Saturday’s good reading and listening for the weekend

Feb 20, 2021

What people in other forums are saying about public policy


The Morrison Government’s economic plan – spend money you don’t have

The illusion of housing prices

“Wotcher gonna do ‘bout ‘ousin?” interjected a woman at Menzies at a town hall election rally.

“I’d put an ‘h’ in front of it” was Menzies’ retort.

In his class-based put-down Menzies’ arrogance was on full display. He was no enthusiast for public housing, but at least he understood the importance of housing affordability. Sixty years later the Liberal Party has come to see housing as a financial asset. Unaffordability is just a little collateral damage.

Even in the country prices are on the way up. Marree, SA.

Housing prices are soaring, for now. Normally when housing and share prices rise rapidly the monetary authorities – the Reserve Bank in our case – would step in to dampen the boom by raising interest rates or toughening banks’ lending standards, but not on this occasion, explains the ABC’s Ian Verrender.  As he says, the Reserve Bank, having found that interest rate cuts have not been able to stimulate the economy, is relying on what economists know as the “wealth effect”. He explains it: “if housing prices inflate and the stock market keeps rising, people will feel wealthier and they’ll start to spend”.

It’s an inequitable and dangerously short-sighted policy. It’s inequitable because it makes housing even more unaffordable for the young. And it’s short-sighted, because the wealth effect relies on the illusion of inflation: some time supply will catch up with demand, and the stronger the boom the more devastating will be the inevitable crash. The Morrison Government is calculating that the wealth effect should carry them through to the next election, and whoever wins the election can deal with the crash when it comes. To make sure housing stays expensive the government is suppressing housing supply by subsidising extensions and renovations thereby tying up capacity, and is certainly not supporting public housing.

For its part the Reserve Bank is going along with this move, presumably because it doesn’t want to take the blame for failing to use all available means to stimulate the economy. In a subsequent article Verrender explains what is happening in Australia in a global context. “The problem is, that having laid the foundations for stock, bond and housing price bubbles, the world’s central banks now are scared witless about them bursting”.

The wealth effect may work in the short term: there are plenty of people naïve enough to believe that because the market value of their house has risen by $50 000 or $100 000 they are so much wealthier and they can spend some of that supposed wealth, even though it’s illiquid and they may have to borrow to obtain the cash. It’s the same economic naivety that leads many to believe that the Coalition is capable of managing the economy responsibly.

A survey of 87 leading economists finds that high housing costs are damaging the economy – Australian experts’ view of housing in the economy: abstract dreamings or real directions?   It was conducted by the City Futures Research Centre of the University of New South Wales, in association with the Community Housing Industry Association and National Shelter.  Expensive housing distorts product and factor markets, resulting in a misallocation of resources away from where they can be most productive.

At a time when the economy needs a fiscal stimulus, and when unaffordability of housing is exacerbating wealth inequality, social housing should be at the forefront in budget priorities. “Omission of social housing investment from the 2020 budget was mistaken” they write.

How to help the Coalition’s election chances – get up to your neck in debt

The entry above is about the Morrison Government’s irresponsibility in using house price inflation as a fiscal stimulus through the “wealth effect”. The government also proposes to weaken requirements for banks and other financial institutions to assess borrowers’ capacity to repay housing and other loans. Borrowers (and lenders) are currently protected by “responsible lending laws” – laws wisely passed by the Rudd Government in 2009 in the wake of the Global Financial Crisis.

Financial Counselling Australia – the national voice for the financial counselling profession –  has surveyed its members, finding that 97 per cent of counsellors want the laws to remain. Their concern is not just for individuals who will suffer the burden of debt they cannot repay, but also for the macroeconomic consequences of loose lending, including the shock of a housing price crash as happened in the United States in 2008.

The Morrison Government’s policy objective in encouraging lending is ostensibly about achieving fiscal stimulus, but it could also be to ensure that Australians are once again carrying a heavy burden of debt, because a workforce in debt is a compliant workforce – in a weak power relationship with employers and lenders, to the supposed benefit of the Coalition’s support base among employers and financiers.

Before the pandemic Australian households had been running down their savings, but because of increased transfer payments (“Jobseeker” and “Jobkeeper” to use their Orwellian names), because of limited spending opportunities, and because of prudence, people’s savings have risen sharply as shown in the chart below.

