Bill Mitchell-en The pandemic exposes the damage that neoliberalism has caused
(http://bilbo.economicoutlook.net/blog/?p=48004)
(i) Sarrera gisa
Australia is now locked into a new phase of the pandemic where NSW is in danger of allowing the virus to run free throughout the population due to the incompetence of the conservative state government. For the duration of the pandemic up until now, the NSW government has been lecturing the other states (mostly run by Labor governments) about how they had a superior health system (health is organised along state/territory lines in Australia) and how they valued freedom more than the dictatorial Labor states that go into lockdown very quickly if a case threatens. It turns out NSW has just been lucky to now and the latest outbreak has revealed their ‘freedom first’ approach is a false freedom. Sydney has been locked down for weeks now and cases are still rising and it seems the contact tracers have lost control. But the hubris from the NSW government has really exposed a much deeper malaise that has been evident for years now as a result of the way neoliberalism has reconfigured the public sector and the role of government. The pandemic is just exposes the erosion of government capacity to provide public services and infrastructure and deal with public emergencies. That is one of the important revelations to come out of the pandemic.
(ii) Australia eta neoliberalismoa
As an aside, but germane, the chairman of Australia’s competition regulator – the Australian Competition and Consumer Commission – who in the past was a major proponent of privatisation, has in recent years began to demand governments stop the process.
In 2016, he accused the governments of incompetence in the sale of electricity, port and airport infrastructure.
In recent days (July 30, 2021), he gave a speech – Privatise for efficiency, or not at all – where he admitted that the way Australian governments had privatised key assets had reduced efficiency and harmed the economy.
Then you have a former conservative Australian prime minister, who in 2015, accelerated the signing of a free trade agreement with China (Source) and claimed all sorts of benefits would follow for Australian citizens.
(iii) Eta Txina
Now with China essentially declining to import a range of Australian exports, the same politician (now defeated) admitted there “is no way he would sign a trade deal with China today” (Source).
He admitted he thought these deals would mean “the Chinese would become ‘more like us’”, whatever that means.
He now says he has had a “hell of a wake-up call”.
There are many examples of these doctrinaire characters, who in positions of power, pushed our nations into the neoliberal marasma, who when confronted with the evidence – the outcomes of their zealotry – now deny responsibility but sing a different song.
It is part of the process of paradigm change – where one pastime is counting the number of rats deserting the ship.
The reality is clear.
(iv) Errealitateaz
Capitalism is now on life support systems provided by the state.
This is the state that we were told was powerless against global capital, that could not create work, that had no money, that would create accelerating inflation if it tried to reduce unemployment, would drive up interest rates if it borrowed, would eventually run out of money if it ran deficits for too long, and all the rest of the bunk.
Now, the capitalist interests line up every day with their begging bowls demanding further and more generous support.
The spectacle is public now.
But, of course, while there is a public aspect ot it now, which means we are all seeing it more clearly, the fact remains that capital has always relied on the state for profits.
State procurement contracts, special deals, subsidies, protection, anti-worker industrial relations legislation, and more have always allowed the centrality of the state to deliver benefits to capital.
In the past, we didn’t see that sort of support very well and so we couldn’t glean the hypocrisy and contradiction of representatives of capital calling for government spending cuts to welfare and assistance to the poor, while at the same time having their hands firmly out for government support.
(v) Estatuaz bi hitz gehiago
As I have written before, if the state was now no longer relevant, why do corporations spend billions a year lobbying the legislators?
But the reconfiguration process under neoliberalism, where the state has become an agent for capital rather than a mediator in the conflict between labour and capital has damaged the state’s capacity to respond to crises.
One of the essential implications of an Modern Monetary Theory (MMT) understanding for a person who values the maintenance of full employment, is the primary role that fiscal policy should play in smoothing the output consequences of fluctuations in non-government spending.
When the non-government spending growth collapses, then the only way a nation can avoid recession and mass unemployment is if net spending by the government sector increases.
But that net spending has to manifest in specific ways – employment creation, income support, infrastructure projects and the like.
This means that the government has to have the capacity to respond quickly and effectively.
