Living in the 80s

John Quiggin24 Comments

If you want to see why the Labor party is in so much trouble, it’s useful to read this piece in the Oz by Paul Howes, one of the brighter lights on the right of the party. Howes says

For a generation or more we have witnessed a flowering of tory political culture. We have watched ideas flowing out of places such as the Sydney Institute and the Institute of Public Affairs in Melbourne. The IPA, the HR Nicholls Society and the Sydney Institute may propose policies that are abhorrent to me, but they’ve created a culture of ideas to nourish conservative politics.

This would have been an unremarkable claim to make in the 1980s (a generation ago). But today ?? The Sydney Institute is Gerard Henderson, who hasn’t had a new idea since the “Federation Trifecta” in 1990. Around the same time, the IPA with John Hyde rose briefly above its history as a conduit for business donations to the Liberal Party and its present role as an advocate of anti-science delusionism on issues ranging from tobacco to global warming to the Murray-Darling Basin (the latter not quite so much since the departure of Jennifer Marohasy). The HR Nicholls society has been moribund for years – its last notable contribution was as the 2006 venue for Nick Minchin’s disastrously leaked suggestion that WorkChoices had not gone far enough (he was bagged for this by John Howard in his autobio)

Howes goes on to mention, and dismiss, a plethora of leftish thinktanks (Per Capita, the Centre for Policy Development, Catalyst, the Australia Institute, the Evatt Foundation, the Fabians (Disclosure: in one way or another, I’m associated with most of them)) any one of which has had more new ideas in the last few years than the moribund shells he describes have had in decades.

Howes’ assessment reveals that, like most Australian politicians and commentators he is still in thrall to the 1980s agenda. The fact that, far from coming up with “brilliant new ideas”, Howes is sticking with an orthodoxy that was already solidifying when he was born in 1981 wouldn’t matter if these old ideas had proved their worth. But they have comprehensively failed, most notably in the current global crisis.

Howes is no fool and has at least made explicit what is merely implicit in the thinking of the average Labor politician (Bligh, Fraser, Keneally, Gillard and Brumby being obvious examples). But it is little wonder that the Greens are making such headway when the major parties offer a bipartisan consensus on such tired and failed ideas.

Radioactive sandpit

John Quiggin559 Comments

Since I’ve been incautious enough to mention the N-word in the previous post, I’ll open another sandpit specifically devoted to discussions of the merits, and otherwise, of nuclear power. Any mention of this topic on other threads will be deleted and will risk bans or restrictions on the offender

Update Since it’s still going, I’ve moved it up, which should reopen comments

One-dimensional chess — Crooked Timber

John Quiggin3 Comments

The big issue to be decided by the lame-duck Congress is whether to extend Bush’s tax cuts for the very rich[1]. This is a one-dimensional chess game, with the obvious zero-sum property that if the tax go through, the Republicans win and (at least in standard political terms) the Democrats lose by an equal amount.

There seems to be a near-universal consensus that
(i) The game is a forced win for the Dems (pass a bill extending the cuts for everyone but the rich and dare the Repugs to oppose it)
(ii) The Dems opening move will be to resign

This analysis certainly gives support to the idea of unobserved dimensions, presumably monetary

fn1. The option of not extending them for the well-off, and doing something serious about the deficit without too much impact on demand is way outside the Overton window.

via crookedtimber.org

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Weekend reflections

John Quiggin21 Comments

It’s time again for weekend reflections, which makes space for longer than usual comments on any topic. In keeping with my attempts to open up the comments to new contributors , I’d like to redirect discussion, as opposed to substantive new contributions, to the sandpit(s). As always, civilised discussion and no coarse language please.

Remembrance Day

John Quiggin30 Comments

Over the fold is the piece I wrote for the Fin which ran yesterday, on Remembrance Day. I wasn’t entirely satisfied with the last couple of paras, referring to the present and future, so I need to spell them out a bit more.

First, while I was, in 2002, a fairly enthusiastic supporter of the decision to go to war in Afghanistan, subsequent events and the evolution of my own thinking have led me to qualify that view, and to conclude, in particular, that Australia should withdraw its troops in the near future.

