Greens’ economic policy

Here’s an extract from a piece I’ve been working on which will appear in Adelaide Voices

Having been disappointed in the economic policy offerings of the major parties, it is natural for an economist to look to the offerings of the remaining serious alternative, the Greens (it seems unlikely that the Democrats will manage a serious run), with a mixture of hope and trepidation; hope because the Greens have generally been willing to take a stand and trepidation because the economic policy platforms of minor parties frequently contain large elements of wishful thinking, small-group hobby horses and plain irrationality

It turns out that trepidation is unnecessary. The Greens economic policy is, quite simply, the most coherent and intellectually-defensible document of its kind ever put forward by an Ausralian political party. At the level of broad principles, it begins with the recognition that economic policy must be financially, as well as environmentally and socially, sustainable. Far from seeking cheap popularity by arguing for both tax cuts and increased public expenditure, the Greens have insisted that public sector debt should be matched by adequate capacity to service debt, and that dubious financial expedients like the use of privatisation to reduce measured debt should be avoided.

The policy is just as good in detail as it is in broad outline. The proposed tax policy initiatives, including a return to full capital gains tax, an assault on tax avoidance and a carbon tax, are just the kind of initiatives that Labor ought to be proposing. Unlike the modern Labor party, the Greens have no hesitation in espousing equality as a goal of economic policy.

Sad to say, in most electorates, a vote for the Greens will have purely symbolic significance, and it will be the allocation of second preferences between Liberal and Labor candidates that really counts. Moreover, it is doubtful that many Green voters will be motivated primarily by concerns about economic policy. Nevertheless, anyone who decides to vote for the Greens on the strength of their support for the environment and opposition to war should be encouraged to know that they are also choosing a party with a policy that is economically as well as socially responsible. If only the major parties could claim as much.

I’d be interested in readers’ comments.

68 thoughts on “Greens’ economic policy

  1. Does this economic policy ‘fit’ with their other policies such as industrial relations? The Greens IR policy seems to be old Labor Left – restoring Awards and the AIRC etc. Not that there’s anything wrong with that, except that those policies were predicated on continuing economic growth to pay for wage increases etc. Certainly the Greens support ‘sustainable’ growth – but so do all the other parties. Do the Greens need to be a bit more radical in areas like IR to be really ‘green’?

  2. JQ,

    I didn’t think I’d agree with you, but I had a look at your link, and there’s a lot more rationality than I was expecting. That said (you knew this was coming), amongst the sensible motherhood stuff you get comments like the following:

    “2.1.3 an effective system of foreign exchange management [sounds very dangerous]

    2.2.10 reduce foreign ownership of Australian enterprise [why?]

    2.2.11 sustainably reduce the high level of foreign investment in Australia, in order to reduce the country’s high current account and net income deficits, while ensuring that a sustainable level of capital is available to the national economy” [is this going to be at the same time that the Greens achieve full employment with low inflation – autarky hasn’t been a great way to build wealth before]

    2.3.7 promote a more balanced structure of Australian industries with more actively interventionist industry policies [here we go]

    3.2.10 Financial speculation and the squandering of scarce material resources can be significantly taxed in order to discourage those activities.
    3.2.11 Tax may be used as a mechanism to limit foreign debt and foreign speculation. [both of the above sound ominously loopy]

    3.3.22 seek to ensure that all income share dividends, including fully franked dividends, are taxed at the marginal personal rate for individuals and the company tax rate for companies [the market – and our super funds – will love that. Let’s return to an era where companies are penalised from giving money back to shareholders]

    3.3.36 support the implementation of a currency transaction tax, similar to the Tobin Tax, to discourage currency speculation. Such taxes may be feasible at a national level without the broader, and desirable, context of international implementation (see Global Economics Policy). [Tobin tax. OK. Sure.]

    [Last, but not least…]

    No formal, significant Commonwealth Government inquiry has been conducted into the distribution of wealth in Australia since 1915. Since then there have been enormous changes in the distribution and concentration of wealth in Australia. The Australian Greens will:
    4.3.27 establish a national inquiry into the distribution of wealth in Australia. [And I suppose the ATO will be handling this enquiry?]

    The Greens economic policy seens internally consistent and far from wacky, but proposes the following:

    – more expenditure on “strategic” infrastructure and social services
    – (consequently) higher taxes
    – higher marginal tax rates
    – higher company tax rates
    – inheritance taxes for estates over $2m, including on the family home (that’s a fair slab of Sydney)
    – a dirigiste approach to industry development, with a “national industry development fund” and targeted development of “industry clusters in regional economies”
    – a controlled foreign exchange market, WITH a Tobin tax
    – greater taxes on speculation and investment in general (higher capital gains tax, abolition of dividend franking, reduced benefit from negative gearing…and that’s just the stuff they tell us about)
    – restriction of foreign investment in Australia

    We’re going to cop all of that AND achieve full employment with low inflation in a ecologically sustainable way? Gold star for effort, but I’ll vote against it, not for it.

