What would John Quiggin’s new socialist utopia look like?

Via John Quiggin at The Guardian:

Socialism is back, much to the chagrin of those who declared it dead and buried at the “end of history” in the 1990s. When the New Republic, long the house organ of American neoliberalism, runs an article on The Socialism America Needs Now, it’s clear that something has fundamentally changed.

The soft neoliberalism represented by Tony Blair, Bill Clinton and Paul Keating has exhausted its appeal, and not just in the English-speaking world. Throughout Europe, new movements of the left have emerged to challenge or displace social democratic parties discredited by the austerity politics of the last decade.

…To reimagine a 21st century socialist economy we need to consider a much broader mix of forms of economic activity than those of the 20th century mixed economy. These include:

  • big business
  • small business
  • government businesses
  • public non-market provision
  • not-for profits and NGOs
  • household production

Under financial capitalism, the standard way of providing goods and services is through big business: large corporations, with an associated network of subsidiaries and dependent contractors. Big business has grown at the expense of the public sector through privatisation and at the expense of independent small businesses through increased market concentration.

At the same time, labour market reforms have reduced the bargaining power of workers and increased that of employers. The combined effects have included increasingly concentrated wealth and power, wage stagnation and slow economic growth. Even the OECD has recognised this.

A socialist program would allocate much less economic activity to big business, and more to other forms of organisation. In deciding what kind of economic activity belongs where, a range of considerations are relevant. These include the scale of the activity, the extent to which it is possible and appropriate to charge market prices, the scope for competition and the relative importance of economic and non-economic motives.

In part this would imply reversing the neoliberal program of privatisation and marketisation. Large-scale capital intensive activities with limited scope for competition, such as the provision of infrastructure, would be returned to public ownership.

We are already seeing the beginnings of this process, with a notable example in the South Australian government’s investment in electricity generation. The Turnbull government denounced South Australia’s policies as those of a “socialist paradise”, sure to lead to economic disaster.

In very short order, however, Turnbull was announcing his own interventions, with the expansion of Snowy Hydro and restrictions on gas exports. We have even seen the suggestion that the commonwealthmight buy the Liddell power station(recently privatised by its state counterparts) to extend its operating life. This is a nonsensical idea, but it illustrates the extent to which the taboo on government intervention has lost its power.

Similarly, we are seeing some attempts to reconstruct the public Tafe system after the fiasco of for-profit vocational training and the Fee-Help system. The Victorian government in particular has taken some positive steps.

A socialist program in the 21st century needs to involve much more than a reversal of neoliberalism. The internet and the information economy have broken the link between productive activity and market returns. Information is a pure public good, which can be shared again and again with no additional costs.

So the production of information (ranging from scientific research to Instagram pictures) has potentially huge social value. On the other hand, the market value of internet activity depends, almost entirely, on the ease with which it can be packaged up with commercial advertising – meaning access is artificially constrained.

The fact that information is naturally a public good creates a huge potential for economic and social benefits of which we have realised only a small fraction. The combination of strong intellectual property laws and reliance on advertising to finance internet content mean that our access to information is artificially constrained. Governments could address this problem, providing vastly increased access to resources of all kinds, from artistic and cultural content to designs to be used in 3-D printers.

But the policies of neoliberal austerity have pushed us in the opposite direction, cutting budgets and pushing public institutions of all kinds towards more reliance on user pricing and advertising.

There is also much more room for voluntary and non-government activity. The neoliberal state, through contracting, competitive tendering and the audit culture, has sought to turn voluntary work and non-government organisations into low-cost providers of government services. In the process, much of the creative potential of civil society has been lost. Expanding the scope for voluntary social initiatives would fit naturally with a socialist program, and this is already beginning with the rise of social enterprises.

The idea of a socialist economy with unconditional access to basic incomes and greatly expanded provision of free services might seem utopian. But in the aftermath of neoliberal failure, utopian vision is what is needed. To re-engage people with democratic politics, we need to move beyond culture wars and arguments over marginal adjustments to tax rates and budget allocations, necessary as these may be in the short term.

Socialists have always seen short-term political struggles as part of a long-term project of transforming society for the better. It is this fact which explains why conservatives have always used the term “socialist” as a bogeyman. It’s also why the term has retained its appeal through decades of neoliberal retrenchment. Social democratic and liberal parties, compromised by their acquiescence in, or embrace of, neoliberalism, need to make a decisive break with the recent past. An explicit embrace of socialism would make that break clear.

Terrific stuff from Australia’s equivalent to Paul Krugman. And lot’s that should be embraced to right our sinking liberal ship:

  • privatisation of natural monopolies is often a bad idea though public ownership also has its issues (see poles and wires);
  • redress for the power of labour is a must, via various mechanisms;
  • market concentration in large businesses is obviously destructive to the public good, something Adam Smith himself explicitly recognised;
  • better public spending is always welcome;
  • and a universal basic income is a good form of debt-deleveraging on the run.

However, there are a lot of policy choices here that do not fall under the banner of “socialism”. Many are, in fact, market-friendly. I’m talking actual functioning markets that promote competition as a utilitarian goal.

There is a hidden assumption underpinning Quiggin’s vision that makes it much more radical than it appears. To run big government investment programs, a drive for full employment, universal basic income etc, you obviously need to be able to run large, very large, fiscal deficits.

So, first you have be able to fund them without causing inflation and losing access to markets. If you borrow a lot offshore as we do then that’s complicated as  Australia’s relatively low public debt guarantees its monstrously high private debt.

Thus, if Australia were to do these things unilaterally then the outcome is likely to be pretty ugly as the nation’s credit worthiness and/or currency collapses. We’d see a very swift adjustment to our living standards.

