John Quiggin

It’s time for another weekend reflections, which makes space for longer than usual comments on any topic. Side discussions to sandpits, please.

Austerity is hitting lots of people, across pretty much all social classes, except for the top 1 per cent, who are rapidly recouping their losses in the GFC and will soon be pulling even further away from the 99. Just at the moment, academics seem to be in the crosshairs, from Washington to Sydney and beyond. Here’s a post on the subject from my friend and former colleague Rohan Pitchford. To forestall a possible line of criticism, let me observe now that, while academics have it better than plenty of others under attack from austerity policies, anyone who plays on this kind of division is a tool of the 1 per cent, and will be treated as such by me.

Sackings Hit Economics School Hard (Guest post from Rohan Pitchford)

I was surprised and dismayed to hear that that several of my former colleagues at the School of Economics at the University of Sydney have been told to leave their jobs by July. A remarkable aspect is that the sackings happened by edict, several layers of administration above the School level. How is it possible for such a removed group to know the details of people’s work life, their roles and the reasons behind their roles without any form of consultation? (ANU also faces budget cuts, but is taking the enlightened bottom-up approach.)

I know all of those concerned personally, and the group includes both talented researchers, teachers and administrators. They were apparently selected using retrospective publication criteria. We all know that most people experience a ‘bare patch’ in their publications during the life course, whether it be because of a new child, a death in the family, illness (admin duties!) etc. Knowing the people involved, the criteria seem to me unfair and random.

Perhaps the most astounding fact in all of this is that Sydney Economics has been perennially understaffed– as a Professor there, I estimated that they were some 10 academics short of what is required to deliver requisite courses: The average class size is 110, I conjecture larger than any other department. There are not enough staff to cover all the classes taught, let alone to reduce class sizes to educationally appropriate levels. Sydney typically has had to hire part-timers to fill the gap. The department generates some 20 million dollars per year in revenue from its teaching program. I cannot imagine that this will do anything but hurt this important revenue base.

A big question is this: Are the sackings due to productivity, or are they in response to an administration that has grossly over-spent on buildings? I have heard rumours of expenditure of 100m on a new medical centre, and 360m on a new obesity centre preceded these sackings.

Solutions? I discuss a possible way forward for Australia here:

My wife alerted me to this piece by Kristina Keneally at the Drum, and so I ran out a quick response.

Shorter JQ: Keneally is right that voter backlash against privatisation caused NSW and Queensland losses, wrong that the policy was sound and even wronger that Labor (at least in Qld) didn’t try hard enough to sell the idea.

The observation “Prediction is risky, especially about the future”, attributed to US baseball legend Yogi Berra, is true for more reasons than one. The obvious risk is that events may prove you wrong. But there’s a also the risk that your prediction may be misrepresented, a risk that’s particularly severe when you have enemies like the Murdoch Press. I courted this risk by being too cute with my prediction after the 2007 election, which began

The Liberal Party will never again win a federal election.

I followed up immediately with

This isn’t a prediction of unending Labor rule, rather an observation that the Liberal and National parties are in such dire straits that they can’t continue as they are. They haven’t got enough support, parliamentary representation or ideas for one party, let alone two.

The obvious option is a merger

but the damage was done.

The first sentence has been quoted by various rightwing bloggers, and most recently in the Daily Telegraph[1], as a suggestion that the conservatives would never get back in.

So, contrary to the claims of the Tele, the fact that the merged Liberal Nationals won in Queensland is a confirmation the prediction in the post. The post also predicted the defeat of the NSW Labor government in 2011, but I thought it unlikely, unless “things go badly wrong for Rudd or for one of the state governments” that the conservatives would win before then.

In fact, of course things have gone very badly for Rudd, and Labor has made catastrophic mistakes at every level. Nevertheless the prediction wasn’t far off the mark with Labor winning five state and territory elections and (by the narrowest of margins) one federal election, and losing two over the relevant period.

At the federal level, the idea of a merger seems to have died, though the current situation is absurd . The National Party leaders in both the House and Senate are members of the merged LNP in Queensland. Still, it seems likely that this misshapen coalition will win the next Federal election. If that happens, I will gracefully admit that my prediction was wrong. But until then, to use another US sporting catchphrase, “It ain’t over till the fat lady sings”.

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So, I just went and voted (Green) in Indooropilly, a seat held by Labor until the last Parliament[1]. In the entire campaign, I’ve seen no sign of activity on the part of the Labor candidate (a commenter tells me he’s a law student). This continued at the polling booth, where there was no-one handing out Labor how-to-votes, the first time I’ve ever experienced this. I’ve heard from other sources that the party machine has been desperately trying, and failing, to round up volunteers.

