How past governments dealt with low wages

Cross-posted from The Conversation:

For the last four years or so average wages in Australia have barely kept pace with inflation, meaning no real pay rises. And all the while, the government has been betting on the market to improve things.

Treasurer Scott Morrison stated:

As the labour market tightens, that’s obviously going to lead over time to a boost in wages.

As the Treasurer asserted, economic theory says these conditions should lead to rising wages, but they aren’t. The country continues its record run of 26 years of economic growth and the banks and other big corporations continue to post record profits.

The Reserve Bank of Australia is at a bit of a loss, speculating at its latest meeting that maybe globalisation and technology are to blame.

However, to understand what’s really going on it’s helpful to look at something most economists and politicians ignore: history.

How past governments have dealt with low wages

There was a period in Australia, and much of the rest of the developed world, from the end of the second world war to the early 1970s, that is often referred to as the “post-war boom”. During this roughly 25-year period, unemployment averaged 2%, inequality fell steadily and economic growth was strong.

Australia’s unemployment rate, 1901 – 2001

This didn’t happen by accident. Towards the end of the war, policymakers and economists began planning for the post-war period.

They had lived through the Great Depression with unemployment averaging 20% and then they had lived through the war, where the war effort resulted in full employment. They asked the obvious question: “If we can achieve full employment through government spending during the war, then why not during peace time?”

That question and the resulting policy answer, outlined in the Curtin government’s 1945 white paper Full Employment in Australia, resulted in the post-war boom with full employment and falling inequality for the next 25 years.

The 1945 white paper (a remarkable political document by today’s standards) tackled the complex questions of inflation, unemployment, wages and economic growth with mature nuance. Policy proposals weren’t made to appear win-win but weighed up costs and benefits, accepting that we must take responsibility for the costs.

One of the costs of a capitalist, market based system is unemployment. In this context, unemployment was not seen as an individual failing but as a collective responsibility. The paper stated the government should accept responsibility for stimulating spending on goods and services to the extent necessary to sustain full employment.

How far we have come from 1945. Today we blame and demonise the unemployed for not being in work, even though there are many more unemployed people than there are available jobs.

Rather than governments taking responsibility for full employment, they set up punitive “employment services” regimes that require the unemployed to jump through meaningless and often demoralising bureaucratic hoops or face financial penalties.

So, what happened in the 1970s to change our attitude to full employment so radically?

During the post-war boom, inequality had been steadily falling. That is, for 25 years, the proportion of the country’s output that was going to the rich was steadily falling. Unsurprisingly, the rich fought back.

Skyrocketing inflation combined with high unemployment (stagflation), caused by the oil shocks of the 1970s, allowed business representatives to claim that the Keynesian system that had given us the post-war boom was a failure.

Enter the age of individualism. Neoclassical economics and its political counterpart neoliberalism were all about individual choice and individual accountability.

To use the words of US billionaire Warren Buffett:

There’s a class war, all right, but it’s my class, the rich class, that’s making war, and we’re winning.

Andrew Leigh, Battlers and Billionaires

The current stagnation of wages we are seeing in Australia is no accident and no mystery. It’s the result of the intentional erosion of worker power (largely due to the successful campaign to demonise unions) and the end of the bipartisan federal government commitment to full employment.

The impact of full employment on wages is profound. The greatest bargaining chip a worker has is to withdraw their labour.

When it’s difficult to get a new job, unemployment benefits are well below the poverty line and the unemployed are demonised by politicians and the media alike, workers are much less inclined to push hard for improved wages or conditions.

I’m not arguing that we could simply adopt the policies of 1945 and magically return to the golden years of the 50s and 60s; Australia is a very different country and too much has changed. However, we can learn a great deal from the 1945 white paper in terms of ambition, commitment, and the embrace of complexity and nuance.

The federal government could restore its commitment to creating full employment in Australia, using its spending power to make up for any shortfall in private jobs as it did during the post-war boom. History demonstrates that the careful and coordinated use of both fiscal policy (spending and taxing), and monetary policy (interest rates) to manage the economy can create a more prosperous and egalitarian Australia.

It’s well past time for a 21st century update to the 1945 white paper on full employment.

