Doing the time warp

Following up on my post about Rachel Nolan’s arguments for privatisation, I ran across this interview with former ALP education minister and attorney general Cameron Dick, generally regarded as a rising star while Labor was in office. Before Nolan, Dick was the only minister willing to go on record with thoughts about Labor’s defeat and he had this to say

he felt the party should have concentrated more on the economy during the election campaign, emphasising the decisions it had made.

‘‘I do think Labor fell into the error, or seriously miscalculated and under-estimated the desire for Queenslanders to hold onto the AAA credit rating,’’ he said.

‘‘And I think the concern Queenslanders had generally about government debt and deficit.

‘‘And I think we were unable to effectively tell our story about investing in infrastructure to keep jobs.

‘‘I mean, that was the strategy we took as part of the global financial crisis.’’

Say what? All of these points would be a great explanation if Labor had lost the 2009 election, after sacrificing the AAA rating to maintain infrastructure and jobs as a strategy in response to the global financial crisis. But, in reality Labor won that election easily. The plunge in the polls came when they announced a drive to restore the AAA rating by selling public assets, mostly infrastructure, and by pushing the panic button with respect to government debt and deficits. All the polls showed that no one except the pollies (and powerful bureaucrats like Doug McTaggart and Leo Hielscher) gave two hoots about the discredited ratings agencies. They hated the asset sales, and dumped the government as a result.

To strengthen my conclusion from last post, while the Newman government has been a disaster, the Labor MPs who supported the sales to the bitter end (all but a handful) brought their fate on themselves, and deserved it. Labor will certainly win lots of seats next time around, and perhaps even win government. I hope they can do a better job selecting candidates whose views reflect those of Labor voters.

34 thoughts on “Doing the time warp

  1. “…in reality Labor won that (2009) election easily.”
    Labor won that election only by bringing it on early. The election outcome was touch & go as it was, had the election been held 3 weeks later, it is possible (likely?) that Labor would have lost.

    “… while the Newman government has been a disaster,…”
    Er.. no, the Newman government has barely put a foot wrong. To date it is the best thing to happen to Qld in years.
    Only if the Macquarie dictionary were to redefine the word “disaster” could the Newman government be described as a disaster.
    It may turn out to be one, but thus far it is pretty much all positive outcomes.

  2. John, instead of complaining can you please offer an alternative argument against privatization? One that is refutable & hence not completely vacuous would be (unexpectedly) preferred. Queensland rail, in the hands of government for 150 yrs, was a failure. For example, John, you often lament overvalued home prices in Brisbane, but, if QLD rail had of improved transport to the city (& hence supply of homes to the city) prices may be closer to an equilibrium value (as opposed to overvalued as you’ve argued).

    John, I don’t disagree with your contention against privatization, but please offer an argument. Instead you become boring!

  3. Almost offtopic
    From todays Ministerial Media Statements
    http://statements.qld.gov.au/Statement/2012/12/3/another-endorsement-for-lnps-fiscal-repair-plan
    “Standard & Poor’s said:

    “We view Queensland’s financial management as a positive rating factor … The new government, following its March 2012 election, is implementing a significant reform program that involves an element of restructuring the shape of the public service and the services it provides. ”
    So S&P sees services being restructured, we the people do, the NGO’s do. How come the government doesn’t admit it is restructuring services provided.
    The original S&P press release is here but unreadable unless you register which I haven’t
    http://www.standardandpoors.com/ratings/ratings-actions/en/us?tabRAL=PR&sectorPR=all&radioPR=-1&sectorRA=all&radioRA=7&alphaRA=Q&sectorNR=all&radioNR=-1&alphaNR=ALL&startRAPrev=0&rangeRAPrev=50&startNRPrev=0&rangeNRPrev=50&start=0&range=50&country=all&jpSectorPR=all&jpSectorRA=&jpSectorNR=&ffFix=yes
    Other sites have the text
    “We consider it likely that this will be successfully achieved, but note that poor execution may ultimately result in a high financial cost should capacity need to be rebuilt over the longer term. ”
    That bit didn’t make it into the Ministerial Media Statement
    Or this bit:
    “The costs attached to such staff reduction will result in an operating deficit in fiscal 2013 and an improvement to an operating margin approaching 10% in fiscal 2015 under our base case. This improvement reflects the new government’s key plank of its fiscal strategy, which targets fiscal balance of the general government sector (calculated as the accrual operating result plus depreciation less capital expenditure). “

  4. “It was wrong when we proposed it and it’s wrong now”: Judy Spence

    At the “Save Our Spit” rally (against the proposed Cruise Ship Terminal) in November 2012.

    “We have stood against development on the Spit for 40 years and will stand against development of the Spit for another 40 years and beyond and beyond and beyond…”

    Then Opposition Leader, Lawrence Springborg a few years ago when we were trying to save our spit from privatisation under the Beattie ALP government.

