Bill Mitchell: MTM eta gaizki ulertze batzuk (2025)

@tobararbulu # mmt@tobararbulu

our levels of happiness. This is all economics. Journalists are just giving these economists free kicks to pump out fiction that we all absorb and we behave and vote accordingly based upon a fictional world.

G’day and welcome to Concept Economy, where we dive into the nuts and bolts of the Australian economic machine and ask, how does it work? The size of Australia’s national debt is a topic of constant debate. What can we afford as a nation? How are future generations going to repay what we’ve spent?

We’re constantly told that the government budget is a giant version of a normal household budget, and, like a household strapped for cash, there are very tight financial constraints on what the government can spend. Modern Monetary Theory says, no, actually, we’ve got it all wrong. Today’s guest is an Aussie professor of economics at the University of Newcastle,

and one of the founders of Modern Monetary Theory, also known as MMT. MMT is described as a lens that we can use to understand how the economy really works, and I don’t think it’s an understatement to say that if MMT is correct, especially when it comes to how government spending works,

then it has the potential to take all of our discussions about federal budgets and national debt and turn them entirely on their head. That’s a pretty big deal. As our guest today explains, MMT states that there are very real constraints on what the government can spend, but they’re not the constraints that most economists, commentators,

and politicians are talking about. Rather than thinking of the government like a household, my guest compares government spending to printing tickets for the public transport train system. He points out that there’s no actual limit on the number of train tickets that can be printed, but the system is limited by how many seats are available on the trains.

Likewise, government spending isn’t limited by the number of Australian dollars that we print, or by the collection of taxes, but it is limited by the resource capacity of the Australian economy. He claims that if we’re willing to take a hard look at how the Australian economic machine really works, we can create better economic outcomes for all Aussies,

strengthen the economy, reliably control inflation and the cost of living, and practically eliminate unemployment. If that sounds too good to be true, then I urge you to stick around for this intriguing conversation. Professor Bill Mitchell, thanks for joining me today. You have been responsible alongside Warren Mosler for establishing modern monetary theory,

which you describe as a lens that we can use to develop a better understanding of how the economy really works. Modern Monetary Theory or MMT is considered by some to be very controversial and it is often misrepresented or misunderstood. I’m really excited to get a clearer understanding of MMT through our conversation this morning. Thanks for joining me.

Welcome.

Thanks for having me.

First, I’d like to ask a big picture question that I’ve been asking a few people. It’s a bit on the nose. The question is, why is economics boring?

When I first started studying economics, I remember John Maynard Keynes calling it the dismal science. Most people don’t associate it with professions like medicine that cure people and astronauts who go to the moon, geologists who discover fabulous rock formations and things like that. So I’m guessing that was behind his motivation, calling it the dismal science.

I came from a mathematics, history, philosophy type beginning and you go into a standard economics undergraduate program. Economics education is divided between microeconomics and macroeconomics. Microeconomics focuses on the small choices that firms and consumers make and macroeconomics is the big thing. economy-wide employment production inflation and trade those big things and first

year in economics you do one semester of macro and one semester of micro and the micro is what we now would call neoliberal it’s properly called neoclassical and it’s tedious it’s a creation of a priori reasoning. In other words, you start off with a set of assumptions about human behavior and then start making

deductions based upon those assumptions. But of course, if you consult a psychologist or a sociologist, or an anthropologist who are experts in studying human motivation, they’ll tell you that the sort of human that the mainstream economists construct, upon which they then do their deductions, doesn’t resemble anything of humanity at all. So you get this sort of puerile,

simplistic statement that we’re all individuals, we maximize our own satisfaction, independent of everybody else, and dog eat dog. And, well, you know, we all grow up in families and most of us understand that the interdependencies between our behaviour and others within our family from a very young age and then

we go and play sport or join a youth orchestra or something, team-based. and we learn compromise and collaboration and teamwork and a sense that we’re part of a collective inner society so the idea that we’re just dog-eat-dog maximizers is quite ludicrous and so for that reason the student is sitting in an economics class and thinking, well,

what’s this got to do with the real world? Now, the problem is that, and we’re slightly digressing here, but the problem is that there’s a lot of research now that discusses the sort of impact upon individual behavior from studying economics. There’s significant amount of research that says that by the end of an undergraduate program,

a typical economics graduate has less empathy.