The consumer organisation Choice has a letter to Parliamentarians calling for retention of the current laws, to which people are welcome to add their names.


Media in a democracy

Facebook – two former prime ministers pitch in

Some believe that Facebook’s move to close down Australian news pages (whatever counts as “news”) was a clever surprise, others think it was a suicidal overreach.

On the ABC’s 730 Malcolm Turnbull presents the situation as Facebook would see it: why should they pay for what others have put on their platform?  His suggestion to deal with the problem is a tax on digital advertising revenue across the board, with the proceeds hypothecated to pay for public-interest journalism. (10 minutes)

On the ABC’s Breakfast program Kevin Rudd criticises the government’s move more strongly (while acknowledging that Labor has supported its passage through the House of Representatives).  It’s about a battle between two monopolies, with a solution crafted to favour Murdoch’s News Corporation. It won’t do anything to address the problem of media concentration – an issue he seeks to have addressed in a commission of inquiry into Australia’s media landscape. (12 minutes)

Both Turnbull and Rudd acknowledge that the problem the government is trying to address relates to the shift of advertising revenue from print media to the internet.

While we’re at it, if you’ve been accessing Pearls and Irritations through Facebook or similar portals, our website is:

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The pandemic’s progress

Australia – is hotel quarantine in its death throes?

We’ve dropped the chart of four weeks of community transmission, because there really hasn’t been any.

What about the Victorian outbreak though – 20 cases, maybe more, as a result of a hotel quarantine failure?  Are we being soft on the Andrews Government?

Because of the way the government handled the outbreak, immediately isolating contacts and contacts of contacts, they hardly count as “community transmission”. And no one is being soft on the Victorian Government: they stuffed it up, once again.

Possibly because few other countries have been so effective in suppressing the virus while allowing travellers to return, Australia and New Zealand have had to learn on their own, and some of those lessons have been learned the hard way.

Stephen Duckett and Brendan Coates of the Grattan Institute summarise the arguments around hotel quarantine – whether to fix the existing system or to develop purpose-built facilities separated from big cities: How to fix Australia’s quarantine system.  Duckett and Coates make it clear that the Commonwealth Government is failing in its responsibilities.

Economists look on with wonder when they compare the cost of dedicated quarantine facilities (costs measured in millions), with the costs imposed by lockdowns – the lost business during lockdowns and the general chilling effect of people’s knowledge that a lockdown may occur at any time (costs estimated in billions). Surely the case for dedicated facilities is a no-brainer – so why haven’t they been constructed? The explanation probably lies in fiscal priorities. While a quarantine facility would show up as a budgetary cost, the disruptions of shutdowns and other restrictions impose costs throughout the economy that have only minor effect on the government budget. The Coalition, ever since the first Howard budgets, has made it clear that in the name of “small government” it prioritises fiscal impression management over economic management.

The good news is that as at Thursday February 17, there were only 12 people in hospital with Covid-19, none of whom were in intensive care, and that it’s been 7 weeks since our last recorded death.

Vaccination in Australia

Leaving aside the unsourced figures touted by the Murdoch media, there is evidence that Australians’ enthusiasm for vaccination is waning. A Roy Morgan Survey finds that between January and February this year there has been a weak increase (from 77 per cent to 80 per cent) in the proportion of Australians willing to be vaccinated, but that might just be sampling error. More significantly that same survey finds that willingness for vaccination has fallen sharply since early 2020: it was 86 per cent in March 2020 when the virus was raging in Australia. The University of Melbourne has reported that willingness to get vaccinated has fallen from 74 per cent in October 2020 to 62 per cent in February this year, “with participants citing concerns about effectiveness, safety, and side effects”.  Both surveys show that younger people are less willing to get vaccinated than older people, and the Morgan Survey finds country people are less willing to get vaccinated than city people.

In view of the high level of compliance with lockdowns achieved in Australia, people are seeking explanations for this apparent unfounded scepticism.  Has it to do with the Government’s messaging? asks Justine Landis-Hanley in The Saturday Paper. (See the Schwartz Media website about access limits). Is it that most Australians have been spared the horrors experienced in Britain, Spain, the US and other badly affected countries? Or does Craig Kelly really have some influence?