    Noticing the pattern?

    Lie in Opposition to get into government so that you can lie in government for which you will end up in opposition again, telling lies in order to get back into government…..

    The LNP (with full ALP support) scam as the last item of business for the year – 7pm Thursday night – was to ensure that defectors from the LNP to the KAP could not get any ‘Opposition’ status for funding and resources.

    The talking point was: “Yeah, they weren’t elected to stand for some other party. They can’t suddenly join some new party and claim to have status.”

    When the ‘LNP’ suddenly came into existence mid-term, that was a different matter. Beattie bent the rules because it was obvious that they were the Opposition.

    When the ALP didn’t have enough seats (10) to technically qualify as ‘the Opposition’ with full party status after the 2012 wipe-out, Newman magnaminously declared them to be the official ‘Opposition’ with full perks.

    The pattern is obvious. We have a two party dictatorship in Australia.

  5. I don’t get your logic at all and think Cameron Dick has it right in the specific quote provided doesn’t he? I think you have tried too hard for self-justification on this one!

    ‘‘I do think Labor fell into the error, or seriously miscalculated and under-estimated the desire for Queenslanders to hold onto the AAA credit rating,’’ he said.

    ‘‘And I think the concern Queenslanders had generally about government debt and deficit.

    ‘‘And I think we were unable to effectively tell our story about investing in infrastructure to keep jobs.”

    That doesn’t sound too different from what you have argued also? Which part of this do you not agree with?

  6. Prof. J.Q, says; “All the polls showed that no one except the pollies (and powerful bureaucrats like Doug McTaggart and Leo Hielscher) gave two hoots about the discredited ratings agencies. They hated the asset sales, and dumped the government as a result.”

    Totally right on all counts. That is my reading too. I voted Green and allocated no preferences as I could not bear to give a vote to the ALP or LNP. (Qld. has optional preferential voting.)

    How can Labor be so out of touch? I find it mind-boggling. Maybe some Machieavellian person(s) are rigging the focus group industry. That would be a nifty idea. Oligarchic owner of Focus Group company takes secret commissions from neocons to rig Labor focus groups to give Labor wrong data on public opinion. The cream on the cake is that Labor also pay for the wrong data and Focus Group company makes double profits. If I can think of it others can. 🙂

  7. @Ikonoclast

    “Reach TEL”

    Have LNP connections. Returned relentlessly ‘pro’ LNP poll info before 2012 election. Since (apparently) dumped by LNP. Now working for the union moomin (thanks Clarke & Dawe and Marn Fergsson) and, amazingly, returning anti-LNP poll results.

    Nope, you weren’t first!

  8. http://www.abc.net.au/7.30/content/2012/s3646515.htm

    Further discussion on any political economy topic is pointless if it does not include the absolute imperative to prevent AGW (Anthropogenic Global Warming). When severe climate change or runaway climate change occurs there will be no modern economy worth talking about and eventually no people.

    The entire world economy needs to be mobilised to one end with that end being to stop AGW. This must involve the conversion to 100% renewable energy and 0% fossil fuel energy within 25 to 35 years. Anything less will not save us.

    MMT (Functional Finance) has a role to play as dirigist mobilisation of the entire world economy is mandatory to effect this changeover if we want to survive as a species.

    This existential crisis represents the ultimate proof of the maladaptive nature of corporate, oligarchic capitalism. It is a system not only of vast inhumanity and internal contradictions but also in complete contradiction to the finite nature of the biosphere and ALL ecological values (including the value of human survival).

    A note for the MMT critics. You can call it Keynesian counter-cyclical spending if that makes you feel more comfortable. The important point to note is that the entire working age population can and must be mobilised in an existential emergency. There is no inherent reason why government “sit down” money cannot be augmented and turned into “jump up and help” money.

    It has been pointed out by some economists that the money tied up in the future fund (with some of it mal-invested in tobacco companies) could reduce unemployment in Australia to 0% (or 2% frictional) for 10 years. There is no inherent reason for unemployment to exist when things need doing. Both MMT advocates and economists like Prof. John Quiggin have pointed out methods for fully mobilising all who want and need work. While the theoretical economic underpinnings might differ somewhat, the practical measures advocated are remarkably similar.

    To argue that we could not fully mobilise our economy and workforce in a dirigist manner to meet a natural existential crisis is the same as arguing that the state cannot mobilise to meet a total war crisis. The empirical evidence from world wars is that national governments and the people can mobilise in this fashion to meet an existential crisis. It can be done. Do we have the wisdom and will to do it? The alternative is the extinction of humanity.

  9. Taking property without the consent of the owner is theft.

    Whether or not the property was ‘paid’ for is beside the point. Given that governments are so ineffective at providing public services, only a fraction of what was ‘paid’ for the assets has, in any case, benefited the public. Most of that money also went to private corporations or into the pockets of their government and public service glove puppets.