Article by Warwick Smith, Research economist, University of Melbourne

Comments

    • Easy – keep 300k immigrants a year , plus 457s, plus student graduate, plus uni student/guest workers. Wages for IT, construction, etc kept well down, Company profits up.

  1. Way less than 28% of AUS was foreign born from 1901 to 2011. And there was no such thing as a 457 visa till 1996.

    What does SAP want done with the 457 visa?

  2. The Horrible Scott Morrison MP

    Savvy workers can gain effective pay rises by buying loss making rental houses and claiming negative gearing tax deductions. This will lower their taxes which is effectively the same as a pay rise. God, how good would the country be if everyone was as sophisticated as what I am.

    • I thought property investors were supposed to be good looking. You my good man have a head like a week old cabbage.

    • If they made money with an investment home it would be called Positibe Gearing.
      Negative Gearing is less money in your pocket.

      • The Horrible Scott Morrison MP

        My my my, someone failed their Strayanomics course. If you make a profit, you have to give the tax man money at the end of the year. If you make a loss, he gives you money. That’s why buying loss making rental properties is far better. Those idiots abroad are so focussed on making a profit. And they wonder why they aren’t property millionaires!

  3. I was reading this article yesterday which touches on what Government can do to help with Inequality.
    What matters about the Paradise Papers http://bilbo.economicoutlook.net/blog/?p=37357
    Can somebody tell me that Bill Mitchell is correct in this article, because if so then the rich and the Governments have been denying the people so much more by under spending on things eg Education which lowers peoples ability to be more resilient.
    Perhaps Leith could do a critique on the Article some time.

    • I expect that Leith would denounce tax havens, but that piece (and all of Bill Mitchell’s) is about MMT.
      Good thought though. My understanding is that the weakness in MMT is the external account and I recall that Leith has expertise in trade economics.

      • Yep The external account is not a weakness of MMT it just means that MMT is TOTAL BS,
        There is nothing new in sectoral balances. that is as old as Methusela. What is new is the idea that government can just print money ad infinitum to correct unemployment no matter what is the state and structure of the economy at the time.

    • Yep The external account is not a weakness of MMT it just means that MMT is TOTAL BS,
      There is nothing new in sectoral balances. that is as old as Methusela. What is new is the idea that government can just print money ad infinitum to correct unemployment no matter what is the state and structure of the economy at the time.

      • I agree with you on MMT. It’s another money illusion. For the economy to have a future and one where real incomes could potentially increase requires the dumping of conventional business and economic thinking. Especially that retarded neoliberal economic rubbish which is no more than a scheme for the 1% to concentrate wealth via debt finance.

        The only way real incomes could increase is by increasing national ‘economic wealth’. The fundamental prerequisite to this in a resource constrained and highly competitive global economy is to put in place a ‘competitive’ national economy driven by ‘technology-based planning’. This then drives increased industrial capacity, jobs (and training) and balances trade. There are some highly ‘competitive’ countries that have this approach and they will continually out-manoeuvre us.

        Personally, I think conventional economic thinking has been a dead end for quite a while now as it offers little understanding in terms of how and economy generates economic wealth. If they (economists) don’t understand this fundamental issue then policy prescriptions from economists contribute to national economic decline.

      • “… policymakers and economists began planning for the post-war period …”

        Oh dear. Every time the central planners get their thinking caps on, bad sh1t and bad policy is bound to follow. That and a financial system in which money is created by fiat. I wish these morons would join the dots …. but no.

        Added to which, comparing the post-war period to now is poor analysis.

  4. The government has no intention of wages increasing no matter what sort of public statements they make.
    Look at their actions.
    “We have immigration and border force staff who face losing $2900 per year, they haven’t had a pay rise since 2013. They want to hang on to what they’ve got, and get the Prime Minister to give them someone to talk to.”
    from http://www.huffingtonpost.com.au/2016/08/11/border-force-strike-delays-expected-at-australian-airports_a_21449898/
    judge them by their deeds, not the words from their golden forked tongue.

  5. Surely the key here is the two 747 plane loads per day of new job applicants (migrants) and the 500K of 547 visa workers?

