Category Archives: Economics

The coming death of the “high street” – and does it matter?

Posted on by
Reply

Embarrassingly, it was only when I initially lived in London in 2007 that the concept of “the high street” really twigged; growing up in Penrith, New South Wales, the fact that our main street happened to be called “High Street” was until that point meaningless. In the UK of course, amongst London’s varied boroughs and municipal areas and certainly further afield across the countryside, “the high street” really does mean something to people. In fact, it means a lot. It means so much to heartland British voters that the Cameron Government commissioned celebrity retail consultant Mary Portas to conduct a review of the state of “the high street” and report back, which she duly did in December 2011. Since then, the government has not exactly leapt to implement the recommendations offered up by the so-called “Queen of Shops”, but to be fair, it has had some other rather pressing fiscal and political matters on its hands so far in 2012.

The picture painted by Portas, needless to say, is not a rosy one. The charm of the traditional high street, with its local, independent shops and offerings is disappearing, and with it, the whole concept’s raison d’être. High streets across Britain are increasingly being peppered with failing or vacant stores, their essential uniqueness incrementally crushed by the omnipresence of large retail companies and supermarkets. If you are going to do your weekly grocery run at the local supermarket, why not go to the local satellite mega-market with its colossal car park, rather than struggle through the car-parking nightmare of a traffic-clogged main street? Better yet, why not do your shopping online and save on petrol and indeed energy? Increasingly in the UK this is proving an attractive option, as major supermarkets Tesco, Sainsbury’s and Waitrose and e-businesses like Ocado and Amazon offer lower prices and a bigger range that any local bricks and mortar store can manage; often with free delivery to boot. Thanks to the latter, nobody much is buying music, books or even computer games from their local any more: iconic chains HMV, GAME and Waterstones are all struggling for their corporate lives. A recent Deloitte report suggests that up to an astonishing 40% of shops on the “high street” could close in the next five years.

The local retail experience has in fact been more dramatic and more pronounced than in Britain; in most Australian metropolitan suburbs there is no “high street” to speak of, at least in the British sense of the term. The domination of the grocery sector by Woolworths and Coles and malls in the American style have reduced many of our main streets to depressing wastelands of “$2 shops”, chain stores, take-aways and struggling restaurants. The only “pop-up” shops (a London trend spruiked optimistically by Wayne Hennessy in the Guardian) that tend to appear in Australia can be described as such because they tend to disappear from the scene just as quickly as they arrive.

So is the “high street” really worth saving through direct local and state government investment, or is it a concept that, in reality, is past its used-by-date? I am certainly sympathetic to the idea of providing some incentive or subsidy to local, independent businesses trying to make a start in the centre of town, but it also feels a bit like government would be a small fry pushing against the tidal wave of the retail market.

It would be particularly interesting to hear of people’s personal experiences with their own local “high street”. Is it alive? Has a local mall taken over? Does it really matter if the malls win?

Cross-posted at Larvatus Prodeo.

“Reassurance Labour” and post-Blair social democracy

Posted on by
Reply

Globally, the centre-left is enduring a period of public weariness and dissatisfaction. In Australia, a relatively unpopular government battles on against a red-blooded Opposition Leader, with the spectre of a leadership context lingering unerringly in the background. Between Kevin and Tony, there’s not much free air for Julia to articulate what she is about and why she deserves more time. In the United States, the ramshackle cavalcade of the Republican presidential primaries rolls on. As we collectively chortle at the successive victories of the likes of Mitt Romney, Newt Gingrich and Rick Santorum, dividing the centre-right, we also quietly question whether Barack Obama will be able to ride home this November on the same wave of good will and anti-Bush sentiment that served to swell his support in 2008. Across Europe, the political cartography doesn’t lie: in 23 of the 27 EU nations (24 if you include the six party (!) coalition in Belgium), the centre-left does not control the government.

A couple of weeks ago, David Miliband, former foreign minister and the exiled elder brother of Labour Opposition Leader Ed, contributed a rambling “vision” piece on social democracy to the New Statesman. It’s the kind of piece that was self-evidently designed to be high-minded without being too controversial, to try and add something to the debate without undermining his brother, or being so practical as to indulge in any policy specifics. It would have floated by altogether, unremarked and soap bubble-like, if Miliband had not taken the opportunity to take a heavily padded pot-shot at former Deputy Leader Roy Hattersley and his recent piece [PDF] with Kevin Hickson for The Political Quarterly:

He is convinced that there exists an obvious instrument for putting social democracy into practice – the central national state, whose strength has been underestimated, he argues, in a rush of market fundamentalism on both left and right. His fundamental point is this: that Labour in the past 20 years has been scared off the most potent vehicle for the expression of its values, and in the process has come to be seen as ineffective as well as unprincipled.

