Extract from ABC News
Analysis
By business reporter Gareth Hutchens
Have you heard of Alfred Marshall?
He was an English economist (1842-1924) who changed the discipline of economics.
He was the originator of the famous diagram that depicts "supply and demand" curves.
His most famous student, John Maynard Keynes, eventually revolutionised economics in his own way, after the Great Depression of the 1930s.
But it was Marshall's work habits that contributed to his stature as a towering figure of the profession.
He did what most members of his profession rarely did: He obsessively travelled the countryside, visiting hundreds of factories and industrial towns, mines, dockyards, and steelworks, to talk to businessmen, managers, trade union leaders and workers to see for himself how the economy was evolving and how working conditions were changing over time.
He'd been inspired by writers like Charles Dickens and Henry Mayhew to hit the pavement, to observe the insides of factories, and to make copious notes.
It gave him insights his predecessors didn't have.
Marshall's personal experiences set him apart
According to Sylvia Nasar, in her 2011 book Grand Pursuit: The Story of Economic Genius, Marshall's effort to understand how businesses worked meant he came to see modern industry very differently from other economists.
"In contrast to the majority of Victorian intellectuals, Marshall admired the entrepreneur and the worker," she wrote.
Thomas Carlyle, Karl Marx, and John Stuart Mill thought modern production was an unpleasant necessity, that labour was degrading and debilitating, that businessmen were predatory and philistine, and urban life was vile.
"But none of these intellectuals could claim the familiarity with business and industry Marshall was acquiring," she wrote.
"Of course, as [Edmund] Burke's phrase 'drudging through life' implied, much of human labour had and was having such effects.
"But, once again, Marshall's reliance on firsthand observation suggested that at least some work in modern firms expanded horizons, taught new skills, promoted mobility, and encouraged foresight and ethical behaviour, not to mention provided the savings to go to school or into business."
It led to his 'most important discovery'
Marshall saw that businesses operating in competitive environments must constantly evolve to survive, and the incessant competition spurred productivity gains which, in turn, delivered higher living standards for workers and consumers over time.
"This is precisely what Mill and the other founders of political economy had denied," Nasar wrote.
"They had maintained that advances in productivity were of little or no benefit to the working classes.
"Marshall saw not only that this was not so in fact, but also that it could not be so. Competition for labour forced owners to share the benefits of efficiency and quality improvements with workers, first as wage earners, then as consumers."
The evidence, in the late 1800s, showed Marshall was right.
"The share of wages in the gross domestic product — the nation's annual income from wages, profits, interest and proprietor's income — was rising, not falling, and so were the levels of wages and working-class consumption — as they had been in most years since 1848, when The Communist Manifesto and Mill's Principles of Political Economy appeared," Nasar wrote.
Past economists failed to study human behaviour properly
In 1885, when Marshall delivered his inaugural lecture at Cambridge University (titled The Present Position of Economics), he said the problem with many economists who had come before him was that they'd treated humans as a "constant quantity".
They'd failed to account for how workers lived and behaved.
"It led them to regard labour simply as a commodity without throwing themselves into the point of view of the workman; without allowing for his human passions, his instincts and habits, his sympathies and antipathies, his class jealousies and class adhesiveness, his want of knowledge and of the opportunities for free and vigorous action," Marshall said.
That was wrong, he explained, because every worker experienced life differently; someone living in an urban labour market faced very different pressures and opportunities to someone living in the regions, for example.
It's a mistake today's political class still makes
Few Australian politicians, anymore, try to claim with a straight face that they could live on $40 a day (which is the current rate of the JobSeeker unemployment payment, excluding any emergency COVID-19 supplements) because it's well below the poverty line.
But many still proffer advice for how people on JobSeeker ought to behave, without regard for how people actually live.
Last week, for instance, in a speech to the Australia-Israel Business Chamber of Commerce, Finance Minister Simon Birmingham said there were "hundreds of thousands of people currently on JobSeeker who are single, have no children, and largely have no impediments to work" and he advised them to fan out across the country to find work.
"[It is] well publicised that there are some [jobs] in different agricultural industries, some of them seasonal or temporary," he said.
"But we know there are many parts of that sector that have been grappling to get Australians to fill jobs."
Birmingham said the Government wanted to encourage unemployed Australians to fill the roles that backpackers and international students used to perform, and that's why it was offering a financial incentive to encourage people to go bush.
"[It's] why we're providing a $6,000 incentive to help people relocate, especially those that may not have the ties to hold them so firmly to a particular location," he said.
(Actually, it's a financial incentive up to $6,000, and your employment services provider will help decide if that money will come in the form of a reimbursement for your upfront relocation costs, or if you're facing enough financial hardship to get the money upfront).
It was a familiar line.
The Deputy Prime Minister, Michael McCormack, has often said unemployed people in cities should just move to the regions to find work, as though uprooting one's life (and leaving your vital support networks) to move to a different community alone is a simple and uncomplicated matter.
Putting aside the fact that the Government's own rules mean your unemployment benefits may be cut if you move to an area with low job prospects, which will often tend to be in regional and rural Australia, when was the last time you knew someone who did so, and for whom it worked out well?
Would you pack up everything and move to an unfamiliar part of the country, alone, for what, even the Government admits, may be a temporary job, and low paid, with all the bureaucratic complications that could ensue with Services Australia?
That's before we even consider the well-documented problems with some agricultural employers, including instances of wage theft and worker exploitation.
There are jobs in other sectors
Of course, Birmingham said there were job vacancies in other sectors of the economy too, including in cleaning, mining, and domestic tourism, so he wasn't just talking about agricultural jobs.
But his Government has already begun making ominous noises about the level of government debt, which has often been a harbinger of a political shift against "people on welfare".
It comes despite the Reserve Bank cautioning that the economy will need significant fiscal and monetary support for years.
Problematically, most federal politicians tend to be unfamiliar with unemployment, as they walk the well-trodden path from university to the corporate world to politics (where they're paid a minimum of $211,000 a year).
Jacqui Lambie, the senator from Tasmania, is one of the rare MPs who has experienced it.
She's been open about her struggle to find work after being forced to leave Federal Parliament in 2017 during the Section 44 constitutional crisis.
The experience made her a better politician, she believes.
"What annoys me more than anything up here [in Canberra] is that these people [MPs] have … never had to live on Vegemite toast for a week," she told her local paper, The Examiner, in 2019 after re-entering Parliament.
"These people are telling those people out there who are living on or below the poverty line how they should live their lives."
For Alfred Marshall, he told his Cambridge audience that poverty was the "chief cause" of poverty.
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