Pearls and Irritations

What people in other forums are saying about public policy

The budget

“Jobs, jobs, jobs”:  are we too obsessed with jobs?

Most criticism of the budget so far has been about whether the numerical targets of “jobs” will be met and whether there will be enough “jobs” for older, people (now anyone over 35!), women, and the long-term unemployed.

This emphasis is time-honoured – it’s built into the budget process. But is it a confusion of means and ends?  Perhaps the concern of public policy should be about the strength of the economy, recognising that in a strong economy, opportunities for productive employment will emerge, and that those opportunities won’t necessarily be in the form of traditional “jobs”. Are we too locked into a paternalistic “employer-employee” model? Have we come to see “jobs” as an end in itself, regardless of the quality of those jobs and the appropriateness of a master-servant form of employment?

The budget papers – not “good reading”, but informative

When Treasurer Frydenberg expressed his admiration for Thatcher and Reagan we found it hard to take him seriously.

But he meant it.

Most Treasurers’ budget speeches are padded with meaningless statements about the government’s supposed competence, followed by a selection of measures to provide the media with cut-and-paste content. Frydenberg’s speech had all that, but he also spelled out a trickle-down ideology, cobbled together from the Liberal Party platform and Reaganomics.

He says “eight out of every ten jobs in Australia are in the private sector. It is the engine of the Australian economy.”  This valorisation of the private sector comes straight out of the Liberal Party’s statement of beliefswhere we see written “businesses and individuals – not government – are the true creators of wealth and employment”.

By this philosophy the public sector is just a big unproductive overhead. If a government must go into deficit to stimulate the economy, that stimulation should be through the private sector. Give money to consumers to spend, and financial incentives for businesses to “unleash a wave of investment across the country” to quote from his statement.

It’s pure trickle down. Don’t provide better government services to people – public housing, child care, education, care for the aged – what we used to call the “social wage”.  Just give them money.  Don’t bother providing businesses with the public goods that help an economy thrive – transport infrastructure, a well-funded university sector. Just give them money.

Frydenberg made much of his “10 year infrastructure pipeline” but it’s piddling compared with Keating’s One Nation plan in 1992 which included a full one per cent of GDP in new infrastructure, in response to a much more mild recession. And it wasn’t spun out over ten years.

To get a glimpse into the Treasurer’s ideology we need to turn to Budget Paper #1, which contains the hard numbers. On Pages 11-10 and 11-11 we see the government’s estimates of taxation receipts. Taxation will fall in the short term, but by 2023-24, when the economy is supposed to be back to 3.0 per cent growth and unemployment is back down to 5.5 per cent (see Page 1.8 of this same document for this piece of creative fiction), Commonwealth taxes will be only 22 per cent of GDP – much lower than earlier in this century when they were around 24 per cent of GDP.

There is no acknowledgement that Australia’s level of taxation, and the size of our public sector, are already nearly the smallest among all prosperous countries. Instead Frydenberg says “under the Coalition taxes will always be lower”, as if that’s a self-evident economic virtue. The case for “small government” does not have to be argued or justified, because government is just an unproductive parasite on the “true creators of wealth and employment”.

Such a philosophy, taken to its logical meaning, says that the nurse in a public hospital does nothing useful, but could contribute to society on moving to a private hospital. A publicly-funded road is just a wasted piece of work, but if it is sold to Transurban and has a toll applied it becomes something useful. The croupier in the Crown Casino is a true creator of wealth and employment but the public-school teacher isn’t. And so on.

The Liberal Party’s ideology is as absurd as its communist counterpart, that saw no value in the private sector, and in the long run is no less destructive of prosperity. In our case it’s producing a lopsided economy, hobbled by an emaciated public sector.

A recession is a terrible event, but at least it gives a government the means to use its fiscal power to address the economy’s structural weaknesses, as the Hawke Government did in 1983. The Coalition, blind to the destructive legacy of its seven years of mismanagement, refuses to acknowledge our structural weaknesses and has prepared a budget that will do little more than distribute financial wealth to the already over-privileged.

Albanese uses his budget reply to affirm Labor values and principles

Over the last few years Labor has not held back from criticising government policies, and in last year’s election Labor put forward a suite of sound economic policies, but we have not heard much about Labor’s underlying values and principles.

Albanese’s post budget speech is a refreshing re-affirmation of Labor principles, some expressed in general terms, and some in specific policies. Three principles run through his presentation:

Economic reform, in contrast to the Coalition’s lazy trickle-down approach. Investing in a national electricity grid, as recommended by the Australian Energy Market Operator, and supporting parents to participate in the workforce, are important investments in the nation’s long-term economic prosperity.