This is a disaster worse in many ways than the wipe-outs of the 1970s when at least the party faithful were, well, faithful. The Bligh government’s sellout on asset sales wiped about 10 percent of its support overnight and, except in the immediate aftermath of the floods, that hasn’t changed.

And yet, the ALP is still in denial about the whole thing. Wayne Swan is expressing his hope that Andrew Fraser, the main driver of the asset sales can be saved. And Bligh’s defenders are pushing the line that electors are finally responding to their desire to punish the government for the sins of the Beattie era. The idea that you lose votes by doing something that’s directly opposed to your platform, that you’ve promised not to do, and that voters hate, seems not to compute

I said in my last post that I wasn’t looking forward to two terms of Newman. But unless Labor wakes up to itself, they could be out for a lot longer than that.

fn1. The Labor member, Ronan Lee, defected to the Greens before the 2009 election, which was won by the Liberals.

Barring a miracle, the Queensland Labor government will suffer a defeat tomorrow, comparable in its severity to the Joh-era election of the 1970s, when the caucus was reduced to the size of a cricket team. The great majority of Labor MPs are likely to lose their seats. While I regret the fact that matters have come to this, and like and respect quite a few of those MPs (including, for that matter, Anna Bligh[1]), I will be shedding no tears over this outcome.

Minor update I found a report listing Paul Hoolihan, Jo-Ann Millar, Amanda Johnstone Dean Wells and Lindy Nelson-Carr as members of caucus who opposed the sales. I have met and been impressed by the last two, and I’m sorry that most of this group seem likely to be swept away along with the rest.
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Behind the Seams has been an innovative project blogging the issues around Coal Seam Gas and the Queensland election. I’ve contributed some text, but the real work has been done by Mark Bahnisch, Pandora Karavan and a few others. They’ve incurred some pretty substantial expenses travelling to areas where farmers are dealing with CSG and spending unpaid time. There’s a final chance to contribute to the costs of the project here.

I’ve just finished revising Zombie Economics for an Australian edition, to be published by Black Inc in May, with an all-new chapter on economic rationalism, the Australia form of Zombie econ. Keep a lookout!

It’s time for another Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpits, please.

A while ago I published a blog post, and later a Fin article, pointing out that the influential Alesina and Ardagna article, Tales of Fiscal Adjustment, that coined the term “expansionary austerity” was riddled with factual and analytical errors in its discussion of Australia. That piece has elicited a string of lengthy replies from the Catallaxy/CIS team, notable for the absence of any substantive content. Sinclair Davidson produced a mammoth post with multiple updates, entirely devoted to refuting a parenthetical snark on my part that the paper wasn’t peer reviewed. Now there’s another one from Steve Kates, who wants to quibble about the chronological relationship between Jean-Baptiste Say and the Mills, father and son.

So, an open challenge. In my original post, I give seven quotes from the Alesina and Ardagna article, all of which I say are wrong or at least misleading. Does anyone want to defend any of these? Special bonus points for anyone who can defend the opening sentence of their Australian section, which reads “In 1985, a single-party left-wing government took office and launched a stabilization plan to correct the internal and external imbalances (the current account deficit was 4.13% of GDP and the total deficit/GDP ratio was above 3% in 1984). ” (emphasis added).

UpdateKates has added a lengthy update to his post, without, AFAICT, defending the erroneous claims in A & A

The news that both the Opposition and the Greens are to oppose the reduction in company tax proposed by the government (to be financed by the Minerals Resource Rent Tax) gives the Gillard government a golden political opportunity, if they are competent enough to take it. All they need to do is put the bill up once and, when it is rejected, announce that they will come back again next year. Meanwhile, they can bank the proceeds which will go a long way towards meeting their (ill-advised) commitment to return the budget to surplus in 2012-13. Then, next year they can do a deal with the Greens to make a cut for small business only. That will leave Abbott promising both to reverse the small business cut, and to impose a new levy on big business to pay for his parental leave scheme. This seems to me to work pretty well for both Labor and the Greens, and it gives Abbott the outcome he has chosen, so maybe it’s a win all round.

Meanwhile, and perhaps more significantly, some news on EU cabon prices, which have been the subject of numerous beatups to the effect that a low price will create budget problems for the government. The EU recognises that the low prices means they can make bigger cuts in emissions at low cost. A proposal to do that was vetoed by Poland at a recent ministerial meeting. But a similar proposal is going forward and will be the subject of qualified majority voting in the EU Parliament, probably in June. The most ambitious versions will require emissions cuts of 80-95 per cent by 2050, with milestones along the way.

