Broken promises and budget anger …

this chaotic mess won’t be fixed with the usual political script

That’s the headline for my latest piece in The Guardian. It’s over the fold

Broken promises and budget anger …

As its first full year draws to a close, the disarray of the Abbott government is obvious to all, and easy enough to understand in terms of broken promises from a government that came to office almost entirely on the basis of branding its opponents as liars. Only slightly less obvious, but much less well understood is the disarray of the entire political process, reflected in wild electoral swings, the success of ‘anti-political’ candidates and the breakdown of the assumption that a newly elected government can expect at least two terms in office.

This disarray in turn reflects the exhaustion of the project that has dominated Australian politics since the 1980s, and the rejection of that project by the electorate. Variously described as economic rationalism, microeconomic reform and (my own preferred term) market liberalism, the set of policies comprising deregulation, privatisation and competition policy was, in some respects, a necessary response to the economic breakdown of the 1970s. But whatever was useful in that agenda has long since been implemented, along with much that was harmful. What remains is an unthinking assumption on the part of the political elite that adherence to this agenda is the hallmark of good policy, whereas following the wishes of a democratic electorate is irresponsible populism.

In policy terms, the first year of the Abbott government followed a script that has been played out many times, by governments of both parties, since its first run under the Hawke government in 1983. Having been elected on a ‘small target’ strategy, with seemingly ironclad commitments not to cut spending on services or to engage in radical deregulation, the government discovered a budget emergency and appointed a Commission of Audit which recommended ditching all electoral commitments. This produced a ‘tough’ budget, which somehow managed to avoid imposing any significant pain on the kinds of people who make up Commissions of Audit.

According to the script, public hostility to the budget cuts should have dissipated over time, and strong economic outcomes should have produced an endorsement of the government’s policies. The tough first budget would have made room for some sweeteners in the leadup to the election, which would result, as usual in the return of the government for a second term.

But the script has stopped working.The benefits of microeconomic reform were always oversold. Our economic success over the years since the deep recession of the early 1990s was mainly due to good macroeconomic management and, to a lesser extent, good luck with the mining boom. The mining boom is over, and macroeconomic management has been rendered ineffectual by obsessive focus on budget deficits, with the result that unemployment is rising and real incomes are falling for many workers.

More importantly, the public, which stopped believing in the microeconomic reform agenda many years ago, is now punishing governments when they persist in pushing it. The obliteration of the (generally competent and otherwise popular) Bligh government in Queensland after it used the standard ‘budget emergency’ script to introduce a privatisation program was the first clear instance of this. Bligh’s successor, Campbell Newman, followed the same script to justify the sacking of thousands of public sector workers and is now facing the possibility of defeat himself. The Victorian state election result is yet another example.

The political class seems incapable of responding to this situation. The best evidence for this is a recent Quarterly Essay by one of the most acute observers among that class, Laura Tingle, accompanied by a shorter piece from a former minister in the Bligh government, Rachel Nolan. To quote Tingle “The things we are angry about betray the changes that have been taking place over recent decades. Politicians no longer control interest rates, the exchange rate, or wages, prices or industries that were once protected or even owned by government. Voters are confused about what politicians can do for them in such a world”

Tingle and Nolan can see the problem: after decades of experience with the policies of deregulation and privatisation, voters don’t believe that these policies have delivered the promised benefits, don’t want any more of these them, and would rather see them reversed than extended. But ‘governments don’t do that any more’. The alternative view, that, having failed to convince voters of the merits of their preferred approach, the political class should instead try to give them what they want, is literally unthinkable for them.

And this is the position of some of the most thoughtful of the insiders. Tony Abbott and his ministers, along with many of the Labor Party, are living inside a bubble where the problem can’t even be posed. In these circumstances, is it surprising that voters turn to Glenn Lazarus and Jacquie Lambie?

It is, of course, impossible to wish away the changes of the past thirty years. Equally, there is no reason to take those changes as permanent and irrevocable. The growth of the financial sector and the redistribution of power and resources to the top 1 per cent of the income distribution have not, as promised, delivered improved outcomes for all. In most developed countries, the outcomes have been disastrous.

Thanks to a combination of good luck, good management and a comparatively resilient commitment to fairness Australia has avoided much of the growing inequality and poverty seen in countries like the US and UK. Rather than mindlessly pursuing the deregulatory policy agenda of the 1980s, we should be looking for ways in which governments can in fact do more for voters in general, even if this means doing less for the financial sector and for wealth elites.

The Abbott government is clearly not up to this task, and Labor has a long way to go before it can begin to tackle it. But until the political class accepts the need to meet the wishes of the electorate, the chaotic mess before us will remain the norm in Australian politics.

108 thoughts on “Broken promises and budget anger …

  1. “Our economic success over the years since the deep recession of the early 1990s was mainly due to good macroeconomic management and, to a lesser extent, good luck with the mining boom. ”

    How much was it also due to selling off of public assets and spending the windfalls on tax cuts. Party on as it were via privatization. Now we have the double whammy of those funds having run out and the government lacking the income they used to yield which buffered the need for taxation.

    This party on is being attempted of course at the moment again in NSW and Queensland. The worry is this living off the capital to maintain parties in office, with a bit of mining revenue buffering, without thought for the medium to long term future is now here to bite us.

  2. Another problem I suggest you’ve missed John is the movement from genuine political vision under say Gough into a cliched marketing sound bite under Keating and its pedestrian recycling up until Abbot and co who now offer nothing as you do point out. Even the wet Liberal hope Turnbull seems to offer nothing these days apart from recycled narrow ideas developed during opposition.

    Meanwhile Labor having junked its old objective of the nation owning the means of production has replaced it with nothing terribly coherent. They’ve done some good things to be sure, Noel Pearson’s identification of followup work on the status of indigenous peoples being one. But how they relate to a vision thing is less clear e.g. how do you harmonise a culture reflecting preagricultural production with the high tech modern which doesnt even sit well with the industrial model of the 1950s Australia.

    This vacuum explains to be how a control freak like Rudd can hijack the whole party, as evidenced by the biannual Labor Party Celebration in 2009/2010 with him saying in not terribly opaque code ‘”L’etat C’est Moi” like any good modern manager.

    I used to hope that some amalgam of Labor social policy and Green perspective of the nation’s biophysical limits would emerge to rejuvenate the imagination of progressive politics. But it appears this message is unsellable/has yet to evolve.

    A last thought. Perhaps instead the problem lies not in the political classes themselves but that since 1980 we as a nation have grown fat and intellectually lazy which concurrently created a society dominated by crude materialism and inhibited the emergence of new ideas on what a sustainable green democratic collective/cooperative Australia should/might look like.

  3. Certainly agree with your article, Prof Q.

    There are (at least) three problems with the current government:
    1) They lied their way to power. Given the disarray of the previous government, they didn’t even need to lie to get elected, but lie they did. And still are.
    2) They chose to roll back a bunch of potentially strong, long term revenue streams. More generally, they presented themselves as a government, if elected, which would just undo any and every thing which the ALP/Greens/Indeps had legislated. I am not aware of a single previous government since Federation which has done that.
    3) They act on the principle of the result trumping intention, i.e. the ends justifies the means. With this as the (only) guiding principle, it is obviously okay to lie to the electorate about what you will do when elected, and to lie about what you are doing when in power.

    Taken together, these three things completely undermine our democratic system. Essentially, there are no rules of fair play now, just a belligerent and uncompromising belief that power is the right of the Liberals, bar nothing. They don’t accept defeat, they never accept legitimacy of a government unless they are it, and they don’t care who gets trampled in the rush to get into power, or to keep hold of it. It is insulting to the electorate at large.

    Okay, there are many more things, especially of an economic nature, which this government is simply incompetent at analysing and responding to in a fair-minded manner. The so-called budget emergency, if for a moment we accept it as a correct depiction of reality, would surely require a long hard look at how to increase the revenue streams for government use, and yet that is almost entirely missing from the budget. Furthermore, many of the policy actions which have used the budget emergency as their complete justification, don’t actually return their revenues to general revenue, but to specific projects which have been introduced in the budget, and furthermore, the establishment costs and ongoing costs are returned to the liability side of the government’s ledger (so to speak). In other words, general revenue is weakened, while the expense side of the equation is increased. What kind of response to a budget emergency is that?

    Perhaps there is a fourth problem I should add to the above list:
    4) Public servants have been vilified, remorselessly and relentlessly, and by association, any thought of public service as being a positive thing to participate in, as if it is some parasitic practice to be eradicated. Chucking thousands of people out of work is a peculiar response to a bleeding general revenue, for it fails to account for the taxation receipts from those people, and for the money they inject back into the business sector; it fails to even consider the impact of putting those people onto unemployment benefits, a direct cost to be borne. With an unemployment rate which is still unacceptable, dumping thousands more onto the queue is reckless.