The social wage, in contrast to the Coalition’s tax cuts and token handouts. Our well-being relies both on our private incomes and on our access to shared services. Labor’s child care and public housing initiatives are both components of the social wage. A significant investment in public housing, through increasing the supply of housing, will help make housing more affordable to all.

Universalism, in contrast to the Coalition’s view of government services as a backstop only for those who cannot cope through their own means – the “indolent” to use the American term. In an interview after the speech Albanese mentioned Kerry Packer’s use of the tax-funded public hospital system when he suffered a heart attack. There are certain basic services we choose to share.

As Albanese said towards the end of his speech, we have a choice. We can go back to the Australia we had before the pandemic – an Australia with stagnant wages, low productivity, and an economic structure heavily based on fossil fuels and extractive industries. That’s the Coalition’s offer. Or we can choose something better.

Other budget comment

There is a plethora of budget coverage in the media, starting with deceptive “what’s in it for me” tables (deceptive, because they disregard the costs of cuts in government programs), and hastily-compiled summaries by journalists trying to digest hundreds of pages of politically-crafted budget documentation in the lockup, followed by predictable statements from lobby groups.

All fairly useless.

Watch out for more independent commentary and analysis by financial journalists and scholars over the next days and weeks. A small selection of the more considered commentary we have so far:

Budget 2020: high-vis, narrow vision, by Danielle Wood, Kate Griffiths ad Tom Crowley of the Grattan Institute. While the government is emphasising job creation, the incentives for capital investment will favour industries with high capital- to-labour ratios. But job losses to date have been mainly in labour-intensive personal service industries. Direct expenditure on government services would have far better employment multipliers.

Commonwealth 2020-21 Budget Update: Dropping the Ball on Economic Reconstruction by the Australia Institute’s Centre for Future Work. It’s a comprehensive analysis and deconstruction of the government’s claims. Even if “JobMaker” gets younger people into employment, these will be dead-end work-for-the-dole type jobs. Contrary to the Treasurer’s claims, there is no expansion of infrastructure expenditure and only a token amount to be spent on manufacturing. And the tax cuts won’t stimulate the economy.

‘Backwards’ federal budget: Morrison government never fails to disappoint on climate action, by John Quiggin, writing in The Conversation. Quiggin writes about lost opportunities for employment in renewable energy investments, and money wasted, including a commitment to rehabilitate a coal-fired power station co-owned by a prominent Liberal Part donor.

Morrison’s new goal: Tax cuts adding to higher debt and deficit, by Ross Gittins, mainly about the priorities of leading economists whose preferences were for investment in public housing and an increase in the unemployment benefit (“JobSeeker”), rather than tax cuts and investment incentives.

The Government steered Australia through the COVID-19 crisis, but the Budget shows it wants business to engineer the recovery, by the ABC’s Ian Verrender. It’s a short piece, pointing out that in relying on business investment and recovered consumer confidence, “this Government has opted to deviate from the hard-won experience of previous administrations”. He reminds us that the economy was in pretty poor shape before the pandemic hit.

Generation debt, by Remy Davidson of Monash University, writing on Open Forum, focussing on debt, and reminding us that at some point consumption taxes have to rise.  (Note in Budget Paper #1, Page 5-21, GST revenue is forecast to be $5.4 billion less than estimated in the MYEFO. That’s $5.4 billion out of state government budgets.)

Other Australian politics and economics

A doubtful future for Australia’s coal

Writing in Inside Story John Quiggin looks at the implications for Australia from China’s pledge that it will be carbon-neutral by 2060 – Left in the lurch by Xi Jinping?  Our thermal coal exporters may be taking false comfort from plans by Chinese provincial governments to commission new coal-fired power stations. Xi is under immense pressure to reduce emissions – some internal, and some which would result from Biden’s plan to apply a carbon-adjustment fee to countries that are failing to meet their climate and environmental obligations.

Our foreign minister should keep a healthy social distance from Mike Pompeo

Australia’s Foreign Minister has been in Tokyo to meet with her counterparts from the US, Japan, India and South Korea.

On the ABC’s Breakfast Program Fran Kelly interviews Jeffrey Sachs of Columbia University, to get his view on the talks.  As is his usual manner, Sachs speaks plainly and directly:

What Pompeo is after, which is completely dangerous and reckless, is to try to enlist Australia, India, Japan and Korea in a front against China. … It is about a new crusade that is led by our worst ever Secretary of State who was appointed by our worst ever President … Pompeo is absolutely dangerous because he is on a crusade against China that is in nobody’s interest in the world and I just hope people of Australia understand how crazy we’ve become in the United States.

