A new sandpit for long side discussions, idees fixes and so on. Discussions about climate policy and related issues can be posted here, along with the usual things.
Monday Message Board
Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.
The Great War of 1911 (crosspost from Crooked Timber)
I recently read Time and Time Again by Ben Elton. It’s about a time traveller who returns to 1914 Europe, aiming to prevent the assassination of Archduke Franz Ferdinand, and, therefore, the Great War. Of course, the war isn’t prevented, and it turns out that there are vast numbers of timelines flowing from the summer of 1914, all more or less disastrous. This has inspired me to draft an alternate history I’ve long had in mind, where the War starts in 1911, as a result of the Agadir crisis.
I’ve changed the dates of some actual events, and the outcomes of some internal political debates, to bring more aggressive leaders and policies to the fore. I’ve also borrowed one improbable event from an earlier war. Still, the result seems to me no more improbable than the actual genesis of the War, beginning with the fatal wrong turn by Franz Ferdinand’s driver. Feel free to disagree, or to fill in some details of your own.
More reform threatened
The Turnbull government is apparently keen to undertake more reform, in this case applying to the welfare system. This weekend I saw a couple of media reports, unsourced but apparently based on material supplied by Social Services Minister Christian Porter, based on the “alarming” projection that welfare payments will rise from $154 billion to $270 billion in a decade, more than can be accounted for by inflation and population growth.
A huge dollar figure makes for a scary headline but not for sensible analysis. The prosaic facts underlying this projection are
(a) Welfare payments are dominated by the old age pension
(b) The value age pension increases in real terms over time, since it is linked to earnings
(c) Even allowing for an increased age of eligibility, and more reliance superannuation, the proportion of the population eligible for the old age pension is unlikely to fall
Put these facts together, and it’s virtually certain that the welfare bill will grow broadly in line with national income (usually measured by GDP), and therefore will outstrip growth in population and inflation. Indeed, a quick check suggests a compound rate of growth of about 6 per cent*, almost exactly in line with nominal GDP (assuming 3.5 per cent real growth and 2.5 per cent inflation).
The government’s proposed reforms appear to involve attacks on recipients of welfare in the popular media sense of the term (Jobstart, disability benefits and so on). But the only ways in which the growth rate of the welfare bill can be held much below that of GDP are
(i) Freeze the real value of age pensions, as has been done to Jobstart since the 1990s; or
(ii) Reduce access to the age pension, either by further raising the access age or by tigntening means and assets tests.
* Porter’s briefing apparently suggested 7 per cent, which I can’t replicate. Feel free to check.
Directional politics
A few Prime Ministers back, Australian politics seemed to be all about Western Sydney. On the conservative side of politics, unremarkable politicians who managed to win and hold former Labor electorates were lionised, while similar wins in other parts of the country were seen as part of the normal ebb and flow of electoral politics. On the Labor side, the region was invoked by the NSW Right (many of whom preferred not to live there) as the basis for its “aspirational” politics. This was all nonsense. The two million or so people who live in Western Sydney vary far more among themselves than they differ from the Australian population as a whole. To the extent that they have any sort of collective identity it hasn’t stopped large numbers of them for voting for (or, for that matter, against) governments led by silvertails from the North Shore, Northern Beaches and Eastern Suburbs.
But since the brief return of Kevin Rudd, the focus has shifted back to an area of more traditional concern: Northern Australia and its supposed need for development. I had hoped to see the end of this when Turnbull became PM, especially given the government’s fiscal woes. But sadly, this is not to be. Not only is the $5 billion development fund still alive, but we are getting stories about Turnbull’s plans to “unlock the North“.
As it happens, I’m in North Queensland right now, and I lived in Townsville for most of the 1990s. Like everyone else in the region I received a special “zone allowance” under the tax system to compensate me for living in a pleasant (if rather warm) coastal city with all the amenities that would be expected by a resident of, say, Newcastle or Wollongong. I understand that this allowance is still available. Nothing of the sort is on offer to people in poor suburbs or declining country towns in the rest of the country.
Like every other place in Australia, the North has plenty of unmet needs for services and, though to a much lesser extent than people seem to think, physical infrastructure. But it is in no sense “locked up”. There are road, rail and air transport links that meet the needs of the region with the same adequacy or lack of it as most other places in the country. Internet access is taken for granted in all but the remotest parts of the region. Ports, and transport links to them, are well developed to carry agricultural and mineral exports wherever they need to be sent. And so on.
Moreover, as with Western Sydney, the region has much the same diversity as the rest of the country, with a corresponding diversity of needs and wants. The cities of Rockhampton, Townsville, Cairns and Darwin differ as greatly from each other and from the rural areas they serve as they do from cities and regions in the rest of Australia.
We don’t need a Northern Australia policy any more than we need a Western Sydney policy. Public infrastructure projects should be assessed on the basis of their merits, and not their location. Private investment should be left to the commercial judgement of those involved. The $5 billion development fund should be rolled back into general revenue and used wherever it is most needed.
