Month: September 2010

A slow motion disaster (update)

John Quiggin24 Comments

The floods in Pakistan never produced a dramatic moment like the Boxing Day tsunami. And one flood looks much like another on TV, so it’s hard to comprehend the scale of this disaster. But it is truly one of the worst in recent history, worse even the tsunami in terms of the destruction it has wrought, though not for immediate loss of life. There’s some more information here from Oxfam.

James Farrell ran an election-tipping exercise at Club Troppo, which raised $1150 ($250 from me). I haven’t thought of a gimmick (suggestions appreciated) but I hope we can raise at least as much here. Please give to your favorite charity and record it in the comments box. If you’re shy, email me with the details and I’ll add you to the list as “an anonymous reader”

I’m moving this back up to the top. The disaster is still going on, and help is urgently needed

One last chance

John Quiggin15 Comments

The decision by Queensland coal companies to drop their bid for the track assets of Queensland Rail hands the state’s Labor party one last chance to hang on to office. There is still time to dump the economically silly and politically suicidal idea of a public float for QR, either because the Premier and Treasurer suddenly announce that circumstances have changed (as they did, going the other way, immediately after the last election) or because the Caucus decides that taking a chance on a new leadership team is preferable to the certain oblivion to which Bligh and Fraser are leading them.

According to this poll report, Labor’s primary vote has fallen to a horrendous 29 per cent. Looking at the dismal performance of Federal Labor in Queensland at the recent election, in which the LNP campaigned against Bligh rather than Gillard, there’s no reason to doubt that this would be translated into reality unless something changes. Certainly, on current policies, I’ll be preferencing the LNP ahead of Labor.

The sandpit

John Quiggin21 Comments

I’ve been dissatisfied with the way comments threads have been going for a while, in particular because I feel that they rapidly become dialogues (or competing monologues) involving a small group of regulars. That discourages new commenters from joining in. So, I’m establishing this sandpit post, as a venue for any lengthy discussions that arise, particularly if they are off the original topic. The comments policy regarding civil discussion still applies, but I’ll try to be reasonably lighthanded.

So, my request is that commenters avoid lengthy interchanges on the main comments threads, and take these to the sandpit, where they can debate to their heart’s content. I’ll issue requests along these lines, if necessary, but I’d rather not. I may also impose, or reimpose one comment/thread/day limits on individual commenters to keep things under control.

With that said, fire away

Coalitions

John Quiggin58 Comments

I was too clever by half with my prediction in 2007 that “the Liberal Party will never win another federal election”, but it still looks as if I might be right. My point of course, was not that Labor would be in forever[1], but that the Liberals and Nationals would be forced to merge before they could get back in. The merger has taken place in Queensland, with the result that the current Coalition includes only six members elected as Nationals. The future for Lib-Nat coalitions at state level doesn’t look much better. On current trends, NSW Labor will be wiped out so thoroughly that the Liberals will have a majority in their own right, and anything they give to the Nats will be an exercise in charity. It’s possible that a Lib-Nat coalition could get in at the forthcoming Victorian election, but unlikely, which brings me to a more interesting point.

The Labor-Green-independent coalition that has emerged at the national level is still being treated by the Canberra pundits as an aberration, but it’s becoming the norm for Labor. Labor governments depend on Green support in the ACT and Tasmania. The NT government relies on an independent and the same has been true in the past in SA, Queensland and Victoria. On current indications, the next round of state elections should see Labor beaten in NSW and Queensland (at least if they stick with Anna Bligh and privatisation). Victoria is the state where Green support is strongest, and any remotely fair electoral system would see Labor forced into coalition with the Greens. Whether the Green can actually win enough Lower House seats to bring this about remains to be seen, but Adam Bandt’s win at the national level has certainly brought this into the realm of the possible.

So, it’s entirely possible that, in a decade or two, when we talk about “the coalition”, we’ll be referring to Labor-Green, not Lib-Nat.

fn1. That said, I never anticipated anything like the fiasco by which Labor managed to turn the unassailable position they held in December 09 into the hair’s-breadth margin they nnow hold.

The miracle of democracy, Part IV

John Quiggin94 Comments

It’s finally over, and the outcome (if it holds) looks like the best possible. If it’s true that a country gets the government it deserves, we must all have been doing a lot of good deeds lately. Despite the efforts of both major parties to force us into a choice between focus-grouped piles of bribes and banality, we appear set for parliamentary reform, and a serious approach to climate change, tax reform and broadband policy[1].

fn1. Trying to watch the Windsor-Oakeshott press conference online was an object lesson in the inadequacies of our existing networks.

One percenters — Crooked Timber

John Quiggin2 Comments

In my post on EU-US convergence, I found that the US was similar to the leading eurozone countries in both productivity (output per hour worked) and employment-population ratio, so that the difference in income per person is mostly explained (in some cases more than explained) by differences in hours worked per employment person. I didn’t take the distribution of income into account, since the data sources I was using there did not provide anything useful. But commenter Detlef found a blog post by Maximilian Hagemes at the World Bank site which links to a useful paper by Piketty and Alvaredo on cross-country comparisons of income concentration. For most eurozone countries, they show that the top 1 per cent of households gets about 8 per cent of total income (the presentation is graphical, but in any case, there is no point in going for spurious precision with numbers like this). For the US, the most recent data gives an 18 per cent share. So, the share of national income going to the remaining 99 per cent is about 10 per cent smaller in the US than in the eurozone.