    Goodness, now I’m onto reason five:
    5) The Liberals have demonstrated that they have scant regard for science, for scientific evidence, or for scientists. They seem to think that scientists are only in it for the money, that scientists engage in conspiracies to cook the scientific evidence on XXX (insert favourite cause here), and that scientific grants are used to reward the applicants with bigger salaries. Again, by association, the theme is you are a lesser individual if you choose to follow a scientific career path.

    Okay, I’ll stop at that point. The list looks infinitely longer the more I think about it…

  4. @Donald Oats
    To make it worse, you could probably count on 2 hands how many (non parliamentary) days between 2010-13 Abbott wasn’t in a hardhat on some industrial site banging on about Gillard’s broken Carbon Tax promise.

  5. Great article! A large part of the media and other ‘stakeholders’ hold the public and their democratic expression in contempt and the Abbott government has taken this further than anyone else. Some people puzzled over Abbott’s unnecessary promises at the end of the campaign and attributed this to either desperation or getting caught up in the moment, but it comes down to the fact that he believes he can say anything to get elected and then get on with the program “serious people” all know needs to be implemented. The problem is that these “serious people” are incompetent, out of touch and well insulated from the problems they create for everyone else.

  6. I agree with JQ (and not the quote I give below).

    This quote is sometimes misattributed to Alexander Fraser Tytler and sometimes misattributed to Alexis de Tocqueville. It is not clear who originally wrote it. My guess is a right-wing journalist and apologist for privilege.

    “A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy.”

    It seems to be a common idea that the majority will vote itself “largess out of the public treasury” until it bankrupts the state and the nation. This idea fails to note that the majority is in fact a plurality of minorities and sectional interests. In a true democratic system each minority and each sectional interest, where it demands excess largess, will be balanced by other minorities and sectional interests acting in concert to prevent any one minority or sectional interest making undue gains.

    The electorate is also intelligent enough, via the same group intelligence effects that make undistorted markets work (in the main), to make democracy work for the majority self-interest. The majority self-interest is a summation of personal and sectional self-interests. What makes most people better off will get voted for and enacted in a true, undistorted democracy. What makes most people better off will ipso facto makes the entire economy better off.

    The fact that both major parties follow policies unpopular with the majority but favoured by the rich elite shows that we do not currently have a true, undistorted democracy. The flip-flopping of the swinging voters (those not rusted on to one party or the other) between the two major parties with their one ideology shows that voters have not yet fully realised what is going on. They keep vainly hoping one of the major parties will enact the popular will. After two or three decades of this not happening, one would hope the elctorate would wise up and abandon the major parties who operate for capital and capitalists, not for workers and not for the ordinary majority.

  7. @Ikonoclast
    but there appears to be a growing appetite in the electorate for independents and minor parties. Negative campaigning from the majors probably help that, but most of the increase is likely from a general dissatisfaction of the major parties and the constant negativity that appears to emanate from Canberra. I wouldn’t be at all surprised to see a further increase in support for independents & minor parties at the next federal election.

  8. I’m guessing that part of the disillusionment is because a great many members of the public have now got first hand experience of privatisation. Maybe they have worked for an organisation that got a government contract to provide some service, only to lose that contract a few years later and find themselves looking for a new job.

    Another factor may be the appalling level of service in some government services. I was at Centrelink, and they suggested I ring to provide some details. I said, “But you can’t actually get through”, which was met with a wry smile. I did ring once, and the recorded voice basically said that if I wasn’t in immediate danger of starving to death, I should get off the line.

    In the early 1990’s, I worked for Social Security (as Centrelink was then), in one of the first Teleservice centres. The minister had set a target of 95% of calls answered within 1 minute, and we used to pretty well keep to that target. Then some smart bugger must have realised that we actually weren’t flat out the whole time, and cut our numbers. Pretty soon wait times had blown out. I left, but found out later how they solved that – if your wait was likely to be more than 60 seconds, then you would just get an engaged tone. So the ministers target was still met. There was one unintended consequence. When you got the engaged tone, you had actually got through, so you were charged for the call. Some people racked up huge bills trying to ring again and again and again.

  9. @Troy Prideaux

    Yes, the appallingly stupid ploy which I believe emanated from the Republicans is “Politicians are terrible people. If you hate politicians, vote for me.” In conversation, I try to counter by saying that most politicians are decent people trying to make our country a better place to live.

  10. John

    A good article. But can we blame the political elite entirely?

    Where have the Public Service been for the past 25 years with their frank and fairness advice? After all, it has often been the Public Service that has had to convert the loose ideology of the political elite into detailed policy and reforms. Not all public servants are on short-term contracts and are captured by their political masters.

    What has been happening in our university training where graduates don’t question the reform agenda (during or after their university studies)? Where are the post graduate researchers evaluating the success (or otherwise) of the reform agenda?

  11. Well before Abbott became opposition leader, let alone PM, I had a conversation with a lady in her early 70s who had known Abbott rather well (I, by contrast, have always had very little personal interaction with him) and who wondered out loud about … brain damage. Before saying anything else I need to point out that this lady, far from being opposed to Abbott per se, was for many years an active member of the Liberal Party, handing out how-to-vote leaflets at election time and what not.

    Anyway, she postulated the hypothesis that Abbott’s sustained career in the boxing ring had inflicted upon him more neurological damage than anyone, least of all himself, had discerned. When this lady offered her conjecture, the newspapers were by no means as ready as they are now to discuss possible cerebral injury among pugilists, let alone among footballers.

    I have found myself thinking more than ever, during the last few weeks, of this lady’s neurological theory concerning Abbott-speak and Abbott-think. It strikes me as far more plausible than the standard meme (Catholicism, Santamaria, seminary life, etc) of What Makes Tony Run. After all, plenty of Catholic ex-seminarians involved themselves with Santamaria’s movement without even remotely resembling Numero Uno. But I stress that this is speculation.

  12. @Jim

    The top level of our public service has been put on contracts and/or politicised. Frank and fearless advice leads to termination of contract and destruction of any future career prospects.

    As Donald Oats said, public servants have been vilified and excoriated remorselessly by the necon elites and the mainstream media. In addition their pay rises have been held below inflation so in real terms these are pay cuts. Conditions and super (once an incentive to put up with relatively poor public service pay) have been cut to the bone. There is now no incentive to be a good public servant at any level, especially the coal face service level. Poor pay, treated like dirt by management, vilified by government and spat on (sometimes literally) by the public. Believe me, I saw it all before I retired on a VR.

    There is no way anyone in their right mind would join the public service now. And I say this knowing a country deserves and needs a good public service. But there is no point being a martyr and allowing yourself to pushed around by mongrels. That is the stae of the PS now state and federal.

  13. John Brookes :
    @Troy Prideaux
    Yes, the appallingly stupid ploy which I believe emanated from the Republicans is “Politicians are terrible people. If you hate politicians, vote for me.” In conversation, I try to counter by saying that most politicians are decent people trying to make our country a better place to live.

    Indeed and I can only imagine how frustrating it must be to openly BS to the public for something you (as an elected representative of parliament) don’t agree with and your electorate might not agree with and the general population of the nation might not agree with; all for the sake of “towing the party line”. What’s worse, the savvy public can often see straight through such lies, so you lose respect, your party loses respect and the respect for the parliament in general is gradually eroded.

  14. @John Brookes

    Yep, you can forget about service from the public service now. It has been cut to the bone. The relatively few workers left (for the real workload) do not have a snowflake’s chance in an Aussie summer of getting all the work done or helping people who need help.

    Someone close to me still works in the PS (not the federal PS as I did) and I can tell you that the chronic under-staffing puts the remaining staff under continuous stress. There is zero staffing buffer to cope with illness or recreation leave. Thus they are almost always operating short staffed.

    It is the height of aburdity that we have over 6% unemployment, something like 12% under-employment and about 25% youth unemployment and yet staff everywhere are forced to work chronically under-staffed. We condemn workers to stress from over-work and condemn others to stress, poverty and hopelessness from having no work at all.

    Our is a really stupid and maladaptive system. It will have to change soon or it will destroy itself and the environment along with it of course.

  15. The economic policy consensus for the last 30 years has been essentially moderate Keynesian macro policy with market oriented micro policy. It has surely worked well as Australia is now a lot wealthier and more productive than in 1985. The 1990s recession was a bad macro mistake. But where are the serious economic problems with microreform other than distributional consequences? Those of us old enough to have lived through the late 1970s and early 80s know how atrocious Australian industry, especially government enterprises, was in terms of service and product quality.