That’s the title of my last piece in the Fin (Thursday before last), which was about the zombie push for productivity (code for working harder) and the failure to pursue the genuine productivity gains that can be achieved through improvements in education, and particularly better education for kids from lower-income families. Ross Gittins made a similar argument, with some nice touches a few days later in the SMH. I particularly liked his point that the “productivity agenda” is essentially about making life easier for bosses.

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There’s been a lot of discussion about the Finkelstein report on the media, nearly all of which (along with the report itself, from what I can infer, having not read it) misses the point. To start with, it’s clear that the central problem motivating the inquiry in the first place is that most Australian daily newspapers are owned by News Corporation, which routinely prints lies, uses its power to demand, and receive, politically favorable treatment and, at an international level, engages in systemic corruption including fraud, bribery of public officials, blackmail, and much more, not to mention the routine criminality of illegal spying on its targets.
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It’s time for another Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpits, please.

One of the issues in the debate over CSG and fracking is the timeframe over which the global warming potential of methane (in the form of leakage from both conventional and unconventional natural gas projects) should be assessed. The leading critics of fracking, Robert Howarth and his team at Cornell have used a 20-year time-frame. Since methane has a much shorter residence time in the atmosphere than carbon dioxide, but has a greater warming potential over that time, the use of a 20-year time frame makes methane seem more serious than if a timeframe of 100 years or longer is used.

The original justification put forward by Howarth for the 20 year timeframe was that this was the likely life of a project. This is nonsensical, and (to me at least) undermines Howarth’s credibility. The world is still warming as a result of coal burned in power stations that closed decades ago, and no one suggests that we should not worry about this.

Howarth has now adopted a new justification that, on the surface at least, is more plausible. Most attention in the debate over climate change has been based on the assumption of a gradual increase in mean global temperatures, equilibrating to a new higher level some decades after concentrations of greenhouse gases have stabilized, with effects that will then play out for centuries. Since stabilization is unlikely to be achieved before 2050, that implies that we should be looking at timeframes of 100 years or even longer.

However, there is also a risk that we will pass some tipping point, after which the entire process will be irreversible. We don’t know much about tipping points, but, as Howarth observes, “”the world runs a high risk of catastrophic climate change in the period of 15 to 35 years from now.””

That’s true, but unfortunately for Howarth and for us, it doesn’t help his case.
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As part of the FAQ “Behind the Seams” series being run by Mark Bahnisch and others, I posted a piece (here at Crikey ) arguing that CSG is less environmentally damaging than coal.

A couple of days after Labor united behind Julia Gillard, allowing her to implement her commitments, we get
this (somewhat belatedly denied) and
this.

Meanwhile, in Queensland, Labor is marching towards a defeat that has been inevitable ever since Bligh’s post-election announcement, in 2009, of a massive, and economically unjustified program, of asset sales. Despite the fact that most of them are going to lose their seats, and that the policies violates both election commitments and Labor policy, hardly a single member of the Labor Caucus has opposed this, or even dissented from the retribution dealt out to the ETU and others who did stand up.

A new sandpit for long side discussions, idees fixes and so on.

It’s past time for another Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpits, please.

In the wake of the Labor leadership ballot, I tried to think a bit about new directions for public policy in Australia. My conclusion, in short, is that there aren’t any. I’ve hammered the point that Gillard is a policy-free zone, and even her supporters haven’t pushed back on this. I have to concede though, that while Rudd’s challenge speech was impressive in many ways, he also failed to produce much in the way of new ideas.

The problem isn’t just one for social democrats and Labor supporters. Abbott is the worst kind of poll-driven populist, and Turnbull, the only person on the conservative side of politics who has anything resembling a clue has been permanently marginalized.

Finally, there’s the policy elite represented by the Fin, the Oz and the various establishment thinktanks and policy talkfests. After thirty years, they haven’t come up with anything better than the tired old 80s agenda of market-oriented reform, competition and productivity, encapsulated in Workchoices, rejected by the Australian public in 2007 and totally discredited by the GFC.

The Greens are the best shot, but under current conditions they can’t hope to do much better than their current role of supporting a minority government and/or holding the balance of power in the Senate. That gives them the chance to make a small number of non-negotiable deamnds (eg carbon price), and to exercise some influence. But in broader areas like economic policy, they remain marginal. Even though they have some good ideas, they aren’t treated as serious players in this field.

The best that can be said is that, as long as the terms of trade continue to boom, the cost of missed opportunities will not be all that great. Australia remains a lucky country, run by second-rate men (and now also women) who share its luck.