Wow.

and more willing to support sort of individual greed. We’re not sure whether that’s because of the program or because of self-selection. In other words, that propensity went into economics anticipating that it would satisfy their propensities. But it’s quite clear that that really ridiculous way of teaching about human

behavior and that satisfies or creates a certain type of individual which borders on becoming sociopathological. Sure. So the neoliberal period has really exploited that.

Mm-hmm.

This idea that you’re all in it yourself and the unemployed are lazy and indolent and haven’t taken themselves and poverty is an individual choice factor. The government should just get out of the road and leave us to pursue our own selfish interests. And economic theory that is taught in microeconomics particularly is of that ilk.

Mm-hmm.

So in a way, we’ve created this monstrosity. And I wouldn’t call it boring. I mean, it’s an intellectual exercise like playing chess. Microeconomics, half of what you learn in economic programs is like playing chess. It’s not connected with the reality of humanity.

Mm-hmm.

and it creates outcomes and frameworks and modes of thinking that reinforce that disconnect from the major issues that we face as humans and the challenges we face and many of those challenges which to solve require empathy and empathy is not a big thing that you learn in economics.

That’s so interesting. And I think the bit that jumps out to me and part of the reason I like asking that question around why is economics boring is because I feel like there is this massive gap between the public perception about what is it that economists do and

what is involved in setting down and creating an understanding of how the economy does work and how it should work and the policies that we should make. There’s a big gap between the way that people see that and A lot of the ideas that you’ve just touched on there in terms of really

understanding the way that people really are from a philosophical standpoint and even from a more realistic social standpoint grounded in our everyday experience, those things are really, really interesting to me. Most people have an opinion about whether family matters or how our care and consideration for people in our community influence our decisions.

I think that’s not something that always comes through in the public conversations about economics.

One of the most extraordinary things that I’ve thought about and discovered over my life is the disconnect between the public and economics. I don’t know exactly the reason for that disconnect, but if you think about it, every day in headlines in our newspapers, social media these days, TV, radio, every day the headlines are full of economics and

Whether you appreciate it or not, what economists are doing via their advice to governments and their advice to corporations, the way they manipulate judicial and planning systems are fundamentally influencing our standard of living, our levels of happiness, our opportunities, the disadvantages that we come up against. This is all economics and economics.

For the public to be so unaware and so compliant to the mainstream view, without questioning it, that we just accept all of this fiction that the mainstream in my profession pumps out there every day through the media. the journalists just mimic what the economists say without you know i mean i’ve

seen you know terrible interviews where journalists are just basically giving these economists free kicks to pump out fiction that we all absorb and we behave and vote accordingly based upon a fictional world and that’s the most extraordinary thing to me that we’re you know we’re obsessed with sporting statistics all of us

who are interested in sport can quote all sorts of complex ratios and if you follow the Australian rules football and I guess it’s in the other codes as well the number of statistics that are pumped out every game are extraordinary these days you know they’re quite complex and we have the capacity to discuss these every

Monday morning at morning tea all these fantastic statistics and we evaluate them and that’s fine that’s fun if you like sport but the statistics that really matter to our lives and our opportunities we’re completely oblivious to and just accept what the economists say without question and that’s the most extraordinary thing

that disconnect yeah i very much agree and that’s why i’m really excited to have conversations with people like yourself bill who are challenging a lot of those mainstream ideas and modern monetary theory is one of the most controversial ideas that I’ve come across. I’m not an economist by training,

but I’ve really enjoyed the process of diving in and reading the work of people like yourself and starting to get a broader appreciation for these statistics and these mechanisms that impact our everyday life. Now, I do want to jump into modern monetary theory a bit deeper here. And again,

I’ve already said modern monetary theory seems to be an idea that appears a bit mysterious to some people. A lot of people seem eager to come out and knock it down as not something worth consideration. I’d like to briefly share a few quotes that I came across that relate to MMT.

Now, American economics writer Noah Smith has a popular online blog, and he recently wrote, For those who don’t know, MMT is a pseudo-theory that pushes infinite government deficits without concretely specifying why deficits are safe or how they think the economy actually works. And then in the same article, he claims that when economists look at MMT, they conclude,

there’s just no actual theory there, And he quotes economists from the Bank of France reiterating the idea that MMT is not a falsifiable scientific theory. It is rather a political and moral statement by those who believe in the righteousness and affordability of unlimited government spending to achieve progressive ends. Now to me, I read that.

