89 thoughts on “Weekend reflections

  1. In this weekend’s AFR, Tony Abbott has an article. In which he states:

    “… should the Coalition win the election. Along with scrapping the carbon tax and the mining tax, stopping the boats and gettiiig the budget back into the black; along with boosting our competitiveness by cutting red tape and slimming the bureaucracy; along with building the infrastructure that a first world economy in the 21st century needs, fostering community-controlled public schools and hospitals and turning a passive welfare system into a more active one, and along with giving our foreign policy a Jakarta rather than a Geneva focus, I want a new engagement with Aboriginal people to be one of the hallmarks of a Coalition government – and this will start from day one.”

    So, can we assume this implies:
    1. Remove Carbon Price
    2. Remove Mining Super Profits Tax
    3. Attack Asylum Seekers
    4. Fiscal Austerity
    5. Corporate Responsibility Compliance reduction
    6. Public Service reduction
    7. “Infrastructure” Building
    8. Community Controlled Public Schools
    9. Community Controlled Public Hospitals
    10. “Active” Welfare System
    11. Jakarta style Foreign Policy
    12. Aboriginal “Engagement”

    In particular, his claims of Fiscal Austerity and Public Service reduction seem very naive as methods for maintaining a deeply prosperous economy (i.e. long-term widespread prosperity and wellbeing). Why is he not able to see alternative and intelligent methods???

  2. Professor Quiggin has closed the discussion on sandpit, before I had a chance to respond to Mel’s tirade against me and my web-site, candobetter. I think this is unfortunate, both for me and other site visitors. Those wishing to read my response to Mel, including links to other resources including a very popular article, which includes video broadcasts of a recent public meeting of Syrian Australians for Peace in Syria at the Melbourne Unitarian Church can read it here.

  3. @malthusista

    If I waited until everyone had the last word before closing off, i would be waiting a long time. As your response indicates, this discussion can be carried on better at your own site.

  4. I appreciate your concern, Professor Quiggin.

    Thank you for having provided informative and interesting articles and a forum for discussion for all this time.

    Site visitors are most welcome to act on Professor Quiggin’s suggestion and post their comments to our web site. Just conceivably, although this hasn’t happened yet, if we were to judge the contributed material to be too repetitive or too verbose, we might also ask that it be published elsewhere, but we would always allow such material to be linked to from candobetter.

  5. What Abbott is signalling there GC#1 is an Australian recession the likes of which we have not seen for decades. That level of Federal Austerity on top of the already State Austerity, and coupled with freer corporate profit taking on the one hand and a 1.5% business tax to pay for pregnancy leavers on the other, is a potent mix of messages for an already confused economy.

  6. You don’t consider the policies of the current UK and Australian governments to increase our population through immigration, ‘baby bonuses’, 457 visas and selling university places overseas, when we are faced with inflated education costs, hyper-inflated housing costs, grid-locked peak hour traffic traffic, water shortages, the destruction of bushland and wildlife to be ‘extreme’, Jim Rose (@ #7) ?

  7. Let’s hope my predictions are wrong. I predict;

    (a) A Tony Abbott / Liberal federal election victory.
    (b) Harsh budeget austerity measures.
    (c) Stalling of all attempts to deal with environmental and resource depletion problems.
    (d) A final pillaging of the remaining natural capital of the country.
    (e) Harsh financial measures on the unemployed, single parents and basic wage earners.
    (f) Wage restraint but no profit restraint.
    (g) Little infarastructure spending of value.
    (h) Crumbling of the public education system.
    (i) Crumbling of the economy over the next decade.
    (j) Descent of basic wage workers and lower middle class into poverty (joining the unemployed)
    (k) Steady reduction of the environment’s ability to properly sustain future projected populations for Australia.

    T.A. will need only 3 terms and maybe even only 2 to bring all this about. He will probably get them. Labor have destroyed themselves and the values they once stood for so there is no hope there.

  8. Ikonoclast (@#9)

    If we had real democracy or Direct Democracy in our constitution, as Switzerland has, that would not be possible. Any proposal for a new law or to repeal an existing law must be put to a nationwide referendum, if more than 100,000 signatures are gathered nationally, or a canton-wide referendum if a commensurate number of signatures are gathered in the canton. There is no way that Howard, Keating, Howard, Bligh, Greiner, Kennett or Newman in recent decades could have so harmed our interests, if we had had the protection given to Swiss citizens.