Perhaps it is something to do with how we perceive vaccination. If I think only of my individual risk, then I may not be all that enthusiastic about a vaccine (AstraZeneca) that has only 62 per cent efficacy rate – implying a 38 per cent failure rate. That is, assuming I think rationally about probability – a brave assumption unsupported by behavioural research.

But if I think of my responsibility to others, and their responsibility to me, and if I understand the basic mathematics of reproduction, then I will understand how even a vaccine of comparatively low effectiveness can contribute to herd immunity, provided enough people take it up.

Unfortunately our governments, particularly Coalition governments, and much of the media have presented public policy in a “what’s in it for me?” frame. (Think of how budgets are presented.)  That may be the most telling reason for our hesitancy. Also, particularly in relation to climate change, most members of the federal Coalition have encouraged us to distrust science and other expert opinion.

The view of experts, published in The Conversation, is that the AstraZeneca vaccine – the one most Australians will receive – is safe, and that it induces immune responses, including in older people. That covers the “what’s in it for me” concern. The same experts draw attention to preliminary research showing that it can substantially reduce virus transmission. That covers the more important “what’s in it for us” concern.

Even with a high uptake the AstraZeneca, on its own won’t get us to herd immunity, but it should be seen in the context of yet another measure to reduce R, the virus’s reproduction rate, along with social distancing , masks and so on.  We don’t stop using seat belts because they sometimes fail.

For those who are concerned about privacy and other issues around vaccines, Rich Sarre and Sarah Moulds of the University of South Australia Law School have a Conversation article The COVID vaccine is here. When and to whom will we need to prove we’ve had it?

The World

Official figures, collated by the WHO and published on reliable sites, suggest that worldwide Covid-19 cases and deaths are falling.  Reported deaths lag reported cases by two to three weeks.

 

Before we pop open our favourite sparkling wine, we should note that the most comprehensive Covid-19 figures have been recorded in East Asia, North America and Europe. It is mathematically possible that reductions in these countries have been overridden by unrecorded rises in other countries in South America, Africa and South Asia.

Norman Swan on Coronacast outlines a few possible explanations about this fall, and he stresses the need for vaccination to be extended to low-income countries to suppress the development of mutants that can be resistant to vaccines.

Sources

See our separate web page of generally reliable information and analysis about Covid-19.  The Economist has added vaccination to its regular entry “Tracking Covid-19”: some countries, including the UK, are achieving high daily rates of vaccination – high enough to get the entire adult population inoculated in three or four months.


Public ideas

The case for conservative socialism

Liberalism has failed, but that does not mean it should give way to populism, authoritarianism and other anti-Enlightenment isms.

Interviewed on the re ABC’s Saturday ExtraThe future of liberalism – Timothy Garton Ash sees two failures in the way liberalism has developed. One is its manifestation in the form of neoliberalism, resulting in worsening inequality and the destruction of community. That’s the fault of the “right”. The other is the way liberalism’s champions have tended to dismiss or deride traditional values such as patriotism and working-class identity. That’s the fault of the “left”.

Liberalism’s great virtue is in its capacity for self-criticism, and its capacity to abandon ideological shibboleths when they are seen to be irrelevant or dysfunctional. Liberals need to return to the ideas of the social market economy and to recognise and respect the legitimate needs of those who feel neglected by the so-called “liberal elites” and who have turned to populists such as Trump and Johnson (he diplomatically did not mention Morrison).  (21 minutes)

His ideas for a return to “conservative socialism” are more fully explained in an essay in ProspectThe future of liberalism.

A call to the left – seize the moment

“A few more years of this and we’ll be a failed state” is how George Monbiot introduces his nine-minute video on Britain’s path to ruin. His country has fallen into the hands of hedge fund managers, property developers, and Rupert Murdoch – the worst people to have in charge, manipulating a government that has fallen into a pattern of gross corruption and incompetence.

He is annoyed and frustrated that Britain’s Labour Party, instead of advocating a return to democracy and good government, is meekly going along with Johnson’s and the plutocrats’ agenda.

(Add in the influence of the resource-extractors and gambling gangsters, and his message could equally apply to our country.)

Remember when conservatives used to talk about responsibilities?