  16. @Ikonoclast

    I think only about the top 2-3% of public servants are on contracts, and very few of them ever get the sack (although perhaps that is because they are being compliant with the political masters). What about the thousands of others? There are lots of senior public servants on six figure salaries that are not on contracts. Don’t they have the capacity to think and be frank?

    Everything is relative (including pay and conditions), and I didn’t see a lot of public servants running for the doors, even before the GFC. I think most know they are onto a good thing. Having been a public servant for about 10 years, and now a consultant for the past 10 years, I’d suggest that there is no way anyone in their right mind would voluntarily leave the public service. In the private sector conditions are worse, job security is not existent, and the bosses are even more unscrupulous.

  17. I am a little disturbed how Treasury has been so slow in understanding how weak nominal GDP is.

    given it started occurring before Swan’s last budget he had total responsibility for this is extraordinary.

    Abbott and co really do not understand the charter of budget honesty or are the worst liars in history. i think the punters have concluded the latter.

  18. @Jim

    “There are lots of senior public servants on six figure salaries that are not on contracts. Don’t they have the capacity to think and be frank?” – Jim.

    To get over $100,000 you would have to be an EL (Executive Level 2) in Centrelink (for example). This is as per the Agreement 2011 to June 2014. Don’t ask me what has happened since June 2014. I suspect the government will be deliberately delaying the next agreement to put a defacto freeze on pay as they usually do.

    Now, my knowledge may be a little out of date. But an EL2 would make a person about a Deputy Area Manager or Area Manager. There are about 15 Centrelink Areas in Australia IIRC. This level is small bikkies compared to the GMs, CIOs, CFOs and CEOs in Canberra. And these latter people if they are in a revenue disbursing agency like Centrelink are small bikkies compared to the top public servants in Canberra in the prestige Depts like PMs Dept and Tresaury.

    The only ones with any real central power are PM, Ministers and the very top PS people on contracts. Anyone below that level has zero power in Canberra though they have some power in their local areas obviously. That “zero power” I refer to relates to power to determine major policy direction and the broad methods of policy implementation. Quite frankly, anyone below $200,000 salary point would have zero power in Canberra and nobody with power in Canberra would ever listen to them.

    So those “thousands” you point to are in effect powerless re national policy and advice about same. In fact, the “thousands” you imagine exist might only be “hundreds”. I doubt the Federal PS has thousands of EL2s but someone might be able to prove me wrong on that. Either way, EL2s can have no effect on national policy.

    “Everything is relative (including pay and conditions), and I didn’t see a lot of public servants running for the doors, even before the GFC. I think most know they are onto a good thing.” – Jim.

    Public Servants over 50 who haven’t made EL1 (ie. up to APS level 6) have been running to the doors for 10 years now. Sure low grade pay in private enterprise is worse. But then there are significant over-rewarded minority groups in private enterprise as well. Someone is making a hell of a lot of money in our society but it is not base grade PS workers nor basegrade, part-time and casual private enterprise workers. This country’s economic system is in a huge mess at all levels and completely unresponsive to workers, line managers, middle managers and voters. A small elite control everything and are wrecking everything. The proof will soon be made manifest.

  19. JQ: I greatly enjoyed your Guardian article.

    On the subject of the apparent irrelevance of the ALP, and other weary forces of social democracy, they wither not merely because of being captured by neoliberalism but, more significantly, because the class forces which they were designed to represent no longer exist in recognisable form. The self conscious working class, if it exists at all, is in China and S-E Asia, South Asia and so on. Most people in Australia who still identify with some sort of (usually) masculinist prolier-than -thou are actually doing a working class drag act.

    The fractures of ethnicity, religion, gender identity, gender, sexual preference, racism, in Australia genocide and as many other intersubjective issues as you may wish to identify, now so cleave the possibility of a monolithic class identity that any attempt to assert the dominance of class as a framework of political understanding is a project only fit for the hobbyist.

    Democracy can survive the demise of last century’s working class but the ALP and the Coalition cannot.

  20. Sounds like “Bad Tony” has come out to play again. Andrew Robb, the golden wrecking ball of the old Rudd/ALP ETS, has swung back on the return swing, ready to smash through the Lima Climate talks (COP20) . Bad Tony helpfully forgot to tell Julie Bishop, and Greg Hunt, that the men are running this particular show…

    I suppose that Robb’s brief is to discuss with the attending deniers where best to plant the textual equivalent of semtex, and to keep Julie Bishop from any prospect of hearing scientificky evidence of AGW and the imperative to do something constructive. It won’t be described that way, not later on, but that is what I reckon he is there to do. It will be interesting to see if a WA mining state minister in Julie Bishop can be greener than Mr Brown Coal in Pants himself, but I’m sure he’ll come down on her like a tonne of briquettes if she even thinks.

  21. Re: the Public Service, the dial has been set to “economic rationalism” for so long that people have realised that any advice not along those lines will not only not be listened to, but will prejudice a career.

    Under the current government I have begun to notice a few public servants, realising that their minister is actually genuinely stupid, taking great delight in giving very bad advice and watching the minister run with.

  22. @Newtownian

    Newtownian, you opine that: “we, as a nation, have grown fat and intellectually lazy which concurrently created a society dominated by crude materialism”, which is a prophecy of Australia’s most popular poet, C. J. Dennis.
    100 years ago he wrote “The Glugs of Gosh”. It is a political, economic allegory about a stupid race of people (guess who) who are happy to trade their abundant natural resources for a foreign country’s manufactured goods to the detriment of their own manufacturing industries. Initially, the trade looks good: “But they all grew idle and fond of ease”
    “And easy to swindle and hard to please.”
    Not a bad guess from 1914, eh?
    Dennis describes the Prime Minister Sir Stodge, leader of the Swanks, as “wise to profundity, stout to rotundity”.
    After Sir Stodge concludes what is, in effect an FTA, Dennis writes:
    “And the knight, Sir Stodge, with a wave of his hand”
    “Declared it a happy and prosperous land”

    “The Glugs of Gosh” should be recommended reading for all Economics 101 students and all politicians.
    BTOMO. Work that out, tweeters.

  23. @Donald Oats

    Taken together, these three things completely undermine our democratic system. Essentially, there are no rules of fair play now, just a belligerent and uncompromising belief that power is the right of the Liberals, bar nothing. They don’t accept defeat, they never accept legitimacy of a government unless they are it, and they don’t care who gets trampled in the rush to get into power, or to keep hold of it. It is insulting to the electorate at large.

    Unless I’ve missed something, JQ’s point is that this description applies 100% to the ALP too. I certainly believe that to be the case. Otherwise we wouldn’t have the unpopularity contest that is Australian politics today (in an “unpopularity contest” you end up with a result like Victoria’s last weekend where the ‘winner’ of the contest was the LNP – they managed to be more unpopular than the ALP on this occasion).

    Voting between the two duopoly parties is now less nominative than it is punitive.

    And I take issue with JQ’s singling out of Lazarus and Lambie in this quote: “In these circumstances, is it surprising that voters turn to Glenn Lazarus and Jacquie Lambie?”

    Nick Xenophon’s Wikipedia entry neatly sums up the increasing reality that “we” are steadily increasing our rejection of the ALP/LNP duopoly in favour of ANYONE ELSE BUT THEM!:

    He was elected to the Australian Senate at the 2007 federal election, receiving 14.8 percent statewide. This was still 0.5 percent over a full Senate quota, gaining election without the need for preferences. However, at the 2013 federal election Xenophon received a record vote of 24.9 percent. Xenophon shared the balance of power with the Greens and Family First during the 2008–11 Senate parliamentary session, with the Greens holding the sole balance of power since July 2011. Xenophon will share the balance of power with a record 18-member crossbench from July 2014.

  24. PS: We once had “The Australian Democrats” occupying that role. But they famously sold out to Howard’s LNP on privatization and, in one case literally, got into bed with the ALP – at which point the electorate disposed of them because they had become the ‘bastards’ they were charged with ‘keeping honest’.

    The political class never learns, and the electorate never forgets.

    PPS: Another very important factor in all of this has been the relentless consolidation of media ownership and control facilitated by both halves of the duopoly in the hands of an old white fascist neo-con ideologue American.

  25. When the govt was being run by the Rudd/Gillard team Abbott & co effectively branded them as untrustworthy and dishonest. Incredibly now that Abbott & co are in govt they have branded themselves with the same labels – and they appear to be stuck on for good.

