Failing upwards

I’ve been busy finishing the manuscript of my book, and dealing with policy issues as they came up, so I haven’t paid a lot of attention to the Liberal leadership saga. One thing that strikes me is that Josh Frydenberg has had exceptionally favorable coverage, apparently on the basis that he’s likable and popular. That’s fine, but if you’re going to appoint someone as Treasurer, shouldn’t a successful track record be a necessary (though not sufficient) condition? Morrison, for example, had a political success in stopping the boats (whatever the morality of the policy) and was generally seen as a successful Social Services minister (unlike his successor, who messed up the robodebt program). He didn’t impress as Treasurer, but at least his previous career justified giving him a go. And while he looks underqualified as PM, the alternatives were even worse[1].

Frydenberg has essentially had one ministerial job, covering environment and energy (though with various titles and temporary add-ons like Northern Australia). In this capacity, his big contribution was the National Energy Guarantee. It was a terrible policy, made necessary by the failure of Turnbull and Frydenberg to face down the denialists in the government. Designed to be all things to all people, it ended up being nothing to nobody. Frydenberg’s failure to secure agreement on the NEG was the proximate cause of Turnbull’s downfall as PM, and the policy was promptly abandoned the moment Morrison took over. In what possible world is this a basis for promotion?


fn1. Bishop was ruled out on tribal grounds. Her weakness as Treasury spokesman years ago was also held against her, even though she wasn’t obviously worse (in retrospect) than Morrison, and much better than Hockey. About Dutton, the less said the better. After that, it’s daylight.

A deliberative Parliament in NSW

Talk about “hung parliaments” always presses my hot buttons. It’s coming up in relation to the NSW elections due in March, and will doubtless re-emerge when the next national election is called, unless it looks like an obvious walkover. As I’ve said many times, the term, derived by analogy from “hung jury” rests on the presumption that a Parliament without  a majority for either Labor or the L-NP coalition is incapable of governing properly. Experience suggests the opposite. A majority government is effectively at the command of the PM or Premier, and the only remedy, between elections, is the one we have just seen applied by Turnbull. Governments forced to negotiate passage of legislation with independents or minor parties have generally behaved better.

In the specific case of NSW, the silliness is amplified because the outcome can be predicted, fairly safely, in advance. There are currently three Greens, a left-leaning independent, a Shooter, and two conservative independents. If Labor wins more seats than the LNP, they will form a government with the support of the Greens and (if needed) the left independent. If The LNP win more they can almost certainly cut a deal with the Shooters and rely on the conservative independents (possibly putting one up as Speaker).  Readers won’t be surprised to learn that the best outcome from my point of view would be a Labor government with Green support.

Reality, not greenies, the enemy of irrigation expansion

That’s the title of my latest piece in The Guardian, responding to a Matt Canavan spray against critics of a recent CSIRO report canvassing options for expanded irrigation in Northern Australia. Interestingly, although Canavan comes across as a typical North Queensland developmentalist (for whom I would have some sympathy) he’s actually from the South-East corner, a UQ economics graduate and a former senior official of the Productivity Commission. Ten years ago, he’d have been debunking CSIRO in exactly the way I do in my report.

After my piece came out, there was a bit of a kerfuffle on Twitter over whether CSIRO had really proposed a dam on the Fitzroy. Their report didn’t do any new analysis of major dams (a point they stressed) but dusted off a couple of existing proposals, then did a more detailed analysis of a plan based on one or more smaller (25 GL or more) dams. None of them were economically sound, except when the magic of regional input-output multipliers was invoked.

Time to join the generation game?

As regular readers will know, I’ve spent a generation or more [1] deriding what I call the generation game – the idea of dividing the population up into birth cohorts (categories based on year of birth) such as Boomers, X-ers and so on (Millennials weren’t invented when I started) and assigning them various supposed characteristics.  Most of the time, this exercise is little better than astrology. To the extent that there is any semblance to reality it simply reflects the fact that young people are, and always have been, different from old people.

But just as I have managed to get some traction with this idea, genuine cohort effects have emerged in politics in many countries. The sharpest case is Britain, where people over 65 voted massively for Brexit in the referendum and the Conservatives in the recent election, while those aged 18-24 went even more sharply the other way. As the map linked here shows, if only 18-24 year olds were voting, based on current polling data, the Conservatives would not have won a single seat. If only those over 65 voted, the Conservatives would win 575 and the combined opposition 54.

This is a massive difference and can’t as far as I can tell be explained by differences in education, ethnic composition and so forth.  It also represents a huge shift on the part of older cohorts, who were part of the electorate that gave Labour three terms not long ago. While there is some tendency for people to become more conservative as they age, it’s normally much more limited than this.