The 8-minute section is titled “Trump Covid diagnosis shortens Mike Pompeo’s Asia trip”, but as Sachs points out the US government has been so incompetent in handling the virus, it is incapable of participating in any serious discussion of Covid-19. But he points out that because we, and other countries in our region, have done so well in containing the virus, there is an opportunity for the 15 countries of the Regional Comprehensive Economic Partnership (ASEAN plus China, Japan, South Korea, Australia and New Zealand), to open up a safe trade and travel zone.

The Coalition’s war on accountability

The Centre for Public Integrity reports that Commonwealth funding of accountability institutions has been cut dramatically over the past ten years.  The Australian National Audit Office (which has exposed corrupt processes in sports funding and in an over-valued land purchase from a Liberal Party donor) has been among the hardest hit agency. Other agencies to have their funding cut include the Bureau of Statistics and the Office of the Australian Information Commissioner.

The report also draws attention to the Coalition’s cuts to the ABC – “our only fully-funded public broadcaster, which means that it provides news that is independent of any corporate interests”.  It points out that “The accumulation of funding cuts since 2014 will lead to the ABC losing $783 million by 2022.”

On a specific instance of lost accountability, writing in Open Forum Richard Moore points out that the Department of Foreign Affairs and Trade has abolished its own Office of Development Effectiveness.

What’s happening with gambling

The Victorian  Responsible Gambling Foundation reminds us that gambling venues in Victoria have been closed since mid-March. The Foundation is concerned to see what will happen when gaming venues, particularly poker machine venues, re-open.  It poimts out that when poker machine venues in Tasmania were re-opened in late June, there was a surge of expenditure on poker machines, shown on the graph below. (Data from Tasmanian Treasury.)

Sources

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

Global politics and economics

Fascism is on the rise

Fascism isn’t just something that happened in Italy and Germany eighty years ago. It is on the rise in liberal democracies where voters, often contrary to their interests, have elected authoritarian and nationalist regimes.

That is a key message from Yale University’s Jason Stanley, speaker at the UTS inaugural Democracy Forum, in conversation with Anna Funder. He identifies Trumpism as a fascist political and social movement, where the “leader” promises to restore the nation to a previous imagined order. He describes the concept of “whiteness”, that gives poor “white” Americans an identity that results in them aligning their political preferences with those of their exploiters. He describes how fascism cultivates disregard for the truth and contempt for liberal education – particularly the idea that a liberal education prepares people to become democratic citizens. (56 minutes)

The discussion draws on Jason Stanley’s book How fascism works: the politics of us and them. He also draws attention to Jonathan Metzl’s Dying of Whiteness: how the politics of racial resentment is killing America’s heartland. Both books have been published this year.

Getting the recovery right

Mariana Mazzucato, writing in Foreign Affairs – Capitalism after the pandemic – urges governments to do more than simply spur economic growth. They should “steer the direction of growth to build a better economy”. Governments have an opportunity to use their fiscal power to deal with structural weaknesses that have accumulated over time.

Governments, through funding basic research, education and infrastructure, have provided opportunities for the private sector, but the private sector has not always passed these benefits on to the public. Pharmaceutical firms, for example, have benefited tremendously from publicly-funded basic research, but in maintaining high prices they are keeping the benefits to themselves, incurring deadweight loss.

We need to reset the relationship between the public and private sectors, but to do so we must address an underlying problem in economics. That underlying problem is a failure to distinguish between value and price – a distinction understood by Adam Smith and Karl Marx, but not understood by ideologues who believe that prices paid in the market equate to public value. Because of tax regulations favouring the financial sector, and austerity programs tightening public budgets, someone employed in a financial firm to shuffle funds around may enjoy a salary several times that of an equally-talented and hardworking primary school teacher, but that does not mean the financier is contributing any more to public value than the teacher (probably less in fact).

Climate change is a growing risk to business

The World Economic Forum has released its Executive Opinion Survey for 2020, asking businesspeople to identify the top risks for doing business in their countries over the next decade. Unsurprisingly the spread of infectious diseases is most prominent, but environmental risks – biodiversity loss and ecosystem collapse, natural catastrophes, extreme weather events, failure of climate-change adaptation – have all risen in ranking. The Forum introduces the survey by dismissing the idea of an economy-environment trade-off:

An overly simplistic view of global economics has fuelled climate denial and skepticism for decades. Some opponents of climate change mitigation policies argue that achieving any progress would require an impossible retrofitting of our economy and result in lower profits and fewer jobs. In reality, in many ways, climate action will help businesses be more resilient in tomorrow’s economy.

