Month: November 2009

Open letter to Doug McTaggart

John Quiggin130 Comments

Update 12/12: This was initially posted here and emailed to QIC on the morning of 10 November. As yet, no response. And, apart from a snark by Andrew Fraser, no public response to my piece in last week’s Fin pointing out that the government’s case for privatisation was entirely spurious

Dear Doug,

As you may be aware, I have been very critical of the “Myths vs Facts” booklet which is, as far as I know, the only document released by the Queensland government to present its case for sales of public assets. In today’s ABC News, you are quoted as supporting the sales and saying

It can curtail its spending on its infrastructure program and let service quality deteriorate, it can raise taxes to pay for the interest bill that’s building up, or it can rearrange its balance sheet – sell those assets which don’t have a particular need to be in Government hands and own assets that should be,

This statement appears to endorse the government’s claims that investment in non-income generating assets can be financed by the sale of income-generating assets, with no need for additional revenue to service the associated debt. In my view, these claims are obviously fallacious, and I would appreciate clarification on a number of questions. I think these questions admit an unequivocal “Yes” or “No” answer, with supporting argument if desired.

1. Do you believe that the “Facts and Myths” booklet presents a fair statement of the arguments for and against privatisation, offering Queenslanders sufficient information on which to make an informed judgement?

2. Do you endorse the statement that ‘Keeping these businesses would cost the Government $12 billion over the next five years. That’s $12 billion spent on new coal trains and new wharves that can«t be spent on roads, schools or hospitals.?

3. Do you regard the statement that “The total return from all five businesses in 2008-09 was approximately $320 million … When the sale process is completed, it is anticipated the Government will save $1.8 billion every year in interest payments” as providing a fair basis for assessing the fiscal costs and benefits of privatisation?

With my regards,
John Quiggin

Note: A previous version was addressed to Bernie Fraser, but Doug McTaggart’s comments appear more directly relevant.

Armistice Day

John Quiggin59 Comments

91 years ago, the world marked the end of the Great War that had consumed tens of millions of lives, mostly those of young men sent to die far from home in a cause that few could explain, then or now. It was a false dawn. The chaos unleashed by the Great War spawned more and greater wars, revolutions and genocides that continued through most of the 20th century and still continue, in places, even to this day.

I’ve written in the past about the futility of war, and that is the most important thought for this day of remembrance. But there is something else that demands more attention than it has received. The cataclysm of the Great War brought forth monsters like Hitler and Stalin, who killed millions. But the War itself, with the millions and tens of millions of lives it took, directly and indirectly, was loosed on the world by political leaders more notable for mediocrity than for monstrous greatness. 

The names of Asquith,  Bethmann-Hollweg, Berchtold and Poincare are barely remembered, yet on any reasonable accounting they belong among the great criminals of history. Not only did they create the conditions for war, and rush (eagerly in most cases) into it, they carried on even as the death toll mounted into the hundreds of thousands and beyond. Even as the original grounds for war became utterly irrelevant, they continued to intrigue for trivial postwar benefits, carving up imagined conquests among themselves. Eventually, most were displaced by leaders who were marginally less mediocre, and more determined to win at all costs (Lloyd George, Clemenceau, Ludendorff, Hindenburg and others).

How could such ordinary, seemingly decent, men pursue such an evil and self-destructive course, and yet, in most cases, attract and retain the support of their people? I find it hard to understand. 

Posted via email from John’s posterous

Both barrels

John Quiggin65 Comments
That’s what Kevin Rudd gave Australian delusionists in this speech to the Lowy Institute, . I agree with him that there is no point in being polite about this. Those who reject action to address climate change are doing so on the basis of lies propounded by tobacco hacks like Steve Milloy, bought-and-paid-for thinktanks like the IPA, loony world-government conspiracy theorists like Lord Monckton, intellectual cardsharps like Bjorn Lomborg and reflexive contrarians like Richard (‘the dangers of smoking have been much exaggerated’) Lindzen. In years following this debate I have seen no-one (literally and without exception) on the delusionist side separate themselves from these hacks and cranks and present a coherent case. That’s because it is impossible for an intelligent person to reach  delusionist conclusions on this issue while retaining their intellectual honesty.

All that said (and I’ve said it many times before) I was surprised to see Rudd, who is normally pretty cautious, going all out like this. My immediate conclusion is that he doesn’t expect the Liberals to support an amended ETS and is preparing the ground for a double dissolution.

Out of the mainstream

John Quiggin32 Comments

I managed to get something of a response from the Queensland Treasurer, Andrew Fraser to my critique of the case for privatisation put forward by the government. Fraser says

The global financial crisis has ripped a $15 billion hole in the state budget. There is no evidence to suggest the state is about to see that hole repaired despite the marginal turnaround in the economy.

“The fact is, Queensland will be better off.

“The myth is that John Quiggin represents the view of mainstream economists.

“The Government is not undertaking this process for the fun of it.”

A couple of responses.

First, the sale of $15 billion of assets does not in any way resolve a $15 billion shortfall in income (the “hole” in Fraser’s statement). The sale value of $15 billion (assuming it’s realised) represents the private sector valuation of the earnings from the assets. Perhaps (though this hasn’t been shown) the value in continued public ownership is less than $15 billion, but it can’t be much less. The coincidence between the two numbers is, intentionally or otherwise, deceptive.

Second, if Fraser is right, it ought to be easy to find mainstream economists to agree that his comparison between last years dividends to general government and the $1.8 billion interest saved (mostly by the GOCs) themselves if the assets are sold and $12 billion of investment is foregone. Any takers?

Finally, it’s worth asking why the government is doing this. My guess is that they place much more weight than they should on the AAA rating, and that Treasury is still pursuing the ideological goals of the 1980s and 1990s.

Fixing Queensland’s Budget

John Quiggin19 Comments

I’ve been very critical of the Queensland government’s proposed asset sales, which, I think, will worsen the fiscal position of the state in the long term. But, the combination of economic downturn associated with the global recession and continuing needs for infrastructure expenditure mean that the government is right to point out the problems and to state the need for politically unpalatable responses. I don’t have the resources of the Treasury, which means, among other things, that I can’t tell how big the problem is now, given that there has been a substantial recovery since the budget in June. So, I’ll just list some possible responses, some of which can be undertaken unilaterally, others requiring co-operation among the states, and, last but not least, action required from the Commonwealth government.

Read More »