Episode 62: Bronwyn Kelly reads Parts 7 and 8 of Chapter 2 of her latest book, The Public Interest Economy: the path to wellbeing, security and sustainable consumption in a democratised Australian economy.
Chapter 2 is called Deploying money so that it can make Australians safe. It describes a project of reform of the macroeconomic policy and governance arrangements for Australia’s economy so that in future all Australians can be assured of their prosperity through the achievement of full employment and price stability.
In Parts 1 and 2 of Chapter 2 (Episode 60) , Bronwyn foreshadowed the need for a reduction of the degree of independence currently enjoyed by the Reserve Bank of Australia, suggesting that it amounts to an economic governance arrangement that is not in the public interest and is fundamentally anti-democratic.
In Parts 3 to 6 (Episode 61), she began explaining how that economic governance arrangement should be replaced with a new integrated approach to macroeconomic management led by the Treasury via the use of functional finance – a marcoeconomic management system devised in the 1940s in line with Keynesian economics. This system can function as a counter to the failures of neoliberal and neoclassical economic theories.
In Parts 7 and 8, Bronwyn puts the view that good economic management in Australia is not simply a matter of downgrading or removing the independence of the Reserve Bank, although that is essential if we want to democratise the economy. The even more important thing to do is to de-prioritise monetary policy itself, especially since it is not an effective macroeconomic tool. Monetary policy is not conducive to establishing either full employment of price stability. The chapter shows how damaging it is to prioritise monetary policy in macroeconomic management and how fiscal policy will be far more effective in achieving full employment with stable prices.
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