And first of all, I think this guy doesn’t really sound like he’s giving MMT a fair shake here. He doesn’t seem like he’s really engaging with him. But the second thought that comes to my head is, wow, MMT seems to be misunderstood by many people. And I’m curious to ask you, why do you think that is?

Noah Smith’s an influencer, and influencers don’t trade in the truth. They trade in self-promotion. Social media is a sort of vexed institution these days, in my view. It’s provided us with deeper connections across the world. So it’s much easier now for me to do my work.

than it used to be because i can just use email i quit twitter for obvious reasons but you know i use blue sky mastodon and i refuse to have a facebook account for obvious reasons or an instagram account for obvious reasons but social media has

been really a fantastic thing for connecting humanity and that but it’s also become a dangerous space for misinformation and self-promotional influences I don’t want to quote Donald Trump but fake news and manipulation and advancement of specific agendas particularly corporate agendas where we’re no longer able to differentiate fact from fiction that’s the problem

So Noah Smith in my view is just an influencer. He has zero credibility in terms of those statements. I mean just take the statement that you read out first that MMT advocates infinite government spending. Well no MMT economist has ever written anything remotely like that.

the way we seek to understand and build knowledge is by reading and understanding who the knowledge creators are and there’s a an academic procedure for doing that it’s called research and research involves reading and seeking understanding and we don’t understand something you ask a question so in the old days as a young

academic you’d write a letter to another professor and a snail mail letter and ask them what do you mean by this so that you could get a better understanding. Now we send emails, text message or something, but same process, it’s called research. And no MMT economist has ever written anything remotely like those statements that Noah Smith said.

So to take this question about infinity, what MMT says is that the currency issuing government, like the Australian government, It’s the only body that issues the currency that we use, the Australian dollar. Nobody else issues that currency. Have they got a financial constraint in terms of its ability to spend that currency?

And the mainstream economists argue that government has to raise taxes in order to spend. And if it spends more than taxes, it has to borrow from the private sector. Well, what MMT tells you is that that’s nonsensical. It doesn’t stack up because you and I use the Australian dollar and the only place we can get it from,

ultimately, is from the Australian government because they’re the only ones that issue it. Now, it’s like arguing that our metropolitan tram system or any of the public transport systems can run out of tickets. sure they obviously can’t run out of tickets what they can run out of is capacity

to have people on the trams the trains can get too full in which case there’s no purpose in selling more tickets but the public transport system can never run out of tickets because it’s the only body that issues those tickets it can issue as

many as is required now it’s the same with the australian government it can never run out of australian dollars it has infinity minus one cent capacity to issue those dollars. So it has no financial constraint. And then the question is, well, why do they tax and why do they issue debt? Well, that’s a separate set of questions.

But the Australian government doesn’t tax or doesn’t issue debt to get money in order to spend because it doesn’t need that. When it spends… The Commonwealth Treasury tells the Department of Finance, which is sort of like the accounting body for Australian government, that it wants to make a procurement of something, spend some money.

And the Department of Finance then notifies the government’s central bank, the Reserve Bank of Australia, and says, okay, the government wants to do this. Can you please facilitate it? And the central bank operator on some computer then types numbers into bank accounts. and that’s government spending. The numbers come from nowhere.

They just are typed into the financial system. No taxes involved, no government debt involved. Noah Smith’s implication is that MMT believes there’s no constraints on that process. Well, of course there are, and it’s the same as there are constraints on the public transport authorities issuing tickets. The constraints are your capacity to carry passengers.

The trams fill up too quickly, and then you can’t get any more people on. Well, in an economy the constraints on any spending but in this case government spending is the available resources that can be brought into use with that spending if the government wants to run a green new deal for example or a green transition or

something like that and needs to get more resources in the public sector than it currently has it can do that by spending the currency it issues But the question then is, what constraints would it face? We’ll take a scenario where all the productive resources are currently being used in other purposes.

If the government wants to get hold of some more productive resources for itself, but they’re already completely utilised, well then what does it do? Well, it can go into the market and bid those resources away from their current uses by offering more money.