    Drown supply and companies never have to train or negotiate a wage again

      • Agree pretty much entirely with your comments above. As I’ve probably raved on before this BS has been going on now for 60 years. As a result our whole economy, our education system and now, our culture, our media and population distribution, mean that we cannot move. It’s al too entrenched. Moving the economy towards a productive base will mean massive dislocation which would not be tolerated by the populations of the capital cities with Sydney Melbourne Brisbane and their immediate surrounds easily outvoting the rest.
        Checkmate!

  6. May I suggest that this article:

    a) misplaces the underlying causes;

    b) woefully underestimates just how bad the future will be.

    It is sometimes said that those who do not study history are condemned to repeat it. More accurately, those who lack historical perspective are inclined to believe that they’re living at the “End of History”. There’s a temptation to imagine that the norms that prevailed in our own lives are the perfection of history and will survive for ever more.

    That is the (unstated) assumption underlying this article.

    Inequality did indeed reach a nadir in about 1970. But if we look at the problem with proper historical perspective, what we see is NOT that the past 40 years are an unpleasant deviation but rather that the Modern Era – culminating in the 20th Century – was the anomaly.

    Human history up until the Industrial Era was a story of aggressively narcissistic, machiavellian (sometimes psychopathic) individuals competing – sometimes collaborating – to attain positions of vast power and relative wealth, then using that power to dominate and often brutalise their fellow human beings – human beings they often regarded as “their” Subjects!

    That is the established pattern of the past. That is the norm over millennia of human existence.

    If such behaviour seemed to change in the industrial era it was not because human psychology suddenly evolved to remove the traits of narcissism, machiavellianism, psychopathy and sycophancy. The psychopaths did not wake up one morning and say, “Oh my God!! Is that the time? Is it the Modern Era already. Quick. Implement social reforms. Give everyone a vote. Devolve power; allow self-government. Improve working conditions. Spread the wealth. Give all children an equal opportunity to access high status professions. Allow public ownership of essential services and strategic monopolies.”

    A plausible interpretation for the temporary change in the industrial era is that the exigencies of industrial production – the need to train large numbers of Subjects to operate complex but not fully automated machinery – made it expedient for Rulers to (grudgingly) offer Subjects a slightly better deal.

    The industrial era saw human physical power and human physical dexterity replaced by machinery while humans themselves retained cognitive superiority. In fact, industrialisation made workers’ cognitive superiority relatively more valuable because a properly trained human being could control a much greater value of production. A trained human was a valuable asset. By going on strike and idling expensive capital equipment it could quickly impose upon its Rulers greater costs than it itself incurred.

    It was under such conditions that Rulers – grudgingly! – made the concessions that people (or at least people who lack historical perspective) now seem to regard as immutable.

    But it is important to remember that these concessions did not come about without the most savage opposition from the Elite. People who lack historical perspective forget that unionism was illegal and punished under “Combination Laws” which provided imprisonment with hard labour for breach of employment contract. In the United States, the Platonic Guardians of the Supreme Court – invoking the Bill of Rights no less! – overturned “populist” State labour laws (for example Lochner v New York, 1905 on working hours or Coppage v Kansas, 1915 on State legislation protecting union membership) on the grounds that they infringed the “liberty” of workers to contract with their employers.

    Viewed with proper historical perspective, improved labour conditions did not arise because of unionism. Rather unionism flourished – for a brief period at least – because the conditions of industrial production made it impossible to withstand. For a time at least, it was easier and more profitable to grant Subjects a few limited concessions than to continue fighting them

    Viewed with proper historical perspective we may see that the ideals of the industrial era – reaching their zenith in the mid-20th Century – were an anomaly. Such anomalies have arisen before. The Peasants’ Revolts of 14th century Europe arose from the acute labour shortage which followed the Black Death.

    But just as the 14th Century Peasants’ Revolts were suppressed as soon as conditions permitted, so the 20th Century Peasants’ Revolt is being relentlessly would back now that the Elite are in a position to reclaim what they regard as being rightfully their own.

    What we are currently witnessing is elite response to the end of the industrial era.

    In fact, viewed with proper historical perspective, we’ve been witnessing it for the past 40 years, ever since the “industrial economy” began to give way to the “service economy”. Piketty has identified 1970 or thereabouts as the nadir of wealth inequality. And the restoration of inequality to its historic norm has been accompanied by the renaissance of laissez-faire economics and elitist philosophy in general.

