution will be offered, only a restatement of the problem in slightly different terms.

Anyone who has ever run a business will tell you that employment results from two critical sources: one, is the investment of time and capital needed to start and run the business. And two, a product that the market will buy at a price that is able to sustain the business.

The problem that we have yet to grasp is that our collective ability to meet criterion two is diminishing every year. As a direct result, the number of people willing to put themselves on the line for criterion one is also diminishing.

But the key lesson still have difficulty in accepting, is that this has nothing - absolutely nothing at all - to do with politics, the political leanings of different governments, or government policies of any kind, shape or format whatsoever.

If we "protect" our internal markets, we raise prices and reduce our standard of living. If we open our markets, we face price competition that drives out the ability to compete locally. Which will eventually increase unemployment (for the reasons stated above) and ultimately reduce our standard of living.

That is why we have never had a sustainable car industry, or a sustainable computer industry, or even a sustainable manufacturing industry of any substantial nature. We survive on growing stuff, and digging stuff up. End of story.

Our only real opportunity to avoid a steady decline is to bring our tourist industry to somewhere close to international standards, exploiting an abundant resource that is competitive with anywhere else in the world. Sadly, we won't actually believe that is possible without government support, such is the prevailing cargo-cult mentality.

Individual
Pretty much all countries are both borrowers and lenders, so in that sense all have debt. A more meaningful measure is net debt (borrowings minus loans), and for this there must be a global balance between net lenders and borrowers. Significant net lenders include Singapore, Hong Kong, Switzerland and Luxembourg.

Most of Australia’s net external debt (74%) is held by the private sector

The problem is the world is now running a current account surplus with the aliens.

http://www.economist.com/node/21538100

Frankly economics is a branch of politics; it is not a science as some people would have you believe. A lot of the data just does not stack up and therefore it not possible to come to any rational conclusions as to what happened and why.

A number of people on this thread have mentioned stagflation of the 1970s. The traditional view was that it was caused by the 1973 oil shock when the oil went up by 400%, but these days that is mostly dismissed and the blame laid elsewhere depending on people’s political beliefs.

The only data that I have ever found useful in making any sense of the economic situation is the demographics of the area in question. There is quite good data in the developed countries on what people earn and buy depending on their age. While I expect the stagflation of the 1970s had a number of causes, I suspect that one of them was the large influx of baby boomers into the work force, who were learning on the job, and as a result every thing started to cost more than it should. As a matter of interest much of the present economic woes in the western nations, may well be related to baby boomers going into retirement

warmair
Interesting article. Of course, a current account deficit is not the same thing as debt, but it raises valid concerns about data quality.

The oil price shocks of the 1970s may have exacerbated stagflation, but they didn’t cause it. The first oil price shock happened in October 1973. In Australia, inflation averaged 2.5% in the 1960s but rose from 3.2% in September 1970 to 9.9% in September 1973. It climbed further, probably exacerbated by higher oil prices, but it was already out of control before the crisis hit.

I agree that demographics can influence economic trends, but a young and growing workforce is an economic benefit, I would have thought.

We need to attack the problem from a different angle and consider the option of providing a job guarantee on a living wage- starting with jobs for young people.

From a neo-liberal POV it will be argued that this can't be afforded. But, we just need to look at the strength of that argument a little more closely. It's always better to pay someone slightly more, and have them do something, than slightly less and receive nothing at all in return. The level of the wage paid to those on JG will set a floor on wages paid to all employees.

A JG would probably be opposed by some on the left who would consider it to be a kind of forced labour. On the right , too, many would argue that it was just 'make work'. But, in a sense all jobs are make work. All wages and salaries are paid from money which originated from government spending. If it wasn't it must be counterfeit! So, in practice, government's fiscal and monetary policies determine who get employed.

If we could provide jobs for everyone, but are worried about the inflationary implications of doing so, we at least need to publicly acknowledge this. Some commentators on this article seem to be unaware of the position.