It can get Labor to quit its current jobs and move into the public sector to do its climate transition policy or whatever. But the question then is, it’s competing at market prices for those resources if those resources are all already fully used. Well, then it will create inflationary pressures. So you’ve immediately got the constraint.

There are no available resources, and the only way you can get hold of them is by fighting for them at market price. In a bidding war in the market, that would be inflationary. So there’s the limit on government spending, real resource limit. In that context, the government could still get the resources without creating inflation. How?

Well, by denying the existing users of those resources the ability to use them. How might it do that? That’s what taxation does because taxation reduces our taxpayers’ purchasing power, which means we can’t spend as much as we might have if there was no taxation.

which means that we can’t demand the use of the current resources as much as we might. And so taxation is a vehicle that the government uses to free up resource space so that it can spend and access those resources for the public programs without causing inflation. The taxes don’t fund the spending.

Taxes just free up resources because we’ve got less to spend. Now, take the opposite scenario where there’s currently mass unemployment, which means that a lot of the available productive resources in our country are not being currently used and there’s no bid for those resources in the market, which means that nobody wants to use them.

That’s why they’re unemployed. Well, in that case, the government spending can just… Hire those resources in various ways, either by directly spending its own money or, say, cutting private sector taxes to encourage private sector to use them. And there will be no inflation in that context. Once you bring those idle productive resources back into productive use,

you’ll eventually get to the first state again where you’ve got all productive resources being used. in which case you hit the constraint again. The question then is, now that we understand that the limits on government spending are not financial, as the mainstream economists claim, but the availability of rural resources, the question is, well,

what should be the extent of government spending relative to taxation? The answer is quite simple. if the private sector doesn’t want to spend all its income that it receives in other words it wants to save some of its income there’s going to be a gap in

spending because the income is generated by a level of production and if all of that income is not recycled back into more spending to maintain that level of production then private firms will start laying off workers the point then is Well, if the private sector wants to not spend all of its income each period,

and that leaves a spending shortfall, which would otherwise lead to a cut in production and employment, then you’ve got the answer to the question of what should the government spending relative to taxation be? It should fill that spending gap.

Yeah, yeah.

And that’s the size of your deficit, more government spending than taxation. And in other words, the government should always maintain a policy position in our view that ensures that all the productive resources are currently being used. In other words, there’s minimal unemployment and capacity is being efficiently used. Now, that’s your limits.

If the government tries to spend more than that, it gets into that first scenario and starts creating inflation. If it spends lessons required, there’ll be rising unemployment and increased poverty and despair. So that doesn’t imply anything to do with infinite government spending. That prescribes a very tight discipline on what government spending should be.

and a very distinct purpose of what the government spending is aiming to achieve. Nothing like an out of control, wild, infinite government going crazy.

That makes a lot of sense to me. A lot of mainstream economics, they’re worried about inflation. And I think one of the red herrings that often comes up when people discuss MMT is, again, the fictitious idea that MMT says we should spend a lot so that’s obviously going to lead to inflation and

famously Milton Friedman said inflation is always in everywhere a monetary phenomenon and what you’re saying is that well we are still worried about inflation but actually the main constraint that we’re looking at here is not about how much money we have flowing around the economy it’s more about what resources we have available to utilize is that right

Yeah, nearly. We worry about inflation and that’s why we believe there’s a strict discipline on government fiscal policy that isn’t a discipline that’s informed by the government being financially constrained, a discipline informed by the government being constrained by what it can spend its money on.

And we mean the resources available for the government to hire, to do work.

or encourage the private sector to hire a free, say, tax cut. But the reality is that the Australian government can buy whatever is for sale in the Australian dollar whenever it wants to, including all idle labour. It can always ensure there’s very low unemployment, just people moving between jobs.

The implication of that statement is that whenever there’s mass unemployment, that’s a political choice. It’s not a financial necessity. It’s a political choice. They’ve just decided not to use their spending capacity. mmt worries about inflation of course it does the reality is obvious and it’s drawn directly from mmt principles that if government pushes what we call nominal

spending in other words money spending at a faster rate of growth than the productive capacity of the economy to absorb that spending and produce real goods and services there’ll be inflation that’s your limit if you’ve got growing productive capacity so increasing population larger capital stock you know investment in machinery

equipment etc more skills higher skills etc the growth in money in the economy is not going to be inflationary because the economy is growing in size and its capacity to produce real goods and services.

