Saturday’s good reading and listening for the weekend 

What people in other forums are saying about public policy


The Australian economy

Albo on Labor values

On Wednesday Anthony Albanese gave a speech to the McKell Institute on Labor values and the path to recovery. He starts with the Morrison Government’s economic shortcomings (there are many), and goes on to outline Labor’s ideas about infrastructure, public housing, and the labour force. Practical policies, but not revealing much about Labor’s principles or values.

While he differentiates Labor from the Coalition on energy policy, most of the policies he mentions could be described as moves a little to the left of the Coalition. To reassure us that Labor isn’t harbouring thoughts about taking Australia in a new direction he describes Labor’s budget priorities as “Jobs. Jobs. And jobs” – a syntactic differentiation from Morrison’s tweets about “Jobs, jobs, jobs”.

Housing – the case for expanded supply

Perhaps next Tuesday’s budget will provide some clarification on the Morrison Government’s approach to housing. So far the Government’s policy seems to be about propping up the market value of the existing housing stock through relaxing banks’ lending rules, rather than increasing the supply and therefore the affordability of housing.  Its HomeBuilder grant, with its support for renovations, seems to have been directed at sustaining activity in the residential building industry rather than in increasing housing supply.

Brendan Coates of the Grattan Institute calls for more investment in public housing: Housing vulnerable Australians means making tough choices. Spending $10 billion on 30 000 new public housing units would make housing more available for the poor, would help make all housing more affordable, and would support the building industry.

Jessica Irvine, writing in the Sydney Morning Herald, points out that when house prices start to fall there is often a feedback process that accelerates the process: House prices: the sleeper issue that threatens our economy.   CoreLogic data suggests that housing prices are falling in Sydney and Melbourne, but are rising elsewhere.  The ABS house price data for June, confirms that significant falls in Sydney and Melbourne, and finds smaller falls in all other capitals other than Canberra.

Lemons in the strawberry fields

The horticulture industry is crying out for labour for the summer fruit-picking season. Covid-19 restrictions, having dried up the supply of so-called “backpackers”, has left the industry with severe labour shortages, and domestic travel restrictions have not helped. These are legitimate concerns.

Some who claim to be industry spokespeople complain that the unemployment benefit –  “Jobseeker” – is so generous that it makes fruit picking look unattractive. (If $408 a week, due to fall to $283 a week on January 1, looks attractive compared to what the horticultural industry has to offer for work in the summer heat of inland Australia, the industry has problems with grasping reality.) And there are some in the industry who would like to see a return to indentured labour, or at least a friendly government prepared to turn a blind eye to breaches of award and other protections.

On Phillip Adams’ Late Night Live Joanna Howe, of Adelaide University Law School, describes the labour-supply problems that have confronted the industry – Harvest season looms, but where will the fruit pickers come from? . Some of the industry’s problems stem from ill-advised government policy, such as the “backpacker tax” and from use of labour-hire companies. Others stem from the reputation the industry has earned because some employers have been taking advantage of foreign workers’ ignorance of awards and lax regulation. Unscrupulous employers can also blackmail foreign workers who are in breach of their visa conditions. The industry is therefore renowned for underpayment, filthy and crowded accommodation, bullying and sexual assault. Potential workers have no way of knowing in advance who the decent employers are, and decent employers must try to compete with thugs and criminals who enjoy a competitive advantage. (16 minutes)

It’s a classic case of what economists know as the “market for lemons”, a market failure that can be rectified by strong regulation.  You can see a short animated description or Mark Seccombe’s 12 -minute lecture, or you can read George Akerlof’s original 1970 paper.)


The pandemic’s progress

We’re entering a high-risk phase

As we move the chart along another week, the picture is looking better and better. (Note that the Y-axis is now on a scale of 0 to 100. A few weeks ago the axis was on a scale of 0 to 800.)  Victoria’s lockdown has worked to bring the R factor down well below one – which explains the exponential decline from the peak, and from here on the authorities will be relying more heavily on contact tracing. Over the last couple of weeks a majority of new cases have been traceable to known sources.  And New South Wales has just enjoyed a week with no locally-acquired cases.

There is some concern that testing rates have fallen. That may be a result of complacency, or it may be that with the cold season coming to an end there are fewer people with symptoms to be tested.

Be patient: you’ll soon be back here

These low numbers have prompted calls from Commonwealth ministers for Victoria to open up. Morrison has hinted strongly that because Victoria’s numbers are down to where New South Wales was a few weeks ago, Victoria should have lifted restrictions to the level now applying in New South Wales. Perhaps Morrison doesn’t understand the basic dynamics of pandemics.