That’s not necessarily not worth doing if you think that that adjustment is coming anyway, as I do. But it brings me to the second and even more radical point to Quiggin’s shift. For this brand of socialism to work, the very mechanisms that create money in our economy are going to have to change. The private banks that offer cheap mortgages supported by an independent central bank will be at minimum curtailed. In their place we’ll have a central bank working hand-in-glove with the government to print money into existence via buying the sovereign bonds that fund various forms of agreed public income generation – infrastructure investment, basic income, digging holes, filling them in, etc.

And that brings me back to the first point. There is no way this can be done while global markets are still operating on Monetarist principles.

So, that does not mean the Quiggin vision is not coming. What it means is that we are not big nor powerful enough to  implement it by ourselves. It will have to come from overseas fist, probably from the US, after another crisis. Granted, Professor Quiggin may well be writing for that audience.

However, we don’t want to throw out the baby with the bath water. Socialism is better than corrupted markets at managing certain public goods. But it’s not better at other things, such as the most efficient deployment of resources into the cheapest possible production of goods and services for households. For that, market principles such as competition, free trade and meritocracy work much better.

Moreover, do we really want to throw out the principle of individual excellence implied by the socialism rubric? Socialism comes with it own forms corruption, as we know, as government favours on production decisions replace those of an “in theory” transparent market. Do we really want to write a blank cheque for the Canberra carpet-baggers? As well, I’m sure even the most ardent lefty would see the danger of creating a permanent welfare underclass paid for by the central bank.

My own preference would be to see our “neo-liberalsim soft” turn into something much more pragmatic in its approaches to market management rather than become  recognisably “socialist”. That is, we need to inject a lot more of the competition and market transparency that we’re supposed to have now: running monopolies from government control; breaking up private cartels; restoring policy by restricting private influence, and deploying many different fiscal reforms aimed at repairing tradable sectors and competitiveness.

Rather than universal basic income from the central bank let’s put the printed money into free education or specific and gigantic Manhattan Projects, such as huge injections into science, research and development that lifts the lowly paid with new skills and higher wages. Sure there’ll be waste but there’ll also be winners, progress and meritocracy.

That said, I acknowledge that this still needs to come with the curtailment of private money creation to kill financialised capitalism so that its commercial version can flourish again. Much higher capital, Tobin taxes, shifted lending incentives from mortgages to business would do it.

In short, kill bankers not liberalism.

Comments

  1. Hurray! You finally said something about universal basic income!

    It need not be a huge amount of money. The Greens put in a massive carbon tax and then did not give even out $5 cheques let alone $500 cheques. Inequality is soaring and anti-poverty cheques would absolutely help.

    How do you fund it? Bank tax, land tax, carbon tax, tap water tax, sugar tax, weed tax, LNG export tax, oil import tax.

    • Some numbers please!!!!! NUMBERS not just damned wishful BS thinking. Keep in mind the present level of consumption and spending is not sustainable – we’re selling the country to finance all our consumption as it is. So your numbers have to both, account for the NEW money for everyone’ AND correct the last 30 to 60 years (just depending on when you think it started) of BS

    • If Universal Basic Income is ‘sit down money’ we know the outcomes. Social isolation instead of social engagement. A Job Guarantee has more powerful economic and social benefits. The approach is also well developed by Prof. Bill Mitchell. Take a look at http://www.bilbo.economicoutlook.net.

      • ErmingtonPlumbingMEMBER

        The solutions can be eaisly be negotiated,…but it requires proper Democracy and Participation to rip POWER out of the hands of the few,…and have that Power put into the hands of the Society.
        (F*** you Thatcher!,… Society does exist!)

        https://youtu.be/ljaXy1t0I44

        https://youtu.be/qX-P4mx1FLU

        You boys want get the SAP of the ground,…then stop trying to be another Centre Right, Wana be contender.
        The winds of Change are beginning to swing Leftwards,…why not jump on that and offer a genuine left wing alternative to the current Politically Correct, Identity Politics, Culture Waring “Left” that doesn’t know who or what they are really supposed to represent.

        http://jfjfp.com/?p=84387

        A retake of the Labor Party is of course my preferred option.

        http://www.alp.org.au/joinlabor

      • $900/year is not enough to live on. Not even $5000/year. But annual cheques of that nature – to the exclusion of the minority who get paid over $80k – would ease a lot of anguish. Driverless cars and trucks are almost here and from there, they could have driverless forklifts. A tsunami of job losses is almost upon us.

    • On calorific density alone a refined oil/fat tax has more merit than sugar/glucose tax, no to mention the health benefits.

      • Not sure if refined oil causes diabetes. Cane sugar certainly does and I avoid it. I enjoy salty food and do not have high blood pressure (unless I think about 457 visas). Heck, if you do not consume salt, you will die within a week.

  2. I don’t think there’s that much distance between your freed up liberal functioning markets and his revitalisation of the ngo sector as both would make space for a burst of creativity.

  3. ceteris paribusMEMBER

    H&H, this is a fascinating discussion and gets at important structural thinking for the future. I really think there is a book in this topic.
    Neoliberalism is stuffed. A cartel, big business approach with a parasitical investor/ownership class exploiting workers, suppliers, local communities and the commons, and the precious environment.
    Old socialism is stuffed. Monolithic, autocratic structures, uncompetitive, unresponsive, demotivating, unrewarding of effort.
    Way of the future- mutualistic and co-operative structures, worker owned and democratically managed enterprises, exposed to markets forces, promoting widespread individual wealth shares as well as broader social goods and goals as determined by mutual members. Small scale market capitalism for individual members but within a supportive co-operative and social structure..
    Best of both worlds- capitalism and communitarian socialism rolled into one.
    Mutualism and co-operatives are big and thriving and often growing business in some parts of Spain and Italy. The movement was strongly supported by Pope Leo 13th in the late 1800s- who condemned capitalism as theft and impoverishment of the poor but equally condemned the autocratic and “Godless” Communism then emerging.
    Forget the religious connotations and I think the mutualistic structure makes much sense- ensuring the individual a property stake and eliminating the tyranny and exploitation of a passive investor overlord class. A viable and supportive structure for a middle path.
    Worth talking about much, much more.