    To understand why, compare the bargaining power of an industrial economy worker and a services economy worker.

    If an industrial worker went on strike he or she could bring industrial plant worth millions of dollars to a screeching halt. The pain on the capitalist is inflicted much more quickly and intensely than the pain on the worker.

    If your fitness trainer goes on strike, . . . . well, who cares? There are others. Or you can go without for a week or two.

    That’s an extreme example but it illustrates how bargaining power can differ.

    The onset of robotics and AI can only accentuate this. No longer are large numbers of Subjects required to run complex but not fully automated machinery of great value. In future it will be small numbers of very highly trained technicians required to manage the robotic workforce. Small in number, they can easily be bought off. Better still, they can effectively be reduced to the status of indentured workers through the weapon of crippling student debt. They dare not rebel for fear of their debts being called in.

    As for the rest of humanity, they may still get employment, especially in providing personal services. But it will be employment subject to savage competition between workers with economic rent flowing to the owners of the monopolistic market platforms.

    And the “New Elite” are responding precisely as one would expect an aggressively narcissistic, self-serving elite to respond. They are relentlessly winding back the concessions hitherto made, while their sycophant theologians are busy justifying it: either as not being a problem or as being for the “Greater Good”.

    All around the evidence points to the ideals of the 20th Century being wound back.

    The 20th Century ideal of egalitarianism is in full reverse. Inequality is returning to its historical norm, as Piketty has documented. Piketty’s U-shaped graphs are the most vivid pictorial demonstration of just how anomalous the 20th century was. We are already returning to a “feudal” state in which property is owned by the magnates and almost everyone else is reduced to the status of dependent serf.

    Where conventional property has proved insufficient, the Elite and their eloquent lawyers have invented novel forms of “intellectual property” to expand the scope of their private ownership.

    The 20th Century ideal of widespread home ownership – of “common people” having a real property stake in their society – is falling by the wayside as we return to a society of landlords and tenants. In Australia and elsewhere, the Elite have been successful in framing this as an inter-generational conflict (young vs old) and some people have swallowed this misdirection hook-line-and-sinker. But Elite children are immune from this supposed inter-generational war. Those who have access to the bank-of-mum-and-dad have no problem buying a house. This is not an inter-generational war. It is a class war.

    The 20th Century ideal of equal access to higher education and to the elite professions is being swept away. The conversion of prestigious qualifications from graduate to post-graduate – together with higher student fees – is no accident. It raises a barrier to entry, ensuring that only privileged children can attain the degrees necessary to enter prestigious professions without running the risk of lifelong indebtedness.

    The move to deregulation of elite university fees would see top universities returning to their historical role: places where the children of the privileged may meet people like themselves (together with a few scholarship kids to freshen up the gene pool) and form the social and professional networks which will allow them to secure economic rents in the generation to come. Is there any wonder that G8 vice chancellors are so keen on a policy which would see them becoming the guardians of an elite marriage market. (At least one prestigious Australian college makes no secret of the fact, telling meetings of new parents to, “Look Left. Look Right. These are your future in-laws.”)

    The 20th Century ideal of public ownership of strategic monopolies, essential services, critical databases and valuable tax revenues is in full reverse. Even if politicians wanted to act in the public interest (which they often do not) they must deal with the incumbent monopolists who control the strategic assets and cash flows. Is the ubiquitous Transurban really any different from the Ferme Generale of the ancien regime? A private taxing regime to whom politicians must go cap-in-hand to ask for money. Is the ring of tolling points really any different from “The Wall of the Farmers General” which encircled Paris in the years before the Revolution?

    And do not expect elected government to do anything about it.

    Viewed with historical perspective, the universal adult voting franchise is little more than a century old. Why would anyone imagine that such a recent and anomalous institution would continue unchanged into the future?

    In most countries, political concessions never went further than a restrictive form of “elective” government dominated by elite parties. Moneyed interests and pressure groups found it a trivial exercise to subvert that. Campaign bribery and the revolving door of jobs-for-the-boys ensure that the interests of politicians and senior bureaucrats remain aligned with those of the elite. Ministers are more concerned with ensuring that they do nothing to jeopardise the million dollar a year directorship or consultancy or other informal kickback they regard as their “entitlement” when they retire from office.

