Saturday’s good reading and listening for the weekendSep 5, 2020
What people in other forums are saying about public policy
The pandemic’s progress
Victoria and New South Wales
Victoria’s rate of new cases is on the way down, but we shouldn’t expect it to follow a linear path to the axis. Just as exponential growth takes us by surprise with its accelerating rise, so does exponential decay frustrate us with its drawn-out tail. Filter out a bit of day-to-day noise in Victoria’s figures, and they are behaving in line with simple mathematical models.
The New South Wales experience is very different. It’s analogous to a firefighting authority dealing with loosely-connected spot fires, hoping that they can stay on top of the situation, while not disturbing the community by declaring a higher category of fire bans.
High risk but it may work.
Australia should “go for zero”
Former head of the Commonwealth Health Department, now Health Program Director of the Grattan Institute, together with economist Will Mackey, has called for an explicit “go for zero” national policy approach to Covid-19 in Australia.
Their report Go for zero: How Australia can get to zero COVID-19 cases, calls for Victoria, New South Wales and Queensland to aggressively drive Covid-19 cases down to zero as part of an explicit national policy of no active cases in the Australian community.
Duckett and Mackey are critical of the idea that we can manage with some steady “manageable level” flow of cases, pointing out that such an approach is dangerous and economically costly. Commenting specifically on that strategy as it is being played out in New South Wales, they warn that “the longer the virus is in the community, the greater the risk of breakouts requiring lockdowns to be reimposed to prevent hospitals being overwhelmed. That’s a ‘yo-yo’ strategy – the economy could be seized with uncertainty as businesses open, close, open, and close again”. Each new case has the potential to grow into a Victoria-style outbreak that can be managed only with extreme measures.
The report carefully analyses all aspects of the costs of the epidemic and of measures to contain it. They warn that “low-level community transmission brings with it its own health and social costs. The ability to avoid this transmission is provided only to some, with many – because of where they can afford to live or where they can work – unable to avoid contact with others”.
What’s happening in our region
In our region the epidemic’s impact has been remarkably light compared with the Americas, Europe, Africa and South Asia – that is, the rest of the world.
The table below, ordered by the total incidence of cases per million population, gives a statistical snapshot of the virus in our region. At the bottom of the table, providing some perspective, are comparative figures for the USA and the UK – countries with which we often compare our performance on matters of public policy. They’re in another, more chaotic, world.
Taking four of those countries that we know have reasonably robust data we can see how the pandemic has tracked over the last three months.
On last Saturday’s Saturday Extra program, in the Foreign Affair segment, Geraldine Doogue discussed Indonesia’s handling of Covid-19 with Herve Lemaiheu of the Lowy Institute and Michael Wesley of the University of Melbourne. (The same segment also covers Chinese foreign policies and Thailand’s monarchy.)
Sources of generally reliable information on Covid-19 are on a separate web page.
National Accounts – look beyond the immediate nunbers
The media have given plenty of attention to Wednesday’s release of the June quarter national accounts. To get some analysis and disaggregation, follow the “Analysis” link on the ABS page, where you will see details about where the economy has gone backwards, particularly in household consumption and dwelling investment: the only significant industry in the private sector to have experienced growth has been the finance industry. Except for a fall in imports our measured GDP would have been even lower.
One notable development is that wages have fallen sharply as profits have risen. Not too much should be read into such data for one quarter: many people have lost their jobs, and government transfers such as “Jobkeeper” have passed through corporate accounts. But of more interest from a policy perspective is the trend in the shares going to labour and capital, well before there was any sign of Covid-19. Are any of the Coalition’s policies intended to reverse the trend?
Also standing out in the national accounts has been a significant jump in the household saving ratio. There are two possible reasons.
One is that with lockdowns and travel restrictions, opportunities for discretionary spending are limited – that’s why the Morrison Government is so keen to see the economy “opened up”, regardless of the risk of another Victorian-type outbreak.
The other, and more compelling, reason is that people realise that the immediate future is highly uncertain, and are strengthening their household balance sheets by paying off credit cards, building up their cash balances and so on. This is normal behavior in a recession – note that the graph shows a similar jump in the saving ratio folllowing the 2008 financial crisis.