  3. I think this would have been a problem until a few years ago, but these days the union agenda has at least as much stress on shorter hours, and reduced work stress as on higher wages. I don’t say that their agenda exactly matches the Greens, but there’s no fundamental conflict between old left and new left on this point, rather a question of emphasis.

    On the other side of the coin, it’s important to observe that there’s no hint in the Green policy of anti-materialism for its own sake, as for example in Clive Hamilton’s Growth Fetish. At least as far as this document goes, if we can have more of everything, including more environmental protection, so much the better.

  4. “The Greens economic policy is, quite simply, the most coherent and intellectually-defensible document of its kind ever put forward by an Ausralian political party.”

    yeah, but they’re nazis.

  5. I thought the comment above was funny, so I’ve left it.

    But before anybody sues or writes furious emails to Senator Brandis, let me point out that my non-expert IP analysis shows that this is a spoof. Apologies to all those for whom this was obvious, but I’ve found there’s always someone who takes this kind of thing seriously.

    Also, in my official capacity as blogowner, I rule that allusions to silly politicians’ statements referencing the Nazis do not constitute a breach of Godwin’s Law.

  6. In general I think you are going a bit overboard. For instance, the taxation stuff is decent as a whole, but they still meddle too much to be really great. Things like “3.3.31 limit the corporate tax deductibility of any executive payout to ten times current average annual earnings” are just pointless. If they included simplicity and efficacy in their principles (which read mostly like goals) along with fairness, then they might not be so intrusive.

    Another rather old-school notion is this: “2.3.5 restore full employment in Australia, including the direct provision of suitable employment by the government and the use of targeted labour market schemes.” I think the Dutch example of a strong safety net combined with a fairly flexible job creation/destruction policies is what they should be aiming for. Direct hiring by the government for anything but the services it provides just doesn’t seem sensible in contrast. “Full” employment is probably unreachable, but implementing policies to both reduce the duration of any one stint of unemployment and to reduce the anxiety associated with the loss of a job is possible.

    So, I’m not sure what you mean by intellectually defensible. Defensible on its own terms, or policy good enough for a left-liberal to defend? Its pretty good on the former, but still a little to controlling for me to be the latter, though I share the its broad goals. Perhaps a tone that is more “best so far” and less “really good in absolute terms” might be better for your article.

  7. To Tom and Fyodor, thanks for your comments. By intellectually defensible, I meant “defensible on its own terms”, which would not be problematic for the audience of Adelaide Voices, but will require some explication if I rewrite this for the Financial Review.

    There is of course, plenty that people can disagree with in the position taken by the Greens policy, which is essentially a modernised version of old-style social democracy. {Since this is pretty much my position, I don’t have a lot to disagree with, though I’m cautious about regional economic planning and suchlike]

    But it’s good that there is something to disagree with in the platform – in lots of party platforms there is nothing sufficiently substantive to permit disagreement.

  8. If what you are saying is true, that their economic policies are a carbon copy of what Labor stood for in days gone by, a relevant question worth posing is do the Greens have a chance of attracting the support of Labor voters (i.e. workers)? I myself don’t think so. Regardless of their economic policies, the Greens have different priorities to socialist/labour parties that place the environment, moral questions, pacifism and an anti-American foreign policy above social reform. Their largely middle-class leadership and membership will not help them, either. And even if the Greens ever do try to broaden their appeal, this will inevitably bring them into conflict with their greenie support base. It may be a political cliche’, but in the end, it might come down to “jobs versus the environment”.

  9. Now if only the Greens could get there policy out their to the average punters. if only our broadsheet (note the singular not plural for brisbane 🙂 could take the party seriously instead of calling them nazi’s and losers.

    I’ve been long impressed with the Greens comprehensive policies across the board. they are a serious academic party with a lot of great ideas (and a few wacky ones). While the Public Relations face of many of them are driven by idealogy instead of reality, the detail inherenent in their freely accessible policies put the major parties to shame.

  10. The Greens are middle-class, left-liberals with an emphasis on non-economic questions. They always have been and always will be. Bob Brown was perfectly willing to sell Telstra, provided the revenue went into the environment. This goes to show you that the Greens can’t be trusted to stick to social-democratic policies.