    The 20th Century ideal of honesty in elective office has proved short-lived. The historic ideal of Rulers being entitled to the perquisites of office has been effectively restored.

    And the events of the past year have shown just how resilient elite elective government is when it comes to staring down popular discontent. Far from being the start of a “Populist Uprising”, the past year has in fact shown the near impossibility of challenging Elite interests and policy under conditions of elective government.

    In 2016 commentators fell over themselves to point out the narrowness of the majority in the Brexit referendum. What they failed to note was the huge majority that had voted against UKIP at the preceding general election. While apparently agreeing with UKIP’s policy, the vast majority of voters were not prepared to elect it to government. Had it not been for division within the Tory party there would have been no vote at all, and establishment politicians would have continued reciting the illogical doctrine that a general election victory means they have a “mandate” for each and every one of their policies.

    Around the world, establishment politicians have drawn the vital lesson: “Never, ever again will they make David Cameron’s mistake of allowing ‘bogans’ and ‘deplorables’ to vote on an issue of importance.” The subsequent elections in Europe have merely confirmed that provided the establishment parties don’t break ranks, they have nothing to fear from their Subjects. Elective government is Elite government. (The Queensland election has just demonstrated the same thing.)

    And even if there had been a “populist breakthrough”, how long could it have lasted? In the immediate wake of Brexit (and also after the Trump rebellion), there was open talk in elite circles on whether it was appropriate to allow “obviously ignorant” people to vote on critical issues. “They’re not college educated, you know.”

    If populist parties did threaten to hold the balance of power, how long would it be before the establishment parties agreed on some new form of voting qualification? In elite circles there is now open talk on whether those who “receive more in welfare payments than they pay in tax” should be allowed to vote at all! (Oddly, there is no suggestion that those monopolists who receive more in economic rent than they pay in tax, or those lobbyists who receive more in government contracts than they pay in tax, or those too-big-to-fail bankers who receive more in bail-outs than they pay in tax, should be similarly disenfranchised.)

    The universal adult voting franchise is an incredibly recent phenomenon. Viewed with historical perspective, there is absolutely no reason to assume that Elite interests won’t move to have it removed or restricted if it should prove inconvenient. Or effectively subvert it by making it difficult for lesser mortals to enrol. Or re-jig the electoral system to ensure that minor parties have no hope of election. In Australia the deal between the Greens and the Coalition to change the Senate voting system was intended to do precisely that. If minor parties continue to be an irritant, does anyone imagine that even more draconian measures will not be taken to suppress them?

    And even if minor parties and “outsiders” do get to be elected, they usually prove to be a disappointment. Those attracted to politics are inevitably those who yearn to exercise power. After the 2010 election in Britain the Liberal Democrats were given a once-in-a-century opportunity to reform Britain’s voting system and introduce proportional representation. The party leader Nick Clegg threw it all away in return for the chance to be Deputy Prime Minister for five years.

    The closer a party gets to exercising real power, the more it attracts to its ranks those who crave power.

    And on top of all that the 20th Century ideal of responsible national government is in any case being steadily eroded by the proliferation of opaque and unaccountable supranational organisations like the EU and so-called “free-trade” agreements.

    Australians like to pat themselves on the back and congratulate themselves on winning the case for allowing plain packaging on tobacco products. But that involved a trade agreement with tiny Hong Kong and an industry that was already on the nose world-wide. Does anyone seriously imagine that Australia could ever win a case involving a powerful industry and trade agreement involving the US, Europe or China?

    And ask this question: “How many Australians could name just one of the members of the arbitration panel which ruled on Australia’s right to implement domestic health laws?”

    The 20th Century ideal of responsible national government is vanishing quickly, and no-one seems to be aware it is even happening.

    The EU began as a “free trade” organisation. But it is in the nature of such institutions that no sooner do they come into existence than an “iron law of megalomania” takes hold. They begin to attract those self-same narcissistic, machiavellian individuals who are drawn to the prospect of exercising dominion over millions of other human beings. As with any empire, the Subjects eventually end up suffering in the pursuit of some “greater good”. Witness the economically counter-productive brutality inflicted on Greece. Witness the “Lost Generation” of unemployed European youth sacrificed to the Eurozone fantasy.

