The Bush, Not Sydney: Lack of jobs, diminishing services and persistent drought

by Professor Bill Mitchell

(This was a speech given at Politics in the Pub, Sydney, 17/11/06)

I run a research centre at the University of Newcastle. It is funded by national competitive research grants through the Australian Research Council which I have to win each year. I employ about 8 people. I have 15 Ph.D. students all working on the projects along the lines of the sort of things I will talk about.

I wasn=t really sure how to approach this talk but I decided that I would present a few vignettes. They are all interlinked and I will leave it to you to make the links. They are just a few snapshots. I=m not going to dwell on the topic of the previous speaker - the drought. I=m going to talk about regional space and regional disparities, and tensions between social settlement and economic settlement.

Vignette #1 -- The Drought.

I=ve written about this in the past. The drought is a very interesting case. The previous speaker, with all due respect, was very sympathetic to the problems that the drought has presented and reflected what the mainstream media is promoting all the time - that we have got to be sorry for our farmers - they are the life-blood of our nation. There are various and popular media campaigns to save the farmers - donate money and the previous speaker said that the Federal and State Governments are being very generous. I noted that he mentioned the manifestation of the generosity was handouts to the farmers. He also mentioned that a lot of people were being unemployed. I will come back to that. ,..

We are naturally predisposed to be sympathetic to farmers at times of drought because we are led to believe that it is beyond their control - that the drought is a lack of rain. Therefore, we want to help our help our fellow citizens because it is not their fault. That=s the way we construct it. I=ve always been interested by that construction, because my major research, over my academic life, has been on unemployment. The way we construct the unemployed is totally different. We have not constructed that as a drought of jobs. We=ve constructed that in a totally different way, and the Federal Government has run very successful media campaigns through their subtle advertising, through subtle releases of terminology, e.g. >jobs snobs=, >cruisers=, >dole-bludgers=. We=ve constructed unemployment, which I would consider to be a drought of jobs..... {Applause} .... which is beyond the control of the unemployed > we=ve constructed that as an individual problem, as something being wrong with the people who are unemployed, but which are in fact victims of the drought of jobs.

We=ve now run them through systematic campaigns of what I call terror. The way we deal with unemployed is state terrorism. {Applause} We vilify them in public. We=ve isolated them. We=ve separated them as a cohort to be vilified by the rest of us. And now we run them through increasingly onerous time commitments and hoops, when we know damn well, that there aren=t enough jobs to go around. That is an interesting juxtaposition to me which has fascinated me all my academic life, i.e. about the way we construct these events so inconsistently.

I could easily (here we go) construct the plight of the farmers in exactly the same way that the Federal Government is constructing the plight of the unemployed. I could say that the farmers are lazy. They are lacking in skills because they haven=t bothered to be educated and to get the skills suitable for their employment. I could easily construct it that way. What would be my evidence for that? If I go out to the west of NSW, out to Dubbo-way I can come across farming areas still today that are green, that have got a lot of water, that have got abundant pasture and cropping. Why? Because those farmers are practitioners of permaculture. They=ve learned that you cannot impose European broad range farming methods onto a dry environment. You have to develop farming techniques that are suitable to the dry environment that will allow one to retain water and moisture and mulch it, and create farming environment which is productive. So why don=t all the farmers do that? Are they lazy? Are they uneducated? That=s the way you can get really misled in public discourse, in the way you construct events. So that=s the vignette about droughts and I will come back to it.

I was therefore very interested in the previous speaker=s statement that the government has been very generous. Well no, they haven=t been very generous at all, because all the people that are being unemployed in regional Australia are being shoe-horned into very pernicious work tests, activity tests - terrorism by Centerlink and a deterioration in their morale and their family structures. That=s not generous at all.

Vignette #2 -- State of the regions.

There are two ways you can consider space. One of the ways is that you can construct it is in terms of social settlements, which is communities where people live and have their families and typically have their social networks, e.g. towns and suburbs and areas. That=s what we call the social settlement. Next to that, or on top of it, or interacting with it is what we can call the economic settlement. That=s where jobs are created, where firms invest (public sector invests decreasingly these days) but that=s where jobs are created and where people find employment, and typically, access to the income distribution system.

