Enough of these zombie ideas: let’s be bold

That’s the title of my last piece in the Fin (Thursday before last), which was about the zombie push for productivity (code for working harder) and the failure to pursue the genuine productivity gains that can be achieved through improvements in education, and particularly better education for kids from lower-income families. Ross Gittins made a similar argument, with some nice touches a few days later in the SMH. I particularly liked his point that the “productivity agenda” is essentially about making life easier for bosses.

Enough of these zombie ideas: let’s be bold

Labor’s leadership struggle, reminiscent of the Howard-Peacock battles of the 1980s, has raised justified complaints that personality conflicts have obscured the need for a new reform agenda. Indeed, neither of the contenders for the Prime Ministership offered much beyond the consolidation of measures dating back to the government’s first term. On the other side of politics, Tony Abbott offers nothing more than opportunistic populism and appeals to the politics of fear.

Sadly, however, the advocates of reform have little more to offer than our current leaders. Rather, they are pushing an agenda that also harks back to the 1980s: the tired old package of microeconomic reform, workplace reorganization and productivity growth. The benefits of this package, oversold at the time, have long since been exhausted.

Even back in the 1980s, careful estimates suggested likely benefits amounting to only a few per cent of national income.

In respnse, the advocates of microeconomic reform invented ‘dynamic productivity gains’ that would supposedly be unleashed by reform. They seized on methods of estimating productivity growth that appeared, for a few years in the mid-1990s, to reveal a ‘productivity miracle’ unparalleled at any time in our history.

In reality, the apparent increase in productivity arose from the increase in the pace and intensity of work produced by the combination of microeconomic reform and the adverse labour market conditions that followed the ‘recession we had to have’. These increases in effort weren’t sustainable, and as Herbert Stein famously observed, a trend that can’t be sustained won’t be.

The speedup in the pace of work, and the resulting problem of work/life balance were described by John Howard as a ‘barbecue stopper’.The imbalance between work and life was apparent to everyone in Australia except the economists looking at the productivity statistics. Although work intensity can’t be measured directly, we can look at related measures such as the number of people working extremely long hours and the proportion of workers compensation claims citing stress. All these measures rose during the spurious productivity miracle of the 1990s, and fell back again during the 2000s. As a result, measured productivity growth slowed to a crawl in the 2000s, even as good macroeconomic performance and favorable terms of trade allowed steady increases in living standards.

The way ordinary Australians understand the push for productivity was underscored by the outpouring of anger against WorkChoices, and the lack of any support for its revival. As has been shown on numerous occasions, Australians understand that ‘workplace reform’ and ‘productivity’ are codewords for ‘work harder and faster, with less autonomy’. Yet, presented with a vacuum at the level of political leadership, the advocates of refrom can come up with nothing better than another attempt to reanimate these

Meanwhile, reforms that could produce genuine and sustainable improvements in productivity have languished. Rudd’s ‘Education Revolution’ is barely a memory. Julia Gillard, who once made much of her passion for education, dropped the phrase the moment she left the portfolio behind. Throughout her period as Minister, Gillard pointed to the forthcoming Gonski review of school funding as a reason not to take any substantive new steps in this area.

Gonski’s committee finally reported last week. It made a powerful case, on both equity and efficiency grounds, for a substantial increase in funding to the most disadvantaged schools, almost all of which are in the public sector. If we are to become a more productive nation, we cannot afford to lose a quarter or more of our young people to inadequate education and social exclusion.

The alternative can already be seen in the United States, where what was once the land of opportunity is now characterized by the highest levels of inherited inequality in the developed world, largely because of unequal access to education.

Gonski’s report was dead on arrival. Responding to the report, Gillard made it clear that the government’s need to achieve a surplus by 2012-12 trumped any need for long term investment in our future.

Naturally, the advocates of ‘bold reform’ are nowhere to be seen in this fight. The only concern of free-market thinktanks like the Centre for Independent Studies is to protect the class interests of wealthy private schools ‘Gonski: less for private schools, AFR 21/2/12’.

This is, indeed, a time for bold new ideas about reform. What we are getting instead is personality politics and zombie economics.

85 thoughts on “Enough of these zombie ideas: let’s be bold

  1. @Ikonoklast

    I don’t resile from my position that dual working parents can still look after children properly if they are organised and concientious.