For some, this will be seductive. It is what I shall call Reassurance Labour. Reassurance about our purpose, our relevance, our position, even our morals. Reassurance Labour feels good. But feeling good is not the same as doing good – and it gets in the way when it stops us rethinking our ideas to meet the challenges of the time. And now is a time for restless rethinking, not reassurance.

“Reassurance Labour”, in short, is just the latest rhetorical salvo in the ongoing war between the hardminded, working-class socialists of the 1970’s and early 1980’s and the so-called “Third Way” Blairism of more recent years. Historically, the centre-left has sought to make its values manifest through the wilful manipulation of the gears and levers of the state, with the national government perceived as being the preeminent mechanism through which this can be achieved. Since then, the world has changed, but how much has it really changed? Miliband clearly feels that any renewed embrace of this top-down approach would be misguided, despite the strong emotional connection that most people on the left have with the proactive welfare states of yesteryear.

The Australian political scene seems to be operating in a slightly different world to the one where this debate is blundering on, in part perhaps because Labor is currently focused less on any grand thematic vision for the future than keeping its head above water in the run up to the next election. Government – particularly when you’re struggling in the polls – will do that to you. Looking back over the last few years, however, one gets the sense that the Rudd and Gillard Labor Governments have dipped quite a bit into “Reassurance Labour” economics, pursuing interventionist tax policies on climate change and mining, and betting the farm on the success of the National Broadband Network project. In the current climate of fiscal uncertainty, after all, nothing says political conviction quite like pumping tens of billions of dollars of public money into a nationwide infrastructure project. It’s a bold policy, and it is quite difficult to imagine a UK government of either political stripe dancing down a similar path in the current climate.

I am unsure about whether this implies the Australian bodypolitik is somewhere ahead or somewhere behind the debate going on in the UK, but one thing is certain: nobody can in practical terms define themselves as being simply “pro-state” or “pro-market” anymore. Governments are increasingly being pushed towards the middle ground by market entities and forces with more unhinged pulling power than themselves, and indeed by pockets of the impotent shouty filling the space vacated by mass political parties and organised participatory democracy.

Despite his departure from the scene, we are all still living in what we might one day call the Blair era – named not for any whizz-bang political dynamic dreamt up by Tony Blair and crew, mind, but the prickly, atomised, tabloid-oriented political environment that created and crowned him.

Cross-posted at Larvatus Prodeo.

David Cameron’s socialism by some other name

Posted on by
Reply

Whither Keynes? For the past six to twelve months, the big philosophical imponderable doing the rounds in British political life has been the extent to which the government should intervene in the market in order to stimulate the national economy. The Conservative/Lib Dem government’s “Plan A” to cut, cut and cut some more is flatlining; growth is stagnant. Unemployment has risen to 8.4% – the highest it has been since 1995 – as the jobs that the government’s austerity programme has ripped from the public sector and wrung from the strangled charity/NGO sector are not being replaced in the for-profit sector as hoped.

This is by every empirical measure imaginable a failing fiscal plan, but Plan B remains firmly off the agenda. And why? Keynesian economics is not policy anathema, but it has become political anathema. Central to the fable being spruiked by Prime Minister David Cameron and the Conservatives is that Labour’s clunky and interventionist approach to economic matters is to blame for the mess that Britain now finds itself in. If the Tories were to take a backward step from their “Plan A”, the economic dogma they’ve peddled since May 2010, they would be letting the Opposition off the hook. They would also be pricking the bubble of fallacious confidence that George Osborne et. al have, in effect, hitched a ride with throughout their war on public spending. It’s easy to forget given all the sanguine polling doing the rounds, but this is a government sustaining itself not through success in matters of policy, actual popularity, or anything resembling hard work, but merely ego: a reserve of confident bloody-mindedness that the market will eventually prove them right and that those on welfare should be punished.

The rigid stance adopted by the government on economic stimulus is particularly galling when one considers some of the moral peccadillos that the Tories apparently feel do warrant some intervention. This is a government that has no qualms about pulling levers and interfering with the market like a bunch of cardboard cut-out social-engineering lefties when doing so will slap and tickle their upper middle-class conservative base. A crusade to cap welfare benefits, directly impacting the lives of some of the nation’s most needy children has in recent days seen support for David Cameron soaring to a 22 month high. Jobs may be disappearing into the ether by the thousand across the country, but as Allegra Stratton alluded to in The Guardian recently, Cameron’s willingness to engage in blinkered market intervention has been plainly evident for some time now:

In a WH Smith not far from Westminster, there are no Terry’s Chocolate Oranges on sale at the till but there’s every other calorie and additive on offer. This stroll to the newsagent counts for political research because if you listened to David Cameron six years ago, flogging cheap chocolate to captive targets was an exemplar of immoral capitalism run amok.

