… 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.
John Quiggin 
“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.
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.
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…
In complete agreement with John and Newtownian
@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.
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.
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.
@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.
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.
@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.
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?
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.
@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.
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.
@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.
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.
@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.
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.
@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.
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.
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.
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.
re: the public service senior echelons – don’t forget michael pusey’s work. -a.v.
@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.
@Donald Oats
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!:
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.
$190 for a bottle of wine.
Just imagine if we were still in the Age of Entitlement…
@Donald Oats
Not to mention the $98 T-Bone steak.
It really is the end of enlightenment.
@alfred venison
Pusey’s work “Economic Rationalism In Canberra” is the greatest intellectual work by an Australian. Nothing else comes near it.
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.
You want austerity, we got austerity
http://www.abs.gov.au/ausstats/abs@.nsf/mf/5206.0
Real net national disposable income
Trend -0.1
Seasonally adjusted -0.3
Cutting spending does not increase growth
@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.
@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.
@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.
@Geoff Andrews
It’s actually a rather tedious and obscure piece though here and there one finds some quite artful use of language.
“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.
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”.
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.
@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.
@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.
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.
@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.)
@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.
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.
@Megan
To steal from history, “Let them eat steak.”
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.
@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.
@Ikonoclast
Oops, my bad.
@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.
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.