    Their ideology can at best be described as “just grab the ball and crash through and score”. So far their only victory has been to score goals for the other side!

    Nobody wants to be associated with a bunch of losers.

  26. @jungney

    The dominance of neoconservatism is the dominance of the class of oligarchs. Other classes exist but are fractured, atomised and powerless as you suggest.

  27. @rog
    Not so sure that spending cuts are the cause here. Overall productivity has been slipping away for over a decade now. Has to catch up sometime.

  28. @rog

    It’s also important to note that debt management is a zero sum game. Reducing public debt entails increasing private debt and vice versa. Private debt constrains private spending and that reduces revenues which ceteris paribus increases the proportionate cost of public debt service. Eventually, if the regime is ruthless about the public/private debt balance with which it is satisfied, a new equilibrium will be reached.

    At any given point, there is a ‘sweet spot’ at which at a given moment, the balance is optimal, but it’s impossible to know where this is at the time you’d need to make the call, and in any event, as those in charge of fiscal policy are not the only actors in the system, even if you knew what it was, you couldn’t be sure that having aimed at it, the context would change and make it sub-optimal.

    That’s one reason why the ranting about surpluses is simply ignorant populism — a kind of fetish. Given that the state is only one of the actors in the system, it would be better to be more cagey on where you saw the optimal level of public debt at any given point and to focus instead on delivering programs and raising roughly commensurate revenue and roughly commensurate loans so as to meet the recurrent costs.

    The bizarre thing is that for all the ranting about the horror of debt and ‘mortgaging the future’ from the right, it was the right, during the mining commodity price boom, that effectively consumed the future by handing our benefits to the top half of the income spectrum rather than investing in infrastructure, and today the right is trying to saddle the next generation with masive private debts — in education and in health, disability and aged services as well, not to speak of their reckless indifference to climate change and the likely costs of that.

    So in addition to being populistic nonsense aimed at transferring to the poorer half of the community costs that should be communally borne, under the rubric of ‘paying down debt’ (to bondholders) the reality is that the regime is increasing debt and stifling the private initiative in which they claim to believe.

    Moreover, in the short run, they aren’t even reducing public debt. Instead, it is ballooning — AIUI by $78bn in about 9 months. They are authoring a mess even by their own foolish, ignorant and reactionary standards.

  29. “The OECD defines it (workforce productivty) as “the ratio of a volume measure of output to a volume measure of input”. Volume measures of output are normally gross domestic product (GDP) or gross value added (GVA), expressed at constant prices i.e. adjusted for inflation. The three most commonly used measures of input are:
    (a) hours worked;
    (b) workforce jobs; and
    (c) number of people in employment.” – Wikipedia.

    I am not sure of the difference between (b) and (c) unless (b) would effectively include the frictionally unemployed. Maybe someone can enlighten me.

    For a genuine measure of total societal productivity the measure of input should be the entire potential labour force including the employed, unemployed, under-employed and the discouraged who have given up seeking working. I am suggesting the broadest measure
    of labour under-utilisation, the U6, should be used. From a total societal point of view, the economic efficiency of society with regard to labour productivity must factor in the inability of the system to get any useful labour from a significant sector of the able-bodied working age populace. This represents 10% to 20% of able-bodied working age people in most developed countries now. Of course, it is much higher again in countries like Greece and Spain.

    Let me use an analogy. If I had a V8 engine running on 7 cylinders and claimed its output per cylinder as total power output divided by 7 then I would be called out on that straight away. “Sorry buster, it has 8 cyclinders, you must divide by 8. The fact that you can’t get the 8th cylinder working is your fault as a poor mechanic.”

    Thus, U6 is our workforce. Labour force productivity should be measured against U6. This exercise would yield some interesting results and show how fallacious our current measures of productivity are.

    Note: With regard to spending cuts, lack of aggregate demand IS one of the causes of our slowing economy. Private spending is weak and now public spending is being trimmed due to “austerity” economics. Every dollar spent is somebody else’s income. Every dollar cut from spending (or at least from deficit spending) cuts somebody’s income. The cuts ramify or knock-on through the system putting an ever greater brake on economic activity.

  30. JQ, you said a lot in your short Guardian article.

    In particular, you hit the nail on the head when you write:

    “Tony Abbott and his ministers, along with many of the Labor Party, are living inside a bubble where the problem can’t even be posed.”

    As a consequence, solutions are proposed to problems which do not exist, while leaving the actual problem unresolved. Imposing solutions to problems which do not exist creates problems – “a chaotic mess”.

  31. A quite eloquent framing of the battle between populism and elitism, which I think defines modern politics. I guess we’re at the identification stage of this shift in public opinion, because in reading it I was hoping that Prof Q would get to the bit where he took his train of thought all the way to actual policy recommendations which would satisfy both sides, but he never did.

    Practicalities are the next topic of discussion, IMO. If we have a dialectic of elites clinging to neo-liberalism but the people demanding something else, is there a middle ground (“Third Way”) to be found that isn’t just a cloak for more liberalism, do the people get crushed to maintain the hegemony, or does the elite system blow up and the tumbrels start a-rollin’? Or do we take a step back and wonder who this debate is in aid of… is this just elites talking to elites to convince them to pay lip service to the unwashed masses to avoid the guillotine, and does change have to come from someone other than an economist or an apparatchik and we’re all just wasting our time?

    I’d love to hear what policies Prof Q thinks are workable in the real world in the medium term to solve the seemingly intractable problem.

  32. @Fran Barlow
    I don’t quite agree with your premise:

    “It’s also important to note that debt management is a zero sum game. Reducing public debt entails increasing private debt and vice versa. Private debt constrains private spending and that reduces revenues which ceteris paribus increases the proportionate cost of public debt service.”

    I don’t quite agree with your first sentence because your premise fails to distinguish between a fixed amount of ‘funds’ (savings) and private and public net debt creation. As such, it is very similar if not identical to that underlying the ‘crowding out’ hypothesis (monetarist).

    I don’t agree with your second sentence because net private debt increases spending at the time it is created and the same applies to public debt created. When too much net debt is created then ‘the system’ stops to work (eg GFC – private debt in the USA, public debt in Greece, to give two examples). So, what is ‘too much net debt creation’? Or, more precisely, what is ‘too much debt creation’ ex ante for ex post everybody knows. Net debt creation presupposes ‘economic growth’ as measured by nominal GDP.

    And this is a reminder that Keynes was concerned with the short term – or temporary equilibrium. It worked beautifully for post-WWII Germany (it was reasonable to assume that once ‘capital’ is made available, the society will ‘reconstruct’, GDP will grow and therefore returns on ‘capital’ will be strictly positive, irrespective of who owns the ‘capital’.)

    As Iconoclast reminds again and again (quite consistent with the axiom of finite physical resources in general equilibrium theory) this growth fetish can’t go on indefinitely.

    As Prof Q once wrote, paraphrased here as Keynes theory supported capitalism.

    My conclusion: A discussion of ‘debt management’ requires the conceptual framework of economic theory to be expanded to take into account the actual workings of the financial system such that the redistributive aspects of this system (growth in income and wealth inequality; see Thomas Piketty for empirical evidence) and the speed of destruction (a bit too strong a word but I can’t think of a better one right now) of the natural environment (see environmental economics research results and G20 on ghg emissions) is brought into line with the natural decay rate.

  33. @Ikonoclast
    Ikon, as far as I can tell in an layman’s way, labour productivity has been growing. Capital productivity appears to be in serious decline for a long time now. The sum of these two as a result is also beginning turn into negative territory at the moment. Seems more than just a coincidence that real wages are coming under extreme pressure now.

  34. As I also boringly remind people again and again, I am not very hopeful of any good outcomes in the near, middle or even long-term. Leaving aside environmental problems and environmental limits for a moment, I cannot see any signs of the neoconservative hegemony cracking. I believe this hegemony is structurally embedded into our entire system (global late-stage capitalism). If you like it is “set in stone”. This petrification of ideology into one near-permanent structural form is replicated in modern mental and social constructs. I see no sign that anyone under fifty now (other than some autodidacts, students and academics with older mentors) possesses any of the concepts necessary to even begin analysing what is happening.

    This ideational and conceptual poverty is striking and almost all-pervasive in the mainstream public debate. It was not the case in Victorian times for example when there was considerable intellectual foment in the (industrial) working classes. Today, you would have no idea the necessary concepts existed to critique what is happening unless you read obscure blogs like this and now-obscure texts like the works of Marx and Veblen to name just two. Some modern specialists like Pusey or gifted generalist philsophers like John Ralston Saul still know what is going on and can provide insights. The masses really do not know what is going on at all. That was one of the theses of Saul’s “The Unconscious Civilization”. For the most part, as a civilization, we are not conscious of what is actually happening and where we are now almost inevitably headed in my opinion.