In terms of policy, this suggests that the Morrison Government’s signaled policy of bringing forward tax cuts tailored to suit the already well-off would have little effect on economic activity. Much would go into further savings, and into asset price inflation, resulting in an even greater maldistribution of financial wealth rather than in any new economic activity.
If you care for more graphical analysis of the national accounts, Peter Martin has produced Six graphs that explain Australia’s recession for The Conversation, covering some of the same ground but with other gems, such as noting that we’re still spending plenty on booze.
Forget the Melbourne Club: There’s a club that’s more exclusive and with more political influence
On the ABC’s Breakfast program, Fran Kelly interviews investigative journalist Marian Wilkinson about how a network of politicians, climate sceptics and so-called “business leaders” have blocked every serious attempt by Australian governments to implement a responsible climate policy, putting us on a path of toxic politics around climate change.
Wilkinson names the usual suspects (Hugh Morgan and others influential in the Victorian Liberal Party), and others who live more in the shadows, going back to the late 1990s, when there was a strong push against Australia ratifying the Kyoto Protocol. She describes deep connections between the Australian anti-climate-change networks, and the well-organised global fossil fuel lobby, and a quiet alliance between John Howard and George Bush to thwart action on climate change.
She takes us into a later Prime Minister-US President relationship, between Tony Abbott and Barack Obama at the 2014 Brisbane G20 meeting, when Obama departed from his prepared script to express his frustration with Abbott’s climate denial.
Wilkinson describes this network of blockers as the “Carbon Club”, which is also the title of her recently-published book. (12 minutes).
The Climate Council is hosting an online book club session at 6 pm on Wednesday September 9 – The Carbon Club: How a network of influential climate sceptics, politicians and business leaders fought to control Australia’s climate policy.
How economists under-estimate the cost of climate change
Perhaps the most deceptive aspect of the Coalition’s 2019 election campaign was its absurd misrepresentation of the cost of dealing with climate change (tradies struggling to tow their boats behind electric cars!) and its refusal to acknowledge the costs of not dealing with climate change.
It’s not only opportunistic populists who ignore or underestimate the economic damage of climate change. So too do economists schooled in the neoclassical tradition, as Steve King points out in his article The appallingly bad neoclassical economics of climate change published in Globalizations. Using historical temperature-GDP correlations, economists tend to trivialize the impact of climate change and they tend to assume that because much economic activity takes place indoors in temperature-controlled environments, most of the economy will be unaffected. In so doing, they are overlooking the scientific evidence that climate change is responsible for system-wide effects, with major economic consequences.
A reader of Pearls and Irritations has drawn our attention to a newly-completed steel plant in Sweden that produces steel with zero CO2 emissions. The power to operate the plant is entirely from renewables, and the process of reduction of iron ore is with hydrogen (generated by zero-carbon methods) rather than coking coal. There are such projects on the drawing-boards in Australia: this Swedish venture demonstrates the practicality of such processes.
Australia’s economy – Superannuation
The compulsory superannuation contribution rate, presently 9.5 per cent, is scheduled to rise in five increments to 12.0 per cent by 2025. The first 0.5 per cent increment is due to take effect in July next year.
Some economists believe the increases should be deferred. Treasurer Frydenberg is considering whether to defer or abandon the increases.
Ask 44 economists …
In The Conversation Peter Martin has collated the views of 44 economists on two propositions about the rate of compulsory superannuation.
The first is: “The legislated increase in compulsory super contributions, which are set to climb from 9.5% of wages to 12% over the next five years, should
proceed as planned” 13 agree;
be deferred” 20 agree;
be abandoned” 9 agree
The second is “Increases in compulsory super contributions are likely to be paid for via slower growth than otherwise in workers’ wages”.
6 are uncertain
The arguments for going ahead are about providing adequate retirement incomes and saving on taxation-funded pensions. (These were the main arguments when the Hawke-Keating Government devised the scheme). Among those who want the increases to proceed as planned are Craig Emerson and John Hewson.