By contrast, US politics seems to be opening up to the ideas of the left, at the same time as the Repubs are spiralling off into the Delta Quadrant. All in all, a lot more color, interets and hope than the drab prospects before us.

A couple of points that have emerged in the debate over the Labor leadership need a response

First, there’s the claim that there are no policy differences between Rudd and Gillard. This is often presented as if the two had independently arrived at the same position. In fact, as the equation in the post title implies, it’s because Gillard is a policy-free zone. Her independent ventures into policy making amount to a disastrous set of pre-election moves on carbon policy (no tax promise, consultative assembly, cash for clunkers) and a series of failed attempts to resolve the asylum seeker problem. Now that the Rudd agenda has mostly been passed or abandoned, Gillard has no policies whatsoever, a point I made some time ago. Her abandonment of the Gonski report, which she used as an excuse for doing nothing when she was Education Minister, is typical.

Second, and with somewhat more justification, there’s the fact that Gillard has been successful in getting policy passed where Rudd failed. The unusual circumstance of a House of Reps minority has led most people to overstate the relative difficulty of Gillard’s task. She has needed the Greens and three of five independents, normally being Wilkie, Oakeshott and Windsor. Rudd needed the Greens, Xenophon and Fielding, which was obviously harder. It’s true that Rudd made the mistaken choice of freezing out the Greens and trying to negotiate with the Liberals, which made no sense given that the Greens were bound to hold the balance of power sooner or later. A more comparable test is that of asylum seekers, where Gillard has done no better than Rudd, arguably worse.

*This equation was allegedly written by a notable, but somewhat obscure economist with his own name in the place of Rudd, and that of a better-known researcher in the same filed in the place of Gillard

A showdown over the ALP leadership, and therefore the Prime Ministership, has been inevitable for some time, and Kevin Rudd has finally brought it on, resigning as Foreign Minister in the face of direct personal attacks from Simon Crean (himself, apparently, a covert contender for the top job) and others.

Readers won’t be surprised to learn that I support Rudd. I have two reasons for this.

First, whatever his problems with interpersonal relationships and administration, Rudd is a serious leader with ideas for Australia’s future. Gillard has shown herself to have no ideas worth the name. Her policy agenda has consisted, almost entirely, of implementing policies introduced by Rudd.

Second, Gillard has totally lost the trust of the Australian people and if she leads the government to the next election, there is no chance whatsoever of a Labor victory. The result will be the election of Tony Abbott, someone who matches Gillard in terms of a lack of any consistent principles or concrete achievements, but adds to it a reactionary ideology and determination to undo the policies brought forward by (Rudd) Labor. Labor’s only chance of retaining office is to go back to Rudd.

Anyway, feel free to have your say

Robert Carling and Stephen Kirchner have a letter in today’s Fin, responding to my piece last week, which restated points I’ve made on the blog (for completeness, it’s over the fold). The letter is notable for not responding to any of my criticisms of Alesina, and for backing away from his previously unimpeachable authority.

John Quiggin’s criticism of us (“Tales of austerity ring hollow”, Opinion, February 16) warrants a response. We referred to Alberto Alesina’s work not because it is the only or last word on this topic, but because it is an example of a much larger literature in support of fiscal austerity (or less pejoratively, “fiscal consolidation”).

It is incorrect to suggest that the case for consolidation “rests largely on the work of Alberto Alesina”. We could also have cited a lot of other empirical as well as theoretical work, as indeed does Alesina himself.

A full examination of the International Monetary Fund and Organisation for Economic Co-operation and Development literature over the years reveals a more nuanced view than Quiggin suggests (not that the IMF or the OECD are the final arbiters anyway). We recognise nuances that we could not canvass in a 600-word article.

One is that the arguments about fiscal consolidation have to be tweaked depending on country circumstances and the credibility of the policymakers. Greece, for example, will suffer from fiscal consolidation, but that is partly the fault of the exchange rate straitjacket they are in.

But, in general, we stand by our basic proposition that fiscal consolidation is essential to the economic rehabilitation of countries with large budget deficits and unsustainable public debt burdens.

The only point worth noting is that the “pejorative” term “fiscal austerity” isn’t mine, it’s from the title of Alesina and Ardagna’s 1998 paper “Tales of fiscal consolidation: can austerity be expansionary”. If austerity is now a pejorative it’s because people know what it means, while “fiscal consolidation” remains a vaguely defined euphemism. Readers with a long memory may recall the US Repubs and Cato dumping “social security privatisation” in favor of “social security choice”

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It’s time for another Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpits, please.