William Burton has a well-thought out post, drawing on personal experience, arguing that currently illegal drugs should be regulated in the same way as alcohol. In an AFR Review Piece, I considered the same question from an opposite point of view. Suppose we accept the case that ‘legalisation of marijuana, cocaine etc. will send the wrong message’. Shouldn’t we then prohibit alcohol and tobacco as well as the currently illegal drugs. This would, of course, turn millions of otherwise law-abiding citizens into criminals, but our existing laws do that already. And it’s at least arguable, based on US experience in the 1920s, that there would be a net saving in lives. Although I started out with the intention of writing a reductio ad absurdam, I found that the case for consistent prohibitionism can’t be dismissed as easily as you might think. What is clear is that our existing policy is a hypocritical failure.
That’s the title of the talk I’m giving to the Economists’ conference tomorrow. Here’s a sneak preview of my conclusion.
The set of policy programs advocated under the banner of ‘microeconomic reform’ is too complex, and the associated set of outcomes too varied, to admit any simple characterization. Microeconomic reform has been neither the success claimed by advocates such as the Productivity Commission, nor the disaster implied by many popular critiques of ‘economic rationalism’.
Taking the two decades of microeconomic reform as a whole, the aggregate impact of the reform program on the welfare of the Australian community has been close to zero. Periods of strong growth in productivity and output, such as the mid-1990s, did little more than recover the ground lost as a result of the impact of the 1980s ‘entrepreneurs’ and the associated ‘recession we had to have’. Much of the apparent productivity growth of the 1990s is likely to dissipate as workers find ways of winding back the increase in the hours and intensity of work extracted through the unilateral repudiation of implicit labour contracts in this period.
Some of the policy initiatives introduced as part of microeconomic reform, such as the removal of tariffs, appear irreversible. Whatever the costs of adjustment during the process of tariff reform, its seems clear that the reintroduction of tariffs would reduce welfare. In other cases, such as those of privatisation and financial deregulation, the process of reassessment has already commenced. Various forms of renationalisation are being considered, most notably in the United Kingdom and New Zealand. Similarly, it seems certain that the next decade will see an increase in financial regulation, rather than the removal of remaining regulations.
As with the curate’s egg, the only verdict on microeconomic reform that is both brief and accurate is ‘good in parts’.
Professor Bunyip finally takes up my invitation to defend Mark Steyn’s claim (cited approvingly by Tim Blair, Miranda Devine and others) that:
“Of the 20th century’s three global conflicts – the First, Second and Cold Wars – who was on the right side each time? Germany: one out of three. Italy: two out of three. For a perfect triple, there’s only Britain, America, Canada, Australia, New Zealand.”
As I pointed out here, this is a schoolboy howler. Belgium and (most embarrassingly for Steyn) France were on the Allied side in all three conflicts, as was Greece.
The Bunyip wants to rule out my first counterexample, Belgium on the grounds that it was a neutral country which only entered the world wars when it was attacked (this also applies to Greece in WWII). Unfortunately, this defence also rules out the United States, which remained neutral in both World Wars, entering the First only after the attack on the sinking of the Lusitania with the loss of 127 American lives, and the Second only after Pearl Harbour.
Bunyip then makes a series of attacks on French perfidy, most of which have already been dealt with the comment thread of my original post. This kind of argument does nothing to save Steyn. It’s like asserting that the British were on the Japanese side in World War II, then defending the claim by saying that they surrendered cravenly at Singapore. I’ll post a link shortly with a more detailed response for those interested.
Most strangely, there’s a lot of stuff about my supposed claims about the “Anglosphere”, a concept I have never mentioned, but which is a good metaphor for the thinking of Bunyip and Steyn. “Being on the right-side” means “blindly following the English-speaking leader”. Of course, with this definition, the English-speaking countries are always right.
Lawrence Lessig The Future of Ideas: The Fate of the Commons in a Connected World. I’ve always found Lessig worth reading, and I’ve been interested in the concept of the commons for for many years – I’ve written quite a few academic papers on it. I plan on reviewing this book, probably for the AFR. It’s a fascinating read, and Lessig really knows his stuff, but I think he is too pessimistic. The slogan “information wants to be free” is facile and simplistic, but it’s also true. I’ll post the review here when it’s done and look forward to seeing Kim Weatherall’s thoughts.
Terry Lane was kind enough to end our interview with a free plug for this weblog. So a big welcome to any of his listeners who have come along for a look. If you have any questions about blogs or economics (or anything!) feel free to email me at John.Quiggin@anu.edu.au.
David Leonhardt notes that millions of American workers are Out of a Job and No Longer Looking. I made the same observation, and discussed Australia’s dire performance on unemployment, in my AFR column two weeks ago (to be fair, I drew on an earlier NYT report). It’s up at Australian Policy Online and also at On Line Opinion, and should be on my website soon.