The arguments for deferral or abandonment are mainly about the macroeconomic need to ensure that increases in remuneration, if any, should be in wages that can be spent immediately, rather than adding to saving. Some economists point out that at 12 per cent some people in retirement will enjoy a higher income in retirement than in their working years. (This is so, but only for those increasingly rare individuals who, on graduation, enjoy an unbroken working life of steady and secure income.)
John Quiggin is among a minority who see that superannuation is a mess. “We need to wind back tax concessions and get a coherent income support policy for all age groups before going any further down this path.”
Keating on economists and on Coalition monkeys
On the ABC’s Breakfast program Paul Keating, in his usual sharp and direct style (a style out of fashion among current Labor politicians), makes it clear what he thinks of those who seek to defer or cancel the legislated rise in superannuation – A bitchy performance by Coalition monkeys. On economists seeking deferral or cancellation he says: “no imagination, no courage, no sense of fairness”. On Coalition backbenchers pushing to stop the rise: “a bunch of little bitchy Liberals trying to knock off two-and-a-half per cent of people’s incomes for the rest of their lives”. Compulsory superannuation has been a major structural reform, not something to be dialed up or down as an adjunct to fiscal policy.
Keating’s arguments go well beyond the rate of superannuation contributions. He describes how the financial assets accumulated by superannuation funds can make investments that banks cannot, and he puts a cogent case for government borrowing for infrastructure. Banks, unlike governments and superannuation funds, are limited to rolling finance of low-risk-low-return assets such as housing and expansion of existing businesses. (18 minutes)
Any delay in going to 12 per cent will be tough on the poor
Per Capita’s Emma Dawson, writing in The Guardian, points out that a freeze in the superannuation guarantee rate would mean a net loss in lifetime income for low and middle income Australians. She also draws our attention to those in Coalition ranks who have an enduring opposition to compulsory superannuation.
How to win elections
Over the last eight federal elections, Labor’s two-party-preferred (TPP) vote has been 49.7 per cent, while the Coalition’s has been 50.3 per cent. Close enough to 50:50 one might say, but Labor has won only two of those eight elections. It even lost an election in 1998 when it had a 51:49 TPP lead.
On the ABC’s Late Night Live, Phillip Adams interviews Chris Wallace of the University of Canberra about the political art of winning elections – something entirely different from presenting a sound set of policies to voters. She discusses her book How to win an election which spells out ten things a political leader and his or her party must excel at to maximize the chance of success. Will Labor learn? (20 minutes)
Northern Territory election
In response to our item on the Northern Territory election last week, where we suggested that there had been a low turnout in some electorates, Michael Dillon drew our attention to the entry on his website: A Walking Shadow: Observations on Indigenous public policy and institutional transparency, where he observes that “one of the concerning issues relating to the NT election is the poor turnout of Aboriginal voters in the bush”. Low turnouts in the Territory’s non-urban electorates “raise uncomfortable questions regarding the efficacy of our democratic institutions in representing the populace at large, and particularly the remote bush population in the NT”.
He is concerned not only with the low turnout of registered voters, but also with non-registration of eligible voters, for which he provides some conservative numerical estimates. He suggests three possible reasons:
- people in remote communities have tuned out;
- intense engagement with social media crowds out media more relevant to political participation;
- groups with strong internal connections may have weak connections to the broader public sphere of political participation.
Results from the Northern Territory Electoral Commission (1 September) show that turnout in Darwin and Alice Springs was reasonably high (79 per cent and 76 per cent respectively). By contrast it was quite low in remote electorates: for example 48 per cent in the Gwoja electorate west of Alice Springs and 51 per cent in the top end electorate of Arafura.
Branch stacking and its consequences – a swing to the right
The Centre for Public Integrity has re-published Mike Seccombe’s article on branch stacking, originally published last Saturday in the Saturday Paper – How branch stacking drags policy to the right. It starts with the now well-publicised branch stacking in the Victorian Liberal Party, where a group with a narrow and uncharitable interpretation of Christian morality – an interpretation centered on matters of sexual behavior – is trying to oust more moderate candidates and members. In Labor’s case the pressure to endorse candidates comes from the voting power of socially conservative unions such as the Shop, Distributive and Allied Employees Association.
