The end of the PFI

John Quiggin16 Comments

The long-running Brexit fiasco has overshadowed most news coming out of the United Kingdom these days. It’s not surprising, therefore, that hardly any attention was paid to news that may be of more long-term economic significance to Australia, and to the current crisis of neoliberalism, than a rearrangement of relations between the UK and the European Union.

In the Budget brought down in late October, UK Chancellor of the Exchequer, Phillip Hammond announced the end of the Public Finance Initiative (PFI). The PFI was introduced by the Conservative government of John Major in 1992, and greatly expanded under Tony Blair’s New Labour government. The PFI provides a financial framework for Public-Private Partnerships, which have their own acronym, PPPs.
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Adani

John Quiggin5 Comments

Adani Mining announced today that its scaled-down Carmichael mine project would proceed without any external funding. Before considering reactions, it’s important to recall causes for scepticism.

First, Adani has repeatedly announced the imminent start of the project, while doing little or nothing. It is possible that this announcement will be followed by months, or even years, of “pre-construction activity” during which the project is kept alive with minimal expenditure from Adani.

Second, the economics of the project are as bad as they have ever been. Thermal coal prices have declined in recent months, especially following China’s decision to freeze imports. If China gets through the winter without significant problems, it is likely that the decline will be permanent. Even if it isn’t, the discount on low-quality coal =of the kind found in the Galilee Basin is rising all the time.

Third, the failure to secure any external finance for the project is significant. Most of the big lenders have now sworn off thermal coal altogether, but if there were real money to be made here, some second-tier institution would probably have gone for it.

So, it would make sense to wait for a while to see what develops. Still, we need to be prepared for a decision on whether Australia is going to back a future for coal, and destruction for the global environment or a moratorium on new mines. Labor under Bill Shorten has been surprisingly brave on issues like tax, and our Trumpist government is in a complete mess. A strong stand would be a huge step towards a better future.

No enemies to the right?

John Quiggin55 Comments

Anthony Albanese has a piece in the #Ozfail (not linked) restating standard [1] claims that political life is increasingly characterized by echo chambers and that we ought to make more of an effort to engage with those whose views differ from ours.

He mentions, as example of the dire consequences of not doing this, some international examples

this polarisation in global politics has seen the demise of many of the historically successful progressive political parties such as France’s Socialist Party, PASOK in Greece, the Partito Democratico in Italy, the Social Democrats in Germany and many other affiliates of the Socialist International.

In many countries, parties of the radical Right have emerged with disillusioned working-class people as their social base.

What’s striking about this list is that most of the examples lost votes at least as much to parties on their left, which rejected their complicity in austerity: Syriza in Greece, Melenchon’s la France Insoumise, and the Greens in Germany and the Netherlands. Yet there’s no hint in Albanese’s article that the centre-left needs to be open to the views of such groups and their supporters: apparently, we need to be talking to the supporters of Golden Dawn, Le Pen, AfD and so on.

Albanese’s position in Australian politics is exactly the same. He’s happy to talk to Andrew Bolt and the Oz in the interests of an open debate, but as far as I know he has never had a good word to say about the Greens, let along sought to open a dialogue with them. Apparently some alternative views are more equal than others.

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Fiddling while Queensland burns

John Quiggin11 Comments

The circus that is the Liberal National Party was pushed down the Queensland TV news today by bushfires, caused in turn by an unprecedented heat wave. There’s little doubt that the severity of the heat wave is the result of global warming, and that it’s part of a broader pattern. The two events are, of course, linked. The chaos in the LNP reflects the determination of the climate deniers in its ranks to reject any action to reduce greenhouse emissions.

None of these people are acting in good faith, or on the basis of a sceptical assessment of evidence. Without exception, their rejection of climate science and the policies it implies is based on a combination of vested interests zndpursuit of a culture war against “greenies”, “virtue signallers” and anyone who wants to do anything to save the planet. There is literally no evidence that can move them from their position, and they would rather see the planet destroyed than admit their errors.

There’s plenty of blame to go around here, but today I’ll call out Ken O’Dowd, the federal member for Flynn, where the worst fires are burning. Flynn is an advocate of withdrawal from the Paris agreement. He’d rather see his electorate burn than admit that climate change is a reality and that we need action now.

