SATURDAY’s GOOD READING AND LISTENING FOR THE WEEKENDJul 13, 2019
A regular collection of links to writings and broadcasts in other media
ABC’s Saturday Extra (from 0730 to 0900 or on their website in case you miss it). Geraldine is back.
Deutsche Bank – what happened and what does it mean for the future of investment banking?
Afghan women have fought to get a place at the table in the peace talks with the Taliban. But what do they expect to get out of those talks and what is the current status of women in Afghanistan?
Anne Summers on the astonishing story of how multi-millionaire Jeffrey Epstein escaped justice for decades of sex trafficking.
From afar, Sweden appears to enjoy an enviable combination of Scandi chic and egalitarianism, but it also has a long history of forced sterilisation and racial superiority. And even Ikea is suspect.
What became of the 135 Aboriginal men who fought in the 1914-18 War and why are they still unrecognised? Anna Wyatt has been researching their sometimes inspiring, sometimes heart breaking stories…
Most Australians are in favour of an indigenous voice to Parliament
A poll of 1100 Australians, commissioned by The Guardian, reveals that two-thirds are in support of an indigenous voice to Parliament, and that an even larger majority are in support of constitutional recognition of indigenous Australians. The poll was conducted by Essential Research, but its results, in summarised form, are available only on The Guardian website.
On the ABC’s Religion and Ethics Report Andrew West interviews Professor Else Grete Broderstand of the University of Tromsø about the Sami parliaments in Norway, Sweden and Finland – countries where recognition of the rights of indigenous people has a long history. As Stan Grant explains, these parliaments have much in common with the proposals in the Uluru Statement: they are respected and influential, but they have no legislative power. (13 minutes)
More polls – but still nothing on voting intention
Essential Research has released a poll asking if people “think the direction and policies of the new [sic] Government will be good or bad” for particular interests. There’s strong agreement that “large businesses and corporations” will benefit while “older Australians” and “the environment” will not, but along other dimensions the results are inconclusive. Paradoxically, but in line with other surveys “the economy” scores a small positive, but “you and your family” score a small negative.
Unsurprisingly Coalition voters are more enthusiastic about the government’s policies than Labor and Green voters. More tellingly, men and older people are more in support of the government than women and young people.
The poll has three other sets of questions. One is on freedom of speech: we turn out to be quite liberal, while also disapproving of hate speech. Another is about some footballer in a contractual dispute with his employer. And the third asks what we think was the greatest scientific invention of last century: penicillin gets top rating, while neither the Hills Hoist nor the stubbie holder even score a mention.
The idea most under threat in the west is not liberalism, but conservatism.
That’s the challenging idea in the one of The Economist’s lead articles. “In two-party systems … the right is in power, but only by jettisoning the ideas that used to define it”. The article mentions the usual suspects in Europe and the USA, and our Prime Minister gets his own mention:
“Conservatism is pragmatic, but the new right is zealous, ideological and cavalier with the truth. Australia suffers droughts and reef-bleaching seas, but the right has just won an election there under a party whose leader addressed parliament holding a lump of coal like a holy relic.”
The writer sees a demographic ray of hope, noting that support for the hard right is strongest among those born before 1945. Younger people, generally benefiting from better education, may remain liberal or become more conservative as they age, but even if they drift to conservatism it is likely to be a traditional Burkean conservatism that, in common with liberalism, is grounded in Enlightenment values, unlike the present anti-intellectual, anti-science and generally anti-Enlightenment attitudes of the present “right”.
Is socialism making a comeback?
On the ABC’s Between the Lines Tom Switzer interviews John Quiggin of the University of Queensland (author of Economics in two lessons: Why markets work so well, and why they fail so badly) and Joshua Muravchick (author of Heaven on Earth: the rise, fall and afterlife of Socialism) about the attraction of socialism in developed countries. Rather than a struggle between ideological antagonists, the program is mainly about the appropriate boundary between the market and the state (similar to the arguments in Governomics: can we afford small government?) Much of the discussion is semantic – what is meant by “socialism”? The word has, at times, been purloined by some of the world’s most vile authoritarian regimes (in the same way that the word “liberal” has been appropriated by illiberal political parties). (30 minutes)
Can the Democrats attract enough disaffected Republicans to throw out Trump?