Investor-state dispute-settlement treaties threaten action in climate change

The International Institute for Environment and Development (IIED) warns that Investor-state dispute-settlement (ISDS) agreements are making it hard for countries to make a transition away from fossil fuels. Public policy directed to early retirement of coal-fired power stations, and closure of coal mines, pipelines and other fossil fuel assets, could subject governments to costly lawsuits – way beyond any reasonable compensation – under ISDS agreements. The Institute has prepared a report Raising the cost of climate action? Investor-state dispute settlement and compensation for stranded fossil fuel assets, focusing on coal-fired power plants in poorer countries.

The Economist reports on the IIED study – How some international treaties threaten the environment(paywalled, but you can register for limited access) – pointing out that “ISDS is not a theoretical threat. It is widely used, more than 1,000 times; and seven out of ten of the biggest ISDS compensation awards, all since 2012, have been to fossil-fuel companies or their shareholders”. A UN working group and the EU are trying to renegotiate a treaty on cross-border trade and investment in energy, with a view to freeing up the ability of governments to act on climate change. As one of the IIED authors put it: “There is no ISDS for the environment”.

The US election

Would a Biden Government make much difference outside the USA?

JK Galbraith said that pessimism carries an air of authority.  Those who are optimistically looking forward to a probable end of the Trump administration will find a strong dose of pessimism in Michael Beckley’s essay Rogue Superpower: Why this could be an illiberal American century, published in Foreign Affairs.  Warning the world not to expect the US to resume its 20^th century role as the defender of the liberal international order, he writes:

A nationalist mood has taken hold in the United States, and for the foreseeable future, it will be the shape of things to come. It is not an anomaly produced by the Trump administration; rather, it is a deeply rooted trend that threatens the rebirth of an older approach to U.S. foreign policy—one that prevailed during the darkest decades of the past century.

He predicts that the US will remain militarily and economic powerful, but that it will become more self-sufficient and aloof from the rest of the world – a world where countries will become more isolationist, more beset with conflicts and whose economies will have to adjust to the demands of ageing populations.  (He believes that the Anglosphere, including Australia, will be less affected by these adverse trends.)

Would a Biden Government make much difference inside the USA?

Stan Grant writes that Neither Trump nor Biden have answers to a broken America in this election. The people the Democrats have neglected – the people abandoned by America’s industrial decline, the people who lost their jobs and houses in the 2008 crisis while the government bailed out rich bankers, the people without degrees or options – turned to Trump.

When people are feeling outcast, disregarded and vulnerable, they cling to what they can find to give them identity and some sense of agency.  An assault rifle is a psychological prop.  A v8 gas-guzzling pickup elevates you a half meter above those weaklings driving small cars.  A “white” skin colour gives you a caste to look down on.  And religion — nothing to do with theology — becomes a class marker.

Quoting Anne Case and Angus Denton, authors of Deaths of Despair, Grant says: “Working class whites do not believe that democracy can help them”.  Why should they care if Trump is tearing apart the country’s democratic institutions? To them democracy is a racket, “a game played by the rich for the rich”.

“This election gives us the power to render judgment”

That’s a quote from the editorial in the October edition of the New England Journal of Medicine –  Dying in a leadership vacuum. It condemns the policy failures that have resulted in 211 000 Americans dying of a disease that much less wealthy, but far better administered, countries have coped with. It outlines America’s policy failures, administrative failures, and above all its leadership failures.

Our current leaders have undercut trust in science and in government, causing damage that will certainly outlast them. Instead of relying on expertise, the administration has turned to uninformed “opinion leaders” and charlatans who obscure the truth and facilitate the promulgation of outright lies.

Perhaps Biden might win

Rodney Tiffen, Emeritus Professor of Politics at the University of Sydney, has an article on Inside Story Why Biden will (still) win.  The qualification in the title says it all. Doubters point to past polling mistakes, but polling has become more fine-grained. Trump will use dirty tricks, but there are limits, and if Biden wins enough states he could lose one or two to corrupt practices and still win in the College. The article has a useful table of margins in key states.

Trump as a character in Greek tragedy

Rachel Hadas of Rutgers University, writing in The Conversation, sees Trump as a character in a Greek tragedy:  “What goes around comes around”, or what Greek mythology says about Donald Trump. She refers to Sophocles’ tragedy Oedipus Rex, a play about hubris, irony and blindness.  She also tells us that the play was written during a plague, which provided its setting – a plague which King Oedipus himself had helped spread.