In days gone by, up until the mid-70s, and certainly not later, the way the national policy framework was constructed was to try to find some kind of symbiosis between the social settlement and the economic settlement. What I mean by that, there was always policies to make sure that areas that didn=t have enough economic activity would have sufficient economic activity to support and sustain the social settlements in those regions. So there were all sorts of public sector activity which was job-creating, which would allow people to live where they were living and to have their families coherent through a life cycle, in order words children being able to grow up where their parents and grandparents are. There were ample jobs. A lot of those jobs were provided by public-sector agencies, in the form of apprenticeships, and right down to make-work or boon-doggling, i.e. public sector jobs though local government and agencies and local governments themselves, creating public spaces, creating environmental spaces for communities. It might be street cleaning, it might be park maintenance, but they were vital links between the economic settlement and the social settlement.

Under the neo-liberal economic philosophy there are no such things as communities, as you know. You might remember Maggie Thatcher=s famous comment, >There is no such things as society, we are all just individuals=. So under neo-liberalism the effective logic of that system is that the market is the ruling mechanism to allocate resources. And so, the economic settlement becomes the priority. The dynamics of the social settlement are quite different to those of the economic settlement, e.g. because firms are always eking-out investment opportunities all over, with no particular loyalty to anything. Remember, the capitalist system has no morality, has no values. The logic of the system is to accumulate capital and to do that through profit maximisation. So what neo-liberalism invokes is that the economic settlement goes where it goes - and the social settlement? Forget about it! People, like me, who are educated in economics, are trained in universities by these ideological mandarins, to believe that the way in which the social settlements creates an accord with the economic settlement, under market allocation, is through mobility. It results from wages rising in areas of growth and people being attracted to those wage differentials and moving to where the economic settlement is. The poverty of my profession is they really believe this nonsense, and so this government has abandoned the national skills development framework. The Federal government has abandoned any regional development framework and it lets the market allocate resources according to the logic of its ideological position. What we end up with is gross disparities between people=s outcomes in this country. What we have now is extreme clusters of disadvantage.

In this sense it is almost a misnomer to juxtapose it as >Sydney or The Bush= because it=s actually about regional space. I=ve just finished a paper which is coming out soon, on what we call >The Two-speed Economy=. We=ve analysed south-west Sydney as a region which is being neglected. It is a region in which the market system is rapidly creating a tension between the social settlement and the economic settlement. It is not just Sydney or the Bush. For example, South-west Sydney quickly becoming a basket case.

Out in western NSW, it is worse. It=s been worse for a long time. It is not just the drought in terms of lack of rain. It is a lack of any policy framework to match those settlements. We=ve done research into the demographic change and service delivery out in regional Australia. A lot of towns in western NSW are fast approaching the status of being geriatric centres. There are very little services. There are no youth, because the youth have gone because they=ve been starved of employment opportunities, partly by the withdrawal of the public sector as an employer. The original inhabitants have grown old, and cannot go anywhere. The older people are now living in slow decline and when death comes the rest of the town goes.

And just to finish that last story about the juxtaposition between social and economic settlements, one of the things that the government is continually saying in this context, is that people in the regions which are outside capital cities are in that position, because they are not willing to move. They continually push this line out, that there are people who will not move and will not try to better themselves.

Well the research will tell you that the mobility flows in Australia are huge. Migration and commuting patterns have changed dramatically as we have had this increasing creation of region disparities in the growth period of capital cities. People now commute from Newcastle to Sydney. People now commute from all-over the place to high growth areas, or they=ve migrated. These flows are huge. The problem is that if you have a lack of jobs overall, then what happens when you have these mobility patterns is that you get some very perverse outcomes. One of them is that the people who are commuting, or have the propensity to commute or migrate, tend to be better educated or have the capacity to have a car. Crucially, people who have been unemployed a long time do not have cars. What happens is that these mobility patterns are bringing people from low employment areas to high employment growth areas. Because there is a lack of jobs overall, the better skilled are being bumped down into lower-skilled jobs, forcing out those people in the high-growth areas who would ordinarily have those jobs. So when we talk about Sydney has been growing very fast up until about a year and a half ago, that=s true, but because there has been a lack of jobs overall in the country, the disadvantaged in Sydney have not really benefited from that. I=ll talk a bit about Sydney again in a moment.