Writing in Politico, Mona Cheren, a clearly not-so-happy Republican, outlines what would motivate her to cross to the other side in the 2020 election. Her message is essentially the same as The Economist editorial line mentioned above: liberals and conservatives have more in common than traditional conservatives have in common with Trump and similar demagogues. A Democrat platform that does not scare the horses will attract enough Republicans to come out and vote Democrat – perhaps only this once.
This year is the anniversary of two events that shaped the world order in the wake of terrible armed conflicts.
It is the 100thanniversary of the Treaty of Versailles. In the ABC’s Between the Lines Tom Switzer reminds us of the ongoing controversies around the rise of National Socialism in Germany: was it in reaction to the harsh reparations demanded at the Versailles Treaty, or was it the result of later developments such as the Great Depression? Switzer agrees with Keynes’ prescient warnings that “a sense in impending catastrophe overhung Paris” as he wrote in The Economic Consequences of the Peace. (The broadcast is in one 30 minute take: the first 20 minutes are a polarised and unenlightening argument about Iran’s intentions; the Versailles coverage is in the last 10 minutes.)
It is also the 75thanniversary of the Bretton Woods Conference. Writing in Inside Story, Selwyn Cornish recounts Australia’s role in the conference that was to shape the postwar monetary and trade system. In contrast to Versailles, where Australia was represented by the belligerent and anglophile Prime Minister William Hughes, at Bretton Woods Australia was represented by an outstanding group of public servants – L. F. Giblin, Roland Wilson, Leslie Melville, and H.C. “Nugget” Coombs – who argued for members of the IMF to pursue policies aimed at maintaining full employment. On that condition, while receiving support from many countries, they were defeated by the USA and a bloc of south American countries, but the more enduring outcome of our participation was our support for and participation in a rules-based trade order – an order now under severe threat from bellicose economic nationalists on both sides of the Atlantic.
Another anniversary – Orwell
This year is also the seventieth anniversary of Orwell’s Nineteen Eighty-Four. In The Atlantic George Packer writes a review of Dorian Lynskey’s The Ministry of Truth: The Biography of George Orwell’s 1984. Lynskey’s book is not a review of Orwell’s work; rather, it is a review of the book itself as a presence that’s been around for the last seventy years, sometimes claimed by the right, sometimes claimed by the left. “The Ministry of Truth is Facebook, Google, and cable news. We have met Big Brother and he is us” writes Lynskey.
What will we do with all our money?
While the most prudent thing we can do with our tax-cut money may be to strengthen our personal balance sheets, Josh Frydenberg and Gerry Harvey are urging us to spend it. It’s accepted economic theory that squirrelling away such money does nothing to give an ailing economy a boost (although one may ask whether spending in Harvey Norman stores will do more to stimulate the Chinese economy than the Australian economy).
The ABC’s business editor Ian Verrender believes the tax cuts aren’t enough to stave off a recession, even when combined with interest rate reductions. Noting our high levels of household debt, he echoes calls by independent economists for infrastructure expenditure. (Unlike consumers with windfall dollars, governments can make sure that money for infrastructure is spent, and that not too much leaks to imports.)
The regular Westpac-Melbourne Institute Index of Consumer Sentiment suggests that consumers are in no rush to spend. It finds “increasing concern about the economy is undermining consumers’ sense of job security”, and that consumers are concerned not only about immediate economic conditions, but also longer-term conditions. There was some upturn in confidence following the election, but that has already been more than wiped out. (Such is the effect when a government wins office through marketing hype rather than by articulating a policy.)
The Reserve Bank has just published a paper on the effect of mortgage debt on consumer spending. One economic theory, presumably the one guiding Treasury, is that if housing prices rise, then even highly-indebted households will feel confident to spend, on the basis that their net equity position (house value minus mortgage debt) is healthy. But the RBA’s researchers find that in the current Australian situation, it’s the level of debt alone that’s most influential in determining sentiment. The research conclusion is: “Higher mortgage debt is associated with less spending even when we control for changes to net housing wealth and cash flow”.
Unless you feel you have a patriotic duty to stimulate the local economy (we still make beer, bricks and toilet paper locally) your best bet may be to put your stimulus money towards improving your balance sheet.
We may not have much money anyway, after we’ve paid our superannuation
Compulsory superannuation contributions, already 9.5 per cent, are scheduled to rise to 12.0 per cent in 2025. This rise is locked into legislation and is supported by major political parties.