The pandemic’s progress

Is New South Wales catching up with Victoria?

Although they are coming from different directions, both states are dealing with hard-to-trace cases which may flare up into outbreaks, and some of the problem relates to non-compliance by individuals or businesses.

New South Wales Premier Gladys Berejiklian is clearly annoyed and frustrated by the lackadaisical behaviour of businesses that are breaking the state’s rules on social distancing and failing to record patrons’ contact details. Has the New South Wales Government been too trusting of small business to comply with regulations? And why has it not taken a tougher approach to indoor eating and drinking establishments, particularly when spring and summer provide safer outdoor options?

Europe and the US

In most of Europe infections are on the rise, exceeding 200 daily new cases per million in the Czech Republic, Netherlands and Spain, and with hotspots in other countries. . Only the Nordic countries seem to have rates around 20 to 40.   According to Britain’s BBC, Madrid has averaged a daily infection rate above 500 per million, which would put it way off the chart’s axis.

The UK’s reported rate has shot up. Some of the apparent recent rise may be as a result of older cases only now being recorded. Apparently UK public health authorities are struggling to come to grips with the emerging technology of computerisation.

Polls and surveys

Essential – we understand the Coalition’s economic priorities but don’t like them

Essential’s two-weekly poll starts with questions about our coronavirus concerns.  Even though the virus has nearly disappeared in seven of our eight states and territories, and Victoria seems to be getting on top of it, there has been no fall in our concern.

Again, people are polled on how well they think governments are handling the virus. Highest ratings go to Western and South Australia. There is no confirmation of media reports that the Queensland Government is losing support. Victoria’s rating continues to slide, but considering how badly it screwed up hotel quarantine, and the chorus of criticism from hairdressers, bars, gyms, cafes and poodle pedicure shops, its support is holding up reasonably well.

These questions are followed by questions on the Commonwealth budget – surveyed the weekend before the budget was presented and therefore based on expectations (which turned out to be fairly accurate). The first question was about who would benefit from the budget: the results re shown graphically below:

Labor and Greens supporters get it – it’s a budget for big business and the well-off. Only a third of those surveyed saw the economy overall benefiting – not even a majority of Coalition supporters believed it would be of general economic benefit.

There were two questions on the government’s overall economic approach.

The first asked people to choose between:

“Now is not the time to experiment with new ideas, we should return to the way the economy was being run”

and

“The pandemic has exposed flaws in the economy and there is an opportunity to explore new ways to run the economy”

Only 22 per cent went for the conservative option, while 78 per cent went for exploring new ways. There was hardly any partisan difference between Coalition and Labor supporters, but, surprisingly perhaps, older people were more supportive of exploring new ways (presumably because they are old enough to have experienced decades of Coalition unadventurous mediocrity).

The second asked people to choose between:

“The government should directly invest in the economy by creating projects and jobs, and raise the standard of living for the majority of workers”

and

“The government should relax regulation and lower taxes for the wealthy to encourage businesses to grow and create jobs”

The first option, which we may call a “Keynesian” approach, had 69 per cent support, while the second option a “trickle down” approach. scored only 19 per cent.  (13 per cent were undecided.) There were predictable partisan differences, but even Coalition supporters split 66 per cent Keynesian, 22 per cent trickle down. And older voters were far more likely to favour a Keynesian approach.

Poll Bludger – Labor off the charts in Western Australia, just ahead in Queensland

William Bowe’s Poll Bludger reports on a YouGov poll, which has the Labor and the LNP level pegging on an unimpressive 37 percent primary support, and a TPP vote of 52:48 in Labor’s favour.  (Beware of TPP calculations.) It has some regional breakdowns, but these are from small sample sizes.

Poll Bludger also has some polling results from Western Australia, showing outstanding support for Labor. It’s still five months before their election, on 13 March.

Bowe has also hosted a post by Adrian Beaumont on the US elections.

Beaumont’s own site reports on New Zealand opinion polling. There is some reversion towards the mean, but Ardern’s government is well in the lead.

Coming events

John Menadue Oration – Thursday

Professor Megan Davis’s John Menadue oration is titled “Can Australia deliver?”. The oration, sponsored by the Centre for Policy Development, will take a big picture view of 2020, encompassing our Covid-19 response, the increased spotlight on Indigenous incarceration, and the future of the Uluru Statement from the Heart.

It will be held at 6 pm, AEDT, on Thursday 15 October. For further details, and to register for this Zoom presentation, click on to the event site.

DIY hints

There’s more than one way to go off grid

Don’t just think of batteries. There are other options.

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

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