Kishore Mahbubani is shocked by the difference between the ways traditional “western” countries have handled Covid-19 compared with east Asian countries –  Has the coronavirus exposed a gap in values between Eastern and Western nations? – on the ABC’s Religion and Ethics Report.

He attributes the difference to the way government has been de-valued in the west:

Because of Ronald Reagan’s proud claim that “government is not the solution: government is the problem”, there has been a progressive defunding, delegitimization and demoralization of government agencies, especially in the United States, and that explains why the United States has handled Covid-19 so badly. So I think that the one big lesson from Covid-19 is that we should pay more attention to good governance and less attention to private markets.

He explains that people’s trust of government is much stronger in East Asian societies than in the west. Explanations about democracy vs authoritarianism don’t hold: Mahbubani rejects the binary division between “democratic” and “authoritarian” governments. Trust has to do with accountability and competence: some authoritarian governments such as China command high trust (he cautiously doesn’t mention Singapore), while some democratically-elected governments such as the US are untrusted.

He sees the problem for western democracies in terms of the way they have emphasised rights, including rights of the rich, rather than responsibilities.

The document to which he refers when he is talking about responsibilities is the 1997  Universal declaration of human responsibilities, prepared by the Interaction Council. Malcolm Fraser was the Chairman and Helmut Schmidt was the Honorary Chairman of the Council. The document was endorsed by a host of former presidents and prime ministers.  (It is hard to imagine Howard, Abbott or Morrison becoming enthused about citizens’ responsibilities to one another.)

What does “subsidiarity” really mean?

“Subsidiarity” is a political ideology that asserts, when practical, that social and political problems should be settled at the most local level. The right tends to see subsidiarity in terms of getting “big government” out of the way and leaving social problems to charities, local associations, or even families. The doctrine of subsidiarity, advocated by successive popes, has provided convenient moral cover for those Catholics and other Christians who align themselves with the “small government” right.

In an article in SlateJoe Biden is a different kind of Catholic – Jeffrey Guhin of the University of California explains the idea of subsidiarity in its broadest sense. It is not anti-government. Rather it is a recognition that politics is about the way we come together to solve problems. If those problems can be solved at a low level then they should be, but many require organization and funding up the line.

Guhin describes how Biden is likely to be guided by Catholic social teaching:

Catholic social teaching emphasizes that the state—like anything else, including and especially the economy—is made of people, and it’s those people the state is intended to serve. The purpose of both government and economy is to ensure flourishing human lives, not the other way around. If the state gets too big, we cut it back. If the economy gets too cruel, we put in protections. These are means, not ends; sets of practical problems, not ideological goals.


The far right in Australia

The rise of right-wing extremism

The Australia Institute has a 55-minute podcast on The rise of right wing extremism, with Anne Aly – Federal Member for Cowan and former lecturer in counter-terrorism – and Richard Denniss of the Institute. Aly presents a short history of right-wing terrorism in Australia: it’s been a changing pattern, generally characterised by racism and ultra-nationalism, but it’s only recently that bodies such as ASIO have devoted a large proportion of their resources to right-wing terrorism.  She names many groups – the Proud Boys, the KKK, Blood in Honor … Some are home-grown, some are local franchises.

Most of the discussion is about the profiles of right-wing terrorists. What attracts people to such groups, and how do these groups recruit?

Some are attracted by groups’ expressed ideologies, while others are attracted by the lure of organised violence without much regard to the ideology. An existential fear, such as the replacement of the white race, is a strong motivator.

Australia’s Cossacks

Last month a group of Australians gathered in front of Sydney’s Town Hall to protest against  Putin’s attempted murder and jailing of Alexy Navalny.

On the other side of George Street there was a counter-protest of “Australian Cossacks” in support of Putin, led by Australia-born Simeon Boikov.

The ABC has a videographic Putin’s patriots, about pro-Russian nationalist groups – Australian Cossacks, the Double Headed Eagle Society, the Night Wolves Motorcycle club – operating in our country. Undoubtedly some are promoting Russian culture and language, but others are pushing Putin’s agenda.


Polls, surveys and elections

We’re not so worried about Covid-19 but the future is uncertain

In January this year 17 per cent of us thought we would become infected with Covid-19, down from 34 per cent in August last year.

