Don Arthur, a great but infrequent blogger, has joined the crew at Troppo Armadillo, which will be a great location for him, I think. His first post is a response to my argument that the era of neoliberalism/economic rationalism is over. Don makes a lot of points, and I’m going to start with a relatively easy one. Don says “it’s hard to see a return to the high tariffs of the old Australian settlement”. I agree, but I think the whole notion of the Australian settlement isn’t very useful in relation to the rise and fall of neoliberalism.

What matters is the Keynesian-social democratic settlement adopted after World War II. Australia was one of the leaders in this with the 1945 White Paper Full Employment in Australia, claimed here as

the first time any government apart from totalitarian regimes had unequivocally committed itself to providing work for any person who was willing and able to work

Nevertheless, there was little that was specifically Australian about this settlement.

While Kelly’s name has been widely used, the things he is talking about are more accurately described by Gerard Henderson’s earlier term ‘Federation Trifecta’, consisting of Protection, Arbitration and White Australia[1]. These policies added up to a uniquely Australian policy package in the period before World War II, but their subsequent histories have been very different.
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Quite a few bloggers, and others, have commented on the fact that neither the Iraq war, nor the Free Trade Agreement with the US, both hot topics in the leadup to the election, have played a big role in the campaign. The obvious explanation is that both sides have vulnerabilities that prevent them from raising the issue.
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While I’m busy scanning the electoral tealeaves, quite a few other economists will be anxiously waiting for a phone call from Stockholm. It’s Nobel prize time, and various people have had a go at assessing likely candidates. Brad DeLong says you should pick fields (I think he’s right about this) and goes for the trade trio of Bhagwati-Dixit-Krugman. Tyler Cowen looks at seven candidates. And of course, there’s a betting market

For what it’s worth, I’d like to see Robert Shiller win. However, on Brad’s criterion, it could be argued that he’ll have to wait until “behavioral finance” gets a guernsey. Kahneman’s prize a couple of years ago was in the same general field and this might count against it.

And then, of course there’s Don Luskin

I’m one of those swinging voters who cop so much flak for being selfish, apathetic, ill-informed and so on. In quite a few elections, I haven’t finally made up my mind until I was inside the polling booth. Admittedly, I’ve usually been pretty sure about the order in which I would put the major parties, so changes in my first preference haven’t made any real difference to the outcome. But then, most of the time, I’ve lived in seats that have been fairly safe, one way or the other, so my vote has been essentially expressive.

This time, I’ve decided to bite the bullet and make a decision ahead of polling day. The decision is a significant departure for me. For the first time in a Federal election since the 1980s, I’ll be giving Labor my first preference vote. I haven’t been satisfied with everything Latham has done as leader, but this is the first time in more than a decade that I haven’t felt that Labor is merely the lesser of two evils. Given that the Greens are obviously going to do well anyway[1], I’m happy to vote Labor.

In view of the generally disappointing poll results over the weekend, I’m less optimistic than I was last week, but Labor’s chances are still close to 50-50. And regardless of the electoral outcome, there’s no doubt that the election marks the end of economic rationalism/neoliberalism as the dominant force in Australian politics. The tide has been running against economic rationalism ever since ‘the recession we had to have’. But Howard’s explicit repudiation of this ideology is as clear an endpoint as we’re ever likely to see.

fn1. I’ve occasionally supported the Democrats in the past, but there’s no point in considering them any more.

Howard’s conversion to tax-and-spend social democracy has led to some interesting responses on the right of the Australian political spectrum. I have discerned three main responses.

* See no evil, hear no evil, speak no evil.

This has been the dominant response of the partisan cheer squad represented by commentators like Michael Baume and lobby groups like the Institute of Public Affairs Faced with policies they can’t possibly endorse they maintain a discreet silence and focus on safe grounds for supporting the government, like “experience” . This was the theme of Baume’s latest piece in the Fin, and of the IPA, who wheeled out ex-Labor minister Gary Johns to say

I think Australia has got itself a future prime minister in Latham but I don’t think people will accept him now.

“I think John Howard is a steady hand at the till (sic). I don’t think the economic conditions are such that people will want to switch horses.”

Of course, if you buy this kind of argument we would never have a change of government.

* Hold your nose and pull the lever.

This has been the second-most common response, represented by people like Alan Wood, who, after deploring both parties, manages to find a bunch of reasons for preferring the government.

