A Better Gap Year

Young men celebrating their release from national service in 1959.

Rebuilding our economy and nation after the pandemic restrictions have been lifted will be a challenge. Why not conscript bored youths for the task? By Will Jefferies.

“National patriotism inevitably springs from the instinct to defend and preserve our homes,” Robert Menzies said in the Forgotten People, his most celebrated speech.

Is it any surprise, then, that patriotism among young people today has declined in line with their ability to afford homes to defend and preserve?

A survey of more than 1000 Australians aged 16-24 by YouGov Galaxy revealed that nearly two thirds see their future as bleak. Only 19% of young people say they are confident enough to be themselves in all situations in life. 46% say they experience a lack of confidence every day or most days. 53% do not believe enough is being done to safeguard their future. Only 20 per cent believe they will be able to achieve their five-year plan. And 61% say that being part of a group of friends is more important than how they feel when they are with them. 

These results are not surprising considering youth unemployment is at 12% and 20% of 15-24 year olds are ready and able to work more. 

At the same time, Australia’s infrastructure is ageing and under unprecedented strain after decades of rapid population growth, and its defence force is so undermanned the recently upgraded HMAS Perth has been forced to sit in a dry dock for over three years. 

So why not integrate a compulsory national service with a quantitative investment program? 

To be more specific, Australia should force young people to do at least one years’ worth of national services out of school instead of taking a ‘gap year’ to ‘find themselves’ in the Netherlands or Thailand. 

National service can take many forms. Some can opt to be trained in the military for a year. Some can take up apprenticeships on nation-building projects such as the construction of new dams and power stations. Others can learn the basics of nursing, teaching or paramedics to bolster our already strained healthcare and education systems. 

This would force young people from all walks of life to work together, breaking down socioeconomic, academic and cultural boundaries. They would gain real-world experience before deciding in which industry they would like to work, or which undergraduate degree to study. It would alleviate the boredom many of them face after school, a boredom that often leads to drugs and crime. It would instil in them an appreciation of service to a higher cause – in this case, the national interest. And they would emerge from int with skills that can be reapplied in the workforce. 

Israel’s conscription program is two years for women, and two years and eight months for men. A study by two academics from the University of Texas in 2013 found Israel’s conscription “cultivates new skills (human capital), new social networks (social capital), and new social norms and codes of behaviour (cultural capital).” It also found that although 60 per cent of adult Israelis have performed military service, the rate rises to 90 per cent in Israel’s most important industry – the high-tech sector, which represents almost 50 per cent of total industry exports today. 

Not only is national service character-building, it’s nation-building too. Apart from the military, Australian conscripts could, if the system was designed properly, be offered the opportunity to work on new dams, irrigation systems, roads, power stations and public transport infrastructure. They could assist in the regeneration of land affected by mining activities, the management of national parks and fuel loads, and can reduce our reliance on foreign workers in the agricultural sector. 

Most important, however, is how Reserve Bank of Australia can easily facilitate such a program. 

Instead of the RBA buying government bonds and other securities from banks to increase liquidity within financial markets and stabilise the economy during shocks such as COVID-19, the government could issue infrastructure share certificates which the RBA could purchase – allowing a savings-deficient country like Australia to fund ambitious new capital works programs at no cost to the national debt or taxpayer. 

This means that the RBA would no longer simply print money at the outset of a recession and hand it straight over to major banks who then issue more loans – a process that further increases debt and exacerbates already highly inflated asset price bubbles. Instead, the money that is printed will be channelled into productive, socially useful infrastructure projects that will benefit Australians and Australian productivity for many decades to come. 

One of the most exciting parts of this policy is the way in which it will not add to our national debt – unlike quantitative easing. Quantitative easing requires the government to issue government debt in bonds to the banks who trade them and eventually sell them to the RBA – who pays for them with money it has printed out of thin air. As such, when the RBA purchases a government bond to stimulate the economy, it receives interest periodically from the taxpayer – adding to the deficit and public debt which is at an unprecedented level.

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However, if the government issued share certificates in public infrastructure projects and requested the RBA to purchase them, government shares would only pay dividends to the central bank if the project generated earnings on top. This would work for projects like toll roads and power stations. But even for projects like schools and dams, which will not generate earnings, the RBA can still be told to purchase shares as central banks have a monopoly on the supply of money and shown they are not afraid to use it.  

So not only will young people be out of their comfort zone, often in regional Australia assisting in the building of crucial infrastructure with their new mates from all walks of life, but they will leave with practical skills that cannot be taught in a classroom or library. At the same time, productivity levels will increase with the provision of new capital works without the need for generations of taxpayers to pay for them in interest. 

If Australia is serious about the need to facilitate jobs and growth into an increasingly uncertain future, it must ask its young people and central bank to contribute. It must force young people (most of who have enjoyed 13 years of free publicly funded education) to give a year back to the country. And it must force the RBA to purchase shares in the public capital works young Australians will be working on. 

And pursuing a new policy like this has never been more important, considering it looks as if we have just entered a period of prolonged economic depression. This is what Roosevelt understood when he employed 21,000 mostly jobless men to build the Hoover Dam during the Great Depression. It is also what the Weimar Republic understood when it issued promissory notes to construct the autobahn. 

Australia cannot be complacent. It is time to get our hands dirty and rebuild this country for the 21st century.