    The evidence shows that the consent of the owners of the public property that was privatised in recent decades — Telstra, the railways, power generation, ports, banks, insurance companies, retirement income, land, housing, buildings, butcher shops, abattoirs, etc. — was never obtained by those who flogged it off — Keating, Carr, Howard, Beattie, Bligh, Kennett, etc.

  10. To quote Robert Lucas:

    “”Micro-foundations”? We know we can write down internally consistent equilibrium models where people have risk aversion parameters of 200 or where a 20% decrease in the monetary base results in a 20% decline in all prices and has no other effects.

    The “foundations” of these models don’t guarantee empirical success or policy usefulness.
    What is important—and this is straight out of Kydland and Prescott—is that if a model is formulated so that its parameters are economically-interpretable they will have implications for many different data sets. An aggregate theory of consumption and income movements over time should be consistent with cross-section and panel evidence (Friedman and Modigliani). An estimate of risk aversion should fit the wide variety of situations involving uncertainty that we can observe (Mehra and Prescott). Estimates of labor supply should be consistent aggregate employment movements over time as well as cross-section, panel, and lifecycle evidence (Rogerson). This kind of cross-validation (or invalidation!) is only possible with models that have clear underlying economics: micro-foundations, if you like.

    This is bread-and-butter stuff in the hard sciences. You try to estimate a given parameter in as many ways as you can, consistent with the same theory. If you can reduce a 3 orders of magnitude discrepancy to 1 order of magnitude you are making progress. Real science is hard work and you take what you can get.

    “Unusual state”? Is that what we call it when our favorite models don’t deliver what we had hoped? I would call that our usual state.”

    When one of the most prominent (New Classical) economist makes arguments like this, is there any hope that the pro privatisation group to give any evidence that matches the reality rather than blind ideology tribalism? Not only ironically the New Classical model fails the Lucas Critique itself, this statement is an undeserved ridicule to the scientist community most of who are really doing hard science based on evidence.

  11. Professor you are leaving out a critical piece of information when presenting your analysis.

    It wasn’t simply the fact that Bligh announced asset sales, it was that she explicitly campaigned on no asset sales in 2009 and then reneged on this after the election. Voters generally do not reward politicions who lie to them. It was also a government that had been in power for 20 years – politics moves in cycles and 20 years is probably about as long as a government can survive before succumbing to the inevitable.

    I think you are being a bit misleading in claiming that it was simply the policy of asset sales that caused the downfall of the Bligh government.

  12. @Ikonoclast
    Yeah, that’s a possibility but my favourite explanation for the rush to the right is that a significant number of federal and state caucuses and, in particular, the back room boys were recruited by the Liberals when they were university students from the early 1980’s onward.

  13. @ rog. Hehe not only that, they are losing elected members to the cross benches or other parties. It doesn’t get any funnier than that. (Or in their minds, disastrous!)
    Strictly speaking I suppose it isn’t disastrous until it looks like costing them government. Though stranger things can happen, it is likely they’ll hold on, albeit losing a swag of seats.

  14. @Tom
    “An aggregate theory of consumption and income movements over time should be consistent with cross-section and panel evidence (Friedman and Modigliani). An estimate of risk aversion should fit the wide variety of situations involving uncertainty that we can observe (Mehra and Prescott). Estimates of labor supply should be consistent aggregate employment movements over time as well as cross-section, panel, and lifecycle evidence (Rogerson). This kind of cross-validation (or invalidation!) is only possible with models that have clear underlying economics: micro-foundations, if you like”

    Exactly. And for this one needs a general equilibrium model with more than 1 individual and one treats the model as a tool of analysis – a step in the development of knowledge – and not as a biblical revelation.

  15. @Ernestine Gross

    But why make the assumption that is should be a “general equilibrium” model? Why is it assumed that the capitalist system tends to equilibrium? Is it not a dynamic system? Does it not tend to disequilibrium (wild swings and cycles) in its “free” or unmanaged state?

    Surely, it is at least sometimes conscious guidance (state or political direction) which steers the system back to “equilibrium” for want of a better term. In other words, the “political” in political economy.

    Or am I missing the point and does “equilibrium” have a technical meaning in economics different from the standard meaning in common parlance? After all “rational agent” in economics is a technical term which does not mean what the man in the street might think it means.

  16. @Ernestine Gross

    If you start off modelling a general equilibrium model assuming all economic agents have ‘rational expectations’ then there really is no difference having 1 agents or several. This is not argued by me but by DSGE (New Classical) economists (whose names I forgot but it was in a reply to Solow’s criticism).