    • Agree totally. Neoliberalism has both betrayed and destroyed capitalism and socialism in very different ways of course. But the result is that there may well be an opportunity to rebuild from the ground up. The foundation has failed and that is private money creation and regulation (banking) but even below a sound foundation we need stable earth, ‘stability’ this requires democratic reform to flush out all forms of corruption.

      Much work to do by our grand children

      • Would never have got off the ground if the new left hadn’t have totally disconfigured the movements ideological underpinning with the Marcusian garbage on campus in the late 70’s.

  4. GunnamattaMEMBER

    A really good read. I dont actually think it is likely we will see any sort of socialist paradise in our world anytime soon, but it is worth comparing and contrasting the intellectual vibrancy (and the ability to root ideas in the day to day experience) of Quiggin’s piece (and HnH’s) with the fug of denialism exuded by Paul Kelly over the weekend (on the return of left win thinking).

    As HnH points out there is great scope for making markets far more competitive and breaking up concentrations of vested interest which are now suffocating all facets of the economy, but the extent to which Australia could (or ever would) go it alone in this is limited.

    But ultimately the great discontent post 2008 comes back to any ideology (or thought bubble – such as maybe One Nationism) being asked ‘what would it look like?’ and enough people thinking ‘better than what we have’. The in situ crowd – from Kelly (et al) to our politicians (in general) all corporates and ‘elites’ are all still positing the current, with a few tweaks, is about as good as it gets.

  5. [Israeli psychologist Amos Tversky] had listened to an American economist [Friedman?] talk about how so-and-so was stupid and so-and-so was a fool, then said, “All your economic models are premised on people being smart and rational, and yet all the people you know are idiots.”

    (From Michael Lewis’ The Undoing Project)

    Hard to discuss waste after decades of government money thrown at utopian corporatism w/ its attendant egregious inequality, inefficiencies [delivering quality goods and services], endemic corruption, endless and expanding wars, incessant social grooming of entire age cohorts via high powered psychological advertising and marketing, revolving door between the public and private sectors, mercenary and predatory behavior in the name of profit, tis a short list.

    disheveled…. 20+trillion without a hint of inflation to save neoliberalism, from itself, noting the 30+trillion in tax havens… rational thingy or other…

    P.S. Btw is John Quiggin a neoliberal – ???? – cuz Krugman has a propensity for regurgitating neoliberal dogma – truths unabashedly, don’t slimeball the guy with false equivalencies imo….

  6. reusachtigeMEMBER

    We need a new General MacArthur to purge the rising communism in this country. It’s a massive attack on freedoms especially on profit maximisation!!

  7. Kill the rentier class and the productive economy shall flourish. True! Make no mistake, the next crisis will see the rise of the socialists once again.

    Juxtapose government enterprise against current private sector enterprise? Which costs the people more in the long run? What point is there in magnified efficiencies (assumption) at the productive level, when human greed places a 400% mark-up on it at market? All of which is funnelled toward a miniscule minority.

    If the neo-liberal experiment has shown us anything, it’s that over the long term, the private sector, using it’s control of either capital intensive forms of production or critical utilities/services, will seek to rape the people at every turn, all in the name of ‘liberalism’ (deregulation, profits, greed).

    Quiggin’s is dead-on imo.

    • migtronixMEMBER

      LOL!!! If privatisation has shown us anything it’s that governments suck at everything. See NBN

      • LOL!! Except you, me and the shit slinging monkey (also, you) know that it was cannabilized by the LNP (corporate boot lickers).

        Look to energy or existing communications to see what a winning success the private sector can create for the Australian people.

      • migtronixMEMBER

        Energy? Last I heard the global spot price is significantly cheaper than the government mandated abortion we have now.

        Communications? My mobile service is awesome, the NBN is shit, and no I don’t know “it was LNP” because I remember writing to Stephen Conroy, it’s his abortion

      • Mobile phone network is good because we have competition between 3 providers. NBN is stuffed because it has to protect Foxtel’s monopoly.

      • That’s right Ronin, but let’s go back to Telecom so Sweeper can have his 2800 baud rate “social democratic platform” back…

      • “government mandated” bwhahahaha, give me a break!
        Global spot prices you say? Go and ask the end Australian consumer what they think of the current energy market compared to the old government owned supply chain.

        Our existing communications network would still be busted up copper without the NBN. That’s what the private sector gives you. Ask former “3” (as well as the other major’s) customers what they thought of private sector mobile coverage 5 or so years back before the government regulator gave them an arse whoopin?

        I don’t give a toss what you think of the NBN under labor, it was a hell of a lot better than what the current government has given or what we’d have received if we’d left it up to the private sector, especially when you leave the silo’s that are Sydney/Melbourne.

      • “”LOL!!! If privatisation has shown us anything it’s that governments suck at everything. See NBN”” – even most Conservative voters polled in recent years support a return of railways in Britain to public ownership. Privatisation in the UK has resulted in extortionate poorly regulated private monopolies. Most people in Australia are against it too, for much the same reasons.

      • Mobile phone network is good because we have competition between 3 providers.

        The mobile phone network is only good if someone else pays your bills or you have low data requirements.

        And there’s really only two competitors, because neither Optus nor Vodafone can provide a service comparable to Telstra, who sits alone at the top of the tree.

