Japan is the world’s first post-neoliberal economy. It has been a prime case study in Modern Monetary Theory for three decades. Let me explain.Like developed nations across the world, Japan drank the neoliberal Kool-Aid of the 1980s. In 1991, excessive private debt caused a massive commercial property collapse. The government’s response, thankfully, did not follow the neoliberal playbook. Instead, the Japanese pushed economic policies to the extreme of conventional limits: continuously high deficits, high public debt, with the Bank of Japan buying much of it.Most economists recycled predictions of high interest rates, accelerating inflation and bond market revolts. None came to pass. Instead, Japan maintained low unemployment, low inflation, zero interest rates and strong demand for government debt. For three decades now.READ NEXTCOMMENTARYIt’s time Australians felt the painKATRINA GRACE KELLYUndeterred, these economists continue to promote a fictional economics that keeps citizens in the dark about the true capacity of government and the consequences of using that capacity to sustain full employment.They manufacture fear about public debt and deficits, predict government insolvency, invoking these names — Weimar, Zimbabwe or Venezuela — to provoke fears of hyperinflation. They rehearse moral arguments about today’s government spending burdening our grandchildren.None of their predictions has materialised.READ MORE:The case for a government jobs guaranteeWhich is why we are hearing more about MMT. It has an impeccable record of prediction and offers answers that the economic orthodoxy fails to provide.Renowned British economics journalist Martin Wolf, commenting on MMT, recently wrote: “In my view, it is right and wrong. It is right, because there is no simple budget constraint. It is wrong, because it will prove impossible to manage an economy sensibly once politicians believe there is no budget constraint.”The Australian’s Alan Kohler has made the same observation.MMT exposes these fictions. But even those central bankers and economists who understand the fictions on which the orthodox view relies think it is better for their political masters and the general public to be kept ignorant.In the real world, currency-issuing governments have no intrinsic financial spending constraint. They can purchase whatever is for sale in their own currency, including all unemployed labour desiring work.Mass unemployment is a political choice. Imagine if all Australians understood that, rather than labouring under the current deception.It was not too long ago when full employment was official government policy.The 1945 government white paper on full employment begins with a fundamental commitment to the Australian people. “Full employment is a fundamental aim of the commonwealth government. The government believes that the people of Australia will demand and are entitled to expect full employment,” it states. This commitment was abandoned in the mid-70s.Australians knew it was government’s responsibility to maintain spending sufficient to sustain full employment. The purpose of fiscal policy was not to achieve a surplus or deficit. Rather, they judged government on how low unemployment was.Unemployment was a policy target, not a policy tool.Recall that Menzies nearly lost the 1961 election because unemployment rose above 2 per cent.Recall, also, that Australia maintained a buffer of public sector jobs that always provided easy employment access to our least-skilled workers.So when and why did Australians become so tolerant of systemic unemployment and its attendant ills — the accumulated human wreckage, to use indigenous leader Noel Pearson’s description — that goes with it?The answer lies in the political and economic developments we now call neoliberalism. They were supported by a series of powerful but interconnected economic myths about money, the capacity of government and our economy.Politicians on both sides now claim that employability (preparing people for jobs) rather than full employment is the proper role for government. They claim the market will take care of jobs.The past 30 years have not supported their assertions. We have endured elevated levels of unemployment and underemployment, suppressed wages growth, ballooning household debt and rising inequality.The waste of human potential is staggering.The unemployed are “managed” within Australia’s newest “industry” — the unemployment industry — and churned through pointless training programs divorced from paid work. They receive below-poverty-line income support and are coerced by pernicious work tests when it is obvious that there are not enough jobs to go around. The robodebt scandal obliges.The victims of this policy failure are scarred with accusative nomenclature — cruisers, bludgers, job snobs, lifters and leaners — when in truth governments made a policy choice to deny them the chance of employment.In May, unfilled job vacancies declined by 43.4 per cent. In February, there were three people for each unfilled vacancy. Now it is 7.2. Adding in the 600,000-odd that “left” the labour force after giving up looking as employment opportunities collapsed gives us 12 seekers per job vacancy. Any reasonable person knows this is a systemic lack of jobs.