* A plague on both your houses

Only a minority of those on the right have been willing to condemn the government in the same terms as they have always attacked similar proposals from Labor. One example is a letter by Greg Lindsay and Peter Saunders of the CIS published in The Australian on 29 September.

The big problem for those with this viewpoint is that they have “nowhere else to go”. A few people, like John Humphreys may put the government last. This would be the logical response (if they lose this time, the Liberals might revert to free-market policies, whereas if they win they will persist with social democracy) but I can’t see many people advocating it.

Napoleon famously said that, after his educational reforms, he knew, at any given time of day, what subject every child in France was being taught. But the Howard government is giving him a run for his money in micromanagement, with a promise to specify letter grades from A to E for every student. Parents who’ve read the obscure reports commonly handed by schools will have some sympathy with Nelson on this score, but surely this is the kind of thing that ought to dealt with at the school level (if necessary, with some general guidance from state departments of education).

And if we are going to have letter grades, A to E seems an odd choice, more reminiscent of Brave New World than of actual grading systems parents will have experienced. At least in the three-euphemism systems commonly employed at present (‘tackling this topic with ease’, ‘mostly on top of this topic’,’ not quite yet’) it’s reasonably easy to work out if your kid is failing. And the letter systems I’ve experienced use the mnemonically unambiguous F. What would a D mean in the proposed setup?

Gerard Henderson gets exercised about the sectarianism supposedly implicit in Tony Jones questioning Abbott about his meeting with George Pell. He has things the wrong way around.

It would be sectarian to suggest that Abbott went to Pell to get his orders – rule from Rome and all that. The actual implication though, is that Abbott went to tell Pell what to do, and that Pell complied, either out of ideological sympathy or in return for past favors, such as help for Pell’s private university.

Pell and Jensen are, quite properly, getting the same treatment as any other interest group lobbyists, and it’s entirely appropriate that their backroom dealings should be publicised.

Update Rob Corr has covered this and made some more good points.

Noting Howard’s prediction of victory, Ken Parish observes

It’s a little surprising really, because you would normally expect both leaders to be still trying to position themselves as underdog at this stage.

but takes the prediction, and Howard’s confident demeanour, as a sign of real confidence, presumably reflecting Liberal polling.

My inclination is to go the other way. After a week or so in which everyone was commenting on how rattled he was (I noted on September 30 that he looked like a beaten man, Howard had to (over) compensate. I suspect that, if he really had good news from the pollsters in his back pocket, he could have managed to look confident while saying it was too close too call (see Peter Beattie for a lesson on how to do this when you are an unbackable favorite). It’s easier to fake confidence if you’re saying confident things.

One thing I find hard to figure out is the impact of denunciations like this one from former blogger James Morrow in the Oz, attacking Howard from the right for his belated conversion to tax-and-spend social democracy. Howard no doubt judges that people like Morrow have “nowhere else to go” and Morrow obligingly observes

, Howard and the Coalition still represent the best chance for our finances.

But he must run the risk of losing people who, unlike Morrow, dislike Howard’s policies on the war, or refugees, or Kyoto, but have been kept onside by his reputation for fiscal restraint.

As I’ve argued a couple of times already, Howard’s massive spending in this election campaign amounts to more than simple political expediency (of course, there’s plenty of that). He has come to a fundamental change of view about what the Australian public wants from governments, one in which more and better services rank ahead of tax cuts. If he continues along the lines of the past few weeks (and, with respect to Medicare[1], the last year or so), I think we might see the emergence of a coherent position, going beyond simply spraying money at every interest group that moves.

Until recently, the best description of Howard’s position on public spending was ‘creeping residualism’. He wanted to kill off big systems of universal provision such as Medicare and public schools, and replace them with a “safety net” for the poor while everyone else got subsidies for private provision. The new position, most evident with Medicare, but also indicated in his education policy, might be called “Universalism + Choice”. In relation to health, this means ensuring universal access to bulk billing and public hospitals while also encouraging private health insurance. Similarly, for schools it means “easing the squeeze” (Sorry!) on the public system, while still providing support for private schools across the board.

Universalism + Choice has some appeal. But, done properly, it’s going to be expensive. Unless Howard stages a full-scale “promises overboard”, it’s unlikely we’ll see significant tax cuts any time soon under a re-elected Liberal government.

fn1. It’s notable that the shift in policy on Medicare coincided with Abbott’s move to health. His well-earned reputation as a headkicker and unionbasher obscures the fact that he’s given no particular evidence of attachment to economic rationalism/neoliberalism during his career. His admiration for Santamaria is worth noting in this context.