The intuitive part to me is we have this classic turn of phrase, right, that inflation is too much money chasing too few goods. If we flip that on its head, we often think about, oh, well, we’ve got too much money and too few goods, so we better not spend so much. But by the same measure, we’re saying,

well, if the productive capacity is such that we can continue to increase the number of goods as the spending goes up, then we never need to worry about inflation.

Yeah, there’s got to be a balance between the supply side of the economy, the productive capacity of the economy, and the demand side of the economy, the spending side. And if one gets out of kilter with the other, there’s going to be problems.

So well, then there’ll be unemployment. And if the spending is growing at a faster rate than the productive capacity of the supply side can absorb it, there’ll be inflation.

Government aims should be to try to strike a balance between those two growth rates. That’s what MMT prescribes. That’s your limit on government spending. When does the government know that its deficit is appropriate? Well, when there’s no unemployment. When does it know the deficit is too large? When there’s full employment and inflationary pressures.

When does the government know that its deficit is too small relative to the size of the economy? When there’s mass unemployment. There are simple ways of understanding it. A 2% of GDP fiscal deficit is no better or worse than a 10% deficit or a 2% surplus. It all depends on state of the economy.

The focus in the media of, oh, it’s a deficit, it’s rising, is a total waste of time and highly misleading to the public. who are then trained like Pavlov response units to immediately say, oh, the deficit’s gone up. It must be bad. The narrow focus just on the financial aggregate is totally ignorant of all of the

actual things that matter that generate that financial aggregate. In other words, targeting a deficit is a waste of time. Government should target low poverty, high employment, good education and those things and just let the fiscal outcome be whatever it is. In the case of, say, a country like Norway, for example, which has North Sea energy reserves,

oil and gas, well, they get so much spending coming in from what we call their external sector, from the rest of the world, buying their energy, that their government doesn’t have to run a deficit and still have full employment. Because they’re getting so much spending coming in from the rest of the world.

Now, Australia is different to that. We have a net deficit with the rest of the world. In other words, we import more than we export. Or what we call our income transfers on foreign-owned assets in Australia net out to being a deficit. So for us… We’re losing spending capacity to the rest of the world,

which means that the government really has to run a deficit if the private domestic sector is to save. That’s just accounting statements. That tells us we shouldn’t be obsessed. The deficit should be whatever is necessary, depending upon the circumstances, whether our external sector is surplus or not, whatever.

These are all contextual matters that we have to take into account. The public don’t understand anything of that. They just say deaths are going up bad. Deaths are going up might be actually good.

Well, it certainly seemed to produce good outcomes during COVID or during the GFC.

Sometimes rising deficits are appropriate, sometimes they’re not. To be able to make that judgment, you have to understand the context. It’s got nothing to do with the size of the deficit. It’s got to do with the context in which the government policy is being designed.

And that’s something that really continues to jump out to me from MMT. So my background is more engineering and design. And what we work with a lot is solving problems. But again, the context is absolutely critical. And we actually start by defining the needs of the users that we’re designing a

product for and very carefully design the kind of outcomes that we want a product to produce. And this is one of the reasons that MMT is resonates very deeply with me because instead of talking about these metrics like the deficit, which seem to be ways for us to measure different parts of how the government is interacting,

MMT seems to allow us to focus more on what are the outcomes that we’re producing for the people in the street? Are we increasing unemployment? Are we decreasing unemployment? Are we making good use of the resources that are available? Are we straining them or are we running in a more optimal fashion?

And we’ve touched on employment a few times. I was going to get to it later, but I’d really love to dive into it. One of the central ideas in MMT is this job guarantee. And it’s the idea that the government could offer jobs at the minimum wage to anybody who found themselves out of work.

And that’s a very different approach to thinking about unemployment compared to a lot of mainstream economics. We often have a discussion that centers around this concept of the natural rate of unemployment. Of course, that idea is promoting the idea that at any given point in time, there should be a certain number of people unemployed.