  11. By intellectually defensible, I meant “defensible on its own terms”, which would not be problematic for the audience of Adelaide Voices, but will require some explication if I rewrite this for the Financial Review.

    Are you going to do that, JQ? I wouldn’t mind looking at an attempt.

    How do the Greens get seats – allowing the dominance of the two-party system. I think the Green’s way out of their dilemma is to start locally and getting themselves elected to councillor or alderman positions. After that, they go for the state seats, and then federal electorates. It’s hard work, but that’s Ted Mack did. At the same time, they can start increasing their share in the Senate.

    It would be harder to do this in Brisbane – and not just because of the Murdoch-dominated press. Most of Brisbane is just one big council. Other cities are made of 20 or 30 microcouncils.

    However, you could get yourself elected alderman to one of the wards – no matter your political tendency. Just set yourself a year, and doorknock every house you can. Set yourself your agenda, go well dressed, and be polite with everybody. That was the way Peter Willoughby (sic?) got himself elected as independent to one of the State electorates.

  12. I shoudl qualify “no matter your political tendency”. I don’t think the above tactic would work for white power groups or the Natural Law Party. But I definitely could see it happening for the Greens in the inner-city and inner west wards, such as “The Gap”.

  13. Terry wrote:

    “Regardless of their economic policies, the Greens have different priorities to socialist/labour parties that place the environment, moral questions, pacifism and an anti-American foreign policy above social reform.”

    I think you’re mistaking the Greens’ media strategy with their policy platform. Social reform is at the absolute dead centre of the platform. Without social reform, you’re left just fiddling around the edges.

    I also don’t think it’s accurate to describe the Green foreign policy as ‘anti-American’. The opposition to the militarisation of space, for instance, has a practical effect only on America (at the moment), but you can’t reasonably call that an anti-American position. The same goes for the policies that are explicitly directed at America, such as the Missle Defence Shield. The Greens are opposed to that because it’s a bad idea – not because it’s American.



  14. In this context, I think the Qld Greens could do with a change of leader. Electorally, Drew Hutton seems to me to be a negative and, while I’m sure he has his merits, they’re not particularly evident to me.

    More generally, I think it’s a bad sign when a party has the same leader for years on end despite limited (in fact, pretty much nonexistent) electoral success.

  15. Dave’s reminder of Bob Brown’s Telstra comments is in fact an example of why the Greens are not flaky on these issues. Whatever the reasons for Bob’s Telstra sale, he quickly clarified that it wasn’t Greens policy and that he did not in fact support any further selldown of Telstra.

  16. The greens simply have too much baggage to overcome to be taken seriously (end of the world is nigh stuff, etc) and they generally are extremely intolerant of anyone with different views. Furthermore, when they have power (e.g. in some academic departments) they are just as bad as the Stalinist left was in the past. On third world issues, they are simply flaky.

    A recent example of their lack of rationality occurred in my Amnesty International group (before I resigned because of the opposition of the organisation to the liberation of Iraq and the overthrow of a torturer, murder and rapist). Two members of the group were members of the green party. They were also two of the most vocal in their criticism of both the Liberal and Labor parties for their policies on refugees. Now I am also critical, although not as critical. (I do think critics should have named an acceptable number of refugees and put forward coherent strategies for dealing with them – I also think they should have acknowledged that not all community concerns about crime within some migrant communities or concerns about Muslim refugees who hold extremist views are the product of racism.) The fundamental problem with the greens view on the refugees is their long term support for zero population growth. In other words, both Liberal and Labour and even Pauline Hansen (I think) have a far more progressive view on immigration and refugees than the Greens.

  17. The Greens economic policy is, quite simply, the most coherent and intellectually-defensible document of its kind ever put forward by an Ausralian political party.

    The Keating (1991-1996) and Howard (1996-200?)Governments have overseen the second longest running expansion in Australian economic history, now in its 14th year (1991-2004)

    Admittedly, this economic expansion has been associated with some polarisation in the distribution of economic resources and owes a lot to the increase of public debt under Keating and private debt under Howard.

    Over this time there has also been a colossal increase in the value of privately held (properties and equities) assets, putting Australias HVI’s in the same league as those in thetop ten wealthiest nations.
    THis top-end wealth trickled onto the mainstream, with private household wealth increasing by over 50% during the first half of the boom.

    According to the new “experimental estimates” from the Bureau of Statistics (ABS), the wealth of the average household rose 45 per cent from 1994 to 2000 as property prices and the sharemarket boomed.

    Household wealth appears to have gone up another 50% during the second half.