    Opaque organisations of this type are accountable to no-one. EU members states claim they are required to implement EU directives. The EU itself claims it is merely responding to the requests of members states. Any organisation where there is no clear line of accountability is a magnet to machiavellian individuals who thrive outside the rules of accountability.

    Human Psychology Has Not Evolved. The 20th Century was just an anomaly.

    Like Elites throughout history the post-modern Elite seek to weave a cloak of virtue to conceal the nakedness of their self-interest. Their sycophant theologians devise all manner of mellifluous apologia to justify the privilege of their patrons.

    Elite theologians love to talk about “The Rule of Law” . . . . provided always that it’s law enacted by – and interpreted by – the Elite themselves: a cosy club of Ivy League or Oxbridge or Grandes Écoles pals who have an uncanny knack of ensuring that “The Rule of Law” is always consonant with “The Rule of Privilege”.

    Like Anatole France we are left to marvel at that “Majestic Equality of the Law” which protects the property of both the immensely rich and the dirt poor to an equal degree. We are left to marvel at that “Majestic Equality of the Law” which allows plutocrat and poor man alike to bribe politicians with campaign donations or the promise of lucrative directorships. We are left to marvel at that “Majestic Equality of the Law” which guarantees freedom of trade but not freedom to have a job paying anything more than minimal and uncertain wages.

    Elite theologians love to talk in honeyed terms about the “end of borders”, but they don’t really intend to abolish borders. All they are really doing is replacing “national borders” (over which the mass of ordinary citizens might have had some control) with “private borders”: elite private property.

    The Elite do not intend to rub shoulders with the plebs. They retreat to their private mansions, their private country estates, their private campuses, their private gated communities, all surrounded by private borders marked with “KEEP OUT. Trespassers Will Be Prosecuted!” signs. The Elite do not intend to stand, crushed cheek-to-sweaty-cheek with the prols on inadequate and overcrowded public transport. They whizz from their private mansions to their private offices in private cars (often along private roads which have been tolled or “road-priced” out of the reach of the masses.)

    And from behind their private borders they sermonise piously on the supposed intolerance of those outside!

    On all fronts the trend is the same: the end of the 20th Century ideal of public rights – over which the citizens used to have some say – and their alienation to elite private interests.

    Some might try to dismiss all this as “conspiracy theory”. But here’s the thing: there is no conspiracy. There’s nothing underhand going on. There are no secrets. Everything mentioned here is happening above board in plain sight.

    There is just one thing to remember:

    “Technology may be changing but Human Psychology Has Not Evolved. The psychopaths have not gone away. Nor have their sycophant supporters. There is absolutely no reason to assume that the established pattern of the past will not be the established pattern of the future.”

    There has always existed within the human population a small proportion of individuals who are not like the rest of us. They are aggressively narcissistic, machiavellian, possibly psychopathic, with a strong appetite for attaining power and dominating others. They may not always be apparent. One of the defining characteristics of psychopathy is “superficial charm”. The psychopath knows more about you than you know about yourself. He or she knows exactly which buttons to press to gain your confidence, your trust, even your admiration.

    Had it been possible to establish genuine Democracy with the right of recall, veto, initiative and referendum there might have been some hope for the rest of the human race, some hope of effectively controlling these people. That is why elite theologians universally abhor genuine Democracy in favour of the corrupt system of “elective” government: elective government which perversely attracts the most undesirable narcissists.

    Elective government provides no safeguards. It will prove no barrier to containing the psychopaths once the cost of pacification falls.

    You don’t need to be Einstein to see how this game may play itself out.

    There is absolutely no reason to assume that the established pattern of the past will not be the established pattern of the future.

    And if that proves to be the case, for most people it won’t be a happy ending.

    • Relevant StakeholderMEMBER

      One of the factors I think you miss is consumption. Consumer society allowed for an increase in markets (fordist).

      Without a somewhat wealthy populace the only real remaining wealth is agricultural land.

