Producers and consumers

John Quiggin11 Comments

I was struck by a recent exchange in the comments thread to my post on libertarianism” in which commenter 24601 took violent exception to the suggestion by another participant in the debate that libertarians focused on the concerns of producers rather than consumers. This, 24601 said, was like asserting that libertarians are “greedy, nasty, evil people who like to kill babbies and don’t care about those silly consumers.”

Allowing for the overstatement characteristic of comment threads, this captures an important point about the free-market side of the policy debate in Australia. Concern with the interests of people considered as producers, in preference to the interests of the same people, considered as consumers, is regarded, quite literally, as evil.

I wrote about this in the Fin last year, also covering the themes of managerialism and professionalism. Some extracts

The last ten years have not been good ones for producers in Australia, whether the item produced is as basic and solid as steel or as abstract and intangible as academic research. Work is central to life, but disillusionment with and demoralisation about work has never been greater. Demoralisation is particularly evident among those groups of workers who derive meaning from theh good or service they produce, rather than just their paypacket. Examples include nurses, teachers and many workers in skilled trades.

It is not surprising that producers are having a hard time. Public policy has been dominated by economists who are openly hostile to ‘producer interests’ and see their mission quite explicitly as ‘shifting power from producers to consumers’. …

The fable of the straw that broke the camel’s back is, among other things, a warning about overburdening those who actually do the work. Economic reformers and enterprising managers have been adding straws to the bundle for at least a decade. It’s time to reduce the burden.

The alignment of free-market economics with a focus on consumers is not surprising. The most appealing feature of capitalism, after all, is the shopfront glittering with an unimaginable variety of goods. It’s during the eight (or nine or ten) hours a day spent producing those goods, if you have a job at all, that you get to see the less pleasant aspects of the system.

The economic record of the Howard government

John Quiggin23 Comments

I’m writing a chapter for a book on the Howard government, in which I’m assessing its economic policies. Here’s my draft conclusion (comments much appreciated).

The experience of seven years of nearly uninterrupted expansion under Howard, following three or four years of tentative economic recovery under Keating has given the government a reputation for good economic management. This reputation has been reinforced by the maintenance of low interest rates.

It is hard to see, however, that the government has contributed much to these outcomes. As in standard nowadays, the Reserve Bank is primarily responsible for the maintenance of macroeconomic stability. The Reserve Bank has judged monetary policy well since the mid-1990s, and, as a result, Australia has gradually recovered the ground lost in the 1989-92 recession.

But whereas the then Treasurer, Paul Keating, must share significant responsibility, along with the Reserve Bank, for the disastrous misjudgements that gave us ‘the recession we had to have’, the current government can claim little credit for the correct judgements of the Reserve Bank. It cannot even claim credit for not interferign. The policy of central bank independence has turned out well in Australia in the last, but it failed badly in New Zealand, where bad monetary policy contributed to a string of recessions in the 1990s.

In its first term in office, the government claimed credit for the decline in interest rates on the basis that the tight fiscal policies associated with the 1996 Budget cuts. The merits of the ‘crowding out’ hypothesis underlying this claim are debatable, particularly in a world of unrestricted capital movements.

More importantly, the government has abandoned any claims to fiscal rectitude since 2001 when it dissipated what remained of the budget surplus, Since then, the government has more or less officially adopted a zero budget balance (on whichever of the various accounting systems seems most appealing in any given year) as its target. This policy ensures that an economic downturn will produce large budget deficits and a substantial reduction in public sector net worth. If the government took its own rhetoric about fiscal prudence seriously it would be running surpluses to prepare for such an event.

Similarly at the microeconomic level, it is hard to see any basis for claims of superiority in economic management. The government has neither produced an alternative to the microeconomic reform agenda of its predecessors nor made any significant contribution of its own beyond the completion of unfinished business and some desultory swipes at the trade unions.

In retrospect, it seems likely that the long expansion of the 1990s will be viewed as a missed opportunity. Such a period of economic stability does not come along very often and is unlikely to persist indefinitely. Yet Australia has surprisingly little to show for this long period of prosperity, except for massive additions to an already impressive stock of housing, now valued at equally impressive prices. Unemployment has fallen a little but is still above the low points reached in previous expansions. No new initiative has been made to deal with the problems of financing retirement for an aging population; there has not even been much progress in tidying up the tangled web of policies inherited from the Keating government. The most important single investment in the future is education: if anything, we have gone backwards in this respect, particularly in relation particularly in relation to post-secondary education, the main area of Commonwealth responsibility.

In 1964, Donald Horne described Australia as ‘a lucky country, run by second-rate people who share its luck’. This epigram could be applied, with equal or greater justice, to the Howard government and its term in office, particularly as regards economic policy. Sooner or later, however, this kind of luck will run out.