As I’ve already indicated, my move to Brisbane has entailed a comprehensive reconsideration of my sporting commitments. Basketball is relatively easy. The players change clubs every season, so I have no problem in cheering for the home team wherever I live. I expect the Canberra Cannons to do very well this year, but I’ll still be barracking for the Bullets. In rugby league, by contrast, community solidarity overrides everything. The Rabbitohs may have lost most of their matches, but they beat Rupert Murdoch and that’s what counts. This won’t stop me backing the Canetoads in State of Origin, but I’m officially neutral in tonight’s preliminary final.
The really ticklish question is whether I can bring myself to take an interest in rugby union. My class prejudices and South Australian birth say No!, but perhaps it’s time to put these things away. I’ll keep you posted.
I’ve been planning a move to Brisbane, and the University of Queensland, for some time, and it will take place next year. Apart from the need to relocate my Web Site, this won’t make much difference to my Internet readers and interlocutors, except in one crucial respect. As a symbol of commitment to my new home, I’m ending my 40 years of (mostly thankless, I must admit) support for Geelong and switching it to Brisbane.
5:30 Update: VICTORY!!
Vaclav Klaus is the living embodiment of the idea that the collapse of Communism entails the final victory of capitalism over socialism. A close friend of the more famous Czech democrat Vaclav Havel, he became Finance Minister, and then Prime Minister in the first post-Communist government in the then Czechoslovakia. Unlike many dissidents in the former Soviet Empire, he rejected any idea of a ‘Third Way’ arguing for a free-market society modelled on the United States, but without the historical compromises of the New Deal.
in 1991 he visited Australia and gave a talk to the Centre for Independent Studies entitled ‘Dismantling Socialism: A Preliminary Report”, in which he set out the progress that was being made in the move towards free-market capitalism.
Ten years later, Klaus has accumulated much of the standard baggage of a political career, including accusations of financial improprietyand some distasteful compromises with the anti-immigration right. His friendship with Havel is very much a thing of the past. Having seen an expected election victory slip out of his hands earlier this year, he is currently the leading opponent of the social-democratic government of the Czech republic.
More interesting than his political career are his thoughts a decade on, given to the CIS in 2001 under the title Dismantling Socialism: An Interim Report. To summarise drastically, he concludes that, while Communism is dead, socialism (or more precisely, social democracy) has actually gained ground over the past decade. The Czech Republic and other East European countries are on the verge of joining the European Union. As Klaus observes, the commitments involved in the EU ‘acquis communitaire’ amount, for all practical purposes, to a constitutional guarantee of social democracy. (Both Ken Parish
and Josef Imrich link to another Klaus piecetaking much the same line.)
This is a good time for me to insert my long-promised discussion of the definition of social democracy and of socialism, and to explain why I now call myself a social democrat rather than a socialist. Social democracy is a fairly well-defined social order. Although it has no perfect exemplar, it has been realised, more or less, in most European countries, to a lesser extent, in Britain and its former colonies and, in to a much lesser degree in the United States. It is a social and economic system which includes a mixed economy with both public and private enterprises and an acceptance that society has a whole has a responsibility for protecting its members against the standard risks of the modern lifecourse (illness, unemployment, old age and so on) and for providing everyone with equal opportunities to develop their potential to the maximum extent possible. An immediate implication is that, while absolute equality of incomes is not necessary, inequality should not be permitted to reach the point where some citizens have massively more power than others, and where their children have a big headstart over other children.
While social democracy was advancing steadily (that is, from about 1945 to 1970), socialism could be seen simply as social democracy without the compromises – no big private enterprises, no inequality and so on. And, if you were prepared to put on the appropriate blinkers, the Soviet Union and its satellites could be seen as an embodiment of socialist economics, marred by undemocratic and therefore anti-socialist, politics.
Social democracy has been on the defensive from 1970 until very recently, and the Soviet empire has collapsed entirely. In these circumstances, the definitions of socialism that were prevalent a few decades ago are no longer relevant. What is left is a much older, 19th century aspiration (modified in the light of feminism), the ideal of a society based on the premise “from each according to their ability, to each according to their needs”. This is still an inspiring ideal, but not, at present, the basis for a political program.
The current political struggle, therefore, is between social democracy and neoliberal capitalism. From the crisis of Keynesian social democracy in the early 1970s until the financial crises of the late 1990s, neoliberalism was gaining ground fairly steadily. But the neoliberal program has failed in New Zealand, the United Kingdom, Eastern Europe and, most recently, in its heartland, the United States. Vaclav Klaus is right to despair.
I’ll be on Terry Lane’s National Interest program tomorrow (Sunday), talking about the IMF report on Australia. Also, I’ll be talking about microeconomic reform at the Economists’ conference in Adelaide next Tuesday. The peripatetic Jason Soon will apparently be paying a flying visit to the same conference.