There are a couple of ways of looking at this.

Update I was too subtle for my own good in the original version, putting up the idea that the share going to the rich could be viewed as a kind of tax, and leaving it to readers to draw the conclusion that (99 per cent of) Europeans get better returns from the money they pay to governments than do their American counterparts from a system where a large share of total income goes to the top 1 per cent. In the update, I’ve spelt this out.

The data on the top 1 per cent share I used was out of date. The figure for 2007 was 23.5 per cent. At this level, the share of US income that flows as disposable income to the bottom 99 per cent is probably below that of most European countries (the exact outcome depends on how much tax is paid by the top 1 per cent). The recession probably took a bit more from the very rich, but they are already bouncing back, at least on Wall Street.

The simplest is to adjust the comparisons given in my previous post by excluding the income of the top 1 per cent. There we saw that income per hour worked in the US is about 15 per cent higher than for the EU as a whole. But, given the much larger share going to the top 1 per cent, most of this difference disappears for the remaining 99 per cent, taken as a group. Within that group, Americans in the the top decile or top quintile (but not the top 1 per cent) do much better in relative terms than Europeans, while those in the remaining 80 or 90 per cent do relatively worse, as Piketty and Alvaredo show. So, in terms of income per hour worked, most Americans are probably a bit worse off than their counterparts in the EU as a whole.

But of course, the EU is a very disparate place, as is the US. France, Germany, Belgium and the Netherlands are all above 90 per cent of the US level in terms of total income per hour worked, and therefore ahead of the US as a whole once the top 1 per cent is excluded. We can then say that (excluding the 1 per centers) income per hour worked in the US is significantly below that in the leading eurozone countries. The gap is made up by longer hours of work and (to a smaller extent) by higher female participation in market employment[1]

There’s another way of thinking about this that I find a bit more interesting. In some sense, the top one-percenters are competing with the state for the job of running the economy. If they aren’t burdened down with high taxes and income redistribution, so the free-market case goes, they will do a much better job in promoting innovation, better resource allocation and so on, to the benefit of all. And through philanthropy, the top 1 per cent can help to provide public goods, health services and so on that would, in a social-democratic system be the responsibility of the state.

So, the income share accruing to the top 1 per cent may be seen as an alternative to paying more of national income in tax revenue for governments. It makes sense then, to combine the two, to see how much of total market income is being turned over to those who run the economy, fund public services and so on. Conversely, post-tax market income, excluding the proportion going to the top 1 per cent, is what is left over for private expenditure.

As with the earlier post, the answer is that, on this combined measure, the EU and US are fairly similar. Wikipedia cites Heritage estimates that the US tax revenue share of GDP is 28 per cent compared to 40 per cent for the Netherlands, 41 per cent for Germany and 46 per cent for France. Simply adding in the proportion going to the very rich (a very crude way of doing the adjustment, but this is a blog post after all) brings the US share up to 46 per cent, while the other three come out at 48, 49 and 54 per cent respectively

Within the inevitable margin of error, we can reaffirm the conclusion from the earlier post that there is no significant difference between the US and the eurozone leaders on output per hour worked or on employment population ratios. The big differences between the two are
(a) Employed Americans work longer hours (offset by the fact that Europeans do more household work)
(b) In both the EU and US, ordinary income earners receive about half of total market income as private disposable income. In the US, however, a much larger proportion of the other half goes to those in the top 1 per cent, while in the EU it is mostly tax revenue. It seems clear to me that that the Europeans get a better return for their money

fn1. Conversely, other parts of the EU are behind. And while it’s difficult to get really accurate state-level or regional figures for the US, it’s obvious that you can go the other way, and point to US states that are better off or worse off than the EU as a whole or the leading eurozone countries.

via crookedtimber.org

Posted via email from John’s posterous

The miracle of democracy, Part III

John Quiggin54 Comments

By the end of election night, it seemed pretty obvious that we were in for an extended period of bargaining before a government could be formed. That seemed unlikely to be an edifying process – the usual expectation would be for a massive pork-barrel auction, throwing roads, dams and other goodies at the electorates whose members were lucky enough to be pivotal. Amazingly, so far at least, the reverse has happened. In its deals with the Greens and Andrew Wilkie, Labor has been forced to dump stupid focus-group policies (like the citizens jury), take on powerful interests (like the gambling lobby) and commit to a range of process improvements. The remaining independents (particularly Oakeshott) have made similar noises, so it’s possible to hope for a government much better than either of the miserable alternatives that appeared to be on offer a couple of weeks ago.

Of course, things can still go wrong, and recent experience suggests they probably will. But, at least for one weekend, there’s a bit of hope in the air.