    No-one could disagree with that position. However, shit does happen and it is not always within the control of the parents or the other villagers. The obvious solution is for the school to provide meals, but that would cost money and impede the ever faster progress towards a state that collects no revenue at all.

    I’ve always found it very strange that the US seems to have had this socialistic system of schools feeding kids for its entire history. A surprising number do, including Finland. In France the lunchbreak is long enough to go home if you want and if you eat at school the long lunchbreak is a chance to inculcate the French obsession with good food.

  2. @Ernestine Gross

    I’m not rejecting cost and entry as a problem, from what I’ve said “The problem in the education system is not only entry and cost to study” how did I reject them being problems? If that statement meant that I was rejecting them being a problem of the education system then let me apologise; I meant to say they are problems but there are other major problems.

    What I’m implying is that even if there can be more people going to university, the society won’t benefit a thing from them being teached neoclassical economic theories or ‘facts’ that are not actually backed by evidence and reality; but of course subjects such as engineering, robotics, IT or art and most others of subjects do benefit the society.

    If you want some example all you need to do is pick up any university economic textbook and read any chapter you’ll understand what I meant. After that then think about how students feel if they knew neoclassical economic theories are nothing better than junk and had to study it through their whole bachelor course.

  3. Speaking of Fin columns, who the hell is Jennifer Hewitt and why does she get the whole of Page 2 to herself every day now?

    The Fin has gone noticeably downhill since Stutch took over and decided to turn it into Oz-Lite. I’ve cancelled my subscription.

  4. @Tom

    Quite right, my first sentence at 25 is muddled. Let me correct it. In reply to your statement: “The problem in the education system is not only entry and cost to study.” I intended to make clear that I did not say entry and cost are the only problem and I wanted to know who asserted that entry and cost are the only problems.

    I further noted it is interesting that, in contrast to your opinion about the education system, you seem to be quite sure that the only solution to the two major problems you identified with ASIC concern entry conditions (to attract higher standard professionals) and costs.

    Perhaps a bit of detail is called for.

    What evidence do you have that “in company law subjects that studies the Corporations Act there is an appearance that the corporations are ‘heavily regulated’ under ASIC;” ?
    What evidence do you have that”, however every accountant knows that ASIC is a ‘fake watch puppy’ that is set up to blind the eyes of the public.”
    What evidence do you have that ‘every accountant’ knows what you claim?
    What evidence do you have that the aggregated information of ‘the public’ does not exceed the knowledge of every accountant?
    What evidence to you have that “They (ASIC) do nothing to regulate the business operations but ‘may’ only act after the business has collapsed or years after significant breaches.” in all cases?
    You ask: “The only way to fix this?” I don’t know because I have no evidence that anything needs fixing.
    You say in reply to your question: “to set up the head office in an area that can attract higher standard professionals”
    What evidence is there that ‘higher standard professionals’ actually exist in any area?
    Further in reply to your own question you say: “and contribute more fundings to ASIC through higher taxes (a policy impossible to sell to the public with the current media)”
    What evidence do you have that more funding to ASIC is solving anything?
    What evidence do you have that it is impossible to ‘sell to the public’ higher taxes with the current media?

    You have presented me with a theory. I leave it up to you to adjudge the quality of your theory.

  5. @Ernestine Gross

    What are you saying? If someone says liberation is not a problem. How does this tie liberation into other things that are problems?

    Presumably if someone uses the adjective ‘corporate’ before capitalism they have already made the distinction you call for.

    Plenty of people have had successful businesses, it is the underlying capitalist economy that is unsuccessful. Plenty of people have failed businesses.

  6. @Ernestine Gross

    Ernestine, I am replying briefly to all your posts. I don’t think it grandiose for a tertiary educated economist to have some opinions on how the overall economy should be run. 🙂 In fact, I would be worried if she or he did not have some opinions in that area. It’s probably grandiose for me (a dilettante autodidact in economic matters) to have such opinions.

    I find I agree with most of your points, which might surprise you. I think we definitely agree on reining in corporate power. Also we agree in principle on limiting and controlling financial instruments, particularly speculative ones. I don’t know enough to have an opinion on whether you particular suggestions would work. Again, we agree on the importance of education and funding it properly. A blog I read recently suggested that California’s penal system expenditure (going up on the graph) has now crossed its educational expenditure (going down on the graph). If true this is most disturbing and a clear diagnostic for what is wrong with the USA.

