The depression we didn't need sinks deeper
Comment by Alan Parker
Keating, Kerin, Hewson, Howard and the econocrats in the Treasury and the Industry Commission got it wrong. The so-called "healthy dose" of shallow recession they said we had to have to make the economy more efficient now threatens to became a deep recession. What's more, unemployment is heading closer and closer to 15%, at which point the term depression might be appropriate. The economic establishment's continued reluctance to admit its error is preventing the introduction of serious measures to tackle unemployment.
In September, 872,000 Australians were on the dole and by the middle of next year the number is likely to be around a million. The Australian Bureau of Statistics says the unemployment rate in October was 10.1%, but the real figure is much higher.
ABS figures for September recorded 10.2% unemployment, but Commonwealth Employment Service figures obtained through the Freedom of Information Act were showing 13%. Even this figure hides the real scale of the problem because many married women and people living on their savings are unemployed but not eligible for the dole, and hence may not have registered with the CES.
As Australian industry is disembowelled, an army of skilled workers is unemployed, talented young people who should be trainees and apprentices are not going into industry, and the deregulated banks are crucifying farmers with high interest rates.
Meanwhile, Australia's $150 billion foreign debt continues to grow. It was the equivalent of 13% of gross domestic product in 1983, 29% in 1990 and will probably reach 40% by 1995. This year's interest bill on the foreign debt is $14.5 billion, $1 billion more than the total debt in 1980.
Foreign debt is a much bigger problem than it was in the previous two recessions, in the early '70s and the early '80s. In the past 20 years, unemployment has trended upwards along with the debt. Federal and state governments are citing the debt as a reason not to spend their way out of the current recession, as would have been done when Keynesianism held sway among politicians and econocrats.
The last time Australia suffered such a combination of high unemployment and high debt was in the 1930s. Between 1929 and 1930, unemployment rocketed from 10% to 18.4%, going on to average 27% for the next three years. Not until the outbreak of world war seven years later did unemployment fall to pre-1929 levels.
Prevailing wisdom in Canberra is that the private sector should be left to solve the unemployment problem. But ABS figures show that the private sector is not making the sort of investment necessary to generate large numbers of jobs.
Private investment in plant, machinery and equipment is at its lowest level in 42 years and will fall to 6% of GDP in 1991-92. Solving the unemployment problem would require an investment equivalent to 10-12% of GDP in plant, equipment and machinery.
In the 1990 Boyer Lecture, former Sydney Morning Herald editor and economic commentator Tom Fitzgerald said today's accepted wisdom in Canberra would have been considered insanity during the 20 years of industrial growth that followed World War II:
"After World War II, investments for business projects were bedded down in physical assets, and many of the projects that brought in the capital contributed positively to our balance of payments by way of exports or replacement of imports. The idea of changing this established order to a national policy of offering and paying pawnbrokers' interest rates to anybody and everybody overseas who would deposit money on very short terms for no specific application, and with obviously no interest in the employment of money to help service the debt, would have been unthinkable ... it would have been declared insane."
The change to deregulated industry and economic policy in the mid-1970s was never decided democratically. Banana republicanism and pawnbroker financing came in the back door. The public stance of Labor and Liberal politicians and the econocrats was that this would make the economy efficient and competitive. But their hidden agenda was the deindustrialisation of Australia.
Much of Australian industry may not have been internationally competitive by the 1980s, but it did provide jobs for most people who wanted to work. In the 1950s and 1960s, most men in Australia had a job until they retired, and the unemployment rate was less than 2% most of the time. Since 1975, unemployment has risen steadily and has hit the under 20 and the over 50 sectors of the workforce hardest. Secure private sector employment until retirement is now a thing of the past for many blue collar workers.
Alongside the high unemployment rate stands widespread under-employment. While the proportion of women in the workforce has increased, part-time and casual work is all that's available to many. For young mothers, even that can be scarce.
Many young people have tried to avoid unemployment by staying at school longer or opting for tertiary education, but they must eventually come onto the job market. The unemployment rate for young people is about 30%, a level that would have been considered outrageous a few years ago.
More people are ending up among the long-term unemployed because they have no opportunity to use and upgrade their skills, and many become demoralised. Employers often refuse to take on people who have been unemployed for six months or more.
In the depths of the 1982-83 recession, around 79,000 had been unemployed more than a year, but it is estimated there will be 300,000 in this position by next July. At present, around 70,000 children are known to be dependent on adults unemployed for more than a year. This figure is likely to double by next July.
During the 1990-91 financial year, there were 9800 non-business bankruptcies, most due to people losing their jobs and not being able to pay their debts. Emergency relief agencies cannot cope with the growing number of desperate people who have run down their savings. Two consequences of this are certain: marriage breakdowns and a continued rise in the crime rate. n