The explanation in simple terms, is Brexit. Most of the time, elections involving competing visions of the future – in the UK case, hard-line neoliberalism vs Third Way Blairism.  In the course of such debates, both sides routinely claim to be on the right side of history, to own the future and so on. By contrast, Brexit represented an appeal to a (partly imaginary) past, against the present and the future. With the exception of a handful of neoliberal ideologues, who saw Brexit as a path to a free-market future, most Leavers were motivated by nostalgia for the glories of the past, and were willing to sacrifice the interests of the young to make a gesture in that direction.

What’s true of Brexit is true, though not to quite the same extent, of the culture war politics that have now become dominant on the political right in much of the English-speaking world. It’s driven in large measure by old men who lost the cultural battles of the 1960s and 1970s, and have never got over the fact.

The result is a situation where the right is appealing directly to members of older age cohorts with the result that younger cohorts are moving left.  The most immediate effect has been to wipe out the support base of centrists of the Blair-Clinton-Keating type, who fail to appeal to either group

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Prebutting the CIS: Lifters and leaners, yet again

Robert Carling of the Centre for Independent Studies has just released a paper, with the title “Voting for a Living“, an even more offensive reprise of Joe Hockey’s “lifters and leaners” rhetoric of a few years ago. The Oz (no link) ran a report by  with the opening claim

The top fifth of households by ­income are almost entirely supporting the bottom 60 per cent of earners

Of course, this is absurd. The actual CIS paper centres on the fact that 60 per cent of the population receive more in benefits and public services like health and education than they pay in taxes, while the top 20 per cent pay more in taxes than they get back. The claim then is that the parasitic 60 per cent are voting for a redistributive state. That’s a long way from “almost entirely supporting”.

If this sounds familiar it’s because  Creighton made almost identical claims in 2014. I rebutted them at the time, in a piece for the Guardian. The key point is that,  since government spending and taxation must be approximately equal[1], we collectively get back from government what we pay in, whether this takes the form of cash payments or public services. So, if services are provided more or less equally, those with an income below  (above) the mean will get back more (less) then they put in. Add in the fact that, thanks to income inequality, mean income is higher than median, and you get the Carling result automatically.

The current version of the paper extends the 2014 analysis in a couple of ways. First, it has a broader coverage of revenue (including GST) and expenditure (including health and education). Second, it includes a claim that the position of the median household has shifted since the 1980s, from being roughly in balance to being net recipients. However, a closer look suggests that all of this change occurred between 1983 and 1993 that is, under the Hawke-Keating government. And, since there’s no data before 1983, we can’t say much about longer term trends.

The other notable change is that the report is even clearer in stating that there is no legitimate basis for asking high income earners to contribute to society as a whole, for example to reduce income inequality.

Shorter Carling and Creighton:  High income earners pay more tax than everyone else and that’s bad.

All this contrasts strikingly with last week’s rightwing talking points, making much of the relatively limited growth of inequality in Australia due, almost entirely, to the redistributive policies introduced under Hawke and Keating. The Oz was all over this, and one of their sources was none other than Robert Carling


fn1. A couple of qualifications on this, which work in opposite directions. Some government spending  is financed by growth in debt and income other than taxes, which means that, on average, by the Carling calculation, we get back more then we pay. On the other hand, some spending categories, such as defence, aren’t included, which goes the other way.

The pension age is already high enough

In the light of Scott Morrison’s latest exercise in jettisoning unpopular commitments, in this case the proposal to raise the pension age to 70, I thought I would relink this piece on the Intergenerational Report, from the Abbott-Hockey era. The crucial observation is that, had the increase gone ahead, it would have cancelled out all of the increase in conditional life expectancy at pension age for women since the pension was introduced back in 1907, and most of the increase for men. The only real problem in retirement incomes policy is the lavish concessional treatment of superannuation.

Our financial system only works for the 1%. It will take another crash to fix it

That’s the title of my latest article in The Guardian. Opening paras

The royal commission into banks has uncovered fraud and misconduct on a massive scale, amounting to nearly $1bn and perhaps more. The usual defences of “bad apples” and “rogue advisers” have fallen apart as it becomes evident the problems are systemic, driven by relentless pressure from the top to maximise profits at all costs.

The royal commission into misconduct in the banking, superannuation and financial services industry has shown that dishonesty and sharp practice are endemic in the retail banking and finance sector. But if retail banking, involving direct personal contact with customers, is plagued with fraud and malpractice, what can we say about the wholesale criminality

A billion dollars sounds like a lot but it pales into insignificance compared to the repeated frauds that have been exposed in global financial markets, and the much greater volume that is almost certainly going undetected. Moreover, while misconduct in retail banking raises important issues of consumer protection, fraud in the broader financial system calls the entire market system into question.

Conclusion “We will probably have to wait for another crash before the power of the financial system can be tamed.”