    On another matter, referred to above, a good antidote to cornucopian idiocy is Sheila Newman’s new book:

    Book Launch SPAVicTas 23 March 2013 of Sheila Newman’s “Demography, Territory, Law: Rules …”

    BOOK LAUNCH & DISCUSSION, Balwyn Library 2pm: Sustainable Population Australia, Victorian and Tasmanian branch

    At this meeting we are proud to launch an exciting new book, published in December 2012, Demography, territory and law: rules of animal and human populations by population sociologist and SPA member, Sheila Newman.

  9. @malthusista

    It’s interesting. A lot of people on the social democratic left deride Direct Democracy. They seem to see it as a libertarian or front or fifth column that will allow democracy to be highjacked. I am not quite sure why social democrats are so suspicious of direct democracy. Perhaps some social democrats here (Prof. J.Q. for one IIRC) can state why they are so opposed to any version of Direct Democracy.

    It’s pretty clear that our current representative democracy in Australia is only very imperfectly representative of mass democratic opinion. A majority of Australians opposed involvement in the Gulf War 2 (Iraq and Afghanistan) and yet we got it. A majority of voters in all states, so far as I can tell, oppose sell-offs of crucial government infrastructure assets. And it keeps happening bit by bit. It is also pretty clear that our major political parties are bought and suborned by capital in general and mining capital in particular. They are also subservient and servile to the US government.

    Some sort of reform to re-make our democracy as responsive to popular opinion needs to occur. The arrogant know-all, plunder-all elites have control and taking us into total disaster.

  10. @Ikonoclast

    A lot of people on the social democratic left deride Direct Democracy.

    For the record, my preferred governance model incorporates elements of direct democracy (but is mainly based on an amalgam between deliberative voting and sortition) with direct democracy for the big picture components.

    I’d also like to see better resort to direct democracy making use of electronic voting channels.

  11. Classic capitalist crisis phenomena are appearing everywhere and the internet is filling up with concerns over a possible global depression.

    Here is the situation for individual insolvencies in England and Wales (fig 2, Quarterly short run, fig 5, annual long-run)

    see: Insolvencies

    In this context, and due to the impact of around 100 trillion of world stimulus, I do not think that skyrocketing stockmarkets are to be taken seriously.

  12. 100 trillion in stimulus spending?????? That would mean that half the states in the world would have had to have access to a trillion dollars to put up. Two short words to describe the probability of that Chris W.

  13. I predict as follows:-

    1. Abbott wins the election.
    2. Per capita real government spending continues to grow.
    3. Per capita real government tax revenue continues to grow.
    4. A few pro market reforms.
    5. A few anti market reforms.
    6. Same as the ALP on same sex marriage.
    7. Same as the ALP on drug reform.
    8. No meaningful labor market reform.
    9. Continuation of the NBN but a change of design.

    Boring, boring, boring.

  14. @Chris Warren

    “The global credit stock has already doubled in recent years, from $57 trillion to $109 trillion between 2000 and 2009, according to the report.”

    That is almost double in 9 years. Using the rough “rule of 72” to work out compound growth that means about 8% minus 1% (because it wasn’t quite a doubling) = 7% annual growth average. Since world GDP grew at about an average of 3.5% over that time (and this may be generous) then this means global credit stock is growing at about twice the rate of global GDP. Given that we started at high levels of debt (ramped up from 1970 to 2000) this doubling from 2000 t0 2009 despite the GFC correction looks ominous and unsustainable. Capitalism exhibits another unsustainable trend due to end in disaster.

  15. Regarding democratic reform. I would appoint our senators via sortition. And I would have a citizens veto mechanism where by a citizens initative could repeal any law. I’d also like an act of parliament that makes all regulations by government agencies subject to a ten year sunset clause.

