The LNP-ONP coalition

After the election results came in, I posted about the implications for the Turnbull government of dealing with One Nation as if it were a normal and legitimate political party.

It seems likely, however, that Turnbull is going to treat One Nation, for the first time in Australia, as a normal political party, and to negotiate with Hanson as an equal. That would be a new low for him, and for Australia. And, sooner or later, it will come back to bit him and the LNP. For an object lesson in the dangers of courting racist votes while maintaining a claim to be non-racist, he need only look at the US Republican party,

It is already clear that this analysis fell far short of the mark. Far from being “just another minor party”, One Nation has become a semi-formal member of the LNP Coalition and part of the dominant rightwing grouping within that coalition. The two most striking developments, among many, are
* The decision of the Queensland LNP to preference One Nation ahead of Labor . This is unusual in itself, given that no election is in prospect any time soon and a radical reversal of the pre-election position of putting One Nation last[1]
* The alliance between One Nation and the LNP right to promote a change to hate speech laws, allowing racial speech that “offends” or “insults” the target.
I remain convinced that this will prove a path to disaster for the LNP in the long run, but it could do a great deal of damage to Australia while the LNP-ONP coalition remains in office.

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After neoliberalism: a snippet

Over the fold, some concluding comments from a chapter I’ve written about the rise and decline of neoliberalism. I’m drawing on the “three-party system” analysis I’ve put forward before, in which neoliberalism (in both ‘hard’ and ‘soft’ forms) is increasingly breaking down under pressure from tribalists on the right, and from an amorphous, but still resurgent left.

This is just a snippet, which I hope will evolve into a more extensive discussion of the policies and political strategies the left should adopt in response to the breakdown of the neoliberal order.

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An offer he can’t accept

Now that the Greens and Xenophon group have rejected the idea of a plebiscite, the only chance of getting one through is if Bill Shorten agrees. Turnbull obviously hopes to wedge Labor on this, by saying that this is the only way of getting equal marriage through the Parliament, and that there is no way he will allow a free vote on the issue. What should Shorten do?

In my (not original) view, Shorten should announce support for a binding plebiscite beginning with a bound vote of both parties. That is, the Parliament should pass legislation stating that equal marriage will come into effect immediately on receiving majority support in a plebiscite. Labor’s support should be conditional on all Coalition MPs voting for the legislation.

It’s obviously unlikely that Turnbull would accept such an offer or that he could deliver on it if he did. So, the primary effect would be to point up the bogus nature of the proposed plebiscite. But, supposing he did accept, I don’t see that this would be a disaster. There’s no fundamental principle that plebiscites are a bad way of deciding things. And the whole idea of a splecial “free vote” makes it clear that this set of issues has always been regarded as exceptional,

It’s true that the campaign over a plebiscite would be divisive. But this has been a divisive issue ever since Howard ramped it up more than a decade ago. An outright win at a plebiscite might be a good way of silencing the haters.

To repeat, though, there’s almost zero chance of a plebiscite happening on these terms. For Turnbull, it’s an offer he can’t accept.

Nitpicking on nominal GDP targeting

Writing in the AFR, economics correspondent Jacob Greber begins his discussion of the Xenophon proposal with the assessment “What a stupid idea”. Given that he is dismissing proposals with wide support in the economics profession (including economists as different as me and Warwick McKibbin in the Australian context) one would expect that he had a knockdown argument to present. In fact, he offers a valid, but minor nitpick and a string of confusions and errors.

The nitpick relates to the distinction between nominal GDP growth, as reported by ABS, and the way the term is commonly used in the context of monetary policy discussion, to refer to the sum of the inflation rate and the real rate of GDP growth. Inflation is typically measured by the CPI. However, the statistical nominal GDP is associated with a different inflation measure, the GDP deflator, which is heavily influenced by export prices. So, a policy that targeted the statistical measure would imply trying to reduce growth when export prices boomed, and increase growth when they fell. In most times and places, the difference is too trivial to matter, but in the context of the recent minerals boom in Australia, it was substantial. So, I’d suggest we really want to use the phrase “nominal growth targeting” with nominal growth spelt out as the sum of CPI inflation and real GDP growth.

After that valid point, we have a mess of confusions and contradictions. First, Greber objects to Xenophon’s proposal on the basis that it would push up housing prices. If this is to be taken seriously, it means that the RBA should be targeting asset prices as well as CPI inflation. While there’s a good case to be made here (I discussed the issues in a paper with Stephen Bell quite a while back) it contradicts the central claim that everything is fine with inflation rate targeting.

Making the contradictions even worse, Greber notes that inflation has been well below the target range for some time. That is, under an inflation targeting system, the Reserve Bank should be cutting rates. But Greber appears to oppose this, while conceding that “To be fair, there is a legitimate debate to be had about how far and for how long inflation should range outside the current band”. In this context, the question of a shift to nominal growth targeting is a red herring. Real growth (about 2 per cent) is only marginally below the likely long term trend (2.5 per cent), so a monetary policy that targeted both growth and inflation would, if anything, be a little less expansionary than a strict inflation target

The obvious problem being ducked here is that, if the RBA sticks to inflation targeting, it may well have to cut interest rates all the way to zero, as most other central banks have already done. So, the temptation is to accept a long period when we are below the target rate. But that, in effect, is switching from a 2-3 per cent target to a 0-3 target, something for which no real justification has been given.

Like Bernard Keane and Glenn Dyer to whom I responded previously, Greber makes much of Australia’s special circumstances, treating nominal GDP targeting as (to quote Keane and Dyer) as “a foreign solution”. This piece of economic exceptionalism is surprising coming from a haven of orthodoxy like the AFR, and even more surprising in the context of monetary policy. Inflation targeting, central bank contracts and 25-basis point interest rate adjustments aren’t Australian inventions. We adopted this approach at the same time as the rest of the world and for the same reasons. We’ve had much better outcomes as Greber notes, but there’s nothing to suggest that inflation targeting is the main reason.

On the contrary, inflation targeting has evidently failed nearly everywhere in the developed world, in at least three ways
* it has not kept inflation within the target range
* interest rates have been driven to zero or below, so that “emergency measures” like reliance on open market operations now appear to be permanent fixtures
* it has not delivered on the promise that targeting inflation would also deliver stable GDP growth

The first of these problems is already evident in Australia, and the second appears imminent. We should think twice before saying that, since nothing has gone badly wrong so far, we should stick with our existing policy framework.

Greg Jericho in The Guardian has some similar thoughts.

Same old, same old on university places

Another day, another article complaining that we have too many young people going to university. I’ll pick this one by Nicholas Stuart, not because it’s particularly good or bad, but because it covers all the main points. Then I’ll ask, the following question:

If you substitute the word “Menzies” for “Dawkins”, is there anything in the article that wasn’t being said 50 years ago, when the proportion of young people going to university was about a quarter of what it is now (that’s a guess, which I’ll try to correct when I get time)?

I’m reaching back to my childhood here,so I can’t remember when I first heard these points being raised. But the way in which they were discussed made it clear they were cliches even them. Those points include massification, dropout rates (higher then than now, I think) the large numbers of graduates doing jobs that didn’t require a degree (Arts graduates driving taxis was the standard example back then), the merits of getting a trade instead of a degree, the role of the university as part of the capitalist system and the corrupting effects of Commonwealth money.