In the Post World War 2 period, as governments committed to full employment and accepted that it was the responsibility of fiscal policy to make that commitment operations, they also built the capacity to not only deliver public services on an on-going basis and ensure there was first-class public infrastructure built and maintained, but also that could be ramped up and down quickly to meet cyclical fluctuations in non-government spending.
That capacity included forecasting, planning, design, and execution capability.
The neoliberal attack on the capacity of government targetted these capabilities and governments began to abandon the idea that they were responsible for these things, and, rather, were only responsible for managing outsourced contracts with non-government sector providers.
That shift (reconfiguration) meant that governments had diminished capacity to respond to emergencies.
(vi) Finantza krisi globala
We saw during Global Financial Crisis in Australia that the Federal government introduced a couple of major infrastructure projects to ensure the nation did not enter recession.
While the objective to avoid recession was met, the programs were far from satisfactory in implementation and resulted in waste and other problems (rorting by the private sector).
These large-scale stimulus interventions of the type taken by the Australian Government during the GFC – which in international terms was early and large relative to GDP – are very complicated and you can expect some administrative inefficiencies.
Imagine if the private sector had to ramp up investment spending within a quarter or so – what do you think would be the outcome of those projects?
But the neo-liberal era has been marked by a major reduction in Departmental capacity to design and implement fiscal policy – given the obsession with monetary policy and the major outsourcing of “fiscal-type” government services to the private sector.
Many of the major Australian government policy departments are now just contract managers for outsourced service delivery.
So with the voluntary reduction in ‘fiscal space’ within the federal government over the last 20 years or more it is no surprise that the overall capacity of the government machine to implement efficiently and speedily complicated nation-wide infrastructure programs has been diminished.
At the time we were debating these issues during the GFC I noted that this was a lesson for the future.
I wrote that we can no longer deny that fiscal policy is required to address serious swings in private spending. Monetary policy has been proven – categorically – to be ineffective in dealing with aggregate demand failures of the sort we have witnessed in the current crisis.
In that context, I wrote that governments must develop forward-looking capacity to ensure that it has project implementation skills when they are required.
(vii) Eta Pandemia etorri zen…
And then came the pandemic.
There was an excellent article in the Meanjin Magazine (July 29, 2021) – A Pandemic To Die For – by Australian academic and journalist – Ben Eltham, that bears on these issues.
Meanjin – has a long history in our literature, being a literary magazine that publishes stories about art, and “the broader issues of the times”.
His article is about how Australia went from being held out as the pandemic model – essentially suppressing the virus to being in danger of an uncontrolled outbreak, in an environment where only a small proportion of the population is currently vaccinated.
The two things that the conservative federal government were responsible for under our constitution in relation to this pandemic was: (1) the maintenance of the quarantine system as our external borders closed but we allowed a limited number of residents to return from overseas, and (2) the procurement of vaccine supplies.
They botched both.
The various outbreaks that have led to damaging lockdowns via the state government internal border powers have come from the defective quarantine system and despite pleas from the states for the federal government to build dedicated facilities (rather than use tourist hotels), the feds refused to allocate the funding.
The vaccine scandal has arisen because the federal government tried to ‘penny pinch’ with Pfizer last year and we now have a vaccine scarcity and will not get adequate supplies until later this year.
Ben Eltham wrote that:
Australia was offered a huge potential supply deal from Pfizer early on in negotiations. But a penny-pinching federal Health department tried to haggle on the price. Pfizer went elsewhere, and Hunt was able to secure only 10 million doses of the Pfizer product in November 2020, well after big orders had been placed by the US, UK, Japan, Canada and the EU. Not surprisingly, this meant Australia was back in the queue for Pfizer supply.
So, the neoliberal obsession with fiscal austerity (the ‘penny-pinching’) has left the nation badly exposed to the Delta variant of COVID and on-going lockdowns enforced by the state governments which are resulting in millions of dollars of lost output and incomes every day.
All for the sake of a few pennies.
The federal government also refused to fund last year local manufacture of the new vaccines and relied on the privatised CSL to manufacture the AZ vaccine, which the public has resisted due to the blood clotting issue and the poor messaging from the federal government around that.