What the unions really need
As I observed here, the Trade Union Royal Commission has spent tens of millions of public money to show that the corrupt behavior of a number of Health Services Union officials is the exception rather than the rule. The payments made to a dozen or more TURC lawyers, after a ‘limited tender‘ process of very dubious propriety, far exceed the amounts involved in any of the handful of offences alleged in the Commission’s report.
But that’s not to say all is well with the Australian movement. The steady decline in union membership is mostly the result of external causes (the increased power of employers, a stream of anti-union laws, and so on), but the unions haven’t always helped their own cause.
Here are some changes I think are needed:
* Term limits for union officials. To take just two examples, Bill Ludwig has been Secretary of the Queensland AWU since 1988 while Joe DeBruyn was National Secretary of the SDA from 1978 to 2014. Both men used their entrenched position to exert political power within the Labor Party, in ways entirely unrelated to the interests and concerns of their members. Which brings me to:
* Ending affiliation with the Labor Party (or any political party). Bob Hawke recently pushed this idea as a way of freeing the ALP from the corrupting influence of the CFMEU. But the real problem is the other way around. The ALP, like most Australian political parties is a shell, controlled by factional chiefs, notably including union officials who control important blocks of votes. Obviously, someone whose main role is as a party apparatchik can hardly do a good job of representing workers
* Actual workplace experience for officials. Bill Ludwig was, at least for a few years, a pastoral worker before he was a union official. By contrast, Joe De Bruyn was one of the first representatives of a modern type – the career union official. He went to work in the SDA straight out of uni , getting the job on the basis of DLP political connections, and stayed there until he retired 40 years later.
Feel free to comment or offer your own suggestions.
Update A colleague tells me that, before devoting himself to the concerns of retail workers, Joe de Bruyn had a brief stint as an agricultural economist at the University of Sydney, where I also worked early in my career. Agricultural economics was a formative influence for quite a few Australian politicians, notably including John Dawkins and John Kerin, as well as many who became prominent in the public service and the broader economics profession.
The Australian exception (crosspost from Crooked Timber Piketty seminar)
Note I wrote two pieces in response to Piketty’s Capital . This one, on Australia, was based on one already published here, but I was asked to crosspost it and I’ve now done so.
What about the iceberg ?
The Trade Unions Royal Commission report, released in the dead news time between Christmas and New Year has had an extraordinarily soft reception from the media. After spending tens of millions of dollars of public money (not to mention the amount witnesses would have had to spend on legal representation) Dyson Heydon has come up with about a dozen allegations of criminal corruption. By far the largest is one involving his own former star witness, Kathy Jackson. Most of the others are for small amounts, some as minor as using the union credit card to get a tattoo.
Of course, it’s deplorable that the funds of union members should be misused for private purposes, and if the allegations turn out to be true, those involved should face the appropriate penalties. But compare these allegations to the routine behavior of members of Parliament. Under the “Minchin rule”, they can charge almost anything they like, with no penalty greater than being required to repay expenditures found to be unjustified. Even while Heydon’s inquiry was running, we saw revelations of misuse of public funds on both sides of politics, notably including senior figures in the government that launched this inquiry. And the situation in the business sector is no different.
Heydon’s other allegations are directed against union officials for the way they do their job. In this respect, the unions can’t win: the AWU gets hit for sweetheart deals, and the CFMEU for going too far in the opposite direction, with allegations of intimidation and blackmail. It’s important to remember these are only allegations. On past experience, most will fall over in court, if they make it that far.
Heydon claims that his findings represent “the tip of the iceberg”, but surely, after all this expenditure and long running hearings, we are entitled to expect the whole iceberg. The Auditor-General should be called upon to investigate this appalling waste of public money.
Do we need a global tax to stop rising inequality (crosspost from Crooked Timber seminar on Piketty)
One of the more depressing features of Capital in the 21st Century is the air of inevitability attached to the much-discussed r > g inequality. This is exacerbated, on the whole, by the fact that Piketty’s proposed policy response, a progressive global tax on wealth, seems obviously utopian.
What about a much simpler alternative: increasing the rate of income tax applied to the very rich, and removing preferential treatment of capital income? Piketty’s own work with Saez yields the conclusion that the socially optimal top marginal rate of taxation, after taking account of incentive effects, would be 70 per cent or more. Such rates prevailed, at least nominally, in the mid-20th century, without obvious ill effects. Again, Piketty provides the relevant evidence.
So, is there something about a globalised world economy that renders a return to high marginal rates of taxation impossible?
Christmas repost
Here’s a Christmas post from my blog in 2004. The theme is that nothing about Christmas ever changes, so it’s a repost of the same post from 2003. Looking back from 2015, the only change I can see is that the complaints about inclusive language to which I referred as “old stuff by now” have now become codified, as the “War on Christmas”.
I’ll add one new thought that the use of “War on Christmas” rhetoric reflects a larger problem for Christianists: should they be asserting their privileges as a majority (as in the demand that their particular holiday be recognised as primary) or demanding their rights as a minority (as in their unwillingness to accept equal marriage). The two strategies undermine each other.
In anticipation of at least a short break, let me wish a merry Christmas to all who celebrate it, and a happy New Year to everyone (at least everyone who uses the Gregorian calendar).
Read on for my unchanged Christmas message
John Quiggin 