And if we try to give those people jobs, then all we’re going to do is end up driving up And you’ve already given us quite a clear explanation, I think, of how really what matters more is not about the number of people who are unemployed. What matters is what are the resources available to the economy at large?

What is the context that we’re operating in? I am still curious to understand why does MMT make such a big deal out of jobs? And what’s wrong with going along with this idea that there’s a natural rate of unemployment? We’ll just say that some people deserve to be unemployed for a while.

or for several years at a time, and then we can just move on, business as usual. Why does MMT have that emphasis on removing unemployment?

This really gets us into the complexity of the ideas. Social media hasn’t done these ideas any favors. To understand the ideas, you have to understand when they were developed and why. I developed this idea of a job guarantee in 1978. And if you go back to 1978,

you’ll know briefly that there was still the high inflation that began in October 1973 when the oil-producing Arab countries doubled the price of oil in protest to the American involvement in the Yom Kippur War in the Middle East. so all the oil dependent importing countries faced a dramatic price shock and that

set off an inflationary spiral it was very persistent and it was persistent in part because trade unions were much stronger then and were able to defend the real wage interests of their members and corporations of course were strong and could fight to protect their profit margins so you had this persistence and at that time Milton

Friedman’s monetarism was becoming dominant the precursor of neoliberalism And governments all around the world started to become infested with monetarist thinking. And they quite wrongly believed that it was excessive government spending. And so they started to cut government spending. And, you know, in Australia we had the so-called Razor Gang.

Philip Lynch was the Liberal Treasurer and Malcolm Fraser was the Prime Minister after they took the democratically elected Whitlam government off the people.

Mm-hmm.

through the coup the john kerr coup so what we saw from the mid-70s onwards was effectively rising unemployment coincident with rising inflation we called that stagflation stagnation and inflation and that was the first time really for as long as anyone could recall that you had those two things coincident normally if you had

an inflationary spiral previously you had too much employment too much spending And if you had low inflationary pressures, you had mass unemployment. They used to be a trade-off. In the 70s, it became coincidence. And so by 1978, I was looking at a world where monetarist thinking was becoming dominant.

This idea that we had to have higher unemployment to kill the inflation. As a young progressive person on the left, I didn’t like that idea of creating mass unemployment and so I wanted to work out a different way of solving the inflation problem without creating the unemployment.

The government at that time was running what was called the wool price stabilisation scheme. So this was a scheme that was the product of extreme lobbying by the rural sector to overcome the boom and bust income cycles that the rural sector was prone to because of booming harvests and then drought and no harvest.

so their income was going wildly high or wildly low so they persuaded the government in the wool sector to stabilize their incomes and the way they did that was they agreed on a set price of wool and if the clip any one year was too large

in other words there was too much supply in the market relative to demand which would have driven down the price, so in other words, there’s an excess supply of wool, the government stood ready to buy that excess supply and take it out of the market. And if there was not enough wool in any one year,

which would have driven the price up, the government’s response would be to sell the wool from its store and maintain the price. Around all of our major cities, there were those big red brick buildings, which are now sort of gentrified apartment blocks. Well, they were wool stores,

and they were where the government stored the wool as part of this wool price stabilisation scheme. So I was studying this in agricultural economics, and I thought, well, gosh, if the government can set the price by running a buffer stock of wool, in other words, building up a stock and then selling from it and stabilising the price,

well, then they can do the same for labor. If there’s too much labor in the market relative to demand, which is causing mass unemployment, well, then why doesn’t the government just buy it all up? If there’s too little labor in the market, in other words, demand for labor is very strong, well,

the government can sell that labor out of its buffer stock of labor. And by doing so, it can then discipline the price of labor, And so as long as it doesn’t enter a bidding war with the private sector for labour, in other words, sets the price it’s willing to pay for the labour at the minimum wage,

not the market wage, it won’t cause inflation by buying up all the unemployed labour. Mm-hmm. You’ve got to see it in that context. At the time, there was mass unemployment, there was inflation, and I wanted to come up with a better way. The government had to reduce overall spending in the economy because there was too

much spending relative to supply. That’s the first point. Second point was the consequence of that would have been, if they did nothing, would have been to create mass unemployment.

So they would raise taxes to limit spending, and the effect of raising those taxes would be a lot of people would lose their jobs.