    Yet, concurrently, Pr Q has relentlessly bagged both Keating and Howard for their reckless and spendthrift policies.

    I would agree with Pr Q that both parties were deficient in their policies with respect to utility infrastructure and spending on public health, education and sci-tech R&D.

    But I cant see any evidence, going by conventional metrics, that the Greens policies would have been worthy of such an economium if they had been touted in the early nineties.

  18. “Furthermore, when they have power (e.g. in some academic departments) they are just as bad as the Stalinist left was in the past.”

    Enlighten us, Michael. Which Green-led academic departments conducted show trials of dissidents and enemies, real and imagined, leading to summary execution of them and their relatives, or 20 years imprisonment in the Gulag?

    Back to original the subject of this thread, I agree that the Greens’ economic policies are more coherent than you’d find on the pages of Green Left Weekly. But there’s more than a whiff of populism to it all, such a their opposition to foreign investment, a prejudice even the Vietnamese communists have managed to overcome.

    Carbon taxes are a good idea, but the true test of Green policy coherence will come when they draw the logical conclusion that if coal fired electricity is bad for the environment, because of greenhouse emissions, and carbon taxes make coal fired power stations uneconomic, then the power is going to have to come from somewhere, and the only source of plentiful, not too expensive, non carbon emitting, power, is nuclear power.

  19. Michael Burgess wrote:
    “The fundamental problem with the greens view on the refugees is their long term support for zero population growth.”

    “zero population growth” is not part of the Greens population policy, so I guess you don’t have a fundamental problem with the Greens view. Shall I send you a membership form ;^)

    Dave Ricardo wrote:
    “the true test of Green policy coherence will come when they draw the logical conclusion that … the only source of plentiful, not too expensive, non carbon emitting, power, is nuclear power.”

    At the risk of sounding like a broken MP3, the Greens already have a pretty coherent set of energy and nuclear policies. It’s a bit different to your solution though.



  20. Daz,
    Put the membership form on hold until, at least, new age beliefs are purged from the greens, consumption is not deemed to cause you to go blind, and Mick Moore, David Sukuki and Susan George are objects of ridicule in the green movement and not of worship. Oh and Bob Brown stops sounding like a secular version of Fred Nile.

  21. At the risk of sounding like a broken MP3, the Greens already have a pretty coherent set of energy and nuclear policies. It’s a bit different to your solution though.

    Until the Greens can explain how they intend to replace coal for baseload power, they don’t have an energy policy that can possibly achieve the reduction in emissions they want.

  22. Michael, the Greens may well have plenty of New Age voters (though I suspect that Labor and the Liberals have equally many) and there may be plenty of Greens who think that consumption is evil, but I challenge you to find any evidence of either in the economic policy platform I cited.

  23. Michael,

    I’m dubious whether nuclear energy really makes sense in a dispersed populated area like Australia. I can’t see the Federal government running one in this climate. Perhaps a private company could have a go – but the amount of safeguards on running the thing would make it prohibitivly expensive. There’s a fair chance any said company will end up going bust – leading to a federal buyout. We haven’t even talked waste disposal. Anyway, Australia has plenty of wind and sun, so why not go for that.

    Having said that, I’m also dubious with the some of the absolutism in the Green Policy document. For example, they don’t just want to outlaw nuclear energy, but nuclear reactors, such as Lucas Heights. Yes, you’ve got cyclotrons for some of the medical isotopes they produce, but are they a good substitute?

    I’m still doing my old policy of giving them my first preference in the polls. Their ideas could be modified, and at least they have fresh Anyway, I’ve seen no evidence that neither Latham nor Howard deserve my first preference.

  24. What I personally find irresistable about their policies is the ability to have a deciding influence in helping shape them!

    Imagine that! So you mean a member of the party actually can have a say?

    Yep, I’ve met a few who have just done that very thing:
    – a public school teacher who feels very strongly about education (!) and helped to contribute in his local group’s policies which very soon after were discussed and passed up the party’s policy discussions…
    – a few community health workers who contributed to that…, etc.

    Quick now!, we need some decent economists and academics (not easy!) to join the Greens and help with the discussions in those areas…

  25. The greens are a great party. I would go so far as to say the most principled and consistent federally registered party in Australia – and the only federally registered party outside the majors to include some intellectual firepower.

    When I ran in the ACT election (2001) I was struck by how uninformed, uneducated and unprincipled the democrats were… and the contrast with the greens. Unfortunately, in the seat where the two were closely competing, the Democrats won.

    Of course, I disagree with nearly everything they say – but that’s a different story.

