The art of a good recession

'Work for the dole' schemes punish the young, rather than address the structural causes of their joblessness. A more creative approach is needed.

When Saxo Bank’s chief economist Steen Jakobsen predicted a week ago that Australia would fall into recession in 2015, he added two positive qualifiers.

Firstly, he said, the shock of a short recession would snap Australia out of its current policy paralysis, and “kickstart a lot of positive processes”.

Secondly, the way out of the economic slump caused by the end of the mining boom was to become a research and IT powerhouse that relied on “education, education, education”.

On the first point, he is almost certainly right. A 23-year run of positive economic growth has lulled policymakers into a kind of economic fantasy based on ‘houses and holes’.

That fantasy relies on the belief that the mining boom profits will continue to trickle down into the rest of the economy for decades to come, and that buying and selling the same houses to each other at ever-higher prices is not only sustainable, but a perfectly good ‘industry’ on which to base future prosperity.

In fact, we haven’t really been spending mining ‘profits’, about two thirds of which belong to the overseas investors who’ve paid Australian workers to build their mines. It is investment dollars that created all those jobs.

And the housing finance industry, through generating huge profits, has created a massive structural imbalance in the economy that makes life extremely hard for the younger generations (When the young abandon Australia, November 19).

On his second point, Jakobsen’s only half right. As explained previously (Mis-selling education to our own kids, May 28), target quotas for university graduates have ruined the quality of education in large parts of the tertiary system. In Australia the figure was 40 per cent of youngsters holding degrees by 2025, but the same problem has occurred in the UK, where the figure was 50 per cent.

It’s important to differentiate, however, between the quality of education and the subject matter being studied. While it’s common to criticise ‘soft’ subjects such as English and media studies, the truth is that these disciplines (or virtually any other), when taught with real rigour, produce really useful graduates.

The most financially successful publisher I’ve ever worked for, for instance, studied the ‘greats’ at Oxford. He was sharp as a tack and could think his way through acres of spreadsheets and sales reports, and streamline costs to turn a profit. Taught with enough rigour, a lot of the old humanities subjects now called ‘soft’ are actually pretty hard.

But I digress. The biggest structural problem we face -- whether or not there is an actual GDP recession -- is the ongoing decline in job prospects for the young.

The Abbott government’s first budget has virtually declared war on this growing cohort of jobless Australians, when for most of them there are simply no jobs being created. The flipside of the growth in mortgage lending has been a stagnation in business lending that would underpin job creation.

Federal LNP backbencher Ewen Jones expressed the government’s attitude a bit too directly in September, when he said: “There are no free lunches, that's what we must be saying to people in this space ... Are we better to say to them, 'look there's your dole, go home, eat Cheezels, get on the Xbox, kiss you goodbye and we will never see you again'?"

And yet the government’s plans to make young Australians wait for the dole, work for the dole and learn ‘dubious’ skills for the dole have been widely panned for punishing youngsters rather than addressing the structural causes of their unemployment.

This is where a bit more lateral thinking needs to be unleashed on the front benches of the Abbott government. And history provides some interesting precedents on which to draw.

For instance, a number of European nations have well-developed schemes to classifying certain ‘jobless’ people as practising artists and requiring, instead of ‘20 job applications a month’ as the Coalition wants to see before handing over public money, demands proof of activity in a particular art-form.

Far from being jobs for the luvvies, such schemes have a two-fold effect.

Firstly, they can sustain creative industries through economic downturns, which tend to hit the arts pretty hard. The Coalition has correctly identified tourism as one of the growth sectors of the economy, which is why keeping galleries open, decent street performers playing, and theatre groups performing is in the national interest.

Secondly, every out-of-work fine-artist, actor or musician, is a potential burger-flipper or latte frother. That is, they will often fall back on the jobs that young Australians should be doing.

Back in the Depression era, the US government acknowledged this reality as part of the New Deal and created two schemes to keep its fine-arts community going: first, the Public Works of Art Project from 1933 to 1934, and its successor, the Federal Art Project, from 1935 to 1943.

The latter scheme produced an artist called Jackson Pollock, who did pretty well for himself (you can see other art produced by the scheme in this slideshow). More importantly, it endowed the nation with literally thousands of prized public works of art and made the queues for soup a little bit shorter.

If we attack young Australians as cheezel-munching gamers, they’ll probably do just that. But offering them jobs, or an entree of their own into the creative industries, is surely better. 

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