Or cut their own spending, one or the other, and all. That would force unemployment, and that’s what they were doing. That’s what they were actually doing, and that was creating the mass unemployment.

Hmm.

And so my idea was that they could still put a downward pressure on the inflation, but not create the unemployment by shifting the labour that were getting shed from the private sector into these job guarantee jobs. Now, those jobs would not add to the inflation. That spending wouldn’t add to the inflationary pressures because it was below the

market bid for the labour.

And it was still adding to national productivity through those jobs as well.

Well, as long as you design the jobs to fill unmet community needs. So when I was a student, during that unemployment period, I was on government employment schemes. One of those schemes, for example, planted marrim grass on exposed sand dunes on the surf coast down near Geelong.

Yeah.

13th Beach, all around there. Well, that saved those sand dunes. Now, that was incredibly productive work that the private sector wasn’t going to do because there was no profit in it. That gave people who were unemployed in that period income and jobs. and it produced productive outcomes.

And so I learned that those type of public sector employment schemes can be incredibly beneficial to society and in the context of an inflationary pressures can absorb labour that would otherwise be displaced into unemployment into productive use without adding to the inflationary pressures. So that’s the idea of a job guarantee.

It teaches us that the government can ensure that everybody has a job without creating inflationary pressures. Now, the question then is, is that all that the government should do during a recession? Well, no. This is often misunderstood. The job guarantee isn’t […] Warren came up with the same idea, Warren Mosler, quite independently of me.

We didn’t know each other at that stage. Obviously, he came up with it in the 1990s, I came up with it in the 1970s, and we came together in the 1990s. But my view was that it was just a better way than creating unemployment.

The objective that Warren and I always espoused was that we don’t really want the government creating minimum wage jobs as a first call of action when there’s mass unemployment. What we would prefer the government to do is create high-skilled, high-paid jobs. At all times, the government should aim to minimise the pool of labour in the job guarantee,

make it as small as possible.

And it would do that through funding larger infrastructure projects?

Yeah, whatever, funding research in universities, et cetera, funding healthcare, funding primary and public education. But as a minimum safety net, a society should have nobody unemployed who doesn’t want to be unemployed.

And I love the intuition of that because it seems to me just to be on exactly the same level that we think about things like public education, like we think about Medicare. We’ve decided that with regards to education and health, We shouldn’t have people who are allowed to just go without basic education or basic medical treatment.

And so the job guarantee seems to be speaking along those same lines.

From my perspective, my set of values is that we’ve got various dimensions of human rights. One of the human rights is access to employment, in my view, because it opens up all of the other opportunities in life, all of the social connections and escape from poverty and risk management,

security for your family and all the rest of it. So to me, if there’s not enough employment generated by the private sector, then the government has a responsibility to ensure that that is overcome.

And that seems to speak to one of the other questions that I had there, which I think we’ve basically answered here, which was around, well, what is the purpose of economic policy or maybe policy more broadly? And one of the answers that you’re offering us there is to support basic human rights of the people in the nation.

I was going to say this before, but tonight the government’s going to outline its fiscal plans and we’ll all be obsessed by the size of the deficit or the size of the debt. But it’s just a completely nonsensical way of understanding it. What’s the purpose of fiscal policy?

We’d be led to believe that the purpose is to get the deficit low. Well, how does that help anybody out of context? We don’t want the government in our lives. telling us what to do and over-regulating us but what we want the government to do is use its capacity to advance our well-being and to ensure that there’s

sustainable environment to ensure that people have got housing they’ve got jobs public health public education public transport we want the government to ensure that we are doing the best we can do given our resources and our capacities and that’s what the purpose of fiscal policy is so tonight i’ll

be evaluating the government’s fiscal announcements in that context and i won’t even think about the size of the deficit i’ll just be saying well what’s this policy doing what’s the policy initiative doing does this need to change is this advancing well-being and our security as people and our society. And that’s the purpose of fiscal policy.

And that’s where we’ve been led astray by economists.

I think that’s a fantastic place to land this conversation. You’ve brought so much clarity, a lot of different topics there. So again, really appreciate you taking the time, Professor Bill Mitchell. Thank you so much for joining me today. Thanks very much, Sam. Bye. Concept Economy is produced and presented by Sam Callaghan.