Collapsing case for privatisation

The Bligh government’s case for asset sales rests in part on a supposed fiscal emergency arising from the global financial crisis and in part from the general ideological claim that putting infrastructure assets into the hands of the private sector will promote economic efficiency. Both parts of the case have taken a knock in the last couple of days. A study by Access Economics confirms the findings of the union-commissioned study by Bob Walker and Betty Con Walker (derided by the government and state Treasury at the time) that the budget position is much stronger than has been admitted so far.

On the second point, Liberal Lord Mayor of Brisbane Campbell Newman has conceded that the days of private toll roads are probably over. As I’ve been saying for years (getting on for decades now) these projects always involve a social loss. In the 1990s, it was almost always the public that took the loss while private operators made out like bandits. In the easy money environment of the 2000s, private investors made silly investments, and often lost the lot. Now that everyone has wised up, there will be no more deals like this.

By far the best solution would be for the state government to buy back all the toll roads, and replace ad hoc tolls with a coherent system of congestion pricing. The Bligh government instead, plans to sell off its own toll roads. As for congestion pricing, Anna Bligh has made her view pretty clear “not while this government is in office”. In reply to which I can only quote Men in Black – “Your offer is acceptable”.

H/Ts Darren Godwell, Tom Miller, Nancy Wallace

Abbott abandons half the population

Tony Abbott’s latest move, floating the idea that people under 30 should be denied access to the dole, is clear evidence of why he should never be Prime Minister. For that matter, it’s an illustration of the weaknesses that made him a second-rate (at best) minister under Howard.

The political calculation is obvious, although the arithmetic looks dubious to me. The idea is to appeal to the anti-youth prejudices of the older voters who form the core of Liberal party support. But older voters are hard to shift in general, and the kind of people who would like this proposal are mostly rusted-on Liberals, though they might once have been One Nation types. By contrast, Abbott’s overt appeal to bigotry against the young will surely cost the Libs votes among this group at a time when their attitudes are still being formed

Coming to the policy merits, Abbott’s supporting “reasoning” if such a term can be justified is that this measure will encourage people to move to “areas where there are skills shortages, such as in the Western Australian mining sector.” We are talking here about the age group where most people start forming long-term relationships and having children (median age for first child is 29, and appears to be declining at the moment). And, even if they are temporarily unemployed, most people in this age group have made career choices that are unlikely to be consistent with a flit to WA to work in the mines. And, even with relatively strong conditions, I doubt that the demand for labor in the mines extends say, to a cry for hairdressers, or bartenders or shop assistants, to pick a few occupations at random[1].

This idea seems too silly even to come from a focus group. In fact, it seems about on a par with the ideas I come up with after a triathlon and a few glasses of muscle relaxant. I usually manage to refrain from communicating these marvellous ideas on the blog, let alone announcing them to the public at large.

fn1. ABS used to publish data on unemployment by usual occupation, but they seem to have stopped.

(H/T Nancy Wallace).

Update: More from Kim at LP

Unit pricing

When we were at the supermarket the other day, I noticed, and made use, of some helpful new information for buying toilet paper. Next to each of the various offerings was the price per sheet. Since the brand was the same, it was easy to identify and buy, the cheapest offering, rather than doing a complex estimation and calculation.

I vaguely assumed I was enjoying the benefits of the market for corporate control, as the supermarket, formerly a small Coles outlet had been taken over by Foodworks. But this article by Ross Gittins informs me that a requirement for unit pricing has been introduced by the Rudd government. Gittins is sceptical, saying:

It’s a nice idea – the kind that appeals to economists – but I doubt it will do much good. It assumes shoppers are a lot more diligent and coldly calculating – a lot more ”rational” – than most of us are.

Since I’m an economist, my delight in this innovation is consistent with the first part of Gittins’ claim, but as a shopper I disagree with the second part. The great thing with this is that I don’t have to be diligent or calculating – the calculation has been done for me. Certainly, I’m benefiting from this without even knowing there was a policy, whereas I never even looked at the unlamented Grocery Watch site.

Hope (crosspost from CT)

I posted this at Crooked Timber. I plan something a little more specific to Australia when I get some time

One reason that many on the left of politics preferred Obama to Hillary Clinton is that his rhetoric, at his best, promised something more than incremental reform, a promise summed up by slogans like “Change we can believe in” and “Yes we can”.

Given the political realities of the US, and the obvious fact that Obama is instinctively a pragmatist and centrist, it was never likely that this would translate into radical policy action in the short run. Still, it seemed at least possible that an Obama presidency would begin a renewal of a progressive project of transformation, setting out the goal of a better world. One respect in which this hope has been fulfilled, for me, is in Obama’s articulation of the goal of a world without nuclear weapons, and in the small but positive steps he’s taken in this direction.

I plan to talk about the specific issue of nuclear disarmament in more detail in a later post. The bigger point for me is that after decades in which the left has been on the defensive, it’s time for a politics of hope. We need hope to mobilise a positive alternative to the fear, anger and tribalism on offer from the right. Centrist pragmatism provides nothing to match the enthusiasm that can be driven by fear and anger, as we have seen.

What the politics of hope means, to me, is the need to start setting out goals that are far more ambitious than the incremental changes debated in day-to-day electoral politics. They ought to be feasible in the sense that they are technically achievable and don’t require radical changes in existing social structures, even if they may set the scene for such changes in the future. On the other hand, they ought not to be constrained by consideration of what is electorally saleable right now.

Over the fold, I’ve set out some thoughts I have for goals of this kind. At this stage, I’m not looking for debate on the specifics of these goals or the feasibility of achieving them (again, more on this later). Rather, I’d welcome both discussion of the general issue of what kind of politics the left needs to be pursuing, and suggestions of other goals we ought to be pursuing

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Straws in the wind

Serious action to reduce CO2 emissions has been stymied in Australia and the US for the moment. So, to get an idea of what is likely to be feasible, and on what timescale, we have to look at Europe, which has both a working Emissions Trading Scheme and a bunch of special incentives to promote renewable energy. At least on the latter point, there is some cause for optimism.

Here’s a graph of new installed capacity and decommissioned capacity for 2009 from The European Wind Energy Association (link here was broken and is now fixed-JQ). The results pretty much speak for themselves, but I’ll add a couple of observations.

The fact that solar PV was a major source of new installed capacity surprised me. Until now, solar (along with fusion) has been one of the contenders for the tag “the energy source of the future and always will be”. But, on current trends, solar is set to be a major contributor in the future. Of course, the outcome so far has been the result of large subsidies, such as feed-in tariffs. But, even as the subsidies are cut back the volume of installations continues to grow. Before long, solar could be competitive with coal on the basis of the ETS and peak-load pricing, without the need for an extra “renewable” subsidy. Gas is likely to be cheapest for some time to come, but there are sound reasons for not wanting to depend entirely on an energy source that can be cut off at short notice.

The other point is that for coal (and also, less surprisingly for nuclear) installed capacity showed a net decline. The combination of the ETS and strong political opposition has made the construction of new coal-fired power stations in Europe almost impossible, at least without a commitment to CCS or some other sweetener.

On this issue, where Europe has led, the rest of the world will follow sooner or later. The big question is whether it will be too late. The good outcomes we are seeing in Europe suggest that, even with a few years’ slippage, big reductions in emissions will be possible in time to stabilise global climate.