  16. I wish I could disagree with you on #17, Terje :-/ Not sure about 9, I think there’s a fair chance they’ll kill it unintentionally or at least recklessly

  17. @TerjeP

    It has started. The Financial Crisis of 2007-2008 (Great Recession) was the first round. Europe has not really recovered with (measured) unemployment over 10% and under-employment likely to be double that. Greece, Spain, Portugal, Cyprus, Ireland and possibly soon Italy are in a depression. Greece and Spain face 50% youth unemployment. Cyprus is obviously a basket case. The whole of MENA (Middle East and North Africa) is beyond basket case status. The USA is experiencing a dead cat bounce before its next crash. China’s path is totally unsustainable both from the resources supply and pollution perspectives.

    A slow motion crisis is difficult to perceive in the first 10 years. By 2020 or maybe 2025 at the latest you will be looking back and thinking, gee that fruitcake Ikon was right after all.

    What can we do? Frankly, I think fatalism is the only option now. Events and financial conditions will be so chaotic that there is almost no predicting safe strategies, personal or financial. But I would rather be in Australia than almost any other country. Being a long way from most of the rest of the world may now be our best asset.

  18. @Chris Warren

    I had to check it wasn’t the 1st of April! Cyprus has signed its own economic death warrant by this action. Its economy will implode. Capital flight, residential flight, an unstoppable bank run and a catastrophic collapse in aggregate demand.

    Usually, a draconian, one-off, unannounced, unmandated (not an election issue) tax surcharge of 10% on savings over a set amount (to bail out rich bankers no less) would be totally beyond the pale. The level set would pull in many middle class savers and quite a few workers for that matter.

    Interesting thing though is that Cyprus is (or was?) a tax haven. Thus, is it poetic justice? All those expat tax avoiders who were too cheap to pay tax in their own country are now getting stung. Maybe they deserve it. I can’t say I feel much sympathy for tax haven users. Maybe other tax havens are now at risk too. Certainly, tax havens are risky places to have your money in the current climate. Anything can and probably will happen now.

  19. @Ikonoclast
    What’s your view on the Citizens Electoral Council (part of the crazy La Rouche party) which has been pushing this stuff for many years (Citizen Initiated Referendums)?

  20. @TerjeP

    Don’t be so mindless and insensitive to what is going on all about the place:

    Japan
    Iceland
    Ireland
    Spain
    Portugal
    Greece

    and now Cyprus. Who knows what stage Italy is at?

    And no doubt you could name states and cities in the United States in the same collapse. That is your homework.

    It is all covered reasonably well in New Left Review – October 2012. The portents for China are particularly interesting.

    What collapse ?? You are in it.

    Are you waiting for the day when capitalists close your bank account and say “Sorry but we need 10% to bail out our companies”?

  21. TerjeP

    Don’t be so mindless and insensitive to what is going on all about the place:

    Japan
    Iceland
    Ireland
    Spain
    Portugal
    Greece

    and now Cyprus. Who knows what stage Italy is at?

    And no doubt you could name states and cities in the United States in the same collapse. That is your homework.

    It is all covered reasonably well in New Left Review – October 2012. The portents for China are particularly interesting.

    What collapse ?? You are in it.

    Are you waiting for the day when capitalists close your bank account and say “Sorry but we need 10% to bail out our companies”?

  22. What has been the record of sortition? I know it was used in Ancient Athens, and to a degree for the initial selection of candidates for jury service. In practical terms would not lead to inappropriate candidates for Senate positions, who would be better off without the experience.

    My prediction is that Queensland will adopt MMP within two electoral terms.

  23. @kevin1

    I am sure we could all trot out crazy and semile advocates of every idea (good and bad) under the sun. The test is what sensible, logical and compos mentis advocates are saying for any particular idea and whether the contentions of the sane advocates stand up to analysis.

  24. The EU27 just posted a GDP growth rate of negative 0.5%. I agree that is not good but I figured you meant something a bit more than that when you used the word “collapse”. This negative growth figure has be set against the fact that growth has been positive more than negative in the years after the GFC. Of course the GFC was a big hit to growth and the per capita figures are probably worse so it clearly isn’t a good story.

    Interestingly the best growth is coming from Latvia.

    Click to access 2-06032013-AP-EN.PDF

  25. I think the above predicted effects of a coalition govt look good. Also the loose consensus for immovable stagnation or complete collapse of manditory growth type economics over a 10 to 20 year time frame looks good . Also I agree that labor govt wouldnt make much difference .
    If the Roman empire economy had grown at 2 or 3 percent until now it would be bigger than our solar system . (maybe nanotech could do it !)