With notably rare exceptions[1]

John Quiggin6 Comments

One of the arguments being pushed by those on the political right seeking to downplay the Victorian election outcome is that Australian state governments generally get a second term. A look over the period since 1990, however, brings up  several exceptions to that rule. Here’s my list:

Borbidge (Queensland), Baillieu-Napthine (Victoria), Newman (Queensland),Mills-Giles (NT)

For the “second-term” argument to work in downplaying the result, more is needed. It has to be the case that, having won a second term, governments mostly fail to get a third.  Here’s a list [1] of instances where two-term governments have been defeated.

Groom-Rundle (Tasmania), Greiner-Fahey (NSW), Kennett (Victoria), Carnell-Humphries (ACT), Court, Gallop-Carpenter, Barnett (WA), Martin-Henderson (NT)

Eagle-eyed readers will notice that all of the exceptions in the first list were conservatives, while only two of the confirming instances in the second list were Labor.

With a limited data set, it’s easy to support a wide range of conclusions. Still if conservative commentators want to use historical patterns to argue that, having easily won a second term, Daniel Andrews is on track to lose next time, I think they’re dreaming.

 

fn1.  This is a moderately famous Internet meme, coined by Alan Greenspan

fn2. One might arguably add the Goss government in Queensland, which won the 1995 election, but lost office after a by-election required by the Court of Disputed Returns.

 

 

 

A state election outcome with global implications ?

John Quiggin20 Comments

After any state election with a decisive outcome, partisan analysis shows a predictable pattern. On the losing side, the state party blames its federal counterpart, while the feds say that the election was decided on state issues. On the winning side, there is generally enough credit to go around, with the state party basking in success, while the federal party (particularly if it is in opposition) points to the outcome as a “message to Canberra”.

The recent Victorian election is, I think, rather different. That’s because, on the conservative side at least, the usual state-based issues (health, education, roads) were disregarded in favour of a culture war campaign almost identical to that being run by the Morrison government at the national level and by the political right globally. Notable examples were an overtly racist law and order campaign, a revival of the drug war, and proposals for publicly funded coal-fired power stations aimed at appealing to climate science denialists. Guy’s slogan “get back in control” could just as well have been used by Donald Trump, or by the rightwing advocates of Brexit.

The stunning rejection of Guy’s campaign gives some hope that Australian voters will not fall for this. In part, that’s because Labor ran on its traditional strength at the state level. But the outcome was very similar to Morrison’s drubbing in the Wentworth by-election, where the state level advantage didn’t apply.

It’s only one election, but it’s one of a number, notably including the recent US midterms, where the supposed irresistible force of rightwing identity politics has proved to be not so irresistible after all. It’s too early to start cheering, but it now looks possible that, in a few years time, the whole rightwing upsurge will prove to have been the final spasm of the losing side in the culture wars. The question then will be how to build a better world from the mess we will inherit.

Bitcoin’s belated bust

John Quiggin21 Comments

It’s been quite a big week in cryptocurrency markets. The price of Bitcoin has fallen close to $4000, down from a peak of nearly $20 000.

As a longstanding sceptic of cryptocurrencies, it might be thought that I would be taking a victory lap. After all, I have previously written that “Bitcoins will attain their true value of zero sooner or later, but it is impossible to say when.” With the Bitcoin price having fallen by 75 per cent, it might seem that my prediction is well on the way to being justified.

Unfortunately, the second part of my statement, about the impossibility of predicting timing has been proved definitively correct.. I wrote this in 2013 when Bitcoins were valued at around $100, and the total market capitalization was a mere billion dollars. A single wealthy individual could have driven the price to zero by short-selling.

Five years later, and despite the price collapse of the past few months, Bitcoins are selling at nearly 50 times the price I criticized as excessive. Moreover, as cryptocurrencies have proliferated, Bitcoin now constitutes only a fraction of the total market. The capitalization of the cryptocurrency market as a whole is fluctuating still close to $100 billion.

Yet this massive valuation is built on nothing. The idea that Bitcoin, or any of its competitors will provide a new and superior means for buying and selling goods and services has been tested to destruction. Nearly a decade after the currency was launched, the use of Bitcoin in purchases is modest, and rapidly declining.

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