Ben Eltham’s article thus reinforced the theme I have been pushing for years now about the way in which neoliberalism has fundamentally altered the capacities of our government – diminishing its capacity to marshall resources to solve complex problems – while at the same time increasing the dependency of the system on government’s fiscal capacity.
He didn’t express it like that – that is the way I construct the developments.
He wrote:
At its heart, though, the bungled vaccination roll-out is a story of poor decision-making abetting deep-seated policy failure. It is a story of Australia’s increasingly atrophied government capability, driven by 40 years of neoliberal ideology which has demonised the public sector and championed free enterprise. For instance, the federal government privatised the vaccination roll-out in aged care facilities to private providers like Aspec and Healthcare Australia. Health Minister Greg Hunt and the hapless Aged Care spokesman Richard Colbeck promised all aged care residents would be vaccinated by April. But profit-seeking firms prioritised income over diligence. The government was still putting out vaccination tenders in mid-June, when Senate Estimates revealed that thousands of residents remained unvaccinated. Even now, the majority of aged care workers haven’t received their jabs.
His article documents in fine detail the failures of the federal government in this regard.
This problem is often characterised as the ‘shrinking state’, which was the motivation for the title of this academic paper – The shrinking state? Understanding the assault on the public sector – which was published in November 2018 in the Cambridge Journal of Regions, Economy and Society (Volume 11, Issue 3, pp. 389–408).
The authors talk about the:
The erosion of the state as an institution can be seen in cuts to social programmes and public sector jobs, underfunded infrastructure, the sale of public assets and other forms of privatisation, along with the more general weakening of regulatory authority and diversion of resources to the private sector.
They also cite the early literature:
A narrative of wholesale state decline was ushered in by the globalisation literature of the 1980s. In its early and extreme form, the globalisation thesis held that states were withering away or reduced to impotence through the emergence of global governance structures and the rising power of transnational corporations …
(viii) Ezkerra galdurik (eta non ez?)
This became the standard Left narrative.
Apparently, globalisation “raised the power of power of capital relative to that of the state and labour, so that national governments embraced the private sector’s preferences for lower taxes, wages, regulation and public spending.”
No, it was neoliberalism that did that.
Globalisation didn’t privatise or cut wages and government spending.
Nations have been trading forever.
But at any rate, we should be clear that it is better to talk about the reconfiguration of the state rather than the state withering.
In our 2017 book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, September 2017) – we argued that the conjectures by progressive intellectuals that the state had withered away or been ‘eroded’ leads to the incorrect conclusion that global capital is dominant and dominates the state, which has lost its capacity to implement national economic policies
The Cambridge Journal authors, however, extend their notion of a ‘shrinking state’ in this way:
… we refer to the potential retreat of the state from its customary intervention in regulating economic growth and promoting redistribution and the overall weakening of the state as an institution in local/regional affairs.
This is more about what I am writing about today – the shift from a service delivery and infrastructure providing institution to a contract brokerage agency of functions that have been outsourced to the non-government sector, but remain in the eyes of the public – public responsibilities.
This is a quite different situation to the more rabid demands that we should only have private activities like private police, armies etc.
Neoliberalism has not been able to negate our perception that there are ‘public’ functions and public responsibilities that extend beyond national defence.
And the pandemic has brought that home in spades
Which is why we have seen the mess in Australia.
Ondorioak
(1) When trouble strikes we don’t turn to the likes of Amazon, Apple, Facebook etc to bail us out.
(2) We know it is a public responsibility.
(3) Which means we should also stop believing the myths about government capacity.
(4) The currency monopoly gives the state immense capacity to overcome crises.
(5) But it needs public machinery intact to ensure that currency capacity can manifest in specific ways.