    Struggling to find a positive note, might i suggest feebly that opportunity on the national ( or more likely) the local scale can come in/from crisis . (in places where there arent too many guns) . No boredom then ! No time to be depressed .

    My firm prediction for the future on a longer than 20 or 30 year horizon (assuming any kind of general progress for humanity) ; is that one day we will look back on the way we treat animals now the way we now look back on public torture in the dark ages – as something horrible that we went thru to get to the better place we are now in .

  26. @Ikonoclast

    But I would rather be in Australia than almost any other country. Being a long way from most of the rest of the world may now be our best asset.

    I have been thinking about that for the last 6-7 years. I might decide to move down there after this summer. Sometimes i decide to do it but then get sidetracked by other things here.
    I still hold some hope for Croatia but it is dwindling down.

  27. @TerjeP

    You are just incompetant.

    Your figure was only for a quarter. The annual figures (Q to Q, seasonally adjusted) for collapse are:

    Finland -1.4
    Slovenia -2.8
    Portugal -3.8
    Hungary -2.8
    Cyprus -3.0
    Italy -2.7
    Spain -1.9
    Greece -6.0
    Denmark -1.0
    Czech Rep. -1.7

    But not only this – in most of these economies, the annual comparison with previous years quarter worsened from Q1 to Q4 as the year progressed. This trend is the real pointer.

    Even large economies with faint growth are trending to zero (Japan, United States, Germany) and the UK is bouncing on the bottom – effectively at zero.

    Next time you try this trick – please use per capita data.

    You are just peddling denial.

  28. EU27 growth was negative 0.5% for 2012q4 versus 2012q3. For the annual figure it was negative 0.6% for 2012q4 versus 2011q4.

    The only thing we really seem to be arguing over is the meaning of the word “collapse”. I would normally work with the following sort of hierarchy of economic badness:-

    economic collapse > economic depression > economic recession

    Whether you take EU27 or the eurozone as the region in question I would think the appropriate term for the current situation is “recession”. Some are calling it the “great recession”. I don’t think many have started calling it a “depression”. And calling it a “collapse” seems a bit premature although one might forecast that things are headed that way, hence my question regarding when it will happen.

    Ultimately it’s a semantic argument. I’m not really interested in labouring a semantic argument so long as you’re clear about what you mean. If you call this an economic collapse then so be it.

  29. Direct Democracy resulted in proposition 8 that banned gay marriage. Similar popular initiatives were passed often easily in 30 other states in the USA. Two further state constitutional amendments failed narrowly.

    A key advantage of representative democracy is minorities can protect themselves from an intemperate and impassioned majority by vote-trading.

    • Many regional and sectional parties have done this successfully around the world. In Australia, they range from the greens and country party to the shooters and fishers party.

    • Family First, new DLP, WA Nats, No Pokies and Katter’s mob are other examples of the ease in which new parties can break into parliament. The little known Christian Democrats lost the last WA senate seat to the Greens in 2010.

    Democracy is a system in which tends to align public policy with public opinion, but there is no reason why public opinion cannot be exploitive and discriminatory.

    The straight up and down votes in a direct democracy results in the exploitation of minorities. They cannot trade their votes on other issues to protect themselves.

    Majorities are well able to get their way through regular elections. An important part of constitutional design is slowing an intemperate and impassioned majority down.

    There is no double secret progressive left majority out there waiting to be heard. There are instead expressive voters who boo and cheer for contradictory agendas.

  30. @TerjeP

    It’s the beginning of the collapse. That’s my argument. It is a recession now overall, a depression already in some countries (Greece, Spain for example) and it’s heading to a global collapse. The collapse will take up to 50 years to play out completely.

  31. @Ikonoclast

    My prediction is quite similar to yours but differ in the sense how “collapse” is termed.

    The ALP is and most likely will continue to run austerity even if re-elected; the only difference in this aspect is that we (or at least I) perceive the scale of austerity will “very likely”[1] to be bigger and “very likely” to be much harsher to social security under Abbott. Hence the economic damage is “very likely” to be bigger under Abbott than under ALP.

