Planning for Pandemics; Production, and Innovation

Published by Dallas Lewis on

Planning for Pandemics; Production, and Innovation

A paper prepared for Modern Money Australia by

Dr James Juniper

Conjoint Lecturer, Newcastle Business School (Economics), Newcastle University

©  2020 Dr James Juniper and Modern Money Australia Inc

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From an MMT perspective, the government responsible for currency-issue should have ultimate responsibility for achieving public health and employment goals, including those pursued on the basis of international cooperation.

In this era of heightened economic competition between the superpowers—China and the US—it seems obvious that China, along with nations such as Vietnam and Singapore, has secured superior outcomes for public health when compared to a North American administration, burdened by a complex federal-fiscal system characterised by high levels of State autonomy, and by purpose-built checks-and-balances designed to curb any threat of radical centralism.

On 1 April, the BBC’s Alan Zurcher highlighted the defects in the US response to the Covid-19 epidemic pointing to early shortages of medical supplies, testing delays that reduced situational awareness of hot spots and contagion sources, and a raft of faulty results from initial testing. With a population of some 329 million, only one million tests had been performed by 30 March, with the subsequent load overwhelming the testing capacity of existing laboratories. The Trump administration was also accused of ignoring pandemic response plans originally developed by G. W. Bush, only to downplay the threat by offering false reassurances of control. In addition, Zurcher cited a failure to adequately police social distancing measures, especially in churches (sometimes aided by a reluctance on the part of some local/state officials to close non-essential businesses) and a lack of clarity around the need to halt incoming tourism.

In The Guardian on 25 March, Oliver Milman had aired the findings of a new report by an environmental watchdog to the effect that,:

“[t]he Trump administration badly undermined the effort to contain the coronavirus outbreak by getting rid of most staff tasked with identifying global health problems, while repeatedly attempting to slash funding for the Centers for Disease Control and Prevention (CDC)”.

In addition:

“The administration disbanded the national security council’s directorate charged with global health and has sought to go further still, requesting budget cuts from the CDC of up to 20% for each of the past three years, only to be rebuffed by Congress.”

And only three months before the breakout in China, Trump had terminated funding for the US Agency for International Development’s $200m pandemic warning program, which had identified the potential for threats associated with more than 160 strains of corona virus. On 1 February, for the same news service, Julian Borger reported that National Security Advisor, John Bolton, had cut the National Secretary on Global Health Security and Biohazards position, which had been established within the National Security Council after the Ebola outbreak.

While some commentators have argued that planning in China has receded in importance with the extension of “marketisation” and “opening-up”, others like China-followers Sebastien Heilmann and Oliver Melton, in a 2013 article published in Modern China, have argued firmly to the contrary, citing the deployment of a triple structure of Comprehensive, Special and Macro-Regional plans. Moreover, they observe that allocative, redistributive and regulatory modes of planning in China can each range in degrees of strictness from mandatory, through contractual, to more indicative forms. Goals and priorities are frequently set with “leeway for local tinkering” and allowance for policy correction during the implementation stage, again, with feedback on the basis of local knowledge.

When it comes to science and technology policy, the US has driven innovation on the basis of a system dating back to the time of Eisenhower, when the resources of the military-industrial complex were martialled for the Space Race with the Soviet Union. More recently, this activity has been bolstered by Silicon Valley “business angels” and private venture-capital finance. In contrast, China has built strong bridges between the planning agencies, publicly-guided development banks, and the Chinese Academies of Science and the Social Sciences to drive innovation. And to their greater advantage, the Chinese government certainly does not share the Republican Party’s obsession with the pursuit of government budget surpluses, even in the midst of the greatest economic downturn since the Great Depression. It remains to be seen whether these same planning apparatuses can achieve comparatively superior economic and environmental outcomes in the intensifying economic contest to come.

The advantages of upgrading our national capacity for planning in Australia, in the aftermath of the Covid-19 pandemic (especially given the drought and bushfire disasters), go well beyond public health concerns. Planning is essential to guide investment in infrastructure, education and training, more progressive tax policy, support for industrial diversification, and to promote the necessary research and development and innovation required to reduce future greenhouse-related emissions (eg through renewable energy platforms, transport networks, and energy-efficient and low-cost improvements in residential and non-residential construction). However, the implementation of a Job Guarantee to reduce the underutilisation of labour resources, would be much more straightforward.

In a recent (25 May) blog entry (http://bilbo.economicoutlook.net/blog/?p=45040 ), Prof Bill Mitchell provided up-dated estimates suggesting that new full-time jobs paying the minimum wage could be provided for 1.2 million unemployed workers (reducing the unemployment rate from 10 percent to 4 percent) at a net cost to the government of $53.9bn (after accounting for clawback from the scheme estimated at $26.6bn). For specific details on how a Job Guarantee could be implemented, by drawing on the resources and capital equipment of local councils and NGOs, Mitchell referred to a 2008 publication prepared for Jobs Australia by members of the Centre of Full Employment and Equity (http://www.fullemployment.net/publications/reports/2008/CofFEE_JA/CofFEE_JA_final_report_November_2008.pdf ).

In this broader planning context, the economic role of a Job Guarantee, above and beyond the obvious goal of providing meaningful employment opportunities for those currently out of work or under-employed, is to ensure that full utilisation of labour can be achieved without inflation. In simple terms, the problem with large-scale infrastructure projects is that they may create jobs in regions where there are few unemployed and not create jobs in remote regions where there are unemployed people looking for work.

To assist in recovery, the Centre of Full Employment and Equity has recently up-dated its Employment Vulnerability Index (EVI) for small regions across Australia. This index identifies the medium-sized areas that have higher proportions of the types of jobs thought to be most at risk when economic activity declines (in this instance, largely due to the Covid-19 lockdown. The full data-set and accompanying maps are available at http://www.fullemployment.net/evi.php ). This information should help policy-makers to understand where the downturn will have the most severe regional impacts.

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