    The talking heads and commentariat in the mainstream media certainly have no idea and convey no worthwhile ideas to the public. The discussion of the “budget” and “deficit” are a case in point. Neither concept is given any context. Nothing is said about what government budgets and government deficits or surpluses are and what they mean for and in relation to the real economy. There is no discussion of financial economy and real economy nor of the distinctions and interactions between these two. It is simply taken as read that the budget must be gotten into surplus irrespective of the condition of the real economy and real people. All the discussion is then about political and financial tactics and strategies to get the budget into surplus.

    It would be a bit like physicians saying they have to get the patient’s temperature to strict normal regardless of what condition the patient is in. There are of course clinical reasons, depending on the patient’s condition and necessary procedures the patient might need, where it is necessary to hold the patient’s temperature above or below normal. Thus, what surplus or deficit or balance do we need? It depends on the condition of the economy overall and especially on the condition of the real economy and real people.

  35. @Ernestine Gross

    Perhaps the best concepts for environmental concerns with respect to the operations of the economy come under two heads;

    (1) Destruction. – Destruction is occurring and is very significant. Rainforest loss, wild fisheries exhaustion, species extrinctions and climate change for example).

    (2) Co-option – Where we are not destroying outright we are co-opting environmental resources and services to human use (human economic use) and away from use by all other biota. This has a knock-on effect of destruction too unless the co-option is truly sustainable, renewable and “equitably sharing” with other biota. (Now I am struggling for a good term.)

  36. @Ikonoclast
    Anthony Giddens, once a critical sociologist, just gave up when he paved the way for Blairism with his 1998 ‘The Third Way’.

    There are forces with a critical capacity in the world. The environment movement, very broadly speaking, after numerous idiotic adventures trying to win the hearts and minds of corporate managers, is finally addressing and incorporating a Marxist critique of capitalism. Possibly because there is now nowhere left for it to go than to the left because everything else has been an abject failure. Nevertheless, there are signs of a decent pulse.

  37. A short version of this is the Government is fighting the electorate and it’s the polls that are landing the blows – the opposition is trying to figure out where it fits in to the big picture.

  38. The paucity of government has me bewildered—and I’m referring to both major political parties in saying that. The answer is always “economic growth,” which isn’t necessarily an issue, but the methods for ensuring economic growth are an issue, for both parties offer relatively similar methods of achieving it, ideologies not withstanding. For example, both parties think that Australia’s population must grow indefinitely, and yet it is clear that is not sustainable. They both refuse to increase general tax collection through progressive taxation of income. While they often talk about corporate tax minimisation, they simply don’t attack it with policies—and action—which have teeth.

    The exceptions have been the application of the price on GHG emissions, and the mining tax: both of these revenue raising measures barely got out of the starting gate, the LNP even campaigning to repeal the carbon tax, as they put it. On this issue of taxation, the Australian public has got to grow up a bit and accept we need to install and retain some extra taxation if we are to avoid recurring deficits. Our shopping habits indicate that there is quite some scope for progressive income taxation changes (at the higher income brackets), and we can certainly simplify/reduce the allowable deductions against income, further increasing the tax captured. Both major parties seem intent on avoiding that particular discussion.

  39. @Donald Oats

    You are using logic, common sense and the ethical standard of the greatest good of the greatest number. Your file has been stamped “Never to be promoted or placed in any position of influence.” – Ministry of Oligarchic Hegemony.

  40. @Crocodile Spending cuts and tax cuts have not grown the economy in the long term, as promised. Both sides of politics have had a hand in this, as JQ points out.

  41. Psephologist Kevin Bonham has pointed out, correctly, that way too much has been made of the defeat of the Victorian government after only one term. He argues that State elections commonly see swings against governments of the same political complexion as the Federal government — and this particularly State government didn’t have a big enough majority to survive any but the tiniest swing against it.

    People who are not very well-informed psephologically have been going on about how there hadn’t been a one-term government in Victoria since 1955. But, as Kevin Bonham also pointed out, there have only been four governments in Victoria since 1955, and four examples isn’t enough to build a case on, while there have been seven one-term governments in other Australian States over the same period. It’s not exactly a common occurrence in Australian politics, but it’s not nearly as unusual a break with past patterns as some people have been making out.

  42. @J-D

    “But, as Kevin Bonham also pointed out, there have only been four governments in Victoria since 1955…”

    Cain Jnr/Kirner

    = 5

    “…while there have been seven one-term governments in other Australian States over the same period.”

    J. Tonkin

    D. Tonkin



    = 6

    Am I missing one, J-D?

  43. For more budget anger, consider being a scientist whose travel to international conferences must be approved by the Industry minister. For those not in the know, scientists need to travel to conferences for that is where they make the contacts which lead to Nobel prizes, among other obvious reasons. Can’t see how another scientist’s lab does the work you want to really understand, unless you are there in the flesh. Power point and u-tube only get you so far.

    Over the years I’ve met and/or known a number of scientists, some quite famous. Unless they are up there for public coverage, say as famous as someone like Brian Schmidt or Brian Cox, the average scientist is just quietly amazed they don’t have to pay the airport-to-accommodation taxi fare out of their own pocket when they are travelling for work. I can’t say I’ve ever met that attitude in the business world. I guess to the business person it is just a necessary expense of conducting business, whereas the scientist sees it as a cost to the research organisation they work for/in, and they feel morally obliged to keep tabs—or even to pay it on the quiet and not claim it back. Two very different worlds…

    Meanwhile, anybody for a $190 bottle of wine?

  44. @Nick

    That can’t be right. Dunstan (ALP) lost after one term in 1968 – when the federal government was LNP.

    As an aside, notice how many of those examples involved the midnight knifing? Maybe that is a factor. Australians prefer to knife their own elected leaders (rather than have faceless types do it in secret), that’s about the only exercise of democratic power they have left.

  45. @ Fran Barlow

    Reducing public debt entails increasing private debt and vice versa. Private debt constrains private spending

    Reducing public debt could be amortized by increased exports instead of by increased private debt, all other things stay equal say unemployment. Under specific inflation providing equilibrium and also with apropriate level of very progressive taxation, public debt can be reduced without imposing growth to private debt. Those were the times of post WWII
    Reducing public debt can produce growing unemployment instead of growth of private debt in times of low inflation. Low inflation signifies already slowing debt growth and it will keep slowing no matter what is happening with public debt.

    “Private debt constrains private spending”, Private debt could eventually constrain private spending but only when private debt stops growing. In other words, when paying off of old debts is faster then creation of new debt is how private debt constrains private spending.
    This comes from the fact that new debt is new money to be spent, hence growth of private debt mostly produces higher spending (more money in the system = more spending) Repaying of debts is destruction of money which means less money in the system if not replaced with new debt. This is what Ernestine is trying to say in response to you, i am just saying it in less academic wording.

    New credit = creation of new money. Paying off the credit = destruction of previously created money. When you incorporate this fact into your thinking then you can see that growth of private debt does not mean less spending, but it could mean exactly that eventually, like since 2008 because reduction of debt is faster then creation of new debt which creates recessions and depressions if not counteracted with growing public debt sufficiently.
    Knowing the facts about money, where it comes from and how is distributed, will make you not worry about budget deficits but about more important things, which is employment and prosperity.

  46. @ Ernestine

    When too much net debt is created then ‘the system’ stops to work (eg GFC – private debt in the USA, public debt in Greece, to give two examples). So, what is ‘too much net debt creation’?

    I do not think there is too much net debt creation problem. The problem is how is distributed in relation to financial economy and real economy. How much of new net debt there is can/will be countered by apropriate level of inflation if due to already existing high unemployment and low buying power there is no upward inflation preassure from new net debt to FIRE economy onto the rest of the economy.

    Since most of the new net debt is usually to housing industry which then puts upward preassure on other wages creating inflation but only under condition of already low unemployment. In high unemployment conditions, no amount of new housing will put upward preassure on wages in the whole economy, only in FIRE sector, this new net debt will become unsustainable.
    Apropriate inflation of wages of the whole economy is necessary for new debt to be sustainable. And such apropriate wage inflation can handle any ammount of new net debt.

    Also in times when housing boom an economy can escape demand for materials by importing and get influx of imigrants to avoid upward wage inflation on the whole economy such new net debt will become too much.
    I am starting to consider that MV=PY becomes uncalculable due to abillity of 5 major currencies to be accepted by rest of the world without limits. Y is not inside one economy but considers the whole world supply. There will be no inflation if supply is from the whole world, not from one country – globalization of dollars, Euro, Yen means increasing demand is amortized by whole world. Can’t create inflation by new money untill the whole world is filled with it.