If the Victoria Government can hold its nerve, the state will pull out of the lockdown with a much more confident population, willing to go out and spend, than would be the case if it were to open up too early while there is still a substantial level of new infection.  (That will be on top of the benefit of a winter without the infantile madness of league football.)

The biggest risk will come after a few weeks of zero or very low locally-sourced cases, when people forget about the pandemic. As the risk falls our vulnerability rises.

Aged care – some immediate reforms

The Commission into Aged Care Quality and Safety has produced a special report Aged care and Covid-19. While it acknowledges that by international standards Australia has coped with the epidemic well, 74 percent of deaths have been of people living in residential aged care at the time of their deaths, a high proportion by international standards. When Covid-19 broke out, measures implemented by the Commonwealth were in some respects insufficient to ensure that the sector was prepared.

Besides reminding us, once again, of the Commonwealth’s aged care responsibilities, this special report does not attempt to allocate blame for that situation. (Presumably that will be in the final report.) Its concern is with four areas where immediate action can and should be taken to support those living in aged care homes. The most prominent area for reform is to ensure that aged care homes can deal with visitors – generally families of residents who provide emotional support and often physical assistance. Without such capacity many homes, during the pandemic, have had to resort to severe isolation of residents – a distressing situation for all involved.

Other countries

There seem to be three patterns emerging.

One pattern is in Europe and the USA, where case numbers are high – daily rates of 100 or more new cases per million population.  In Europe the infection rate is now higher than it was in the March peak. Of course there are regional differences – rates in Spain and France are around 200 new daily cases per million population, and there are hotspots within European countries and within the USA.  But even the most successful European countries such as Finland and Denmark have rates around 20 new daily cases per million population.  (Australia’s current rate is 0.7.)

Another pattern is east Asia/Pacific, where for a variety of reasons infection rates are very low. Japan, South Korea, Australia and New Zealand, for example, have all had second waves, shown on the graph below, but note that even at our peak of the Victorian outbreak our national rate was just over 20 new daily cases per million population – equivalent to Europe’s best. Now all four countries are down below 4 new daily cases per million population. If we added countries such as Vietnam and Singapore to the graph we would see similar patterns.

Then there are developing countries in the rest of the world, where no clear patterns are evident, mainly because there is little reliable data. Perhaps a roll-out of low-cost testing will help poorer countries, and the world, understand how the pandemic is developing.  Whatever the developments in particular regions, the pandemic is wiping out years of gains in the war on poverty.

Sources

Sources of generally reliable information on Covid-19 are on a separate web page.


Australian politics

From parliamentary democracy to elected autocracy

Australian ministers are increasingly bypassing parliament to create laws. The Centre for Public Integrity has prepared a briefing paper Executive law-making doubles while accountability decreases, analysing the trend over the last 30 years for executive law-making to displace parliamentary law-making, through delegation of law-making powers. Such delegation has understandably increased with the Covid-19 crisis (which has seen the Finance Minister with his hands on a $40 billion advance), but it was well-established before this year.

The Centre for Public Integrity calls for Parliament to re-assert its primacy and to establish a National Integrity Commission with jurisdiction over federal Ministers.

A short article about the report is on the Centre’s website.


Only 31 sleeps before the US election

What we learned from the Trump-Biden catfight

There is a consensus view that any subsequent “debate” between Trump and Biden has to be governed by different rules to avoid the unedifying spectacle of the first session. But at least one political commentator believes the format was ideal. On the ABC Breakfast program you can hear David Frum, senior editor at The Atlantic and former speechwriter for President George W Bush, defend the format: he argues that Trump’s behaviour was quite informative for voters. (11 minutes)

Robert Reich on the unfolding saga

Robert Reich is keeping his website up to date on the contest – always worth logging in.  His entry on 30 September is a detailed analysis of the “debate” (which he calls “a confrontation between a decent human being and a lying sociopath”).  His 10-minute video includes key snippets from the “debate”, saving you the discomfort of viewing 110 minutes of Trump’s vulgar and bullying behaviour.

His entry on 27 September – mounted separately – is titled The coming civil war over Trump’s ego. The election isn’t about public ideas. It’s about Trump, who “has turned America into a gargantuan projection of his own pathological narcissism”.

What if Trump refuses to accept the election results?

The US Constitution has no provision to secure a peaceful transition of power: it simply presupposes it.

This is one of the points made by Barton Gellman writing in The Atlantic: The Election That Could Break America. There are many tactics legally open to Trump to defy the will of electors.

Pre-poll, voter suppression is the time-honoured means Republicans have used to intimidate potential voters.

