Over the fold, is my piece from today’s Fin on the task facing Obama. The original version started “Following his convincing election victory, Barack Obama can look forward to taking office under the most challenging conditions facing any incoming president since Franklin Roosevelt’s inauguration in 1933,”, but another columnist came in with an almost identical lead, so I changed mine. But the great thing about a blog is that you can choose which version you like best (or dislike least). The original opening paras are at the end of the post.
The End of the First Age
It will be some time before we can truly determine the political, social and geopolitical implications of Obama’s victory. In the meantime, I’ll be parochial and observe that this really is the end of an era (in fact the first era) of political blogging.
A new hope
With the networks calling Ohio for Obama, the only question remaining for today is the size of the win. I have to work on my Fin column, so I’ll throw it open to you to discuss the implications.
The big one
Barring an unforeseen catastrophe, Barack Obama will be elected president of the United States tomorrow. Barring an unforeseen miracle, by the time he is inaugurated, the US (and much of the rest of the world) will be in the deepest recession for decades. This is going to be a huge challenge, and two months of drift certainly won’t help. Paul Krugman is calling (not sure how seriously) for an interim government of national unity. It seems highly unlikely, though, even in the face of a failure as complete as that of any Administration since Hoover’s (or maybe Buchanan’s) that Bush will be willing to cede even one day of power to the incoming Democrats.
The situation when Obama takes over will be one of huge challenges and huge opportunities. The challenges are obvious: the economy in a gigantic mess, a string of foreign policy disasters and military misadventures and a deeply divided country. Only changes that are both radical and well designed will fix these problems, and this is a difficult combination to pull off.
The opportunities are the flip side of this. Not only does Obama seem likely to come in with big Democratic majorities in both Houses of Congress and a big popular mandate*, but the severity of the crisis has undermined what seemed like unalterable political taboos. The Republican Administration has just nationalised a large chunk of the banking system, and has long since abandoned any adherence to notions like balanced budgets. In these circumstances, the idea that policies of expanded government intervention are too radical for Americans to contemplate seem only marginally less silly than a literal acceptance of the McCain clam that Obama’s victory would constitute a referendum in favour of socialism.
Looking at what Obama needs to do, the big items are bringing the financial system back under control, rebalancing the tax system while substantially increasing tax revenue in the long term and completing the New Deal, particularly with respect to health care. More on all these items soon.
* In this context, I don’t think it’s critical that the Dems win the 60 Senate seats required to stop a filibuster under the Senate’s arcane procedural rules. It’s usually possible to peel off a few moderate votes. And, in any case, it’s just a procedural rule that can be abolished by simple majority. The threat of that happening will probably be enough to prevent overuse of this device.
What I thought about deposit guarantees in 2006
Here’s a piece I did for the Australian Institute of Company Directors in 2006 (actually, in 2005, but it came out later). I think it covered most of the main points that have arisen in the debate over deposit guarantees.
Embarrassment alert Thanks to a system failure, the link wasn’t saved but reader Tintin found it here. Before that, SJ found a piece from 2002 which has (ahem) a bit of overlap with what I published in 2006. The second piece does have some refinements, notably explicit support for narrow banking, but I didn’t learn an awful lot on this topic in the intervening four years.
Monday Message Board
It’s time once again for the Monday Message Board. Post your thoughts on any issue. Civilised discussion only. Please avoid snarks and trolling and strictly no coarse language.
Weekend reflections
It’s time (on time for once) for weekend reflections, which makes space for longer than usual comments on any topic. As always, civilised discussion and no coarse language.
Treasury on the cost of saving the planet
I’ve been too busy to do more than read the summary of the Treasury’s estimates of the cost of an measures to reduce greenhouse gas emissions, most importantly an emissions trading scheme. Of course, there have been quite a few exercises of this kind, but what’s striking about this one is that it looks at a much wider (and more realistic, if we want to save the planet) range of options, going all the way to a 90 per cent reduction in emissions relative to 2000 levels, achieved by 2050. This is a contract and converge scenario where all countries accept a common emissions entitlement per person.
Treasury estimates that, under this scenario, GNP per person in Australia will average $78 000 in 2050 compared to $50 000 at present. By contrast in the reference scenario which has an 88 per cent increase in emissions, 2050 GNP is estimated at $83 000, or about 6 per cent higher (I don’t think this takes account of costs avoided through climate mitigation).
When I get a bit of time, I’ll report more on the details and assumptions. But the quibbles coming from predictable rentseekers, and their tame consultants, look like just that, quibbles.
Treasury’s estimates are, not surprisingly, quite consistent with the arguments I’ve made for a long time on this blog. That’s because any competent economist doing the analysis must come up with estimates of a comparable order of magnitude. If you want to make the case that saving the planet requires reducing living standards, or even a big reduction in the rate of growth of living standards, you need either to invent a whole new economics or wave your hands vigorously enough to conceal the fact that you don’t have any economic analysis to support you.
Bris Science plug
I’ll be speaking at this month’s Bris Science lecture on Monday 3 November, on the topic “The Financial Crisis and what it means for you”. 6:30 pm to 7:30 pm (Doors open at 6 pm) Ithaca Auditorium, Brisbane City Hall
Details over the fold
Read More »
Meanwhile in a galaxy far, far away …
This story about the IMF rescue package for Ukraine (second of many, after Iceland) quotes Timothy Ash, head of emerging-market research at Royal Bank of Scotland Group Plc in London as saying
`The money is only half of the issue, conditionality is key. We hope the fund is maintaining its push for a more flexible exchange rate, far- reaching reforms in the banking sector and more privatization.”
Mr Ash, just returned from a six-week holiday on Mars, was reading from his prepared boilerplate script and had yet not been advised of the recent nationalisation of the Royal Bank of Scotland.
(found in today’s AFR)
John Quiggin 