      • migtronixMEMBER

        Lol the only busted copper was owned by the government, genius. Everything from mobile to the cable I used to have *sniff* or microwave up links was brought to you by the private sector, and yeah it’s expensive but at least it works. When government does it its expensive and broken.

        See NBN 🙄

      • lol, what the hell have you been smoking mate? Here I was thinking Telstra owned the old copper network pre-NBN. Did I miss something, did the sale of Telstra not go through?

        Back on planet earth, the rest of Australia worked with ADSL pre-NBN. Can be daunting climbing down from your ivory tower, but it might provide you with a view of life outside the city center. You’re locked into an argument with me on the merits of private communication investment, but as already said, we both know that bereft of the NBN (not just from it’s direct impact, but also as a competitive incentive), we’d be mucking in the mud on internet access/speeds at an international level. Preempting your snarky retort on the NBN competing at the international level, remember what we had before it…

        It’s ‘broken,’ because the LNP (privateers) got their grubby hands on it.

      • ….you slam public sector investment on nationwide communications, but conspicuously ignore the climate prior to the NBN. One wonders what miraculously perfect mutli-billion dollar investment Telstra might have made? And at what cost to the Australian consumer moving forward?

      • Given the forces arrayed against it, it’s amazing the NBN has progressed as far as it has, and works as well as it does.

  8. A great read but….Why would the elite, including politicians and big business, willingly give up their power? Increasing serfdom for the rest of us (aided and abetted by technology/robotics etc,) is more likely. Come in Mr Morris……

    • As the recent turnover of our governments shows, in the end the people decide on governments not business. When someone bright enough strikes the right cord then rentiers will be history.

      • Fanciful dreaming HnH, people will always sell their soul for money, hence business will always have politicians at foot.

      • Where goes the AUD and inflation in the circumstances you allude to? You have more faith in democracy than I H&H !

      • @Wiley Wolf, all our physical actions start as a thought in the mind so there’s nothing wrong with dreaming of what could be.

        One can quickly check whether a party allows itself to be influenced by non membership revenue sources. All of the currently registered parties I’ve checked are in that boat, even the new ones some here are a fan of.

        There are examples of individuals starting successful political movements that where doing it for non financial reasons and weren’t dependent on donations. There was a particular one in Germany a while back that did quite well this way which you can probably guess which one it was.

        Deal with the debt based money creation problem and put it toward free education etc as HnH says and we’d be doing quite well.

        I don’t get the logic of a universal basic income. Sounds like a bandaid fix.

        If we deal with the fact that most economies have one of our essential living costs jacked up through the roof (here housing ..USA health would be an example) and dealt with money creation and stopped incentivising unproductive investment in landlordism I can’t see how we would have an unemployment problem. Thus no need for a “Universal Basic Income”.

      • Dave
        Harry Potter has a potion”Felix Felicis”, which works like Bundaberg Rum, whereby everything the drinker attempts, they think, will have a good chance of being successful.
        I’ll put a helpful article in links in the PM

      • @Wiley Wolf

        Expectations / probability of success is a different topic.

        Much easier to be talking about this stuff than doing the action.

        Do what I can in my spare time is all I can do.

      • I don’t get the logic of a universal basic income. Sounds like a bandaid fix.

        The logic is that eventually we’re going to be in a situation where the vast majority of people have pretty much nothing to do, because there’s nothing they can do a robot or computer can’t do better.

        (That said, for the moment I am a proponent of a jobs guarantee. We ain’t there yet.)

  9. Guys hole in your story, all those proposing this socialism don’t have any access to the money to make it work and those with the money are not going to hand over any to anyone who is going to give it away.
    Since biblical times and before, the poor have always been with us, it is a feature of our civilisation, and that is how it will stay.

    • You make it sound like socialist constructs have not and do not currently thrive WW.

      The assumption is that the next great crisis, likely a post-QE crash, will see the ermergenence of socialist movements. Even before the crash has happened, we have the likes of Sanders, Corbyn, Mélenchon.

      All that protects that small minority and their control of the wealth is the apathy of the people. When that is no longer present?

      • when apathy is no longer present??? the majority reason that straya is in its moribund status is from apathy.
        commercially, sportingly personally. We cant even win a game of cricket
        the whole nation is a take over opportunity to any one who will ave a go.
        Wiht all this abundance there is no excuse for being poor. asking for handouts, wow???

      • Translation, the illusion of wealth has not been shattered and will never be shattered; aka it is not an illusion, we’re all doing bloody great! Neo-liberalism worked! Nothing to see here, move along.

  10. So we currently have unlimited private money creation (or at least limited only by how deeply the great collective of borrowers are willing/able to hok themselves) allowed under special license and privellage by the sovereign government, yet the sovereign state would have trouble with fiscal deficits in it’s own currency of issue – an abstract identity that arises purely out of the legitimacy of said sovereign state?

    There’s no way our state would not be able to do it – the current way only happens because the state allows it. We are simply not as hostage to global financial markets as the received wisdom of the last 30 or so years tells us, a large part of it is a political and ideological choice. The tiny nation of Iceland rejected demands by international finance to crush it’s people and economy for the banks benefit and the country has since thrived.

    Agree that those who the state voluntarily handed the reigns over to will never willingly relinquish their fabulously privellaged position. But expansion through private money creation via ever-expanding private debt is a dead-end.

    There should be no illusions at all that the current situation is not the result of some invsisible hand but rather of consciously exercised ideoligical choices made by the political elite over the past 4 decades or so.

    To that end, significant parts – I do not say all, very obviously it wasn’t all – of Quiggan’s vision do not merely describe a vision but a memory of something that actually existed here post WW2. It wasn’t perfect but it worked.

    Make no mistake that this is perfectly do-able for our sovereign nation – all that is missing is the political consciousness of the prols and the will and incentive on the part of a corrupted political elite who benefit from what we have now.