That has been missing under neoliberalism and needs to be restored.
joseba says:
The ideology of neoliberal ‘freedom’ ends up damaging all of us – NSW Covid outbreak
(http://bilbo.economicoutlook.net/blog/?p=48046)
It has been a while since I updated my commentary on the new bi-weekly dataset using Australian Tax Office payroll data that the Australian Bureau of Statistics started publishing in March 2020, in order to provide more updated information on the state of the labour market during the pandemic. The Monthly Labour Force survey comes out in the third week of each month and relates to data collected around the second week of the previous month. With ongoing state government lockdowns being imposed with little warning having a significant impact on employment, this more frequent dataset was welcome. We are now in a situation where around 13 millions Australians are in tight lockdowns (over half the population), principally in Melbourne and Sydney. The latter, due to the incompetence of the conservative state government in NSW, has been in lockdown for weeks now and as the largest state, the reverberations are clearly going to be felt across the nation. Last week (August 5, 2021), the ABS released the – Weekly Payroll Jobs and Wages in Australia, Week ending 17 July 2021 – which provides the first glimpse of what the impact of the extended lockdown in Sydney (in particular) is having on the labour market. Employment in NSW shrunk by 5.1 per cent in the 3 weeks since June 26, 2021 (the start of the restrictions). Overall, employment has slumped by 2.4 per cent nationally. And the virus is spreading into regional NSW and things will get worse. The damage is being borne largely by our youth, given the occupation segregation in the ‘closed down’ sectors. The Federal government is demanding we all get vaccinated but due to its trying to ‘save money’ last year, there is insufficient vaccine available to supply the demand. Both the NSW and Federal governments have demonstrated their incompetence in the decisions they have taken in the name of ‘freedom’ and ‘fiscal surpluses’.
In terms of the coverage of the ATO Single Touch Payroll data, the ABS report that:
Approximately 99% of substantial employers (those with 20 or more employees) and 71% of small employers (19 or less employees) are currently reporting through Single Touch Payroll.
Past analysis of ATO Payroll Data
See links at the end of this blog post.
Overall jobs recovery uncertain
The ABS – Press Release – notes that:
Payroll jobs fell by 2.4 per cent nationally in the fortnight to 17 July 2021, following a 0.2 per cent fall in the previous fortnight …
While every state and territory saw a fall in payroll jobs across the fortnight, the falls were much larger in New South Wales (down 4.4 per cent) and neighbouring Australian Capital Territory (down 2.4 per cent) …
New South Wales usually accounts for around a third (32.0 per cent) of total payroll jobs and Victoria around a quarter (26.2 per cent). As a result, lockdowns in these two states contributed to a strong fall in payroll jobs nationally …
The Accommodation and food services and Arts and recreation services industries saw large falls over the fortnight, down by 19.0 per cent and 18.0 per cent in New South Wales and by 8.7 per cent and 4.5 per cent nationally …
As we saw in the early weeks of the pandemic last year, payroll jobs held by women and workers under 30 were particularly impacted, especially in New South Wales.
The impact was predictable.
Whereas the Premiers in the other Australian states have learned that at the onset of COVID cases, a short and sharp lockdown is necessary to meet the national targets of zero community transmission (and these lockdowns usually last a week or so), the NSW government, in their attempt to occupy the ‘freedom’ higher ground, delayed the decision to lockdown, despite being urged by most of the Australia’s leading infection experts to go early.
The result has been that the NSW government has now lost control of the virus and it is spreading into regional NSW from Sydney and the case numbers are rising quickly, with the inevitable rise in deaths.
Newcastle is now in lockdown (from this week) because the government failed to restrict movement between Sydney and the regions and so the virus spread (I am currently stranded in Melbourne in Victoria by the way).
So when the NSW government finally realised that they had to lockdown the employment consequences started to become obvious – the longer a state delays, the longer the subsequent lockdown and the worse will be the labour market impacts.
The other states/territories that use the short and sharp approach damage the labour market too but less so and the impacts are of shorter duration.
Here is what has happened to total employment in Australia since January 4, 2020 (the ATO data starts at the beginning of the year). The index is based at 100 on March 14, 2020 which appears to be around the peak employment, although it was slowing since February 29, 2020.
1. Overall, payroll employment is 2 per cent higher as at July 17, 2021 that it was on March 21, 2020. But in terms of the most recent peak (which was 4.8 per cent higher – on June 26, 2021), there has been a rapid deterioration in the next 3 weeks to July 17, 2021 – a fall of 2.6 per cent.