    As a side point – I would regard the greens as democratic socialsits… not social democrats. The major parties are social democrats.

  26. Anyway, Australia has plenty of wind and sun, so why not go for that.

    The big problem with electricity is that for the grid to work supply has to meet demand pretty much exactly. With wind and solar, the supply varies in an unpredictable fashion that may have no correlation with the demand, so either renewables remain a very small part of the grid, you invent good energy storage technology (we don’t have *any* good large-scale ones yet), or you use a technology without these variations.
    Renewable energy advocates like the Greens would do well to address this issue.

  27. John,
    Once I get time I will look at it in some detail. But even if the greens did somehow produce a credible report (which would surprise me as much as European soccer clubs falling over themselves to release Australian players for key World Cup qualification warm up games) there is still the credibility issue. I don’t me to sound rude but I have noticed that academics often tend to have a more positive view of social movements than those, such as myself, who have been very active in them for 25 years or so and have run numerous fund raising activities etc. The crunch, whether it is a greens group like Greenpeace, and overseas aid organisation such as CAA or even a human rights organisation with a high reputation such as Amnesty International, inevitably comes when a member starts to challenge the often silly consensus (e.g. CAAs extremely daft view that only countries who follow bottom-up development up development can succeed at development). In essence such organisations essentially often act like religious cults where anyone questioning the leader is ostracized and forced out. So assuming for the sake of argument that the Greens have come up with a sensible economic report, I will essentially treat it until proved otherwise like I used to treat the activities of the Italian Communist party relative to the Eastern Blocs. Yes, they are more moderate but what if they were to obtain power?

    Carlos in relation to having a say try disagreeing with them and then see if you find the experience so nourishing.

  28. What about the Green’s policy of a state-provided “Guaranteed Adequate Income”, or have they dropped that recently? To me that appears unsustainable in both the short and long term.

    Curiously enough, when I looked into it, I found that a guaranteed inadequate income would be workable and constructive, at least after the costs of a transition had washed out, if only the on costs of funding it could be kept down. Whereas a full blown guaranteed adequate income doesn’t add up, there is a range within which a guaranteed inadequate income wouldn’t overload the tax base and would allow more and more people to price themselves into work for top-up wages lower than living wages (ignoring minimum wage laws for the moment), so increasing the size of the supporting economy. The problems with that are either transitional or from the compliance/transaction costs in funding it.

    Of course there may well not be efficient enough means of raising revenue, but with those caveats the whole thing would work for so long as we didn’t hit Malthusian limits. The economics of the USA in the frontier period roughly correspond to a system where the range can be set as low as zero as there are still resources there for the taking – a habit which has formed certain people’s economic outlook long after the underlying circumstances have changed.

  29. This may be accurate, but it implies that voters are better advised to preference other parties before the Greens:

    Sad to say, in most electorates, a vote for the Greens will have purely symbolic significance.

    The more people that vote for the Greens, the more seriously they will be taken, leading to better qualified people becoming involved, an improved standard of policy and representation, and thus toward a more viable political alternative.

    If you believe the Greens will more closely represent your interests than other parties, then you should give them your preference over all the others.

  30. If I were the Greens starting from scratch, I’d only have 2 broad forms of taxation. A resource consumption tax(including heavy carbon taxing) and an annual net wealth tax for further equity.

    The main benefits of this simplified constitutional marketplace would be:
    1. We rely totally on the market for resource allocation. You wouldn’t need govt regulated Greensmart housing codes and the like.
    2. It taxes the life blood of capital, namely fossil fuels and not labour at all. The shift in relative pricing should see a switch in demand toward full employment.
    3. The relative increase in transport costs of resources should ameliorate the long term trends of centralisation and globalisation.
    4. Raising the cost of resource use should see a shift to quality rather than quantity and embed a higher recyclable cost within products. Raising such costs would make us all circumspect about incurring the costs of disposable packaging generally, rather than sticking it up the odd emotional shopping bag.
    5. The tax avoidance/evasion industry is minimized, particularly as there is no differential of resource taxing for private, business or charitable use.
    6. There is no tax on savings until consumed.

    The problem with the Greens for me, is they like too much stick rather than the carrot. Enjoy an air conditioned house, dishwasher, heated spa or pool, drive a V8 and enjoy jet travel and I’ll have an intravenous tax drip right into your jugular. That’ll help get you to meet our Kyoto emission targets and if the rest of the world want to trade high energy/resource products from overseas, for the output of their service industries they set up here with no income, capital gains or company taxes, then more fool them.

