By Joe Montero
American economist Professor Stephanie Kelton has been visiting Australia, and while here, suggested that the Australian government should fund large scale job creation program to overcome the problem of unemployment. She was invited by activist organisation GetUp and is consequently here speaking as part of its Future to Fight For campaign.
Calling for a major job creation program is not new. Many have advocated this. Often via the building of new infrastructure. The Kelton proposal is different in that it is a much broader approach and incorporates the concept of a “jobs guarantee” for everyone.
This means that getting work is not only on the back of those without. Society has a responsibility to provide work for its members. This is a major transformation in how unemployment is regarded, carrying into a government obligation to apply this ethos.
The proposed plan involves offering everyone a government paid job, which is then managed by local communities. Local community management is important, because local communities are in the best position to determine what their needs are and what kind of work is most appropriate to meet these needs. Kelton says, they are the “ones to imagine the kind of work that is going to provide the most value.”
Professor kelton is an adherent of the relatively new and growing school of modern monetary economic theory, which holds that that the government has an unlimited capacity to spend, if the money entered into circulation in the economy is offset by taxation and other obligations to balance the books.
The proposal fits in with other schools of thought as well, including Keynesian, traditional classical and even Marxian economics, which suggest that the only real limit is not government debt, but the constraints of the real world, imposed by limits to what nature can provide and human capacity.
Critics argue that approach would boost inflation. The answer from those who support job creation and job guarantee approach, is that this will not be the case, as long as new economic growth is created to soak up the increased spending.
Furthermore, continuing unemployment involves the cost of economic opportunity foregone, when those affected are not contributing to the economy’s output, and there is a significant cost in providing a means of subsistence, even if minimally, through the Centrelink system.
In contrast to the failure of the punitive blame the unemployed and low government spending approach to create jobs, job creation with a guaranteed for all, offers a pro-active answer to one of the most pressing social problems of our time. This is a very good reason to consider it.
Modern Monetary Theroy is not new as per Harvard University “The reality is that MMT just describes the system that most countries in the world live under and have lived under since 1971, when the US president at the time, Richard Nixon, suspended the convertibility of the US dollar into gold. At that point, the system of fixed exchange rates—in which all countries agreed to fix their currencies against the US dollar, which was in turn benchmarked in price against gold—was abandoned. So since that day, most of us have been living in what we call a fiat currency system.”