  47. @Nick

    On your first point, I slightly misrepresented what Kevin Bonham said.

    When people were talking about Victoria’s electoral history before this year’s election and saying there had been no one-term government in Victoria since 1955, they were relying on evidence from just four Victorian governments — obviously the recently defeated Victorian Coalition government was not part of the evidence base: at that point it had not yet been determined how many terms it would run for.

    On your second point, the missing entry from your list is the SA one-term ALP government from 1965 to 1968, led first by Frank Walsh and then by Don Dunstan.

  48. @Megan

    None of those seven examples of one-term State Governments involved a midnight knifing. Six of those them had the same Premier from beginning to end, and in the seventh instance Frank Walsh was obliged to retire on the grounds of age by the rules of the SA ALP at the time.

    I can’t find a single example (in Australian State politics) of a government party choosing to dump its own leader in its first term in government and then losing the next election — that is, before the current Victorian instance. It has happened, only not in a first term.

  49. The destruction of CSIRO and indeed of science itself in Australia proceeds apace.

    I have to admit to a bit of transient Schadenfreude at the expense of the scientists at one point.

    “CSIRO staff are treated as commodities, whose function and requirements are essentially interchangeable with any other public servant.” – Staff spokesman.

    At this point I thought, “Yeah, welcome to the world of the rest of the un-special public servants. Now you know what it is like to be treated like sh** like all base grade public servants have been for the last ten years or more.”

    But this transient and ungracious Schadenfreude passed and my more abiding thought was “If we destroy science we destroy our economy and all progress.”

    It’s worth undertaking a thought experiment. What gave us the progress of the modern world? Three prime candidates are capitalism, democracy and science plus technology. If we consider the case the Soviet Union, it had neither capitalism nor democracy. It did however have science and technology. It did manage to run a polyglot nation or perhaps even an empire for about 90 years. It recovered from WW1, survived the depression, tooled up and armed for WW2, defeated Germany (the world’s second industrial power at that time) with very little help from Western Europe or the USA until 1944. It then recovered and ran (shambolically it is true) until 1992.

    The Soviet Union did this all without capitalism and without democracy but with science. If there is one materially imperative element to modern life it is science and its attendent technology. Democracy is a social and moral imperative. Capitalism is now becoming an impediment to further progress not an aid.

    Destroy science and we destroy our civiization for sure.

  50. agree. so next step will be to change (reform?) the electoral system to try and weed out these troublesome inependents.

  51. @Ernestine Gross

    “Tony Abbott and his ministers, along with many of the Labor Party, are living inside a bubble where the problem can’t even be posed.”

    This applies to almost the entire Western economic fraternity.

  52. “change (reform?) the electoral system to try and weed out these troublesome inependents”.
    good luck with increasing confidence in the system thereby.
    imo the answer to “troublesome independents” is not to reform the electoral system so as to “weed them out” but rather to address or reform the corrupting practice of major party influence peddling with the distribution of minor party/independent preferences. -a.v.

  53. @Ivor
    It depends on whom you include in the ‘Western economic fraternity’. For example, would you include people with training in law or accounting? Would you include so-called ‘market economists’? Would you include everybody who ‘made money’?

    At present, IMHO, the general public seems to have a better understanding of contemporary economics (as defined in the economic literature) than those who make laws and regulations which affect ‘the economy’. To illustrate, using a broad brush, the general public perceives the May 2014 budget as ‘unfair’ (because it reduces the relative wealth of the already relatively poor). This amounts to an objection to continuing with the wealth redistribution from the bottom to the top. There is plenty of empirical research, long term (eg Thomas Piketty) and medium term (eg the past 30 years) which is consistent with the general public’s perception of there having been an increase in wealth inequlity and it should not continue. Furthermore, the public ‘anger’ is neither an expression of wishing ‘socialism’ nor an expression of wishing public debt to grow without limit. On the contrary, it seems to me to be an obvious source of anger if those in power who say they want a ‘market economy’ and ‘freedom of choice’ don’t seem to know that, to the best of our theoretical knowledge, having policies that reduce the wealth of a segment of the society (to the point of potential starvation, eg not giving any money for six months to young unemployed nor gainful employement) strongly contradicts the minimum wealth condition in the theoretical models that make precise the idea of ‘a market economy’ and ‘freedom of choice’. That is, they are hearing nonesense. I can’t vouche for every member of the general public putting it quite this way. But the long hand (thousands of daily life examples) takes to long to write down.

  54. @J-D

    I hadn’t considered it like that. That makes more sense. Though to be pedantic, that still works out to ‘1 in 5 Vic governments is a first-termer’. Since the Australia-wide average in the last 60 years is much the same (8 in something like 37 state governments), I’d suggest that’s maybe more than enough datapoints to gauge how infrequently it occurs?

    Which I guess all boils down to – to the extent that there’s federal influence in state politics, Abbot’s is a particularly unpopular federal government. That combined with the Liberal’s blatant hypocrisy over Shaw not long after the Thomson affair went down federally, plus Napthine’s unmistakably dodgy signing of the East West tunnel contracts (a majority of Victorians are polled as wanting it, but I don’t think a majority of Victorians appreciated it being foist upon them a few months out from an election the Libs were tipped to lose, nor Abbott’s pathetic last minute attempts at blackmailing them into voting for it) was more than enough to seal their fate.

    Megan, thanks for the heads up. Fascinating to read last night about all those state governments. Dunstan and Steele Hall’s in particular. Dunstan lost with 52% of first preferences, and 54% of the two-party preferred vote. Hall was so embarrassed that he’d only won with 43% of the vote (and obviously under a lot of public pressure) that he reformed SA’s Playmander system to ensure it never happened again – even though that virtually guaranteed a LCL loss at the next election. Hence, his became the very next 1-term state government in Australian history. Didn’t know any of that beforehand.

  55. @Ernestine Gross

    To put it simply the public knows in the case of the last Australian budget, that it is “being sold a pup”. (From an old swindle, where one would be sold a bag purportedly containing a piglet, but which actually contained a puppy.)

    At a fundamental level, the public does NOT know the path that capitalism is on. Theorists like Sweezy, here speaking in 1982, have known the path that late stage or Monopoly-Finance capitalism is on and have been proved remarkably prescient.

    “Let me digress for a moment to point out that the fact that the overall performance of the economy in recent years has not been much worse than it actually has been, or as bad as it was in the 1930s, is largely owing to three causes: (1) the much greater role of government spending and government deficits; (2) the enormous growth of consumer debt, including residential mortgage debt, especially during the 1970s; and (3) the ballooning of the financial sector of the economy which, apart from the growth of debt as such, includes an explosion of all kinds of speculation, old and new, which in turn generates more than a mere trickledown of purchasing power into the “real” economy, mostly in the form of increased demand for luxury goods. These are important forces counteracting stagnation as long as they last, but there is always the danger that if carried too far they will erupt in an old-fashioned panic of a kind we haven’t seen since the 1929–33 period….” – Sweezy.

    John Bellamy Foster and Robert W. McChesney write of the above quote;

    “There could hardly have been a more far-sighted description of the contradictions of U.S. capitalism, pointing ahead to the Great Financial Crisis of 2007–09, and to the conditions of severe economic stagnation that arose in its wake. These warnings, however, went unheeded, and no resurrection of the stagnation debate occurred in the 1980s.”

    This economic stagnation is now our WHOLE future in my opinion. The developed world has followed a long term trend towards zero growth from the relatively high growth of the sixties to the low growth and indeed stagnation of the present. The US is still growing (just) but Europe has stagnated since the GFC and Japan has also stagnated. Europe and Japan will never grow again and the US will soon cease growth. Australia has ceasedf growth about now, at least in per capita terms is also never likely to grow again.

    This long term trend to stagnation is implicit in, indeed systemically embedded, in late stage or Monopoly-Finance capitalism at least in the case of the already developed nations. CHINDIA and maybe even the BRICs avoid it for now by having cheap labour to be exploited or a relative plenty of natural resources remaining compared to the near global limits on resources. Though Russia is stagnating right now due to low oil prices (these prices probably being engineered by the USA for this express purpose).

    It’s a perfect storm of unfortunate influences on the economy. Late stage Monopoly-Finance Capitalism naturally tends to stagnation. The phenomenon of “secular stagnation” is real at least in the sense of “demographic stagnation”, meaning ageing and the end of population growth in the developed nations. We have an ossified ideology of neoconservatism in the West where no new ideas and even many good old ideas are inconceivable to the ruling elite and thus totally inadmissible in public debate and policy formulation. Then we have the limits to growth which we have already overshot in sustainability terms. Resource shortages, substitution costs and climate and environmental damage are becoming an ever larger drag on the economy.