  17. Can people who reflexively write “government is bad at doing things” please first compare the costs of delivery of say, banking services with social security (social does better), check who laid their phone, water, electricity lines, take a moment to check the relative sizes of government and any private sector organisation, and ask what kind of publicity a business would get if half the board was permanently tasked to find fault? A good number of studies have found that government investment usually has a higher return than private investment (hardly compatible with awful management). I never see this supported except by a priori reasoning (but, no profit motive!!) or anecdote.

  18. @Ikonoclast
    It is obvious to me that equilibrium means stable economy with stable sector proportions. After a shock economy, moves into a new equilibrium after a turbulent stabilization period.
    If you use dynamic models you could see economy moving into a new equilibrium after a policy change, or an external shock such as oil price.
    Biggest problem for equilibrium stability is population change. Equilibrium needs no new entrance into labor market, so without government policy we would have consistent rise in unemployment due to population growth.
    There is an obvious preassure on governments to reduce unemployment, so they do it with policy like unemployment benefits, stimulus spending. The conservatives do not like equilibrium change since that also produce change in elite. That resistance in change of elite members is shown in Nuevo Riche disrespect from old aristocrats. Every change in equilibrium brings new elite members. Aristocracy hates changes within membership, hence conservative push against government interventions in order to preserve ruling elite status quo in economy.
    If equilibrium is fixed, population change wil cause unemployment.

  19. J.Q.

    ALP education minister and attorney general Cameron Dick, generally regarded as a rising star while Labor was in office.

    Considering his answers and known process of privatisation where a lot of public money is trown into companies that are later privatized, isn’t there a question of why and how such politicians as Cameron Dick become a rising star?
    I am from Croatia, neo-liberal paradise, where this process is done without wait time for party in power change and is remarkably visible. Government of Croatia have spent € 14 Bilion in order to consolidate and fix banking sector and received about € 8 Bilion from its privatization.

  20. voting for LNP is an odd way to stop asset sales and austerity etc.,

    the old folly of the Left: the way to win back the centre is to go Left. the old dream is a mass of voter are parking their votes with the LNP pending the arrival of a hard left ALP!

  21. But those ratings agencies are the smartest people in the room, yeah?

    Or not:

    http://www.theglobalmail.org/feature/the-smartest-girls-in-the-room/503/

    As Jagot J found in the Federal Court when busting Standard & Poors:

    “no reasonably competent ratings agency” could have considered any analysis on the basis of a volatility of 15 per cent a proper or reasonable foundation for rating the risk of certain derivatives in question.

    “Justice Jagot found that Standard & Poor’s was negligent, as it owed a duty of care to investors and did not have reasonable grounds for assigning the AAA rating. Most significantly, the court found that Standard & Poor’s could not hide behind its disclaimers which say the AAA rating was merely an opinion.”

    These highly dodgy ratings are what Cameron Dick (and now the Libs too) trash public assets for, and lose elections over.

    Sad, really.

    @John Quiggin

  22. the old folly of the left was to remain pure and in opposition.

    They were perfectly happy to remain in opposition but have pure policies.

    That is why Whitlam fought them and won.

  23. @JB Cairns

    I think you are forgetting some history. The Real Left built this country and many of its great institutions from the ground up after 1901.

    E.G. The Commonwealth Bank

    “The Commonwealth Bank of Australia was founded by the Commonwealth Bank Act in 1911, introduced by the Andrew Fisher Labor Government, which favoured bank nationalisation. In a rare move for the time, the bank was to have both savings and general bank business. The bank was also the first bank in Australia to receive a Federal Government guarantee. The bank’s earliest and most strenuous proponent was the flamboyant American-Australian Labor politician, King O’Malley, and its first Governor was Sir Denison Miller.” – Wikipedia.

    The Commonwealth Bank continued as a commerical bank and a “reserve” bank for most of the period until WW2.

    “In 1931, the bank board came into conflict with the Labor government of James Scullin. The bank’s chairman Robert Gibson refused to expand credit in response to the Great Depression (as had been proposed by Treasurer Edward Theodore) unless the government cut pensions, which Scullin refused to do. Conflict surrounding this issue led to the fall of the government, and to demands from Labor for reform of the bank and more direct government control over monetary policy.”- Wikipedia.

    Here we see Old Labour (The Real Left) trying to execute the correct policy during the depression and being opposed by the “neocons” of the day with only capitalists’ interests at heart.

    “The Commonwealth Bank received almost all central bank powers in emergency legislation passed during World War II and at the end of the war it used this power to begin a dramatic expansion of the economy.”

    Real Labour was a great party and built alongside working people a worthwhile social democracy in Australia. Menzies slowly began to destroy the legacy when he and the Illiberals gained power. The destuction of the Labor party as a force for social democratic good began with Whitlam and was completed by Hawke and Keating. Whitlam and his tradition compromised to gain power. They became like the other side. Thus we now have two right wing major parties in Australia. (A very simplistic and highly compressed summary of course as blog-space does not permit me to write more.)

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