    • Strweth!!! After years of discussion here on this site we are back to this crap that we can print unlimited money with no consequences. No understanding of the interaction of government or private deficits with the external account and currency value! One day, I don’t know when, we will run out of assets to sell to foreigners. What is generally proposed here, under the great socialist agenda, is free money for everyone – one thing you CAN bet on will be that the collapse of living standards will be accelerated in this particular utopian vision.
      Hopeless!!

      • Note Leftee I did not mean that as a particular criticism of what you said. I’m critical of tripe such as that written by Quiggins here. No facts! Nothing! What is needed is a realistic assessment of where we are at and what will happen as reform is attempted. Rose coloured views that it isn’t a problem because we can just print all the money we need is just plain BS.

      • What is suggested here, is that we don’t sell off said assets to foreigners, but instead have it in public hands again.

        Under the current regime, the taxpayer either builds and then sells off assets to private interest groups (with continued taxpayer support) or the private interest groups build it in their own right using taxpayer money (with continued taxpayer support); look no further than the Adani farce…either way, the taxpayer pays for an asset that is then owned by a private entity, who subsequently rapes the humble taxpayer.

      • Brenton, very many assets which are foreign owned are listed on the ASX.
        if you have the money you can easily buy em back.
        how about the frogs looking to buy our hotels – resorts so now the profits from our holidays, even, go off shore.
        why cant strayans buy it instead and maybe time share it.
        nah shee’ll be right.

      • bolstroodMEMBER

        Way back when, there was an idea called Social Credit, it may have origonated in NZ
        Basically the entire improvements of the country were valued and that amount of credit issued.
        Build a new bridge for $xmillion, add that much cedit to the system etc etc
        It never flew, but has some positive aspects that may well be of interest in this new “Socialist “paradigm.

      • Taking back the power of money creation from the banksters / elites to the government, does not mean allowing the government to print unlimited money. In the current world even without the power of money creation, the US government is already printing unlimited money through borrowing it from the banksters / elites.

        What taking back the power of money creation does, is it changes the monetary system from being based on debt (FUTURE WORK) to money based on PRESENT WORK. In the current system all money is borrowed into existence either through the government, private sector or people taking on mortgages. Money created from debt needs to be repaid in the future, therefore by design it is a monetary system where the future pays. The other problem with this system is that it will always require someone or some entity to be in debt, if no one is in debt there will be no money. The purpose of money is to easily facilitate trade. When you have the unit of trade tied down to debt, you have a system which by design creates artificial scarcity. In the past when there was actual scarcity of resources and periodical jubilees (which creates debt free money), this system worked. In the current world where technology has overcome scarcity, debt based money holds the world back since it creates artificial scarcity. Giving back the power of money creation to the government means that money instead of being based on FUTURE WORK, it becomes based on PRESENT WORK. Every dollar the government gives to someone (excluding unemployment and pensions) is paying someone for work being done in the present. Money that does not need to be repaid to the banksters / elites and in turn doesn’t directly enrich them or concentrates wealth in their hands.

        Obviously inflation would need to be monitored properly and just like the current system, where central banks target 1-2% inflation. The government would only be allowed to create/spend as much money as to leave inflation within the target. Any extra money required would need to be collected as taxes.

      • Lurker
        You are ignoring the debt created in the external account. Whether money is created privately or by government there is little difference in this regard. Perhaps, actually, if the value of the currency is not artificially inflated as per, especially, Aus then the private sector may allocate better.
        Does the private sector currently actually create money? The answer to that is almost definitely no if the full circle of transactions and time lag is taken into account. The RBA is the only body that can actually ‘create’ A$. From a macroeconomic viewpoint we can conflate government and the RBA so, in effect, it is n the government that actually creates the money.
        Private Banks can create but when that money comes back around and ends up in the external account it needs to borrow offshore to fund itself. It is the artificially high value of the currency that allows that. Do private banks recklessly lend and borrow in the face of that artificially high currency? You betcha! Is the political system corrupted to an extent that allows the welfare of future Australians to be so recklessly wasted just to boost FIRE sector profits? You betcha! Is the population selfishly voting for this corruption just so they can have more SUV’s and ibloody phones etc? You betcha?
        So should a government run a deficit to put money into private hands – i.e. lower down the economic food chain? Yes of course it CAN however while the government runs a deficit we cannot allow the private sector to run a massive deficit at the same time. That is how we have arrived at the situation we have with massive external debts and most of our important assets i.e. mines and core businesses, in the hands of foreign interests.
        So, if the government runs a deficit interest rates MUST be such that the private sector saves and runs a surplus.

      • When the government creates and spends debt free money, it does not need to deficit spend by issuing treasury bonds. Debt free money does not need to be repaid by the government. The government needs to repay treasury bonds by collecting taxes or selling off public assets.

  11. Quiggins article is good. He is right that Labor needs to make a decisive break from Keatings neoliberalism. One way to do this symbolically would be to expel Keating from the party. Then the Keatingites need to be purged – Wong, Husic, Feeney, Bowen , Burke etc.
    Then adopt the traditional social democratic platform again. The media will hate it. Who cares no one takes them seriously anyway. No one reads Bramston.
    This can’t be that hard; despite the Keating disaster as far as I know the socialist objective from the 20’s still sits in the party platform ‘socialisation of industry, production, distribution and exchange to the extent necessary to eliminate exploitation and other anti-social features in these fields…’ maybe it’s time to recommit to it.

    • migtronixMEMBER

      And pray tell what are these “traditional social democratic platform”? British Rail? Its not 1890s grandpa

      • Yeh lets do politics based on what’s cool. Last season was Trump, maybe a bit of “private fiat” hate. That’ll go down a treat with the identity cultists on social media. What about tax and redistribution? Is that trending on social media? Good I’m for that then.