2. The first trough came in the week ending April 18, 2020 and the total employment loss was 8.5 per cent.
3. The second dip coincides with the extended Sydney lockdown before Xmas.
4. The third big dip that we are now witnessing coincides with the extended Sydney lockdown now being endured.
Gender trends
Here is the same series decomposed by gender.
While the pattern was almost identical for males and females up to March 22, 2020, the data for the earlier parts of April 2020 showed that the crisis was impacting disproportionately on females.
This bias was driven by the occupational segregation that has women dominating the sectors that were most impacted by the lockdown (accommodation, hospitality, cafes, etc)
As the lockdowns eased and businesses reopened, women started to gain jobs at a faster rate than men.
In terms of the decline since the most recent peak (June 26, 2021), male payroll employment has fallen by 2.3 per cent and female employment has dropped by 3.1 per cent.
So the ‘bias against females’ pattern that was evident in the big lockdown at the onset of the pandemic is repeating itself.
Wages data suspended
The ABS said that “Around the end of the financial year there is a greater variation in business reporting, as businesses finalise their employee’s earning information and the financial year is reset in payroll systems.”
This variability has led them to suspend the wages estimates.
However, tomorrow the Wage Price Index data is published and I will analyse that accordingly.
Comparison with prior cycles
The following butterfly graphs are constructed from ABS Labour Force data and provide a vehicle for analysing what happens to employment following a downturn.
They show for full-time and part-time employment indexes set at 100 for the peak in total employment in the downturns for 1982, 1991, GFC and now the COVID-19 cycles.
For the first three events, they show the trajectory for 90 months after the peak, capturing the dynamics of the cycle.
The pattern in a usual downturn are demonstrated in the first three episodes – even as full-time employment declines as the recession bites, part-time employment continues to grow for a while, until it becomes obvious that the recession is deepening.
At the peak before the 1982 recession, the ratio of part-time to total employment was 16.2 per cent. By the time, full-time employment had reached the peak level again (after 41 months following the peak), the ratio was 17.6 per cent (and rising).
The 1991 recession was particularly bad and there was a major shift away from full-time work. At the peak before the 1991 recession, the ratio of part-time to total employment was 21 per cent. By the time, full-time employment had reached the peak level again (after 65 months following the peak), the ratio was 22.3 per cent (and continuing to rise).
The GFC event was reduced in intensity by the substantial fiscal stimulus that the Federal government introduced. But the part-time ratio still rose and full-time employment took 23 months to return to its pre-GFC peak. The part-time to total ratio in February 2008 (peak before the downturn) was 28.3 JobKeeper cent. After 23 months, the ratio had risen to 30.1 per cent.
While the ratio is rising on a trend basis as the labour market is increasingly casualised and job protections are wound back under the aegis of government policy designed to tilt the playing field towards the employers, there is an acceleration in the ratio during recessions when employers scrap full-time work and replace it in the recovery with part-time, fractionalised and insecure work.
The COVID episode is different given the nature of the job loss – lockdowns – which have directly impacted on the sectors where part-time work dominate.
But it is clear from the observations we have (lower-right panel) that as the lockdowns were eased, part-time employment rebounded somewhat but full-time employment continued to struggle.
It is important to note that prior to the pandemic, overall growth was declining and the labour market was weak.
The pandemic has made matters worse but the problems were there before the onset as a result of the federal government austerity onslaught.
Age breakdown of Job Loss
The age breakdowns for Australia as a whole are shown in the next graph.
The blue line shows the total history since March 14, 2020 (when the index = 100) to July 17, 2021 by age category. So you interpret the graph as being deviations from 100.
The orange line shows the period June 26, 2021 to July 17, 2021, which is from the previous peak to the current point and starts to capture the impact of the renewed lockdowns, particularly the now extended Sydney restrictions. So you interpret this line as being deviations from the June 26, 2021 peak.
Overall, it is the youth 15-29 age group that has borne the brunt of the pandemic so far in terms of employment.
This is largely due to the industrial composition of the job losses – services, accommodation etc.