      Although I agree with you on the power relationship. AI and automation means capital wins.

    • The moment the hype started I thought that something was amiss. In 2012 Galbraith and his team published an extensive empirical investigation of income distribution using new datasets that they constructed. Beyond the interview I did with Galbraith and a few other articles and the like the release of the study didn’t get much play among economist types. The reason should be obvious: whereas Galbraith arrived at heterodox conclusions, Piketty’s are mostly orthodox.

      As Galbraith notes in his review Piketty seems to put some weight in the idea that the problems with income inequality that we face today are mainly to do with technology and education. Galbraith and his team, on the other hand, point to something that should be intuitively obvious to anyone following political and economic events in the past decade; namely, finance.

      https://www.nakedcapitalism.com/2014/04/philip-pilkington-galbraith-on-thomas-piketty.html

      • I should know better than to reply to skippy but I’m not sure what point he is trying to make. The article he links to (and has cut and pasted) goes on to say:

        “Rather Galbraith asks us to consider alternative approaches.

        ‘ If the heart of the problem is a rate of return on private assets that is too high, the better solution is to lower that rate of return. How? Raise minimum wages! That lowers the return on capital that relies on low-wage labor. Support unions! Tax corporate profits and personal capital gains, including dividends! Lower the interest rate actually required of businesses! Do this by creating new public and cooperative lenders to replace today’s zombie mega-banks. And if one is concerned about the monopoly rights granted by law and trade agreements to Big Pharma, Big Media, lawyers, doctors, and so forth, there is always the possibility (as Dean Baker reminds us) of introducing more competition.’ “

        But how???

        How does one implement such policies if the system of government is subverted by wealthy/powerful interests who are totally opposed to them?

        That was the reason for pointing to the history of organised labour. Wages didn’t rise because of unionism. Unionism was savagely repressed. That attempted suppression failed (at least into the 20th century). But why did it fail?

        The plausible explanation is that a change in the environment changed the balance of bargaining power, as it did in Europe following the Black Death. In 14th Century Europe it was plague which temporarily reduced the supply of labour. In the 20th Century it was demand for workers trained to operate the complex – but not yet fully automated – machinery of the industrial economy.

        What hasn’t changed, and will not change in the foreseeable future, is human psychology. There has always existed within the human population a small proportion of individuals who are not like the rest of us. They are aggressively narcissistic, machiavellian, possibly psychopathic, with a strong appetite for attaining power and dominating others.

        And – it may be added – that core of psychopaths is surrounded by a much larger “Halo of Sycophants”: typically the weaker, more timid males who enter into client relationships with the psychopathic rulers in return for individual protection and promotion. They don’t bloody their own hands but they support those who do, provided they and their families and being taken care of.

        Much of the self-styled “progressive” media would fall into this latter camp. They belch unctuous platitudes about their concern for the lower orders . . . provided those lower orders remember to stay lower. The last thing they really want is for the “bogans” and “deplorables” to rise up and and have a real say in how things are run.

        If we really are returning to the historical norm, then the outlook is grim indeed. There is a remote chance that we might prevent it, but it will require winning over those sycophants who still think they can rely on the psychopaths for protection into the indefinite future. These are the people who need to be convinced that their long term interests actually lie with those “bogans” and “deplorables” who they like to look down their noses at.

      • “I should know better than to reply to skippy but I’m not sure what point he is trying to make.”

        Crap mate, and you want respect and acknowledgement, hows it been working for Yanis.

        disheveled… you could note even redress, just an epic orthodox mental pull…

    • Bravo: No war but the Class war
      The weird thing is that I have many friends that you would doubtlessly class as Privileged yet these very same people are th:e strongest voices for Equality in our society.
      wrt landlords: from what I’ve heard the recently rich (especially those that gained wealth riding the property bubble to these dizzying heights) make the worst landlords. They never repair anything, always keep the bond (damages you know) and are willing to toss large families out on the street (at 4 weeks notice) if they think this will in any way benefit them.
      I mentioned a few weeks back that a friend had just had their lease terminated (after 3 or 4 years) so that the owner could reoccupy and sell the property unencumbered before it dropped any further. The family was unable to secure alternate accommodation in the 4 weeks notice, so the owner / agent threatened them and tried to get them immediately evicted pleading hardship. The agent even went as far as promising to have all the locks changed within 5 days…this is clearly an illegal action (tenants rights and all that) but it had my friends wife very very worried. I stepped in and provided some financial help and referred them to another very Privileged individual that did a little pro-bono legal work…wow didn’t that agent change her tune when threatened with a $20K+ injunction.
      As I said, I know a lot of people that you’d consider Elite but I don’t know anyone that is this single minded and unfeeling as this jumped up 5hit of a landlord.