Vignette #3 -- Overall state of the nation.

This tries to put those two previous stories together for you. What we have seen over the last ten years, is a federal government who makes a virtue of ripping us off relentlessly in the form of budget surpluses. {Applause}. What they=ve told us is that the government has to save for the future. They are relying on this analogy between the federal government and a household. You and I are households. We have what economists call a budget constraint. Before we can spend, we have to go out and find the sources of finance, and the Federal government is saying [Myth #1}: >We=re like you, we cannot spend, we have to save like you for the future=.

The Federal government is the issuer of the currency, we are the users of their currency. The only way in which you can maintain a fully employed economy, and sustain that full employment, is that if the government makes sure that you fill what economists call the >spending gap=. In brief terms what does that mean? It means that if the private sector wants to save, then the public sector has to fill that lack of spending to make sure that there=s enough spending to create the demand for labour, to make sure there are enough jobs. It is no surprise that in the period that we=ve had governments pursuing increasingly large budget surpluses, (which are just ripping off our disposable income) they are just taking it out of the system. It is not surprise that we=ve had persistent under-utilisation of labour.

This idea that the government has to save for the future is Myth #2. The government never has to save for the future. How can you save in your own currency? It would be a bit like me creating a currency system at home and my kids, you have got to do jobs with my business cards, and I=ve got to save them up. I can create business cards at will. The government can spend whenever it wants. The budget position that it runs today, has no bearing on the budget system they can choose to run tomorrow. They=ve conned everyone of us - apart from me! {Applause}.

The government says, >We=ve had strong growth, under us=. There are reasons that we=ve had strong economic growth when there have been budget surpluses dragging growth out of the system. First of all we=ve had a consumption boom in the country, fuelled by financial engineers, ramming credit down anybody=s throat that they could find. These financial planners increasingly take advantage of people who don=t understand the commitments being entered into, and that was all okay as long as there was a housing property boom in the capital cities and the credit was coming.

What we=ve ended up with, is that we=ve now got a household sector in the country that has record levels of indebtedness. The slightest change in circumstances will drive increasing numbers bankrupt - the slightest change. Why do you think the Reserve Bank has been pushing interest rates up {only?} 25 basis points {0.25%} at a time? Because they are scared to death that it might produce a melt down. If you analyse their forced mortgagee sales figures you=ll see that they=re rising in the capital cities... i.e. forced sales, i.e. there is rapid growth in mortgagee sales.

The second reason we=ve had strong economic growth in recent years is because the Chinese economy is growing so fast. The growth is creating an environmental disaster which the world is going to face. But for now, the demand from China has created a minerals boom which is driving our economy. As soon as that slows down (which it will) then all of that fiscal drag which has been coming out through the budget surpluses is going to strike us really badly. What we=ve been left with, with this neo-liberal legacy, is a household sector which is on a knife edge. So you can see it in south-west Sydney. The people there have been >riding on the horse= of the consumption boom with unbelievable over-investment in housing, driven by lax credit policy by these financial engineers. They are now in the most precarious situations holding huge levels of debt and are extremely vulnerable as we see interest rates increase.

Vignette #4 > The myth about full employment

The Reserve Bank was in denial about the growing household debt crisis for years as the Feds continued to extract liquidity from the system via budget surpluses. They really amaze me how narrowly they view their role now under inflation targeting. But as they push up the interest rate, more and more of those households in SW Sydney, in Northern Adelaide, and west of Melbourne are going to lose their homes. More and more of them are becoming unemployed as manufacturing has given way as the consumption boom is failing. More and more are trying to save now as they realise how precarious their balance sheets are, but it is too late for many of them. A lot of them will lose their houses. These regional imbalances have been driven by an emphasis on the market, driven by a lack of responsibility from the Federal government. Far from being prudent and responsible the Federal government has been irresponsible. It has led the country on an unsustainable path. It has not only created regional disparities, not only worsened the impact of these natural problems of water shortages, but has also left a legacy where the whole house of cards is ready to fall.