Once the polls close there are still many avenues open to Trump, many with connivance of Republican state governors. Republicans can dispute the legitimacy of postal votes – as Trump has already hinted. (Postal votes in the US tend to favour the Democrats.)  If a state has a tight count, a compliant court can legitimise having the count stopped at a time when it is in the Republicans’ favour – as happened with the Florida vote in 2000 when, with help from his young brother who was Governor of Florida, and a Republican partisan who was in charge of the election,  George W Bush stole the election from Al Gore. And there is always the option of state governments overriding the popular vote in their state to appoint their own choice of electors to the Electoral College. (Gellman rightly observes that over America’s history, opportunities for such manipulation have been enjoyed almost exclusively by Republicans. Would Democrats be just as opportunistic if they had the same chance?)

Who is Amy Coney Barrett?

We know that Amy Barrett, Trump’s nominee for the Supreme Court vacancy, has been described as a conservative Catholic, but that doesn’t tell us much.

Massimo Faggioli, Professor of Theology at Villanova University, one of America’s leading Catholic universities, gives a bit more detail in an article he has written in PoliticoWhy Amy Coney Barrett’s religious beliefs aren’t off limits. He points out that she is “a life-long adherent of the People of Praise, a charismatic Christian group with a highly authoritarian internal structure”.

He asks what covenant she signed when she was accepted as a member of People of Praise. Would her loyalty to this secretive movement conflict with the loyalty a judge must show to the Constitution?

His misgivings aren’t about “anti-Catholicism or even liberal bias against conservative Catholics”. They’re about accountability.  Pope Francis has warned that some of the charismatic movements that have developed in the Catholic Church can usurp their members’ spiritual and intellectual individual freedom.

Faggioli expands on these concerns in a segment on the ABC’s Religion and Ethics Report: Amy Coney-Barrett and the People of Praise. People of Praise has a strong anti-liberal-anti-secularisation agenda, is dismissive of the rights of minorities, and does not necessarily accept the principle of separation of church and state.  (9 minutes)

Coming update on the US election

On Wednesday, 8 October, 7 pm AEST, Bruce Wolpe of the United States Studies Center, will give an update on the US election, He will “look at the national polls and the key swing states and the Electoral College; and provide an overview of the congressional elections for the Senate and the House of Representatives”.

This Zoom event is hosted by the Balmain Institute – follow their link to register.

US Polls

Nate Silver’s Fivethirtyeight poll gives Biden an 80 per cent chance of winning the election, up from 76 per cent two weeks ago. The “debate” does not seem to have gone down so well with America’s undecided voters.


Other foreign affairs

What does that agreement between Israel, Bahrain and the UAE mean?

Last month two Gulf monarchies, Bahrain and the United Arab Emirates, joined Egypt and Jordan as the only Arab countries to recognise and exchange diplomatic relations with Israel.

The ABC’s Saturday Extra has run two sessions with scholars and experts who provide some enlightenment on this development.  Why is the agreement with these two small countries, and not with the big power in the region – Saudi Arabia? Where does Iran come into the picture –  is it irrelevant to the agreements, or is there a common anti-Iranian sentiment giving these countries a shared interest? And where does this all leave the Palestinians who have been cut out of the deal?.

The first program, New Era for the Middle East, is with James Dorsey of Singapore’s Nanyang Technological University and Ehud Yaari, a Middle East commentator for Israel’s Channel 12, and a Fellow for Middle East Policy at the Washington Institute. They see the agreements from the perspective of the Gulf states, and with a belief that the there is little future in trying to develop peace agreements through the Palestinians.

The second program, Palestinian perspective on Israel’s new friends, is with Diana Bhuttu, Ramallah-based analyst and former legal advisor to the PLO, and Rashid Khalidi of Columbia University. From their perspectives the Palestinians have been let down, and there have been missed opportunities for Israel-Palestine agreements.

Is all harmonious in China?

Writing on the ABC website, Stan Grant suggests that China’s recent crackdowns on dissenters is a sign that not all may be as harmonious as the country likes to present itself to the outside world. – China can’t show weakness to the world. But it also needs to convince its own people. He suggests that “the Communist Party, for all its power, is afraid of its own people”. There are hundreds of protests across the country over issues such as “corruption, land seizures, pollution and economic stress”.  China’s rulers are very conscious of the history of the twentieth century, when internal dissent and weakness rendered the country vulnerable to foreign incursion.