Update Lots of useful comments already! I’m grateful for substantive, stylistic and typographical corrections and suggestions. As well, the comments thread has some good discussion of things like measures of unemployment. I’m very encouraged by this and will probably post more.

Improvements?

John Quiggin6 Comments

I’ve made some changes in the right-hand sidebar.

First, I’ve made the picture smaller in response to people who’ve had trouble with the sidebar sliding under the main posts (this happens if your viewing window is too small relative to teh (fixed) size of the picture).

Second, following the lead of Crooked Timber, I’ve replaced the list of the most recent 10 posts with a list of the 10 before that (thanks to Kieran Healy for advice on how to do this)

Third, I’ve replaced the 10 most recent comments with the 10 most recently-commented-on posts. (thanks to James Russell for advice on how to do this)

The main idea is to overcome the “top of the page” problem, by which attention is focused on the most recent two or three posts. I’d like to think that, as we get better at this kind of thing that we can maintain discussions running over weeks, rather than, as at present, a few days.

I’d very much appreciate your responses and suggestions

War and health

John Quiggin9 Comments

Also on Mark Kleiman’s blog

The Pentagon says the occupation of Iraq is going to cost about $50 billion per year, indefinitely. That’s not counting reconstruction costs. Keeping Afghanistan safe for its warlords is now costing about $10 billion per year. Can you imagine how much safer a world we’d have today if we’d been willing to spend half that much on rebuilding the fragments of the Soviet Empire in the years just after 1989? Or how much a tenth of that, well spent, could do for human and economic development in Africa? Or how big a horselaugh you would get if you proposed spending anything like those sums on an activity that didn’t also include killing people?

I made the identical point here (full text here, with some reasonably hard numbers

Consider, for example, the alternative option of allocating the money to improved health care or public safety. Under current conditions, marginal health care and public safety interventions in the United States typically cost around $5 million per life saved. Thus, if the direct war budget of $50 billion had been allocated to public health instead, the lives of around 10 000 Americans could have been saved.
…It seems certain, however, that the war will herald a sustained increase in military expenditure of at least $US100 billion per year. A more reasonable comparison, therefore, is the ambitious proposal of the Commission on Macroeconomics and Health, led by Harvard Economist Jeffrey Sachs. The Commission aimed to achieve, for all a poor countries, a two-thirds reduction of 1990 child mortality levels, a three-fourths reduction of 1990 maternal mortality ratios and an end to the rising prevalence of major diseases, especially HIV/AIDS.

As the Commission pointed out, in addition to the humanitarian benefits of saving as many as 8 million lives per year, reductions in mortality are directly correlated with a reduced frequency of military coups and state collapse. These provide the breeding ground for terrorism and dictatorship and ultimately lead, in many cases, lead to US military intervention. The estimated cost for the Commission’s seemingly-utopian program over the next decade is estimated at between $US 50 billion and $US 100 billion per year.

Of course, there’s nothing new here: the same point has been made over and over again for decades. What’s frustrating is that the advocates of war as public policy seem to have no answer to this except to dismiss it as politically unrealistic.

Drugs and Prohibition

John Quiggin4 Comments

Via some critical responses from Kevin Drum, I found this piece by Mark Kleiman opposing the legalization of cocaine. There are some good arguments, and evidence, for drug prohibition. However, it’s crucial to apply a consistency test here. Most of the arguments and evidence that support prohibition of cocaine can also be used to support prohibition of alcohol. (Mark’s “adjustment costs” argument about unemployed coke dealers is an exception, but not, as Kevin notes, a very convincing one).

I wrote a piece for the Fin a while back, looking at the experience of Prohibition in the US and concluding as follows:

In summary, Prohibition produced greater benefits than the War on Drugs, at a lower cost in terms of crime and social dislocation. The idea that it is impossible to change the status of currently legal drugs, does not stand up to an examination of the evidence.

The real reason we will not even attempt to make society drug-free is that we do not want to. I don’t want to give up my evening gin-and-tonic, even if it does me more harm than good. Similarly, despite the appeal of ‘Just Say No’ and the priority placed on abstinence rather than risk reduction in other contexts, no-one seems to be suggesting the promotion of even voluntary abstinence from alcohol.

We are then, left with a paradox. Through the governments we elect, we are willing to turn our homes into fortresses and our streets into battlefields in order to maintain the illegal status of drugs that have been widely used for decades. But the same governments are unwilling to take even modest steps against drugs whose only distinguishing characteristics are a longer history of use and abuse, and the existence of influential producer and consumer lobbies.