  56. @rog
    Rog, sorry for any confusion. I was referring to your point re the fall in disposable income with the productivity angle rather than actual spending.

  57. Hi,

    this chaotic mess won’t be fixed with the usual political script

    …as per JQ.

    No, the usual political script it won’t fix the ‘problem’ because the entire global economy is being utterly smashed by the ecological crisis.

    From an environmental perspective it is of no concern whether you choose to attribute total ecological destruction to capitalism or finance capital when any honest consideration of the ecological vandalism in the USSR and the PRC shows that environmental destruction is absolutely the consequences of industrialism. Different political systems, same ecological outcome.

    Remember this:

    All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses his, real conditions of life, and his relations with his kind.

    Yesterday’s verities don’t apply any more. The shift from the politics of the industrial age to the politics of the present and future requires an engagement with ecology, with the science of ecology, and a subsequent renewal of rationality and democracy. Real, informed, educated, democracy.

    It seems reasonable to also recall this:

    Men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past. The tradition of all dead generations weighs like a nightmare on the brains of the living. And just as they seem to be occupied with revolutionizing themselves and things, creating something that did not exist before, precisely in such epochs of revolutionary crisis they anxiously conjure up the spirits of the past to their service, borrowing from them names, battle slogans, and costumes in order to present this new scene in world history in time-honored disguise and borrowed language.

    On reflection, why bother conjuring up ‘up the spirits of the past’ when the whole of our present and future is nothing if nothing if not an unlimited field of play? To whose ghosts do we owe allegiance.

    The dead are many.

  58. The Conservatives blame a hostile Senate and a failure to sell the message .Alternatively some normal people in the Senate blocked policy that cant be sold anyway. There are some stunned participants because the might of the Murdoch empire has failed to control events .

  59. It’s official: America is now No. 2.

    “The International Monetary Fund recently released the latest numbers for the world economy. And when you measure national economic output in “real” terms of goods and services, China will this year produce $17.6 trillion — compared with $17.4 trillion for the U.S.A.

    As recently as 2000, we (USA) produced nearly three times as much as the Chinese.

    To put the numbers slightly differently, China now accounts for 16.5% of the global economy when measured in real purchasing-power terms, compared with 16.3% for the U.S.

    This latest economic earthquake follows the development last year when China surpassed the U.S. for the first time in terms of global trade.

    Make no mistake: This is a geopolitical earthquake with a high reading on the Richter scale. Throughout history, political and military power have always depended on economic power. Britain was the workshop of the world before she ruled the waves. And it was Britain’s relative economic decline that preceded the collapse of her power. And it was a similar story with previous hegemonic powers such as France and Spain.

    This will not change anything tomorrow or next week, but it will change almost everything in the longer term. We have lived in a world dominated by the U.S. since at least 1945 and, in many ways, since the late 19th century.” – MarketWatch.

    The New American Century is over after just 13 years. Having said that, China scarcely faces a smooth path. Pollution, climate change and resource limits will hit over-populated China hard.

  60. @Ernestine Gross

    In general I do not disagree but, there are two ways of “making money” as you put it, and two types of “market economy’ and two types of ‘freedom of choice’.

    Capitalists deny this – that just parade their concepts of making money, market economy, and freedom of choice as if these are first principles.


    There are two ways of making money 1) by your own production; 2) by accumulating the production of others.

    There are two types of market economy 1) capitalist market; 2) market socialism.

    There are two types of freedom 1) capital enjoys one regime of freedom 2) labour suffers a different regime of freedom.

    You have to get behind the labels and look at the actual content.

  61. @Ikonoclast

    Nice comment Ikon. I’d like to think (and maybe I’m being hopelessly naive) that at some point people will realise what is exactly in their best interests, and vote for it.

    I like to think that after the sacrifices and teamwork of WW2, that it was necessary, and even natural, for the ruling class to be nicer and fairer. And for a little while, they even took the advice of good economists. Reading J K Galbraith, sometime in the 60’s the Yanks were faced with the decision to improve society, or reduce taxes, and they chose to reduce taxes. The pace really picked up under Reagan, as did the policy of blaming the poor for their predicament and being tough on crime.

    And by now the right have gone full feral to the point where Gina wants people to work for $2 per day. And most people are convinced that if we don’t head down this route the sky will fall. And of course the right will try their best to make the sky fall if anyone stands up to them.

    Depressing or what.

  62. @Ikonoclast

    This is right. Even without looking at the Soviet Union and its offshoots, you can observe a vast set of variants on capitalism, ranging from laissez-faire to social democracies where the state takes more than half of all income, all of which have delivered substantially improved living standards over a long period*

    * Not always environmentally sustainably but, as I’ve shown in dozens of posts now, the big environmental problems we face could be largely resolved without much of an impact on living standards

  63. Yes, commentary from my conservative mates ranges from “how about those nut cases in the Senate” (they do represent the community, que?) to “watch out what Shorten will do to your super”.

    Not that any side is immune from sophistry.

  64. you can observe a vast set of variants on capitalism, … all of which have delivered substantially improved living standards over a long period*

    For some – not for all. For a few decades – not for ever.

    Socialist growth can improve living standards for all, and for ever.

  65. Yes it does raise a lot of thoughts, Ike.

    For starters the dominant economy tends the exploit and command the greater share of resources. What does that look like in the Chinese context.

    The Chinese govt has the objective of raising the living standard of its people, the US govt (republican) has the objective of reducing the living standard of its people. The Chinese govt has a national growth plan, the US govt does not.

    There used to be an index for an international comparison of the “nationalmdegree of automation” for which the US and Japan routinely held the highest rungs. That figure is now buried in the mire of the “productivity” political football, but automation is the primary performance multiplier which underpins standards of living. There are many other factors these days but automation, along with the average age of machines, is a good identifier of the fundamental competitive strength of economies. If the US looses position on this factor then it will be on a downward spiral from which it will be difficult to recover from especially considering the fractured nature of its political overhead.

  66. Whether it’s China, India, the US, the EU or wherever, it’s still trans-national corporations which rule the world and when China has been sucked dry of resources and the residents no longer tolerate becoming a toxic waste dump, the corporations will move on to the next continent ripe for exploitation and environmental destruction – Africa.
    If the US was economically disadvantaged in a serious way by China becoming #1 it could only be a good thing for world peace but it has massive IP and other investments in trans-national corporations which will keep it wealthy wherever they set up camp. Wealthy enough to remain a meddling superpower that is but not to improve equality back home.

  67. @Nick

    According to Dunstan’s own detailed account in his memoir Felicia, Hall supported boundary change before the 1970 State election because the LCL was certain to lose without it (because the inexorable growth of metropolitan Adelaide was spreading into electoral districts which had once been predominantly agricultural and fundamentally transforming their demographic character); he does not support the view that Hall was motivated by ’embarrassment’ at winning the election with a minority of the vote.

    On the more general point: some time in the last few years, I compiled a more extensive data set of Commonwealth, State, and Territory elections, but unfortunately I seem to have lost it. As best I recall, however, what I found was that governments facing an election after less than five years in office won about three-quarters of the time. That does mean that one-term governments are unusual, but not nearly as unusual as people have been suggesting recently, which was my original point.

    The pattern is also less striking given that I also found that in Australian elections generally governments win somewhere between three-fifths and two-thirds of the time. Apparently in Australian elections it’s an advantage (although far from a decisive one) to be in government already, and to be a government that’s been in office only a short time does add to the advantage, but not hugely so.

  68. China is not that foolish, SG. Talk to anyone on the subject of Chinese investment. It is very easy to send money to China. Getting money out of China is the exact opposite. Chinese interests are served very well by the West.

  69. I am not expert in international economics, but I think there is another major problem with the previously orthodox free market economic ideology – globalisation and tax avoidance. It really is now cheap to ship things around the world. Yet the benefits of free trade may not exist for some countries or industries. In a globalised world there is no guarantee that any amount of restructuring will make a particular job viable in a high wage country. Nor will the financial benefits of the restructuring be received by those restructured. If the profits are dropped out in some distant tax haven, say Luxembourg, there seems very little benefit at all to the workers or taxpayers in a high wage country from liberalisation. They will lose their jobs, and their tax burden will go up. So they are correct to oppose it. If we are to have a global economy, we also need effective global taxation.