    • Sorry Sweeper the Quiggins article is ”not good” (I don’t normally disagree with you as I’m really only interested in numbers and fact) There is not a single number or fact from the beginning to the end – just regurgitation of old stupid crap that has all been written before. There is not a single fact nor new idea from beginning to end.
      Sweeper “This can’t be that hard” Sorry mate but the FIRST thing that has to be recognized is that it will be HARD. We agree on the the whole Keating idiocy which has now been distorting the economy and society for about 30 years. However Keating was just reacting to the idiocy of the previous 30 years which had presented the issue of either taking some hard decisions and actually reforming the structure of the economy or to just let the debt demons loose. He chose to let the debt demons loose. The damage done is unimaginable to nearly all. It will only be apparent to most either when TSHTF or some well meaning idiot tries to reform.

  12. migtronixMEMBER

    God this all such drivel – if information is a public good what’s with all the surveillance?!

    Manhattan project was extremely brain intensive, good luck with that down-under…

    We don’t live in an era where you need masses of people to achieve something, you need targeted skillsets and flexible credit. The masses of Straya are not technically competent for this new paradigm, I should know, I work in senior IT position and at least half of the workforce aren’t Australian. The Australians are found in marketing…

    • @Mig

      Competence in IT. Are you kidding? Whether Aussie or not (and I deal in procurements with both), you can’t find competent IT people. They are too busy chasing their own tails, rather than addressing larger more important issues.

      • migtronixMEMBER

        And yet miraculously your apps work, but maybe if you want to be more specific with your lament I can help.

      • casewithscience

        @Mig

        Not as specified…..

        I think IT guys are fine doing a single app running its own processes. They are not good when it comes to having to implement in a crowded environment. I have over 100 apps running on stack against a single data format. Vendors are regularly missing implementation requirements and just free texting into new tables. Absolutely useless for a massive system. Never seen a vendor not whinge about the problems and just try to do their own thing.

  13. For Labour to remain an essential element in the provisioning of Products or Services, Labour itself needs to remain Valuable.
    We’re at the turning point where additional Labour creates a net Negative vector for production / productivity, humanity has never before stood at this junction, we’re looking at a world where “we” are simply not necessary.
    What does this mean? Truth is I’m not sure. I suspect it means that Labour (as in us) will make itself (ourselves) valuable by deliberately interfering with the process of Automation. Labour will in effect become Productivity (systemically valuable) by destroying our production capability.
    The only question in my mind is: Is our Labour force sufficiently skilled to execute this plan? my gut says no.

      • Me a Luddite, now that’s a laugh.
        What I’m saying is why wouldn’t people react this way.
        Why wouldn’t an unemployed truck driver continue driving his truck only now targeting Uber self drive cars, each one he squashed would put little more than a scratch on his bumper, $100K damage to their “productivity” economy fixed with a can of touch up paint from his perspective.
        Why wouldn’t ex factory workers sneak back in at night and take deliberate actions to disrupt the automation that replaced them?
        Why wouldn’t ex IT workers create/leverage deliberately created system weaknesses? This view of fully Automated coding AI machines writing code for other AI machines is such a crock, I’m not saying that automated coding wont happen just that the code these machines generate will never understand ALL the possible ways that humans will find to deliberately interfere with their AI generated perfection.

    • ErmingtonPlumbingMEMBER

      For a long time, esp in the Anglo Sphere, the Working and middle class have been encouraged/indoctrinated into thinking of themselves as individual Consumers, their Identity based on what and how much they can consume, leaving little place for workplace Solidarity or Identity.

      If employment is going to collapse,.. then Techno Feudalism is our almost gaurenteed future, if we maintain our current form of Plutocratic electoral dictatorship.
      The POWER to decide what what will and won’t be regulated or allowed, is what everything will hinge apon. If people don’t wake up and challenge this growing Global Coporate Plutocracy then a smooth transition from wage slavery into techno serfdom will occur without any real fight.

      What a practical solution to fight all this?
      How about something like Ubers booking system being Nationalised on a Nation State level with ownership of selfdriving “Uber” cars, only available to citizens and ownership limited to only 1 or 2 vehicles per Citizen.
      Could be done with the stroke of a pen.
      Same for News papers, TV, Google, twitter, and Facebook Ownership concentrations, break up and anti trust these companies to death!
      If we are required to accept all this diversity at the working class end of town, why not forced diversity of Ownership of the capital, that benifits from all this technology that has been funned and subsidised by the Democratic Nation state for centuries!

      Requires people to demand what they want,… Consumersim has many forgetting what that is.

      Can’t have a proper Left/Right dichotomy without a proper Left.

      https://youtu.be/qX-P4mx1FLU

      • migtronixMEMBER

        And who exactly in government is going to run this Uber scheme? Ex-union “leaders”? Who Ermo?

  14. “The private banks that offer cheap mortgages supported by an independent central bank will be at minimum curtailed. In their place we’ll have a central bank working hand-in-glove with the government to print money into existence via buying the sovereign bonds that fund various forms of agreed public income generation – infrastructure investment, basic income, digging holes, filling them in, etc.”

    This over complicates the reforms that are required.

    The RBA could buy government bonds directly for the purposes of funding new activities of the government but a simpler starting point would be to buy the bonds directly and fund tax cuts for the lowest income earners and some increases to social security recipients.

    Until there is a clear demonstration that all the important tasks that need doing are being done by robots we should NOT be assuming that we cannot fully employ all able bodied people in a productive manner.

    Reducing taxes while maintaining the current level of government expenditure will generate fiscal deficits as large as we require and WITHOUT an interest bearing debt burden if the government bonds paying 0% are sold to the RBA directly and they remain non-transferable.