I do not know whether our social acceptance of established drugs is a good thing. But until we are prepared to take a consistent position one way or the other, we should stop talking about sending messages. The only message our current policies send is that we are a bunch of hypocrites.

You can read the whole thing here

Update Mark Kleiman responds, suggesting

Even believing that alcohol, on balance, creates a net social deficit, I don’t actually believe that alcohol should be prohibited. Given the enormous user base for alcohol, its prohibition would be operationally nightmarish as well as politically infeasible. Instead, why not ban its sale to those previously convicted of alcohol-induced violence or repeated drunken driving? That ban wouldn’t be perfectly obeyed, but it would have some good effect nonetheless, and wouldn’t create another huge illicit market.

I’m not sure this particular policy would work, but I’m with Kleiman on the point that a pragmatic drug-by-drug policy is needed. I’m reasonably satisfied that this would imply more restrictions on alcohol (e.g. on advertising), further tightening on tobacco, some form of legalisation for widely-used illegal drugs like marijuana and ecstasy and harm minimisation for heroin (needle exchanges, injecting rooms and some form of legal provision for registered addicts). I don’t know much about cocaine – for reasons I don’t understand, it never seems to have become a big deal here.

Libertarianism, again

John Quiggin28 Comments

With the exception of Chris Bertram, participants on all sides of the debate over libertarianism kicked off by Ken Parish seem to regard refuting Robert Nozick as being a bit of a cheap shot. As Perry de Havillard says in Brian Weatherson’s comments thread

Nozickâs are the weakest arguments for the whole libertarian edifice so donât congratulate yourself all too much on hitting such a large slow moving target.

So I think this is a good time to move on to more serious objections to libertarianism.

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Deja vu

John Quiggin6 Comments

A piece in today’s Oz opens with a slab that looks as if it’s been cut and pasted from a dozen previous outings

WHOM does the ALP represent and what is its core constituency?

Historically, the answer was the working class represented by the so-called Howard battlers in the western suburbs of Sydney and Melbourne.

Since the Whitlam ascendancy, this is no longer the case. Beginning in the 1970s and ’80s, the ALP, in Kim Beazley Sr’s colourful phrase, turned its back on the cream of the working class in its rush to embrace the dregs of the middle class.

What’s striking about this set of boilerplate is that it’s often, as in the present case, used in a piece advocating neoliberal policies that the pre-Whitlam Labor party would have rejected instinctively. I reviewed another example here.

In this case, Kevin Donnelly is advocating voucher-based support for private schools and up-front university fees. He says that these policies would benefit the working class and that it’s the middle-class nature of Labor’s current leadership that makes them oppose it.

It is a matter of historical record that the pre-Whitlam Labor party was bitterly opposed to any form of aid to private schools. More generally, it’s worth reading Donnelly (and other articles taking the same line) then trying to imagine the reaction of say, Ben Chifley or Arthur Calwell.

Donnelly may have some good arguments in favor of the policies he proposes, though they are not evident in this article. But he is either ignorant or dishonest in claiming that they represent traditional Labor policy.

The trend to renationalization

John Quiggin9 Comments

The New Zealand Labour government has confirmed that it will renationalise the country’s rail network. The Blair government in Britain did the same thing last year. In both cases, the decision reflected the failure of the private operator to deliver the expected outcomes rather than an ideological commitment to public ownership.

It is becoming increasingly clear that attempts to determine the optimal role of the public sector on the basis of an a priori ideology, such as old-style socialism or neoliberalism, are bound to result in bad policy decisions.

New blog

John Quiggin1 Comment

Brian Weatherson announces

A New Blog!

A new group blog, Crooked Timber, has just been born. So far the group is Chris Bertram, Henry Farrell, Maria Farrell, Kieran Healy and moi.

There will be others appearing on the scene in the near future – to a first approximation Crooked Timber will be a broad-based leftie academic blog. But we’re open-minded about what counts as leftie, and as what counts as academic. To mangle a cliche or two, the party is meant to be more prominent than the party line. It’s a very exciting project, and I was rather honoured to be asked to join it.

Brian’s first entry joins the Nozick debate, with partial endorsement of the argument I presented against Nozick.

Notes on Nozick

John Quiggin6 Comments

Ken Parish links to various critiques of Nozick’s arguments in support of libertarianism. Broadly speaking, Nozick claims that libertarianism is right not because it produces good outcomes (he doesn’t argue one way of the other on this) but because a requirement for just process implies that property rights should be inviolable. Nozick’s position has been criticized in various ways, often focusing on the fact that he never specifies a just starting point. I want to present a different argument: that given any plausible starting point, Nozick’s approach leads to the conclusion that the status quo, including taxes, regulations and other government interventions is just. I illustrate this point with a story.

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