Japan – plus ça change

Writing in Jacobin, Gavan McCormack suggests that Japan’s new leader, Suga Yoshihide, will maintain the old regime. His essay is really a summary of Shinzo Abe’s periods in office, the last of which a critic has described as “a seven-plus-year-long stain on Japanese history”.  McCormack suggests that “Suga will preserve the main features of Abe’s long stint in power: creeping militarism, subordination to the US, and a high-handed approach to political opposition.”

Empirical confirmation – the Swiss are cleverer than the English

Switzerland isn’t part of the EU, but the outside observer would hardly know it. (The only way one becomes aware that one has crossed from Switzerland to Germany is that prices are suddenly much more reasonable.) Switzerland is a member of the European Free Trade Association and it abides by most rules of the Schengen Agreement allowing for free movement of people.

Last Sunday, at the bidding of the right-populist Swiss People’s Party, the government held a referendum on a “Swexit” proposal to shut its borders with the EU.  The proposal was thoroughly defeated – 62:38 per cent. (If you follow the DW link, you can also see a short clip about how global warming has physically shifted the Swiss-Italian border, transferring an alpine business establishment from one country to another.)


Public ideas

What is liberalism?

In a half-hour session on Late Night Live Ian Dunt, editor of politics.co.uk, explains liberalism – “the single most radical political program in the history of humankind”. It displaces institutions of intellectual authority because liberalism does not tell us what to think. Rather, it teaches us how to think.

He explains how liberalism evolved from the philosophy of Descartes and from the scientific revolution, how it has shaped political thought, and how it has been whittled away by elected nationalists: Ian Dunt’s How to be a liberal.

Dunt has just completed a book of the same name: How to be a liberal.

Beyond Piketty – what is “capital”?

Writing in the Real World Economics Review, Andri Stahel of Barcelona’s Universitat Popular del Baix Montseny has an ambitiously-titled article Why are the rich getting richer while the poor stay poor?  It builds on Piketty’s work by looking further into the different types of “capital”. (Piketty’s “C”, the symbol he used for capital, encompassed “capital” as a broad and undifferentiated entity.)  Stahel writes:

Piketty’s book does not shed a light on a crucial distinction between capital gains derived from productive capital investments from those resulting from purely speculative gains. It does not distinguish between incomes deriving from producing different and new wealth from those resulting from the mere increase in prices of properties like land, real estate, artwork, antiquities, collectables, stocks and other financial instruments and goods.

The distinction is important, as Marx, Smith and other economic philosophers have pointed out.  Enjoyment of the gains resulting from trading in financial assets produces no gain in real wealth. It merely channels income to those who are already well-endowed with financial assets without creating any surplus to distribute.  (Stahel’s work closely aligns with that of Mariana Mazzucato.)

Looking at the long term

Economists and others have been puzzled by the way stock market prices have remained high even as the world slips into recession.

A Bank of England staff working paper — Eight centuries of global real interest rates, R-G, and the ‘suprasecular’ decline, 1311–2018 – by Paul Schmelzing provides some context. His analysis over 700 years finds evidence that the return to capital, and therefore the real interest rate, has been on a long-term downward trajectory. There is therefore nothing anomalous about high share prices when profits are low. Nor is there anything anomalous about negative interest rates.

He claims, with some validity, to have refuted one of Piketty’s basic findings, because Piketty had assumed a stable return to capital. (But his refutation of this point does not detract from Piketty’s conclusion about the positive feedback loop that sees the wealthy becoming wealthier.)

A conclusion from the paper is that what economists call “the social rate of time preference” (aka the “social discount rate”) has been falling over the long term, and we should not expect it to rise. That is, we are becoming more willing to defer consumption now in order to enjoy benefits in the future.

Schmelzing’s conclusions are mainly about stock prices. Although he does not mention climate change, his finding is highly relevant to climate change policy, which is largely about how we trade off future benefits in return for investments made now. Sir Nicholas Stern grappled with the way we value this trade-off, choosing a social discount rate of 0.1 per cent a year, setting off a still-raging debate about an appropriate value.

Schmelzing’s work provides us with some long-term perspective at a time when our politicians cannot think beyond the next election, when Treasury bureaucrats concern themselves only with three-year or occasional ten-year fiscal projections, and when the main concern of small business people seems to be whether the Victorian Covid-19 restrictions can be lifted a couple of weeks earlier than planned.


Something to celebrate on October 3

Germany’s Wiedervereinigung

At a time when conflicts and incipient conflicts dominate the news, we can reflect on Germany’s re-unification, 30 years ago today.


Watch out tomorrow, Sunday, for Peter Sainsbury’s Sunday environment round up.

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Ian McAuley is a retired lecturer in public finance at the University of Canberra and a Fellow of the Centre for Policy Development.

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