    And yes unproductive capital inflows MUST be tightly restricted to ensure that the exchange rate reflects our trade performance and not our capacity to sell off assets and claims on our future incomes (public or private).

    As for the activities of the private banks, the curtailment of their credit creation operations will be necessary simply because if they continue to create credit as they presently do we are likely to suffer from a rising rate of inflation due to the combination of the larger fiscal deficits and private bank credit creation.

    The simplest way to start limiting their credit creation operations is to regulate those operations to ensure that any credit they do create is limited to the creation of new productive capacity. That means loans where the security is existing assets will be limited either by volume or availability. There are plenty of non-bank methods of securing loans using existing assets and that is the way forward for those who wish to borrow using their existing assets as security. The price of those loans will reflect that they are not getting an effective taxpayer subsidy which is what happens when private banks create credit secured by existing assets.

    The private banks will be increasingly restricted to credit creation that involves new productive capacity with lending secured by existing assets heavily regulated and/or left to the non-bank lenders.

    If needs be, and I think it is likely, private bank credit creation could be abolished completely and all lending and investment would then be conducted by non-bank financial organisations.

    None of the above is difficult or involves radical reform. In essence the system we had prior to the effective deregulation of private bank credit creation was such a system.

    A lot of people overlook that prior to financial system deregulation we had TWO major ways that the public sector could create ‘money’.

    1. Fiscal deficits

    2. Credit creation decision by publicly owned banks like the commonwealth bank. Lending decisions by the old Commonwealth development bank were designed to encourage the creation of new productive economic capacity.

    The sale of all the publicly owned banks removes option 2. We could bring back option 2 but a more practical approach from this point of time is likely to be:

    1. Directly financed fiscal policy

    2. Private bank credit creation restricted to clearly productive purposes

    3. A public savings bank option so that savers have a public option for saving – Australia Post could supply these services.

    This debate will not advance if people insist on running hysterical hyperbole about the alternatives or over complicating what is required.

    The reforms are not difficult and we need to start talking about them now.

    • Reforming negative gearing isn’t difficult either, in terms of the Bill that would need to be passed…

    • There’s a positive with the money creation reform compared with other necessary reforms such as negative gearing, capital gains tax etc.

      That positive is that it’s possible there will come a time at some point where the reform could solve an immediate and pressing problem.

      If and when our housing market turns down.. and the credit creation process goes into reverse, credit growth turns negative instead of positive etc, then unemployment will start rising (as Steve Keen shows), GDP drops etc.. won’t be happy times…

      It’s that point in time where the people and those that currently occupy our parliament may be more receptive.

      As total money supply starts shrinking there needs to be a Bill ready to be enacted which will inject non debt based money into the system.

      • David,

        Yes, I think that a housing crises might stimulate more discussion and possibly action but there is a more pressing concern that I think might drive action sooner.

        In essence what we are talking about is unproductive investment being encouraged over productive investment.

        Doing that is fine when we are a rich developed country and can afford to fool around speculating on asset price bubbles.

        But that is not a costless exercise as non-productive investment in excess eventually drains the productive energy from an economy and wages and incomes decline.

        Western countries – especially the Anglo-Saxon economies are starting to feel the consequences of living off the productive investments of previous generations and they are watching rising economies that are still directing investment to productive purposes.

        Addressing the issue is not simply a matter of doing the right thing. It is about avoiding a slow decline and decay.

        I think the rise of China and other countries is and will continue to be the thing that ‘wakes us up’. Hoping that they will catch our disease and start spraying money at speculation rather than productive investment is wishful thinking. China saw what happened to Japan when Japan adopted “Wall Street” thinking in the 1980s. They will not make the same mistake.

        I have tidied up and extended my comment above.

        https://theglass-pyramid.com/2017/10/10/socialism-with-a-spine-is-that-the-only-alternative/

      • David,

        And you are right about the politics as well.

        Any policy that directly targets asset prices or even close to them – like negative gearing / CGT reform runs large political risks.

        Whereas credit creation regulations work less directly and less visibly and are much harder to “finger” for political purposes.

        We are seeing this right now where APRA has actually intervened in the credit creation process of the private banks and stopped the Sydney housing market in its tracks.

        Driving private bank credit creation towards new productive capacity (such as housing – in the absence of crazy rates of immigration) and away from lending secured by existing property will have substantial impact on house prices but it will be very hard to politicise. Plus the volume control on credit creation is easy to control by regulations on price, quantity and availability or all three.

        Defending credit creation that promotes new capacity should be a pretty easy sell as well.

        It avoids the problems of the RBA cranking on the target rate and of introducing explicit legislation like NG / CGT reforms.

        As we can see in Perth – a substantial buffer stock of available housing (residential tenancy rates that start with a 4 or 5) kill the speculative mood effectively and causes prices and rents to soften. Without any change to negative gearing laws or increases in the target rate by the RBA.

      • If your trade performance is chronically unsatisfactory there is no such thing as an injection of non-debt based money. It is impossible.

      • @flawse

        Source: RBA > Statistics > Statistical Releases > Financial Aggregates > August 2017

        As at August 2017:

        M3 money supply in $AUD is $2,047.7 Billion
        Currency in $AUD is $71.3 Billion

        As at August 2016:

        M3 money supply in $AUD is $1,917.4 Billion
        Currency in $AUD is $68.2 Billion
        ____
        2047.7-1917.4=130.3
        71.3-68.2=3.1

        From August 2016 to August 2017, the money supply in $AUD increased by $130.3 Billion, of which only $3.1 Billion was due to an increase in currency (physical notes and coins).

        @flawse, how did our money supply increase by $127.2 Billion over that twelve month period?

        Do you believe it was from trade?