    Also unless our monetary system changes under Abbott, even if he impoverish the nation with hard austerity measures, the consequence is likely to be similar to Japan or worst, UK. Which means pro-longed economic slump but difficult to classify it as “collapse” (however it is still a disaster), if “collapse” is used to describe the kinds of economic woes troubled EMU nations face i.e. Greece, Italy, Spain.

    [1] Although pretty much a near certainty, I think it is still more appropriate to use very likely

  32. @TerjeP

    bulldust bulldust bulldust—-just an opinion

    btw in Sats nufin

    the cartoon caricature had me stymied.

    who was the pointy eared picture trying to picture?
    the closest i could get was Stokesy,but the haulpac (faith might move mountains but haulpacs definitely do) and the little red heart? something to do with caterpillar maybe?

    also Cypriots are a bit annoyed but not as annoyed as the owners of the huge monies that has been parked there.
    i wonder to where the owners of said huge monies will take said huge monies

  33. Cyprus Capitalist Collapse

    The immediate pain is an expropriation of 6.75 for bank balances less that Euro 100,000 and 9.9 per cent for over 100,000 Euros.

    This is not a tax – a charge for public services. It is expropriation to protect capitalist enterprises.

  34. also Cypriots are a bit annoyed…

    Is that just a term used for those poor depositors of Cyprus or a prophetic portmanteau pun of what’s bound to happen there soon [sigh]

  35. @Chris Warren

    As I pointed out, it is worth noting that Cyprus is (or was) a tax haven. Expatriot and international depositors of monies there were seeking to escape the legitimate taxes (charges for public services) of their country of origin in most cases. As such these tax avoiders and/or tax minimisers deserve no sympathy for being stung. The locals might be in a different boat.

    It’s also worth noting that when small to medium investors play big peoples’ games, like tax avoidance, the big sharks always find a way to chomp them. Be warned, the world of capitalist high finance is a world of sophisticated criminals with a vast array of resources, “legal” strategems and dirty tricks way beyond what the other 99.9% can muster.

  36. @Ikonoclast

    Yes, tax haven cash is a key factor. If the expropriation was targeted at only non-resident accounts over a threshold, then fair enough.

    But this appears not to be the case. The interests of foreign investors were protected by a general raid on all accounts. There may be some international treaty guaranteeing foreign capital the same treatment as domestic capital. A higher initial threshold and more progressive rates would have been better.

    UK banks, eg LLoyds TSB, have their foreign-owned sterling accounts registered in Jersey, presumably so they escape any inconvenient requirements under international treaties.

  37. Re Cyprus: According to yesterday’s Sueddeutsche Zeitung, “Schulz”, an EU banking official, proposed to exempt ‘small’ depositors from the levy.

  38. confiscating bank accounts?! you must wonder what ideas the EU rejected as worse than going after people’s bank accounts.

    we are going to encourage you to hide you money under the bed policies are never the best.

  39. TerjeP :
    I predict as follows:-
    1. Abbott wins the election.
    2. Per capita real government spending continues to grow.
    3. Per capita real government tax revenue continues to grow.
    4. A few pro market reforms.
    5. A few anti market reforms.
    6. Same as the ALP on same sex marriage.
    7. Same as the ALP on drug reform.
    8. No meaningful labor market reform.
    9. Continuation of the NBN but a change of design.
    Boring, boring, boring.

    I agree. The wild cards are:

    1. Will Abbott get a workable majority in the Senate?

    2. Will Abbott risk a double dissolution if he fails to achieve that working majority?

  40. Jim Rose, it might be useful to be a bit more careful with the description of the EU bailout conditions for Cyprus (“confiscating bank accounts?” Obviously the answer is NO.) An alternative to the bailout conditions might be to let the banks in Cyprus go bust then all deposits might be lost, rather than a little less than 10% of ‘big’ (greater than Euro 100,000), a little over 6% for others and, as proposed by Schulz, EU, 0% for ‘small’ deposits.

    Unfortunately, given the way monetary transactions are recorded, it isn’t possible to quickly have a fairer way of stopping the rot.

  41. @Ikonoclast
    Remember at post #11 you said “Perhaps some social democrats here (Prof. J.Q. for one IIRC) can state why they are so opposed to any version of Direct Democracy.” That’s what I’m responding to. That is, direct democracy, in its majoritarian prejudice, can cater for local smalltown minds. This may be discriminatory against local minorities – aborigines, homeless etc.