First, some general thoughts

* War is justified only in self-defence (including collective self-defence), and only to the extent that there is a reasonable expectation that going to war will yield a better outcome than not doing so
* Even when war is justified by self-defence, it should not be used as a pretext for securing benefits that go beyond restoration of the status quo ante bellum (bearing in mind that war changes things, so exact restoration is often not feasible).
* Political and public thinking is biased in favor of the belief that military force is an effective way to deal with political problems and a successful use of military force (even if justified) reinforces this bias. So it is important to create whatever institutional constraints are possible, such as requirements for Parliamentary approval of decisions to go to war
* Even when justified ex ante, war is unpredictable and likely to go badly. The idea that having started on a war that has turned out badly, we should “see it through” is a mistake

Coming to Afghanistan, I think the self-defence case is clear-cut. The US was attacked by terrorists trained in and led from Afghanistan, by a group supported by the Taliban government. It’s possible to make a hypothetical case that absent the incompetence and malice of the Bush Administration (backed by Blair and Howard in the decision to start a new war in Iraq) that there was a reasonable expectation of success. However, I observe with some discomfort that much the same case is put forward by many on the left who backed the Iraq war, where, however, the self-defence case was a transparent sham. In any case, we are past the point where continuing the war can be expected to produce benefits for either Afghanistan or the world. It would be better to withdraw and spend some of the money saved as a result (many times Afghanistan’s annual national income) on aid.

Finally, I concluded my post by saying “On this Remembrance Day, we should honour the sacrifice of all those who died by giving up, once and for all, the belief that war should be part of our national policy.” To be clear, I am not a pacifist and do not oppose fighting in self-defence. The idea that “war should be part of our national policy” means to me, that the use or threat of military force can and should be used to advance our perceived national interest. This idea, which forms the basis of military policy in most countries, appears to to both morally wrong and factually false.

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Bligh and Fraser sell Port of Brisbane … to themselves

John Quiggin24 Comments

According to the Brisbane Times, the Bligh government has just sold the Port of Brisbane to a consortium led by the Queensland Investment Corporation. This must have been a tough negotiation, given that the QIC website states

As a Queensland GOC, QIC’s shareholding Ministers are the Honourable Anna Bligh MP, Premier and Minister for the Arts, and the Honourable Andrew Fraser MP, Treasurer and Minister for Employment and Economic Development

Note: As with the QR sale, it looks as if the government has retained about $1.3 billion of debt in the Port of Brisbane Corporation, which now has no assets, so the net proceeds will be less than half the announced price of $2.3 billion.

Balance sheets (updated)

John Quiggin11 Comments

I just took a look at the share offer document for QR National, and discovered the interesting fact that the company has only $500 million in debt. Looking at the 2009-10 accounts, QR had debt of $7 billion. Of this, $4.3 billion in debt was allocated to QR National, when QR was restructured.

The offer document shows that this was followed by

a restructure of borrowings under which $4.3bn of borrowings from QTC will be transferred to the State under Transfer Notice for nil consideration prior to Settlement (emphasis added)

That is, to sweeten the sale offer, the government has taken $4.3 billion of QR debt onto its own books. It looks as if the government will only sell about 60 per cent of the shares and the price will be at the low end of the indicative range, so the cash proceeds of the IPO will be something like $3.6 billion. That is, it appears that the additional debt taken on by the state as part of the sale will offset nearly all of the sale proceeds assuming a good outcome, and will more than offset the proceeds if the IPO goes poorly. To be sure, the state will still have 40 per cent equity in QR National worth about $2.4 billion, as it did before, but it does not appear that there will be any money at all for schools and hospitals, even on the spurious cash accounting favored by the government.

I’m now fairly confident my analysis is correct. However, I’d welcome correction from anyone who has better info.

Postscript: Another way of looking at this is that the old QR had a gearing ratio of about 65 per cent, so the government’s equity was equal to about 35 per cent of the total capital value. Having taken all the debt onto its own books, the government will sell about the same proportion of the company (now all equity), so its net worth is essentially unchanged, as is the financial position of the general government sector. All that has happened is that QR’s debt has been converted into private equity.

Work for the Dole — Crooked Timber

John Quiggin61 Comments

Faced with a sharp rise in unemployment since 2008, the Con-Lib government in Britain has diagnosed an epidemic of laziness, and announced measures to push the “work-shy” back into jobs. In particular, they’ve announced that those deemed not to be looking hard enough for work will be forced to undertake unpaid part-time work for community organizations.

Stripped of the punitive rhetoric, this is a cut down job-creation scheme, partly paid for by the unpaid labor of the participants. It’s hard enough to make job creation work well as a counter to unemployment, without adding in this kind of thing.

Australia has been there and done that. Following the discovery in the late 1990s that it played well with focus groups, John Howard (conservative PM) introduced a program explicitly called Work for the Dole and targeted initially at the young unemployed. It was a political success, but didn’t have any evident effects on unemployment. This evaluation of Work for the Dole and other programs suggests that it performed much less well than the explicit job creation and wage subsidy programs it replaced. Strikingly, given that the UK government is supposed to be on an austerity drive, the cost in the late 1990s was $2000-3000 per participant (around 1000 stg), on top of the benefit payment for which they were working.

But at least Howard’s moves came quite a few years into an expansion when it could credibly be claimed that there were jobs available for people willing to look hard enough. For a government that is busy creating unemployment to start attacking the “work-shy” requires a truly impressive level of hypocrisy.

via crookedtimber.org

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