  31. With wind and solar, the supply varies in an unpredictable fashion that may have no correlation with the demand, so either renewables remain a very small part of the grid, you invent good energy storage technology (we don’t have *any* good large-scale ones yet), or you use a technology without these variations.

    Yet. I feel that most of the pieces are there for a solution, although some need tinkering. There are hydrogen fuel cells for storage (with an electricity/hydrogen/electricity efficiency of 50%?) Solar power in the outback – well, would most supply variations be the normal day/night cycle? That’s hardly unpredictable. There is a lot of desert in Oz. There aren’t that many days where the whole continent in overcast.

    Alternatively, there’s the Solar Tower that (hopefully) combines wind and solar to generate 200 MW of energy. (Use of water pipes through the greenhouse allows energy to be generated through the darkness.)

    It’s an odd mix of optimism and pessimism that I’ve found muself here. Realistically, I think we’re not going to get rid of coal power plants for the next few decades. (The greens want to phase it out by 2050.) The Solar Tower isn’t going to go into production by 2009. However, I could see that this could change.

    One thing I’ll say: I still don’t think nuclear power is a good idea for Australia.

  32. Why does Australia besides Greens, not have a left oriented party. Most of the today’s political agenda in this country is set by arguments between centre-right(Labor) and right(Liberal). Even though Liberals would like to be considered as centre-right party. Most of the countries in European Union have reasonably strong left wing parties. And in countries like Germany greens even form government. By mandating high environmental standards they stimulate their industry and R&D, to produce world class environmentally friendly technolology(pollution emission systems, recycling etc) which then they export lucratively to the rest of the world.
    Why does it take decade or so for Oz to catch up with the progressive world. I’m myself am a migrant and I’m still working out the political spectrum here. But the Oz greens do look like a real alternative party. I feel sorry for saying that I don’t consider Labor as an alternative, from what I can observe they are more or less the same as Liberal just not as extreme. i.e more similar than dissimilar

  33. The Greens are in line for at least 3 new senate seats (Tassie, NSW and WA look the most likely) , but this could blow out to 6, which would give them the balance of power. So it is positive to see their policy on such matters at being looked at.

    Also I love that Solar Tower project and hope they get their money.

  34. 3.2.10 Financial speculation and the squandering of scarce material resources can be significantly taxed in order to discourage those activities.

    3.2.11 Tax may be used as a mechanism to limit foreign debt and foreign speculation. [both of the above sound ominously loopy]

    Loopy like Tobin and Dornbusch.

  35. IMHO the important lesson to learn from the Greens is their understanding of process. I’m probably being a little parochial in claiming that the West Australian Greens are mostly responsible for this. Certainly, their success at a State level was as much due to their willingness to overcome the faction/idiot factors by instuting good meeting proedure and educating their members in conflict resolution and group dynamics.

    In W.A. the Greens have won respect for their willingness to think on their feet and to broker compromises where possible and to engage in local political issues. A notable fact is our reliance on women candidates.

    GIven that the Greeens grew out of the ashes of the Nuclear Disarnament Party at a time when the thing that was dreaded most was the Trotskyite (DSP) mob trying a takeover, I think it’s a considerable acheivement that the party’s policy is coherent let alone comprehensive.

    Process, maintenance work, reproductive work,call it what you will, is the unregarded element of econmics and politics alike.

  36. Google tells me that back on 22 March two people asked about my book Economia (ABC Books, 2004) – see
    I haven’t seen any responses.

    The discussion of Greens economic policy gives me an appropriate entrée to comment and plug. First, a few points relevant to this and a couple of other recent topics:

    A Tobin tax on financial markets is only sensible, because financial markets are parasitic and their instabilities are damaging and seriously reduce economic efficiency. The markets fluctuate much more than does the underlying productive economy – witness the 1987 crash, when market values dropped 30% in a few hours, though 30% of the world’s factories had not been bombed overnight. The markets fluctuate so much because their rate of trading is perhaps 100 times faster than is required to service the productive economy – the equivalent of all the world’s tradable assets are traded in around a month or less. Thus only about 1 percent of trading is useful, the rest is speculation, unrelated to the real world, and the market is driven mainly by the whims of the speculators.

    These comments relate also to the “efficient markets hypothesis” and to “economics as an empirical science”. To a scientist like myself, there is readily available evidence of the complete inadequacy of the neoclassical paradigm and the dysfunctionality of many markets, especially at the global level.