    • Stephen good points with your reply to Skippy below.

      However, I don’t share the grim view.

      When studying organisational behaviour at uni there were two needs of either need for power or need for achievement. I paid attention at the time because it seemed there would be value in steering the culture of an organisation (which is easier if you are the founder/leader because then it’s your actions not words that will shape the culture) so that need for achievement is rewarded and rules around advancement and demotion are very clear. In short create a culture and system that those with a strong need for power don’t enjoy.

      I have worked in a private company in Aus that had a real need for achievement culture, flat hierarchy etc so I know it’s possible.

      • I hope you’re right. I hope all these predictions of doom will prove to be self-defeating. But that can’t happen unless people start to take the risk seriously.

      • @Stephen

        First step is being aware of the risks.

        For example, a young political party wants to run candidates for the first time in an electorate. What happens?
        A call for candidates, some screening of them, make a choice and put them up to run. What’s the chance the power hungry would go for that?

        How would you reduce that risk?

        Firstly it takes months of working with someone in a variety of situations to get a good sense fo their character. So ideally you’d want to have seen potential candidates have demonstrated over many months they have a need for achievement, not so much a need for power.

        Someone with a need for achievement is measuring their personal success based on the OUTCOME. That means they will be more comfortable giving other people credit for good ideas/actions (the opposite of what current pollies do). This signals to others in the organisation that outcomes matter, that it’s ok to take some risk and even look a bit silly in the short term or make some mistakes, provided everyone is learning and looking to achieve better outcomes down the track.

      • The one thing you both negate to mention is system architecture e.g. you can’t just wing it a be a new party it takes yonks to build up the skill, knowlage, networks, and trust of citizens.

        disheveled… again… glaring example of Yanis…

    • Another observation is that ‘pillars’ of conventional business and economic thinking need replacing. They are made up of well cultivated myths and offer little meaningful insight into how the economy or business really functions. This thinking is insidiously crippling the economy and enriching a few percent.

  7. The federal government could restore its commitment to creating full employment in Australia, using its spending power to make up for any shortfall in private jobs as it did during the post-war boom. History demonstrates that the careful and coordinated use of both fiscal policy (spending and taxing), and monetary policy (interest rates) to manage the economy can create a more prosperous and egalitarian Australia.

    -100% we should be spending to create new high-end industries like robotics or advanced manufacturing

    Or even tourism infrastructure

  8. How far we have come from 1945. Today we blame and demonise the unemployed for not being in work, even though there are many more unemployed people than there are available jobs.

    Rather than governments taking responsibility for full employment, they set up punitive “employment services” regimes that require the unemployed to jump through meaningless and often demoralising bureaucratic hoops or face financial penalties.

    Watching Struggle Street on SBS last night, some poor fat bloke was trying to earn an honest crust in the gardening and maintenance game. Anyway he got some government grant to get started (good he had a trailer, a truck and a mower etc..) he gets started mows the lawn of this little old lady for $60 (not worth it when you factor in size of yard, fuel used getting there and in the mower etc..) and then comes home to discover his sisters dogs got out and local council captured them. Fine $2000 ($1000 for each dog)..

    That’s on top of his existing court fines etc.. He will never get anywhere at this rate. But that’s the system we have, 1 that kicks you when you’re down and makes it really hard to pull yourself up by your bootstraps.

    • Bootstrapping was always a Bernays fairy tale told by the libertarian creative class writers, working for the industrialists and proto FIRE sector. That kinda thing only works when there is new untapped space to move into, hence move west romanticism.

      disheveled…. if 95%+ of new businesses fail within the first 3 to 5 years one would think the bootstrapping meme would obviously be fake info….