Meanwhile, we=ve now got the sort of indecent situation where about 1.8 million Australians do not

have enough work. The government tells you that the official unemployment rate is only 4.8%. They don=t tell you that underemployment since 1991 has been rising sharply. They don=t tell you that people have been pushed out of the labour force by various policies and by a lack of jobs, so that they don=t figure in the official statistics. They don=t tell you that around 60% of all jobs created are part-time, and more and more of them are casual jobs, and more and more of those casual jobs are at the bottom end of the hours distribution rather than at the full-time end. Remember that to be classified as employed in this country you only have to be working one hour per week. When Peter Costello gets up and says >We=ve created >this number= of jobs=, ask him, >How many full-time equivalent jobs does that represent?= I can tell you from the work at our research centre that total labour underutilisation is currently conservatively estimated at around 12%. That is, 12% of the willing labour force is unable to find enough work, i.e. around a half a million without any work, and the rest without enough hours.

Meanwhile, we=ve now got a skills-shortage. Please identify the skill-shortage and the unemployment as two-sides of the same coin. The malicious disregard for the communities of this country by the Federal government is the cause of both of them. {Applause} We are nowhere near true full employment despite what they tell you. When we had true full employment, in the 1950s and 1960s, there were always jobs for everybody. Vacancies which were unfilled were always running ahead of those who were unemployed. What that led to is two things. One is that the federal government took responsibility, through the Department of Employment to forecast, through occupational planning, what the occupational skills were likely to be needed in the next two to three years, then to fund and create apprenticeship opportunities to make sure they were there. It was an imperfect system because you can never have perfect foresight. But it was a still a pretty good system which fed the skill-machine. In other words we had a National Skill Development Framework.

The other upshot of running vacancies ahead of the unemployed was that the private sector also had to do some work in training, because they had to scramble around to get workers, because if they didn=t they would lose market share, and as capitalists, they hate to lose market-share. They were forced to change their hiring conditions, and to give up their simple prejudices against certain cohorts in our population, to scramble for workers, and to make sure, in the context of the paid job there was training offered so that the workers could do the work.

By running the unemployment rate and the labour underutilisation rates at such persistently high levels now, you=ve taken all that dynamic efficiency out of the economy, because the employers have no incentive to train anyone ~ why would you? There are so many of them in the queue. You can indulge in as much prejudice as you like against certain cohorts, based upon ethnicity, based up gender, based upon age, whichever way you want to cut your prejudice.

When we talk about skill-shortages, we need to see that it is due to a lack of government endeavour in the past -- it didn=t suddenly happen. Why has the Federal Government been paying billions of dollars to Job Network agencies who have among the items that define their main charter the responsibility to provide intensive assistance to increase the skills of the long-term unemployed. How can you have a skills shortage if they=ve been doing their job properly for eight years?

Vignette # 5 --What do we do about it?

(Answer from audience: >Change the government=.)

Let me tell you that the private sector has never employed enough people to match those who want the work. In other words, you=ve got to have a public sector as a significant employer. You don=t have to advocate nationalisation to realise that you need a significant public sector employment role. What I advocate and what I=ve advocated since 1978 is at the very basic level, you have to have an employment (job) guarantee to really sustain full employment. When we have full employment in the 1960s there was an implicit job guarantee offer. You could always get a job in any public utility. You could go down to the rail-yards on any day and get a job. That=s been lost. Neo-liberalism has cancelled all that. That=s the first point we need.

We also need much spending that takes resources away from what I would call market use or private cost calculus, into what I would call, green calculus. In other words, we have to steer spending and production towards things that are environmentally sustainable, and build communities in rural sectors which are prone to drought so that they can survive it. We need to promote much more community gardens, much more permaculture activity and small-scale farming.