Writing in The Conversation, Brendan Coates and Owain Emsile of the Grattan Institute argue that a higher superannuation contribution rate is not an unmitigated good; in fact it could leave middle-income earners worse off over a lifetime. One often-overlooked fact is that the age pension is indexed to wage earnings (i.e. not including superannuation), and because higher superannuation involves a trade-off of wages, lower wages result in a lower age pension.
The cost of tax cuts
Plenty of economists are pointing out what our government and its politicised Treasury are not pointing out – that our tax cuts come at a cost. For every dollar we may gain in tax cuts we will be paying more than a dollar for more expensive privatised services (health insurance, road tolls, school fees), or going without important government services. Those statements by economists are fairly dry in style, but there are also some strong stories making the same point. Tara Schulz, a young lady whose life was turned around by government services writes what the tax cuts mean to her: Australians like me are ending up in jail and your tax cut won’t help.
The graph below, drawn from OECD data, takes a macro perspective of tax cuts. It shows for high-income countries the relation between taxes and economic growth: it certainly does not support the idea that high taxes impede economic growth – look at the upward slope of the line of regression. Australia is down in the low-tax-low-growth corner, and it appears that the Dutton-Morrison Government wants to push us even further into that corner.
The cost of power privatisation
About half of your electricity bill goes to pay for the transmission and distribution infrastructure (power lines, transformers etc) that connect your home or business to the generators, and about a half of that half – that is a quarter of your bill – is the profit margin the Australian Electricity Regulator allows the privatised or corporatized companies. Last year a group of economists, representatives of manufacturing and farming industries and officials from social service organisations prepared a submission to the Australian Energy Regulator calling for the regulator to lower the allowed profit margin. To summarise a very long and equation-laden report, they found that these companies are allowed to make an outrageously high profit in an industry that’s so highly regulated that it’s virtually risk-free.
The coal lobby, with help from the Coalition Government, has been trying to convince South Australians that their high prices are due to their reliance on renewable energy. But, as in other states, and as confirmed by the report to the regulator, the culprit is the generous rate of return allowed to the companies. The Australia Institute has surveyed South Australians to find their perceptions of the reasons for high power prices, and it seems that the SA public have it right: privatisation and price gouging are the main factors they identify. Unsurprisingly Coalition voters are more inclined than Labor or Green voters to blame renewable energy and are less inclined to blame heatwaves for high power prices.
National Party Minister announces the collapse of Australia’s metallurgical coal industry
Deputy National Party Leader, Bridget McKenzie, has gone on air asserting that all of the 54 000 people recorded by the ABS as employed in the coal industry are working in the thermal coal industry. That’s the low-value stuff driving ancient power stations, wrecking the planet and which Adani wants to dig up. McKenzie’s announcement means that BHP, among others, must either have ceased metallurgical coal production (or that their operations are now entirely controlled by robots!)
Or perhaps, true to National Party traditions, McKenzie is either confused or uninformed. After all, BHP for one has recently announced that it is getting out of thermal coal, but will be staying in the metallurgical coal industry. And the ABC has fact-checked the figures on coal employment, pointing out that the ABS is in the process of developing more accurate and meaningful figures in employment, which indicate that the whole industry employs around 38 000 people. That’s about 0.3 per cent of Australia’s employed workforce, or only about two-months’ worth of average new employment creation (22 000 a month) in Australia.
The Murray-Darling crisis in language even the National Party can understand
It’s not all that complicated: irrigators are taking too much water from it, explains John Quiggin in The Conversation: The Murray-Darling Basin scandal: economists have seen it coming for decades.
Let’s celebrate engineering
We hear a great deal from people who keep themselves busy by shoving around other people’s money – economists, financiers, currency traders and so on. People who don’t know the difference between stress and strain, or between a watt and an amp. On the ABC’s Late Night Live, Phillip Adams (whose 80th birthday was on Thursday), interviews Lord John Browne, Fellow and past President of the Royal Academy of Engineering. Engineers think about the needs of people and society, and then develop things that make life richer, healthier, more interesting, more comfortable. Do we take their contribution for granted? (18 minutes)
Spare a thought for baby boomers
Some say they are the most economically privileged cohort of Australians of all time, but they have faced a monumental struggle to retain their hard earned imputation credits, but they are so badly deprived of recognition.
Watch out tomorrow, Sunday, for Peter Sainsbury’s Sunday environment round up .