    Or drinkers: I lived in Box Hill Vic for many years where pubs and licensed restaurants were outlawed, with some relaxation recently. This resulted from the temperance movement in the 1920s who achieved local govt statutes in some Council areas requiring residents in a defined area (4 or 5 local streets) to approve of any retailer/restaurant who wanted to sell alcohol. I presume this is the reason for the large BYO incidence in Melb.

    This statute attracted wowser types, Baptists, Salvos etc. to live in BH which reinforced this prohibition influence, and in Box Hill it was always voted down by NIMBYs. Bottle shops at supermarkets were not affected however.(Being a lower to middle class area, people drank like fish, and garbos reported that BH was very high in the rank order of Melb suburbs for their weekly wine/beer containers recycling output.)

    The only exception was the RSL for obvious reasons, but also the BH Golf Club, who played a trick. The statute required the applicant restaurant to advertise in a Victorian daily newspaper of their intention to sell alcohol, and every time it was noticed, objections were made, local referendum held, and negative vote resulted. But the golf club advertised in the Sunraysia Daily, in Mildura, no-one in BH noticed, so no objection or referendum, and the permit was granted. I never confirmed this, but I suspect John Zigouras, a leftwing Greek Labor lawyer who had an office in Mildura and later stood for BH as a Labor candidate, may have been the clever dick.

  42. Cyprus banks still a target.

    The WSJ reports that a new deal could see depositors with up to €100,000, taxed at 3%; those with €100,000 to €500,000 taxed at 10%; and those with over €500,000 taxed at 15%, while sources told Spanish news agency EFE that the levy on small depositors would be reduced to 3% with those over €100,000 taxed at 12.5%.

    According to the Cyprus Broadcasting Cooperation, the vote in the Cypriot Parliament, originally scheduled for 2pm GMT today, could be postponed by 24 hours as Cypriot President Nicos Anstasiades continues his last minute efforts to secure a majority for the agreement. Anstasiades warned yesterday that voting down the package “would mean being ejected from the Eurozone.”

    Russian President Vladimir Putin called the tax, which will hit the large Russian holdings in Cyprus, “unfair, unprofessional and dangerous,” reports Reuters. According to Greek Reporter, Gazprom offered to cover the cost of the bank restructuring in exchange for exclusive rights to gas exploration in Cypriot territory, although the Cypriot government rejected the proposal. George Osborne said yesterday that the Treasury will compensate UK military staff and officials hit by the levy, but British civilians based in the country would lose out.

  43. Ernestine Gross :
    Jim Rose, it might be useful to be a bit more careful with the description of the EU bailout conditions for Cyprus (“confiscating bank accounts?” Obviously the answer is NO.) An alternative to the bailout conditions might be to let the banks in Cyprus go bust then all deposits might be lost, rather than a little less than 10% of ‘big’ (greater than Euro 100,000), a little over 6% for others and, as proposed by Schulz, EU, 0% for ‘small’ deposits.
    Unfortunately, given the way monetary transactions are recorded, it isn’t possible to quickly have a fairer way of stopping the rot.

    Ernestine, this reads to me as if you are in favour of the bailout conditions and expropriation of client monies as a kind of least worst scenario.

    I think the whole scenario illustrated the verity of a number of propositions;

    (1) Small nations (city states, island states) are often economically unviable. They would be better off forgetting parochialism and merging where possible with a larger, viable nation.

    (2) Tax havens are economically damaging, nationally and internationally, to good economic governance and to crime fighting (financial crime, money laundering).

    (3) Larger, viable fiat currency issuing states can and should have at least one state owned national bank (like Australia’s Commonwealth Bank used to be) and the deposits in this bank should be 100% government guaranteed.

    (4) Arbitrary expropriation of banked funds (as opposed to legitimate ongoing taxation) should never be countanced except for proceeds of crime as proven in court.

    Cyrpus will permanently damage its good reputation (if a tax haven can be said to have a good reputation which is doubtful) with this policy. Who now with any sense would ever put a euro, dollar or yen into Cyprus? If they proceed as planned, they will see the mother of all small nation bank runs. A lot of local people will be hurt by this bank run.

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