    The alleged success of the Keating/Costello economic management relies mainly on the increase of the GDP, which is far from a measure of general welfare, even of material welfare. This is because it measures economic activity, but takes no account of whether the activity is useful, useless, harmful, or cleaning up the mess left by other “activity” – it’s as though you put all of your shop’s transactions on the credit side of the ledger and add them up. The incomes of lower and middle-income people have moved only slowly in Australia or the U.S. Anyway, much of the alleged new wealth is not wealth created but wealth extracted by exploitation (of people and the environment).

    Briefly, my book argues that the neoclassical assumptions are grossly violated in the real world, and that the central neoclassical prediction of an optimal general equilibrium bears no resemblance to real modern economies, which are so pervaded by instabilities that optimality is not a definable concept. Real economies are complex self-organising systems, which have many possible viable states, so we can, if we choose, live according to the values we choose and restore and promote cultural diversity and biodiversity – without going broke. There is no assurance whatsoever that unfettered markets will deliver what we want. Rather, the undoubted power of markets needs to be harnessed and guided, and the best way to guide them is probably through a coherent structure of financial incentives. This is neither socialism nor old-fashioned capitalism.

    You can read more about my book at

  37. Green voters are well to the left of ALP voters on their attitudes to economic policy as shown by the research of Clive Bean on the 2001 election. I suspect however that the issues that stir and inspire most Green voters are not economic ones. The desertion of Labor voters to the Greens in 2001 was not due to economic policy. Here the Greens are divergent from theirs ideological antecedents in the old moderate-radical left (that is the old ALP Left and the Eurocommunist CPA of the 1980s). I doubt that a Labor-Green coalition government would be very different in economic policy from a Labor government. The example of the SPD-Green government in Germany suggests this. However a Labor-Green government would be somewhat more egalitarian. Supporters of the old moderate-radical left should therefore welcome a strong showing for the Greens and support proportional representation to force Labor to deal with the Greens. If Labor can form a coalition with the National Party in South Australia it can surely work with the Greens. One reason for the Green’s practical approach to economic policy is the past involvement of many of the membership in student politics, student political involvement can give useful experience in management, human resources and budgeting for multimillion dollar organisations. It is the moderate left, such as the Greens, who have the best record in management of student organisations whereas the right demonstrates remarkable financial irresponsibility. I am not including in this criticism those on the libertarian right who have a principled opposition to participation in student politics.

  38. I haven’t read Geoff Davies’ book, so I’ll just comment on his post.

    Financial markets are not parasitic, they provide a highly efficient means of pricing and distributing all manner of goods, from commodities, to currencies to financial capital itself. This pricing and distribution mechanism is VITAL to a productive economy, and humankind in all of its history has never produced a better alternative.

    Next issue: trading volumes. How much is enough? You seem to think of trading as an necessary evil, that should be kept to a bare minimum. This is unrealistic, and ignores the way markets work. Markets work best (i.e. are most efficient at pricing assets) when they are open, transparent, well-regulated and include as many participants as possible. Markets work BETTER when there are more participants trading MORE. If you actually decrease trading volumes by some exogenous force, you risk impeding efficiency. Markets do fail, sometimes spectacularly, but reducing their efficiency with excessive regulation and taxes does not make them work better.

    Speculation: markets need speculators. It is the involvement and trading of speculators that keeps markets efficient (at least most of the time). They enable farmers to sell their wheat at the best price, and for young families to get a home loan at the most competitive rate. Without speculators, you don’t have a market. You have to be totally clueless about the way markets work to realise that they are not only necessary, but also not evil.

    GDP as indicator of wealth: GDP is simply the sum total of goods and services produced and distributed in the economy. Yes, there’s more to life than accumulating stuff, but for most people it is one very good measure of well-being. The fact is, we are getting richer and more productive every year, and providing our children with greater and greater economic resources. This isn’t just a measure of plundering the environment – it’s also about being more productive in the way we use those resources, people’s labour and accumulated capital.

    A final point: markets need regulation, and we need governments to provide those goods and services that we can’t provide for ourselves. You won’t get much argument on either of those two points; the question is how much government involvement is required in markets and the economy. My perspective on history suggests that economies with greater market freedom tend to produce greater economic growth and well-being for their populations. Suggestions on the theme of Tobins taxes and curbing “parasitic” and “damaging” speculation are likely to cause greater harm than the supposed evils they address.

  39. I haven’t read Geoff Davies’ book yet, and I’m less deeply-immersed than many of my UQ colleagues in complex systems theory.

    That said, I’ll observe from experience that the importation of new ideas from physics into the social sciences has commonly delivered less than it has initially promised. Examples (all starting with “c”, oddly enough) include catastrophe theory, chaos theory and control theory.