That’s one of the more significant findings from the latest ANU survey Tracking outcomes during the Covid-19 pandemic, subtitled “cautious optimism”, by Professors Nicholas Biddle and Mathew Gray.  We hear many stories of hardship, but the survey finds “life satisfaction continues to be at a higher level than just prior to the COVID-19 pandemic, and levels of psychological distress are lower than they have been since the spread of the disease in Australia, including a significant decrease since November 2020”. (It should be remembered that in January last year we were still experiencing the bushfires.)

Younger people are generally optimistic about the future, provided they have a sound educational base.

Some of the strongest findings related to trust in institutions. Confidence in the federal government was at 27 per cent in January last year, and had risen to 60 per cent in November, before falling back to 54 per cent in January this year. But we still have much more confidence in the public service, state governments, police and hospitals than in the federal government. All of these more trusted institutions can be considered as “the government” free of association with federal politicians.

The ANU provides a narrative summary, with a link to the document  (where there is a heap of demographic and income cross-section data) on a separate web page.

Essential – Morrison’s ratings hold, Albanese’s  fall

In spite of renewed revelations of corruption in grants programs, and election donation data revealing the influence of big money on the Liberal Party, Morrison has strengthened his lead over Albanese both in terms of net approval and as preferred prime minister, according to the February Essential Poll.

Also encouraging for the Coalition is a finding that the proportion of people who rate the federal government’s response to Covid-19 favourably has continued to rise: it’s now  69 per cent. But most people still think their state premiers have done a better job than Morrison, and most people believe the Commonwealth Government should take more responsibility for quarantine.

There is a set of question relating to the way Morrison has handled Craig Kelly.  Most people believe Kelly is undermining Morrison’s leadership. Otherwise they have nothing else positive to say about Kelly.

There are questions about setting targets for CO2 emissions. People are more enthusiastic about targets for 2030 than a “net zero” by 2050, with predictable partisan differences. Only 9 per cent agree that we shouldn’t have any targets for reducing emissions, but when broken up by voting intention, (Labor, Coalition, Green, other) opposition to reducing emissions rises to 17 per cent among “other”.  There is a question about excluding agriculture from emissions targets: only among Coalition supporters is there more than 50 per cent support for excluding agriculture.

Kosovo swings left

We may believe that in eastern Europe populist authoritarian governments are well-established.

Not so in Kosovo, however, where the left-wing anti-establishment Vetevendosje (“Self Determination”) Party won 48 per cent of the vote in parliamentary elections last Sunday.

You can hear Marko Prelec, of the International Crisis Group and Tim Judah, of The Economist explain the election outcome to Phillip Adams on Late Night Live.

The party is progressive in relation to its platform on social justice and taxation and in relation to its strong anti-corruption stance – a stance that enabled it to see off the long-time ruling Democratic Party of Kosovo in a landslide. But it is also strongly nationalist. Prelec and Judah explain how this nationalist agenda relates to its relationship with Serbia, and how with Trump out of the way it is likely to have more support in international arenas.


Development economics

Can Africa follow Asia’s path to prosperity? Perhaps not

East Asia’s path to prosperity followed a standard script in development economics. Start with labour-intensive industries such as clothing, move on to industries involving more skills but that are still labour-intensive such as household appliances, and then on to skills and capital-intensive activities such as automobiles.

But is such a path open to the poor countries of today, asks Dani Rodrik: Poor countries’ technology dilemmapublished in Project Syndicate. Many manufacturing technologies of today are intrinsically capital-intensive or skilled-labour intensive. The initial stage of Asian development may not be open to African countries.


Webinars

The Australia Institute

See the Australia Institute website for coming webinars with Ross Garnaut (Wednesday 24 February), Senator Jacqui Lambie (Wednesday 3 March), Senate President Scott Ryan (Tuesday 9 March), journalist Rick Morton (Friday 19 March) and Richard Denniss (Wednesday 31 March).


Virtual art tours and other attractions

Until our governments get a move on with vaccination and manage to sort out quarantine arrangements, you may not want to run the risk of travelling and getting stranded or called home at short notice. In the meantime the National Gallery has a collection of videos and virtual tours that you can enjoy.


See Michael West Media for more analysis of these and other economic and political issues, and watch out tomorrow, Sunday, for Peter Sainsbury’s Sunday environment round up

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