  70. One big reason Europe emerged from obscurity to beat everyone else in the empire building game over the last 3 – 400 years is that there bankers and financiers became more powerful than kings. Another reason was the European scientific style (its admission of ignorance) .Capitalism could then be used full throttle for empire expansion – most of which was done by companies .I imagine the Chinese leadership wants to harness the power of capitalism without risking becoming dependent on, and then abandoned by, mega companies .

    A world government to protect us from amoral growth maximisation would be good. Because of carbon a green one is needed now.

  71. I agree with you, Vegetarian, Ernestine hit the nail on the head in recognising that the world operates on neither Keynes nor efficient markets, it operates on a hybride system as JQ has also identified on a number of occasions. To JQ’s credit he has many times sought input for alternative economic thinking.

    We are in desperate need for a new economic definition that optimises for public well being, market performance, environmental stability, and sustainability.

    I do not see any attempt to find a “unified economic theory”. There is another thrash around of the old arguments going on here

    I haven’t delved heavily into the arguments but at first glance it is the usual samo-samo, no new insights.

    So hows about it economic thinkers? Lock away your Marx, Keynes, Hayek and your Friedman. Clean sheet of paper. What are the fundamentals for sustained economies to be stable, energetic, fair, and robust in a climate shifting world?

    This should not be about dumping everything that we have, it is principally about bringing the political narrative to a more common focal point in order to minimise the extreme waste we experience with every change of government.

    As Ernestine Gross points out, the public intuitively knows what is right and fair. We need new words for our politicians to use to reflect those that everyone else use, AND as JQ also suggests in the header.

  72. Brilliant analysis (in The Guardian) as usual, Professor, thanks very much.

    The political class just doesn’t get it.

  73. @J-D

    Interesting. This is worth a read:

    Jenni Newton-Farrelly: The Fairness Clause In South Australia

    j_d: “the inexorable growth of metropolitan Adelaide was spreading into electoral districts into electoral districts which had once been predominantly agricultural and fundamentally transforming their demographic character”

    Also relevant were Playford’s SA development policies, which had directly parachuted large numbers of Labor-supporting skilled workers from other states into regional and rural districts…

    The LCL had identified those issues in the very early sixties, and I’m pretty sure they played some part in getting Walsh/Dunstan into power in the mid-sixties in the first place.

    But I’m inclined at this stage to believe both versions of events. It doesn’t come across to me as an either-or equation.

    Faced with huge public backlash, as well as Governor Bastyan strongly advising both parties work bilaterally to sort things out…

    …and seeing the longer term realities of changing demographics in SA, and the writing on the wall for the LCL if it refused for much longer to move with the times.

    That said, I don’t believe Hall thought ‘the LCL was certain to lose in 1970’ without electoral reform, and I can’t find any evidence to support that view. Since Labor won in 1970 with a reduced first preference vote, but a 7 seat majority compared to the previous hung parliament under the 1955 boundaries – if indeed Hall had thought that the LCL would benefit in 1970 from the changes, he badly miscalculated to say the least.

  74. Btw, j_d, let’s take this to sandpit if you want to continue shall we? I really like JQ’s post and everyone’s commentary, and don’t wish to derail it any further…

  75. Face, palm, *ouch!*
    That was my reaction to hearing PM Tony Abbott on the TV, waving away Koch’s question about misleading voters and breaking promises; Abbott said he didn’t accept the premise of the question at all (about misleading voters prior to the election). He then went on to explain how the GP co-payment was extensively discussed before the budget. Koch interjected, saying “But not before the election…” and Abbott just re-iterated how there was ample discussion before the budget, blah, blah, blah. The budget was in May 2014, the election in Sep 2013: Sheesh!

    How can you reason with someone who categorically denies all the facts before them? The transcripts of their own words? Honestly, this current government is unforgivable: I hold the Liberal party directly responsible for this trammelling of Australia’s political system, and I am not in a forgiving mood.

  76. @Donald Oats

    How can you reason with someone who categorically denies all the facts before them?

    You can’t. There are people loose in the world who are sociopaths, psychopaths and otherwise in possession of a personality disorder. Some of the most cunning are narcissists. My view is that in specific epochs certain human subjectivities are more advantageous than others. In pre-industrial periods, when communal sharing was a valued personal ability, then those capable of sharing and other communal values flourished.

    The current neo-liberal epoch, which may indeed herald the end of history, is one in which the psychologically deranged flourish. Hence Abbott and Morrisson, Hunt and Pyne, Hockey and Bishop and so on including the barking mad religious right.

    There is no cure or political manoeuvre that can rid us of this pestilence of the privately educated, privileged and deranged class.

    The trick to dealing with the personality disordered is to set boundaries and vigorously tend them. They need to have their heads kicked until such time as they retreat into private life.

  77. @Donald Oats
    “How can you reason with someone who categorically denies all the facts before them?”
    You keep slashing until their arms and legs are gone. Monty Python’s black knight is the perfect metaphor of Tony Abbott and I think he is balancing on bleeding thigh stumps ATM.
    He refuses to see how ridiculous he has become. Even worse is that 38% of the electorate still refuse to see it.

  78. @Salient Green
    Indeed: “’Tis but a scratch.”

    Still, he has the scrappiness of a junkyard brawler, so he is not to be counted out of the fight: biting, gouging, scratching, the low blow—heck, even making the floor slippery by bleeding—all are tools of trade for this midnight mauler.

  79. Salient Green :
    @Donald Oats
    Even worse is that 38% of the electorate still refuse to see it.

    It’s truly amazing that anyone could still support the LNP. Really the only things they’ve done is (possibly) “stop the boats”, as if stopping a few desperate refugees wash akin to saving us from the Mogul hoards, and reversing previous government policies that (a) raised revenue and (b) demonstrably cut emissions. Weird.

  80. @Fran Barlow
    I note your fullish commentary on “The Glugs of Gosh” and the underlining sentiment therein.
    I appreciate how you would find it tedious: it scans and rhymes, an old fashioned skill; and is thus death in the eyes of the modern poetry critic.
    Furthermore, it’s funny – it’s a joke with a message; a satirical cartoon. Poetry has to be serious.
    For those with a short attention span, tedium can be relieved by taking the book one poem a day for a fortnight.
    For readers not familiar with the Glugs or mired in negativity, Dr Lyn Gallacher (PhD, English Lit), ABC Radio National presenter of The Book Show might change your mind at:
    and download the audio.

  81. Adding to the question of broken promises, we could also start a list of ones they’ve made after the election…and broken since then. Now that PM Tony Abbott has dumped the GP $7 copayment and introduced a reduction in the medicare payment by $5, allowing GP’s to recoup it on a discretionary basis, where does the money to fund the $20 billion dollar medical research centre(s) come from? In the above linked article, PM Abbott is complaining about the need to improve the budget as his justification for introducing the $5 cut to the medicare rebate for GP visits, but that leaves the medical research fund hanging. So, which lie is it, which lie is being broken now? My head spins trying to keep up with it all.

  82. Jungney and Donakd Oats, those comments (43 >) frame the leadership situation perfectly there is little more that can really be said. Thanks for you observations.

  83. It would be good to get a clear statement of what they hope to achieve with this additional “price signal”.
    Maybe there’s a member of the rabble which now occupies the Treasury benches who is honest enough to admit they want to destroy bulk billing.

  84. It is pretty obvious, Zoot, that they are attempting to throw the blame for the funding cuts onto doctors who have the “option” of absorbing the cut themselves and maintain pricing to the public or operate a 2 tier pricing programme with a cheaper price for the disadvantaged and a higher price for everyone else. Or, most likely, just slug everyone the same, and take the blame for being greedy.

  85. @zoot
    My daughter spent a year in the US and to be fair to their health system, Americans are poisoning themselves through what is loosely described as ‘food’. Large swathes of the population practically live on processed and fast food.

  86. @John Brookes
    As doctors have quickly pointed out, there is a cost to their collection of the $5 from the patient, so they will possibly add a charge—to the patient—to cover that additional cost. The alternative is to see more patients per standardised day, but wait, didn’t PM Tony Abbott say this would increase doctor-patient time? This whole thing strikes me as a political calculation and not a financial one.

  87. @Salient Green Thats not necessarily by choice – fast food is often cheaper than home cooked and for those working long hours and who live out of town it’s often the only way a family can be fed – the family eats in the car en route. To keep prices down some “restaurants” serve meals that are largely pre cooked ie they open packets and assemble product on a plate.

  88. @rog Thanks for adding weight to my point that the American health system is pissing into the wind. Trying to brake a car with the throttle fully open is another metaphor.
    The wind and the open throttle being population growth, consumption growth, eating poor food, taking too many medicines, gambling, lack of jobs, poor education.

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