That’s the title of my new column in Independent Australia. I plan to write fortnightly from now on.

Now that quantitative easing is no longer needed, the problem is how to manage the huge increase in money balances that is driving demand. This is not a new problem; it arises every time a lot of spending is needed to handle an emergency, and we know what works and what does not. In the aftermath of World War I, governments in the UK and Australia sought to unwind the inflation created by wartime spending and return to the gold standard. The result was a long period of economic weakness, culminating in the Great Depression. By contrast, after World War II, wages and prices were allowed to rise, as wartime rationing ended and reconstruction gradually removed constraints on production.

As long as the real value of wages is maintained, a once-off increase in the price level is a small price to pay for avoiding economic disaster during the pandemic. The reconstruction of supply chains, along with the underlying increases in productivity generated by technological progress, will allow a gradual return to lower rates of inflation. We can also hope for some additional gains arising from the experience of the pandemic with remote work, telecommunications and home delivery of goods and services.

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Following up my initial response to Lane Kenworthy, I decided to approach the question from a different direction and ask “Would we be better off without corporations?”. That is, I’d like to consider a society in which all large enterprises were publicly owned. There would still be room for owner-operated private businesses, worker-controlled co-operatives, partnerships and perhaps some other forms of business I haven’t thought about. I won’t get into disputes about whether this would constitute socialism, except to say that it would be radically different from any version of capitalism we’ve seen so far.

I’m also going to reverse the burden of proof implicit in Kenworthy’s approach. I start from the assumption that the expansion of corporate power under the neoliberal (or market liberal) policy package of privatisation, financialisation and deunionisation that has prevailed since the 1970s has been bad for most of us.

Given that neoliberalism is a term that’s often used loosely, I’ll try to be more specific about the adverse effects that can be tied specifically to the resurgence of corporate power.

The most obvious is the growth in inequality that has coincided with the rise of neoliberalism and corporate power. Virtually every aspect of neoliberal policy reform from increasing capital mobility to union-busting to flattening of tax scales has contributed to increased inequality. Moreover, they all reinforce each other.
?So, if we can do without for-profit corporations without incurring significant economic costs, we should.

I started looking at this on a sector-by-sector basis but then realised I would need to write a whole book in reply. So, over the fold, some disorganized thoughts

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My latest Substack newsletter

I’ve just received a copy of Lane Kenworthy’s latest back Would Democratic Socialism be Better (Shorter LK: “capitalism, and particularly social democratic capitalism, is better
than many democratic socialists seem to think”).

The book is a follow-up to his Social Democratic Capitalism, which made the case that the USA would be better off moving to a Nordic model of social democracy.

I’m hoping to make a longer response soon, but I thought I’d begin by summing up the argument as I see it, and the reasons I’m unconvinced.

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The usual trade-off between maximising revenue while protecting industry’s long-term future no longer applies

That’s the headline and standfirst for my latest piece in The Guardian, looking at revenue options for the coming Queensland Budget. It’s over the fold

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After dealing with multiple natural disasters, and facing the need for huge investment in an overloaded electricity system, it’s not surprising the Queensland government is in search of extra revenue ahead of next week’s budget. The obvious source, already flagged by the treasurer, Cameron Dick, is an increase in royalty rates for coal.

These rates, set on a sliding scale according to the price of coal, have been frozen for the last 10 years, as promised by the Newman LNP government after a small increase in 2012. With the 10-year freeze now expired, resources groups are lobbying intensely for no changes to the existing regime. But there is a logical case for increasing royalties on coal, which is currently trading at spectacularly high prices.

For most commodities, the high prices we are now observing would be a signal of favourable prospects. For coal, it’s the opposite. World coal consumption peaked in 2014, and is predicted to decline steadily over the next decade. Many countries have already ended the use of coal to generate electricity, or will do so in the next few years. Metallurgical coal, used in making steel, will last a bit longer. But the coal-based blast furnace technology is already facing the prospect of replacement by coal-free techniques using renewable hydrogen.

While coal demand has flattened out, new investment in coalmines has dropped far more rapidly. Investors can see that there is no long-term future in coal. Witness BHP’s inability to sell its Mt Arthur coal mine, which it announced on Thursday would close in 2030. Meanwhile, global financial institutions have abandoned the industry, pledging not to finance or support new coalmine projects.

In these circumstances, there is only limited supply response available to meet temporary increases in demand, like those arising from the strong economic recovery after Covid, followed by sanctions imposed on Russia. The result is the sharp increase in prices we have seen recently.

Coal is on the way out, but a good deal of money can be made in the meantime, while high prices last. Most major corporations, with a long-term future in mind, have abandoned the industry. Those that remain need to reap profits fast, which is why they are more determined than ever to resist any increase in taxation.

But the same analysis applies to royalties, the price paid by miners to the public as owners of the coal resource. Usually there is a trade-off in setting royalty rates, between maximising revenue while protecting the long-term future of the industry. However, this no longer applies. Investment in new coalmines is in long-term decline, whether or not royalty rates are increased.

Queensland’s focus must be on gaining additional revenue while export demand remains strong and using it to transform our energy system. The transition to a carbon-free energy system will require big capital expenditures. In particular, public investment in carbon-free energy through CleanCo needs to be greatly expanded.

As well as decarbonising our own electricity grid, the government needs to plan for the future of regions which currently rely on coal exports as a major source of employment. Many of these are well suited to produce solar, wind and hydrogen.

From the government’s viewpoint, the impending decline of coal is both a challenge and an opportunity. The challenge is the need for a transition to a future beyond coal, both as a source of energy in Australia and as a major export commodity. The opportunity is to use the current period of high coal prices to finance the transition to a decarbonised economy