    With respect to printing money, neither I nor MMT suggest that a sovereign currency can be printed ad infinitum without inflation and without regard to the economy of real goods and services. The difference is one of emphasis which you seem not to perceive or else perceive differently to me. MMT suggests that the real economy is the object not the budget outcome. MMT suggests that targeting a budget outcome for its own sake and regardless of the state of the real economy is not sensible. MMT suggests budget deficits where there is a lack of capacity utilisation (unemployment etc) up to the point where unemployment (apart from the frictional) is solved. The proviso would be that the currency is not debased by excess inflation in this process.

    Concomittent with this process would be better control of the issue of debt money by the banks. It seems to me axiomatic that excess bank issued debt money also creates inflation. Control of this source of inflation would widen the scope for more fiat money creation without inflation pressure. The economic difference is that the government can apply the new fiat monies to educational spending (for example) rather than bank issued debt money fuelling (as it does) asset price inflation like housing prices. This would advantageously re-jig the economy IMO.

    Finally, I did not tie the liberation of women into the workforce to neoliberalism. That is a complete misreading. (Maybe I did not express myself well). The liberation of women is very much an anti-neoliberal movement. I did say that neoliberalism economically hijacked the liberation of women by underpaying working women (and working men to a lesser degree) and taking the opportunity to push up overall debt of 2 worker households.

  7. @Ernestine Gross

    In regards to ASIC, it’s quite difficult to find evidence about all those statements. E.g. I’ll be surprised if there is a data on how many percentage of the accountant profession think ASIC is useless. However with that being said, it is a generally regarded in accounting profession that they are useless because they fail a lot of their roles in the ASIC Act, and even when cases are reported that reporting entities breached accounting standards there is not a great chance of them proceed with investigation unless after the company collapses.

    ASIC’s headquarter is based in Morwell in Victoria where the town has little attraction to professionals, e.g lack of entertainment. For Example say if you are an accountant would you rather work in the major city CBDs or in towns that are more boring than Canberra? It is one of my thoughts on the matter although it is true I have little evidence to back that claim.

    Second with regards to more funding might improve the performance of ASIC, anybody works, know or involved in law cases should understand how much they cost. Especially if the law case might be some of the largest companies in the economy. With the high cost of legal fees, investigation cost etc. it is quite risky for ASIC to investigate any claim because they might not be able to gather enough evidence or enough fundings to proceed with pursuit of legal action. It is because of so that “I believe” is the reason why they pursuit action after company has collapsed or cause major problems most of the time (if not always).

    With the final statement about higher taxes will be impossible to sell to the public, do I even need to prove it? I mean anyone lives in Australia with a grasp of reality knows that carbon price is not an easy sale, even if it’s not even half the GST. The carbon price and MRRT has been so damaging on the labour party as to swing voters if anyone believes that they are easily sold to the public they are not being realistic. Now do you believe that an increase in company tax or income tax etc will be easier to sell than MRRT and carbon price?

  8. As an addendum, I would say that money is a tool. The real object as I said is the functioning of the real economy, the delivery of real goods and real services for the needs of real people. Deficit monies and bank debt monies in particular are tools of leverage (like a crowbar to make a simple analogy). When using a tool of leverage one exerts the maximum leverage necessary up to the point that does the job or up to the point that would bend or break the tool. Crowbars are heavy but of soft steel so they bend rather than break. Moderate bending is mendable.

    In a basically healthy economy, currency demontrates this quality too in relation to inflation. It is malleable rather than brittle. The currency bends (moderate inflation) before it breaks (hyperinflation). Thus we can push the deficit lever until it bends (moderate acceptable inflation). If the contaminating alloy of bank debt money is reduced, the deficit lever is stronger and can do more work without breaking and creating hyperinflation.

  9. Look, the only way that Australia can improve the functioning of its economy is if we stop educating all these kids that are never going to need an education anyway. What we need is cheap labour for our factories and coal mines so that we can compete with China again. To get that we have to stop educating all these kids as its costing a fortune and reducing our competitiveness, and then they want all this stuff which is causing us a balance of trade issue. If we import less and export more, everything will be great for those willing to provide leadership by extracting maximum efficiency from their workforce – and the economy will be working the way the economists want it again. + we won’t have to worry about those workers living so long and needing pensions to boot. Get all these kids off the internet and into real work, I say.

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