Paul Krugman proposes his economic plan for the US. As he says, it’s not rocket science. He plans to supplement expansionary monetary policy with $100 billion of short-term fiscal stimulus, offset by a scrapping of the long-term tax cuts proposed by Bush.

Given the increasingly alarming parallels with Japan though, it’s worth observing that Japan did much of this. The big problem has been the failure to tackle the corrupt and debt-laden financial system. I’d say the US needs something much the same – a sharp tightening of financial standards and some big bankruptcies among financial institutions – before there will be a sustained recovery.

Science fiction writer and right-wing commentator Jerry Pournelle has some interesting thoughts on the decline of the US labor market for less-skilled workers. He links to the NYT piece on the growth in disability benefits I flagged a couple of weeks ago in the Fin. I don’t share his IQ determinism, but this isn’t central to the argument. The case would be even stronger if ‘human capital’ (innate ability plus education & training) were used instead. (Thanks to Peter Lawrence for alerting me to this).

Liberal MP Julie Bishop backs the IMF push for a top marginal tax rate of 30 per cent. Actually, given the way these things work, it’s more likely to be an ambit claim from within the ‘official family’ (Treasury, Treasurer’s Office and RBA) than a suggestion originating from the IMF itself. Ken Parish has already put up a substantial critique, as well as proposing more work for me in the form of an estimate of the revenue cost (I’ll do it soon, I promise!).

There’s only one thing left to bug me. In my interview with Terry Lane on the National Interest, I said that the incentive case for lower tax rates was nonsense and that a stronger argument was that based on the claim that high tax rates promoted tax avoidance. Sure enough, this was the point Julie Bishop ran with. I don’t know if she was listening but, if so, she obviously missed my observation that New Zealand had tried a 30 per cent top marginal rate, found it did no good, and abandoned it.

2 million voters have selected the World’s funniest joke

Steven Den Beste argues that US opposition to the International Criminal Court reflects attachment to the Bill of Rights. If den Beste is worried about attacks on the Bill of Rights (which is undoubtedly one of the key documents in the history of democracy) surely he could look a little closer to home. As I understand the position of the Bush administration, anyone in the world, including US citizens living in America, can be declared an ‘enemy combatant’, seized and held incommunicado and without trial indefinitely, inside or outside the US. At one point, the government was also claiming the right to execute such ‘combatants’ after a ‘trial’ by a special court with no requirement to adhere to any notion of due process. I’m not sure if this is still the case, but current US reality is far worse than anything that has been imagined about hypothetical abuses by the ICC.

In a recent post on the concession of failure by Czech free-marketeer Vaclav Klaus, I made the bald assertion that the neoliberal program has failed in New Zealand, the United Kingdom, Eastern Europe and, most recently, in its heartland, the United States. Naturally, the comment thread was full of challenges and queries. No-one had the nerve to challenge my judgement on New Zealand, but the others were controversial. Ken Parish raised questions about the US. John Ray asked about the view, which he attributes to discredited Blair spin-doctor Peter Manderson that ‘we are all Thatcherites now” And someone with the imaginative pseudonym ‘Anonymous’ asked the question on everyone’s lips ‘What about Estonia?’.
To start with the last question first, I don’t claim to be an expert on Estonia, though I know that it has pursued a more free-market policy than other Eastern European countries. A quick Google search reveals the news that Unemployment in Estonia reached 14.2 percent in the first quarter, up by 0.6 percent year-on-year. More to the point, Estonia, like the Czech Republic, is lining up to join the European Union. As Vaclav Klaus notes, this means signing up for the EU social charter and becoming a social democracy. Anonymous and others can live in hope that EU enlargement will trip over the various obstacles in its path (Cyprus) or that the voters of Estonia will prefer free-market ideology to European citizenship, but I think its safe to say that Estonian neoliberalism is on its deathbed.
As regards the UK, I have pointed out on a number of occasions that, while Tony Blair came to office advocating a version of the Third Way that amounted to little more than “Thatcherism with a human face”, his government has gradually reverted to traditional social democracy, raising taxes in the last budget and, more recently, breaking the taboo against mentioning redistribution. All that is left of the Third Way is the Public Finance Initiative, and this sorry excuse for a public investment policy cannot last much longer.
Finally, there is the United States. A couple of years ago, when the unemployment rate there was 3.9 per cent, I observed that the debate between social democracy and neoliberalism turned on whether this exceptionally good performance could be sustained. This question has been resolved in the negative. Even assuming a sustained recovery in the US (most unlikely in my view), it is now clear that there is little if any payoff, in terms of employment and social mobility, for the massive inequality and poverty generated by neoliberalism in the US.

Update My view that Blair’s Third Way is dead is developed further here, here, and here, and has been endorsed by publications as disparate as The Guardian and The Telegraph. I couldn’t find a really good link for the Telegraph, but this interview with the self-described “last Blairite in the Cabinet” indicates the prevalence of the view I’ve been putting since the middle of 2001.

A good day at The Hague

My paper presented at the Economists’ Conference in Adelaide, entitled “Looking back on microeconomic reform”.
Warning 1: This is a PDF file
Warning 2: Not quite the final version

Tim Blair reveals himself as willing to kowtow to the United Nations rather than accept the rightful verdict of last Saturday.

Peter Fitzsimons puts the boot into ‘eggheads’ who sneer at sport. But are there any examples of this species left? As a leftwing intellectual, I move in fairly ovoid circles*, and I haven’t run across a good example of an anti-sport sneer for at least a decade. The big line in recent years has been “What about us?” claims for equal time. Feminists have successfully shamed the TV networks, particularly the ABC, into covering netball as heavily as football (give me WNBL any day, but each to their own). Meanwhile, the egghead lobby is trying the same thing, arguing that we should be cheering just as loudly for our gallant Aussie solar energy researchers/heart surgeons/postmodernist literary critics as for the Wallabies and Kangaroos. As we’ve seen in the blogosphere, if anybody will be sneering at Sunday’s rugby league grand final, it will be the more bigoted followers of AFL and Union.
*Yes, you can draw a circle on an egg