Sumer is Icumen in
More fires and floods, and rising sea levels. Are we prepared?
As with viruses, bushfires have little respect for state borders. This is the reality underpinning the report of Interim observations of the Commission into Natural Disaster arrangements. The Commission was established in February this year following last summer’s catastrophic bushfires, but its work “is not only about bushfires, but also about natural disasters more generally—that is, naturally occurring, rapid onset events that cause serious disruption to a community or region, such as floods, bushfires, earthquakes, storms, cyclones, storm surges, tornados, landslides and tsunami”.
The report dispels any idea that last summer’s fires were a unique event. As a result of climate change we can expect to experience more frequent and intense floods and bushfires, and continuing sea-level rise.
Without making specific recommendations, it makes it clear that the Commonwealth should play a more active role in natural disaster contingency planning, information management and coordination between sub-national agencies, as well as providing resources “when a state or territory government becomes significantly incapacitated or its resources are exhausted”.
The party of no content
What is the Republicans’ policy platform? Writing in The Atlantic Annie Lowery has a good look around, and can find virtually no content – just a few bullet points about half-developed ideas: The party of no content. This is quire different from Trump’s 2016 campaign about repealing Obamacare, building a beautiful wall, and ending the trade deficit.
Part of the explanation is that Trump is not engaged with the job:
The most obvious explanation is that Trump does not care much about policy. He often seems uninterested in the work of the presidency and the extraordinary power and opportunity it affords, and uninterested in learning what he could do with it if he felt like it. He does not read intelligence reports or think-tank proposals. He does not dine with the nation’s top experts. His administration is filled with neophytes and yes-men. He watches a lot of television and plays a lot of golf.
Another possible explanation is that the Republicans are a disunited party, and yet another is that had Trump and his party pushed through its 2016 platform, particularly the repeal of Obamacare, it would be even more unpopular than it is now.
She suggests that if the Republicans lose on 3 November they will have a hard job reconstructing themselves as a credible political party.
Let them eat tweets
Where did Trumpism come from? is Sheri Berman’s article in Social Europe, exploring the forces that have given the world’s richest and most powerful country such a dysfunctional presidency. She considers first structural economic developments, particularly rising inequality and precarity, that have led to a discontent of the most disadvantaged and the rise of populism world-wide.
She explains an alternative view as put by Jacob Hacker and Paul Pierson in their book Let them eat tweets: how the right rules in an age of extreme inequality. The Republican Party – a party well to the right of European Christian Democrat and similar parties – has deliberately pursued a “plutocratic populist” economic agenda, that has little connection with the electorate’s more centrist values. The strategy is to shift the battle ground from economic issues to identity and cultural issues. “This strategy involves fear-mongering about immigrants, fanning resentment against African-Americans and other ploys to make white, and particularly white working-class, voters feel as though their values, traditions and identities are threatened.”
The world economy
It’s official – the world is becoming more equal
In 2013 Branko Milanovich and Christoph Laker produced research that showed worldwide per-capita income growth by income group. Everyone was doing better except for the middle classes in “developed” countries, who were stagnating or going backwards. This was a clear tension of globalization. We might recall their “elephant graph” showing the western middle class squeezed between emerging middle-class Asians and plutocrats in their own countries.
Milanovich has updated that work – The world is becoming more equal – published in Foreign Affairs. The same forces are still in operation, after having been briefly interrupted by the 2008 global financial crisis. He makes some telling observations on China: it was responsible for a large part of the equalization that took place earlier this century, but, having moved up the income scale, is unlikely to play such a role in the future.
He is concerned that isolationist reactions to Covid-19, and the trade and technology war between the US and China, may put an end to further progress in moves to more global income equality.
Away from Covid-19, Trump, Morrison, Murdoch and other pestilences
William Barton, supported by members of the Sydney Symphony Orchestra: Petrichor and birdsong at dusk.
Watch out tomorrow, Sunday, for Peter Sainsbury’s Sunday environment round up.