The last couple of points I will make - we need to increase our priority towards social settlements again. We need to get out of this hangup or this belief, this misbelief, that the market will solve the problems. We have to be proud to intervene in the economy. We need regulation, we need planning, we need forward visions and we need the government to do it for us - they are our agent. And if the party you are voting for currently doesn=t do it, stop voting for them. Tell them why, and stop voting for them.

We also need within that context, a national skills development framework, because the two big cohorts in the labour demographics that are in underutilisation, are the older men, above 55, and the 15-19 year old teenagers. How the hell, did we let that happen? How did we let the most experienced people in our community of working age (whatever that is) count for nothing.

Audience Question 1:

Having tried permaculture on a property on the Atherton Tablelands, the establishment of such a property requires a lot of resources. In this market-driven economy they are very hard to find, when you=ve got primarily a fairly long lead-time. Furthermore, are we trying to force European plants on Australian soils? Do we have a lack of vision for rural Australia? If you might want to elaborate on social settlements? Thank you very much.

Answer: I will probably decline to answer all the questions about farming, because I=m an economist after all. Any change in land usage will need new resource allocation patterns and they need to be funded. So, I cannot see that, when the previous speaker was asked before, people were asking, should they just get out {leave the land}? The agronomists would say that they should. They should just close down those farms and create new employment in that area in a different land-usage pattern and invest in, instead of handing out drought-relief, in the form that will retain the people in their current activity, it would be much better in the long term, to realise that this is not sustainable and to create new employment opportunities in the same areas. I=ve had this dispute with The Greens from time to time where I=ve given them advice about their political strategy where they say, >We cannot have any activity at all in certain forest areas=. Well, what they are really saying to communities is that >You cannot live here=. That=s not a very good political message. What they should be saying is, >Let=s think of lateral ways in which we can create sustainable employment and economic settlement in areas where people currently live. This is something that The Greens don=t do very well. They want to save forests, but they don=t know what they should do in place of that. They don=t really have an answer. I=m not an expert on permaculture although I practice - but any change in land-management and resource allocation needs investment that is sort of something that the community has to deal with.

Audience Question 2:

What does it take to have the public wake up? We=ve got 43% unemployed in youth, in Wollongong and the Illawarra, and similar problem in the Hunter. What does it take for us and people to wake up that they are being conned by the mainstream political parties and start voting for parties that will try to turn around this absolute madness?

Answer: Probably the next recession - which is looming. The Federal Government has been very successful in picking off groups in our society, up until recently. So they=ve been able to pick-off the weakest and the most fragile in our community, and isolate them with nomenclature which is very vile. So we=ve have >queue-jumpers= and >dole-bludgers= which I=ve mentioned before, and they=ve been able to separate them sufficiently through his dialogue and nomenclature, that we=ve gone along with it and played into their hands. I think it is like a school-yard bully. They school yard bully picks out the little guys and knocks them s=>=less and gets away with it. So they become a bit braggadocio they overextend themselves and then they pick on somebody who knocks them rotten one day. The way I think about the analogy is that I think WorkChoices (legislation) is the school yard bully over extending itself.

I think WorkChoices and the subsidiary Welfare-to-Work legislation plus regulation (you appreciate that most of the details in regulation can be changed without any change in the legislation, so that we never see a debate in Parliament - that=s the way this government has gone). These things are going to affect all of us. And it will be very hard for the Government to run a vilifying campaign against all of us. So my view is that it is easy to vilify the unemployed, the Aboriginals, and the Muslims in the west of Sydney. That=s school yard bully stuff. But WorkChoices is over-extending themselves. When we have the next decline, as the Chinese economy starts to slow down it will come quicker, the SW Sydney market is already contracting, the unemployment rates are rising. This is an area where householders are holding extreme amounts of debt and they will go under, a lot of them. When that happens, then you will see the employers take more advantage of the WorkChoices freedoms that they have, and exploit more and more workers, and more and more households are going to realise that they are screwed. When they realise that, that=s when their vote will change. That=s my conjecture but remember I=m not a political scientist..@

Professor Bill Mitchell is Director of the Centre of Full Employment and Equity, Uni Newcastle