    As far as I know, catastrophe theory, which had a huge vogue in the mid-70s has never been seriously applied in the social sciences. Chaos theory has had limited application. Control theory has become an important tool of analysis in some fields, but not a central part of a new economic paradigm as was originally hoped.

    I can envisage some important applications for complexity theory, but I’m sceptical about claims of a revolutionary impact.

  40. Well said Fyodor. As for Quiggin’s trifecter of “c” words… I’m not sure if most economists were ever convinced of their promise to start with.

    And Jo – there is no useful historical perspective by which we could call the ALP or the coalition “right”. If you placed either party into the 1950s or 1920s or 1870s etc they would both be considered fabian socialists.

    I think there has been a trend towards the “left” in the developed world… and from the perspective of these people the world looks like it’s getting more “right-wing”. Not so.

  41. North Korea’s economic policies (or Cuba’s – the current darling destination of the inner-city left) are probably “intellectually defensible” too. But real world disasters.
    What does an “effective system of foreign exchange management” (2.1.3) mean. As a principle, it tells you nothing. Do they mean they want Treasury to determine currency exchange rates again.
    And imagine PM Bob Brown (hope the kiddies were asleep for that one) announcing the implementation of his policy to “reduce foreign ownership” (2.1.4) – the Whitlam capital flight in hyperdrive.
    And moving along to 2.2.2 – ‘controlling interest rates’ – what does it mean if anything?
    And then we get into the really loopy stuff – perhaps this is a pitch for the AMWU vote – ‘industry planning agreements’ at 2.3.8
    Whoa – is that the Buena Vista Social Club I hear in the distance?
    One that did intrigue me was 4.2.3 “ensure no particular companies in Australia gain undue marketplace influence”. And at 4.3.12 they’re going to bring in tough anti-monopoly laws.
    Sounds good, right? But wait at 4.3.15 they are going to abolish national competition policy. So competition in private but not public sectors.
    Public monopolies good, private monopolies evil. We’ve heard this ‘intellectually defensible’ stuff before.
    Their economic policy is predictable, a grab bag of resentments, with no coherence or any practical application.

  42. Trevor, this kind of invocation of North Korea (or Cuba) calls for a new subclause of Godwin’s Law. I propose:

    “In an Australian policy debate, whenever anyone refers to North Korea (or Cuba) as the exemplar of a policy which was in fact in force under Sir Robert Menzies, they shall be deemed to have lost the debate automatically”

  43. Fyodor wrote:
    Without speculators, you don’t have a market. You have to be totally clueless about the way markets work to realise that they are not only necessary, but also not evil.

    But surely a speculator can still be a necessary evil?

  44. Good point, the Greens policy would take Australia back 50 years.

    And, broadly speaking, the object of free-market reform is to take Australia back 100 years.

    On a related point, I discuss the uselessness of terms like “progressive” here.

  45. kyan,

    I suppose it depends on how you view good and evil. I view speculators as a necessary and positive force for market efficiency, which I see as a good thing. Some people see speculation as akin to gambling and thus, from a moral perspective, inherently evil. I can understand that point of view, but I disagree that speculation and gambling are the same thing.

    Successful speculators profit by pricing assets better than others, not from taking blind risk. Trading in a market is a lot different from playing against a casino (or a slot machine) where the odds are stacked against you. Moreover, the by-product of speculators’ behaviour is a more efficient market, which is a social positive.

  46. “Moreover, the by-product of speculators’ behaviour is a more efficient market, which is a social positive.”

    Do you mean, like, the speculators in dot com stocks? As I recall, at the market peak, the market valuation of a firm that sold air travel tickets on line was greater than the combined market valuations of all the world’s airlines.

    Depends what you mean by an efficient market, I suppose.

  47. It must be pleasant for you, John, to sit back and cast out theoretical models about the Greens economic policy, but what would it mean in practice? An increasingly interventionist Government which distrusts the freedom of individuals to organise amongst themselves and to become wealthy through hard work, and instead insists on forcing their own dubious moral agenda on people through high taxes, making public many formerly private organisations, overregulation, etc, etc, etc. It suits those people fond of bureaucracies, fond of being told what to do, etc, but for folks like me, the idea is hideous. I’ve been on welfare for the past couple of years, and let me tell you, it’s freaking awful to have to rely on a public institution for your very existence, let alone the limited freedoms it lets you have.
    I’d much rather see Australia continue down the privatisation line, thank you very much.

  48. Your update to Godwin’s law is now in the Wikipedia, and until it is edited with spam and/or porn and/or anti-semitic garbage it shall be proclaimed as fact

    Click on the link to see

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