In this episode of the Australia Together Podcast on Substack I read the first two parts of Chapter 2 of my latest book, The Public Interest Economy: the path to wellbeing, security and sustainable consumption in a democratised Australian economy.
Chapter 2 is called Deploying money so that it can make Australians safe. It describes a project of reform of the macroeconomic policy and governance arrangements for Australia’s economy so that in future all Australians can be assured of their prosperity through the achievement of full employment and price stability.
Ultimately this chapter leads to a recommendation to reverse the degree of independence that has been given to the Reserve Bank of Australia over the last thirty years. It supplies reasons for this proposal - showing how and why the current degree of independence for the bank is not in the public interest and is fundamentally anti-democratic.
The Reserve Bank of Australia is independent of government, but it is not sufficiently independent of the influence of the financial sector.
In place of the current macroeconomic governance arrangements, the chapter therefore proposes that the Treasury should take leadership of an integrated marcoeconomic policy by use of functional finance.
This recommendation runs counter to the preference of most economists but the reasons for it are clear. The intention is to restore democratic accounability in Australia’s economic governance arrangements.
Introducing the argument for a new economic governance arrangement
In these first two parts of Chapter 2, I describe the difference between two opposing camps in economics - the neoliberal and “neoclassical” camp versus the modern camp whose members favour the post-Keynesian schools of modern monetary theory (MMT) and functional finance. I suggest that the former camp is not capable of deploying money in a way that will make us safe but that if we adopt the views of the latter camp we will be well on the road to securing our welfare and wellbeing.
I set out the failures of neoliberalism and neoclassical economics and show how the current government’s views of sound economic management - where fiscal sustainability, balanced federal budgets and low government debt are prioritised over the sustainability of people - are economically pointless and socially harmful.
Prioritisation of fiscal sustainability in Australia’s economy is inadvisable; it is not a secure road to economic sustainability – at least, there is little if any evidence that it will automatically lead to, or is necessary for, such an outcome. If Australia’s economy is strong, it will not be because the government has pursued fiscal sustainability. This is obvious in that 21st century Australian governments have not pursued it and yet the economy has continued to grow.
The remainder of The Public Interest Economy is based on an acceptance of the modern, non-mainstream views of economics and how money actually works. The thesis is that the neoclassical views of economics that prevail in Canberra are both wrong and harmful and that in any event it will not be possible to build an economy that secures everyone’s welfare and wellbeing if Australia’s economic managers persist with a neoliberal and neoclassical economic policy orientation. Governments who really wish to secure our safety and wellbeing should abandon the economic paradigms that, since the GFC of 2008, have twice been proven to be false.
If Australians are to be made safe, macroeconomic policy arrangements which prioritise fiscal sustainability should be replaced with those that prioritise functional finance.
For a readily accessible summary of the opposed views of the above camps of neoliberalism and mainstream, neoclassical economics versus modern economic schools, see Extracts from The Public Interest Economy - Appendix 1, Opposing approaches to economic management in Australia, particularly:
Table 4 – which shows the beliefs of the opposing camps in economics.
Table 5 – which shows the prevailing economic policy orientation under neoliberalism in Australia and the alternative policy orientation necessary for a public interest economy.
Table 6 – which shows the current mindsets predominant in governments in Australia and the mindsets needed for a public interest economy.
A public interest economy cannot arise if Australia persists with a neoliberal and neoclassical economic policy orientation.
Listen to a full reading of The Public Interest Economy
You’ll be able to listen to a complete reading of The Public Interest Economy in weekly instalments.
If you wish to keep reading now, the full book has already been published and is available on Kindle here. The paperback is available for pre-order here or click on the picture below. Or visit the Australian Community Futures Planning website to purchase The Public Interest Economy at https://austcfp.com.au/publications#public-interest-economy