        If you google “fractional reserve banking in Australia” you’ll likely find an exchange with the RBA with them answering the above question.

        http://www.rba.gov.au/statistics/frequency/fin-agg/2017/fin-agg-0817.html

    • Pfh007 I agree with you that it needs to be done now and agree that the focus on unproductive investment needs to be addressed now, but those who currently occupy Canberra are quite busy focusing on themselves: http://www.theaustralian.com.au/opinion/columnists/troy-bramston/secrecy-over-review-of-2016-election-against-labor-tradition/news-story/a6d25ec9afde6a14ff6854fc03ab3f34

      Grandpa had a sign above a door in his house that read, “if you are not here with the solution then you are part of the problem”.

      For me that means having Bills ready to be enacted to deal with these problems.

      • David,

        One kind of expects the LNP to be keen on a ponzi speculation driven economy but it is extremely disappointing when the ALP and Greens remain so oblivious to the issue as well.

        Andrew Leigh’s new booklet rabbits on about the wonders of immigration and free capital flows yet contains almost zero discussion of any of the above issues.

        It is worth a read simply as a reminder as how deeply status quo thinking is entrenched.

        The good news is that more and more people are talking about the issues and when the number starts to reach critical mass I think we will find that suddenly everyone is talking about it and politics will follow.

        Ultimately a modern politician does not lead. They listen closely and reflect back what they think their target voter wants them to say. If they hear a message often enough they start to talk the talk.

    • The more logical the options are of making small changes to where the new money is directed..ie to more productive investment the less likely they are to happen, because there is no one there to bribe them and no public outcry to make it happen. Ie the lower the chance of virtue signal benefit the less chance it will happen: http://www.theaustralian.com.au/news/world/the-times/politics-is-obsessed-with-virtue-signalling/news-story/7eecb993dfdd7b8125d48f9741e321c3

      Finding a way to put some pressure on via litigation would be a more efficient and mentally stimulating route inmho. But need to be in the right position with ones life to be doing that.

  15. “Rather than universal basic income from the central bank let’s put the printed money into free education or specific and gigantic Manhattan Projects” – akin to Peoples QE proposed by Corbyn and John McDonnell

    • We need to get gravity solved
      we already have a good grip on small values of anti gravity and anti matter
      should just be a matter of working through it.

  16. Happy for massive investment in R&D (which is my space) but can we not refer to it as “Manhattan Projects” – spending 100m on new methods of fMRI or bio-fabrication should not be confused with developing WMDs.

      • Cost IndexMEMBER

        Wow, just wow.

        Nothing to do with their muderous Socialist regime now would it?

        Socialism always fails.
        Every.
        Time.

      • So the decades of being a corporatist neoliberal banana republic was optimal…. eh… nothing about the US sponsored coup back in the day a dim memory – ?????

        Pegging to the USD is fraught with dramas, low oil prices, FX trader games, same old story for yonks in central and south America. Do your masters bidding and a few elites will make a squillions whilst everyone else stays 3rd world.

        disheveled…. anywho social democrat is not the same as ev’bal socialism of the national sort, its actually democratic capitalism vs corporatist capitalism [neoliberalism].

  17. Cost IndexMEMBER

    At this juncture of history a thorough absorption of George Orwell’s “Animal Farm” is required by all.

    • George Orwell was a fascinating figure and brilliant writer. He was an idealist, who is best known for his work in warning of the dangers of totalitarianism (whatever its political form) This can be seen in the two classics 1984, and Animal Farm. Orwell was also a committed socialist who sought to promote a more egalitarian and fairer society.

      https://www.worldsocialism.org/spgb/socialist-standard/1980s/1986/no-986-october-1986/political-ideas-george-orwell

      A lot of American right-wingers seem to have gotten it into their heads that George Orwell would have loved the idea of invading Iraq, which seems doubtful to me but at least possible, but Hendrick Hetzberg observes that Newt Gingrich has further extrapolated from this the idea that Orwell would have hated socialized medicine. Here’s Gingrich on Orwell on socialism:

      [The message of 1984 is] that centralized planning inherently leads to dictatorship, which is why having a secular socialist machine try to impose government-run health care in this country is such a significant step away from freedom and away from liberty, and towards a government-dominated society.

      And here’s Orwell on socialism from “Why I Joined the Independent Labour Party”:

      I have got to struggle against that, just as I have got to struggle against castor oil, rubber truncheons and concentration camps. And the only regime which, in the long run, will dare to permit freedom of speech is a Socialist regime. If Fascism triumphs I am finished as a writer — that is to say, finished in my only effective capacity. That of itself would be a sufficient reason for joining a Socialist party.

      I have put the personal aspect first, but obviously it is not the only one.

      It is not possible for any thinking person to live in such a society as our own without wanting to change it. For perhaps ten years past I have had some grasp of the real nature of capitalist society. I have seen British imperialism at work in Burma, and I have seen something of the effects of poverty and unemployment in Britain. In so far as I have struggle against the system, it has been mainly by writing books which I hoped would influence the reading public. I shall continue to do that, of course, but at a moment like the present writing books is not enough. The tempo of events is quickening; the dangers which once seemed a generation distant are staring us in the face. One has got to be actively a Socialist, not merely sympathetic to Socialism, or one plays into the hands of our always-active enemies.

      https://thinkprogress.org/george-orwell-was-a-socialist-13e95a2cd10e/

      disheveled…. you seem conflicted, Orwell did not suffer the same condition that say Hayek et al did.

  18. Lol, all these problems could be solved by

    a) reducing the power and size government, after all, government is the sole life-giver to the Game of Mates.
    b) throw fractional reserve banking into the trash and adopt a sound money system.
    c) shut the doors on the RBA and allow the market to set rates.

    True, the debt liquidation phase of this transition would be extremely painful but the economy (and society) would come back stronger for it and future generations would thank us.

    However, I won’t be holding my breath.