It is also clear that all age groups are suffering in the most recent period of lockdowns across the nation with younger and older workers enduring the greater percentage contraction in their employment.
The following sequence of graphs gives the age profiles of the job loss for each State/Territory.
The patterns are similar across all jurisdictions except that in Victoria, the short-sharp lockdowns in recent weeks has not yet damaged the youth cohorts.
You can also see that the current restrictions in NSW are having much more significant negative effects on employment across the age groups, particularly the young and old, than in other states/territories.
Industry job loss breakdown
The following graph shows the percentage decline in employment for the Australian industry sectors from March 14, 2020 to July 17, 2021 (blue bars) and from June 26, 2021 to July 17, 2021 (orange bars).
The latter period shows the impacts so far of the restrictions that have been imposed to deal with the Delta variant of the virus.
The worst hit sectors overall are Accommodation & food services (decline of 9 per cent), Transport, postal and warehousing (down 8.1 per cent), Information, media and telecommunications (down 5.8 per cent) and Arts & recreation services (down 3.5 per cent).
The recent lockdown period has impacted badly on those sectors, but has had a negative effect overall.
State and Territory job loss breakdown
The following graph shows the employment losses from March 14, 2020 to July 17, 2021 for the States and Territories (blue bars), while the orange bars shows what has happened between June 26, 2021 and July 17, 2021.
NSW overall, the largest state in Australia has experienced negative employment growth over the entire period and a sharp 5.1 per cent decline in the period between June 26, 2021 and July 17, 2021, which covers some of the most recent lockdown.
Victoria, which had a 110-day harsh lockdown last year (much harsher than the current NSW lockdown) has overall added jobs over the pandemic but in the recent period has contracted by 2.1 per cent (as a result of two short/sharp closures).
NSW began its lockdown on June 26, 2021, so this data is covering only the first 3 weeks. The situation has deteriorated significantly since July 17, 2021 (when this current data ends) as the infection rate has spread in Sydney and has now escaped to the regional centres, such as Newcastle.
The data suggests that it was foolish of the NSW government not to follow the short/sharp lockdown approach used by the other states/territories, which appear to be significantly less damaging and are successful in bringing the outbreak under control.
NSW is now in for an extended period of lockdown as the case numbers accelerate upwards and the death rate rises and the employment damage will compound.
Neoliberal ideology does it again!
Conclusion
The labour market is once again contracting, largely because of the errors the NSW government made in controlling the latest outbreak, which was a breach of quarantine.
They have failed to curb mobility and the infection rate is spreading into the regions.
They reluctantly imposed a lockdown but it was too late.
It will now be an extended contraction.
The other states/territories have all followed a different model of short/sharp lockdowns and are more successful in controlling the virus and limiting the labour market damage.
The NSW government, infested with neoliberal ideology about ‘freedom’ and under pressure from the big employers (clubs, racing etc) stayed open too long.
Now we are all suffering, given that NSW is the largest economy.
Relevant blog posts as I trace this data trail over time are:
1. “We need the state to bail out the entire nation” (March 26, 2020).
2. The government should pay the workers 100 per cent, not rely on wage subsidies (March 30, 2020).
3. A Job Guarantee would require $A26.5 billion net to reduce the unemployment rate by 6 percentage points (April 30, 2020).
4. Latest employment data for Australia exposes Federal government’s wilful neglect (May 5, 2020).
5. The job losses continue in Australia but at a slower pace (May 19, 2020).
6. Worst is over for Australian workers but a long tail of woe is likely due to policy failure (June 16, 2020).
7. Latest Australian payroll data suggests employment damage from shutdown is worse than thought (July 20, 2020).
8. Australia’s job recovery stalling and soon to head south again (August 12, 2020).
9. Payroll employment falling again as second-wave and inadequate policy response bites (August 25, 2020).
10. Federal government cutting spending as payroll data shows employment still in decline (September 10, 2020).
11. Latest employment data in Australia continues sorry tale and what I would do about it (September 24, 2020).
12. Australian labour market continues to go backwards as government sits idly by (October 20, 2020).
13. Australian labour market struggling with significant sectoral disparities (May 11, 2021).