“As Britain faces an obesity crisis, why does WH Smith promote half-price Chocolate Oranges at its checkouts instead of real oranges?” Cameron protested. Through the bully’s pulpit of office and opprobrium, he sought to change it.

In America, they would call out such a protest as socialism. In Britain, it would just be an all too typically fluffy intervention into the market on behalf of the morally conservative, rich or powerful, while the brutalisation of the truly needy by the market continues, wholly aided and abetted, in the background.

Occupy London: radical or conservative?

Posted on by
Reply

For almost two months now, the Occupy London camp has remained firmly entrenched outside St. Paul’s Cathedral, having been banned from the private grounds of Paternoster Square, where the London Stock Exchange is located. After winning its philosophical “huddled masses” tête à tête with the St Paul’s authorities, the movement is preparing itself to tackle its next challenge: eviction proceedings being brought to bear by the City of London Corporation. The formal hearing is scheduled to take place from 19th December.

It certainly feels that despite its raison d’être being as self-evident as ever, Occupy London is on the cusp of an existential crisis. In the coming weeks and months, the camp will need to fight for the right to maintain its most visible presence in the British capital, one of the world’s international finance hubs. The storm of publicity attracted during the movement’s disagreement with the St. Paul’s hierarchy has died away, and with it, many of its most effective tendrils of engagement with the general public. Amidst all the background noise of day-to-day news and political developments, the debate is slowly and steadily shifting away from the question “are the international Occupy movements right about modern capitalism?” and towards the question “is it time to finally get rid of all those tents outside of St Paul’s?” We all know how hungry the 24×7 news cycle beast can be; it would very much like another dramatic (and hopefully violent!) Dale Farm style confrontation between the authorities and people who purportedly shouldn’t be where they are.

In short, it is difficult to see what the next step for local branches of the global “Occupy” movement should be. Turn radical, and they stand to grab some more publicity and potentially reinvigorate their campaigns for economic justice – but they also stand to turn large swathes of the law-abiding general public off their arguments. The current tack, at least in the London context, seems to be rather more conservative; just last week Occupy London published an “Initial Statement of the Corporations Working Group”, effectively a press release. It sure sounds high-falutin’, but it’s all a tad banal frankly: here are the three key points:

We must abolish tax havens and complex tax avoidance schemes, and ensure corporations pay tax that accurately reflects their real profits.

…

Legislation to ensure full and public transparency of all corporate lobbying activities must be put in place. This should be overseen by a credible and independent body, directly accountable to the people.

…

Those directly involved in the decision-making process must be held personally liable for their role in the misdeeds of their corporations and duly charged for all criminal behaviour.

Laudable sentiments, yes, but hardly visionary ones, and my, what a vague and middling way in which to express them! If the purpose of the Occupy movement was to establish an amateurish tent city of students, interested passers-by and disenfranchised Liberal Democrats, firing occasional uncontroversial missives into the offices of news organisations across the country – they have succeeded. But it’s clearly not the right path.

Occupy London needs to find a new, creative way of continuing to express its message, or risk fading inconsequentially into the background static.

Barnaby Joyce, policy whacko esquire

Posted on by
2

Despite the resumption of parliament, political debate has been muted this week; with the news dominated by a few unfortunate seconds of video footage of a Macquarie Bank worker and a legal case featuring one (or is that two?) of Australia’s favourite national songs. Such is the flippant, transitory and ultimately tabloid nature of modern news.

One intervention into the headlines worthy of debate was made by Shadow Finance Minister Barnaby Joyce. Appearing at the National Press Club for the first time as a seriously senior member of the Opposition, Joyce delivered a performance that undoubtedly left Liberal Party members across the country scratching their heads and squirming in their seats. Michelle Grattan reports on Joyce’s most questionable comments in The Age:

”We are giving $150 million to the World Bank. Fair enough. $50 million of that is to deal with the food inflationary aspects in the Third World. Well, why doesn’t Kevin Rudd deal with the food inflationary aspects in this world, you know? That would be handy,” he said.

…
Senator Joyce said: ”We’ve got to be cautious when we’re borrowing money from overseas to send back to overseas … because we’ve got to pay the money back.”

Putting our Macquarie Bank staffer to shame, in a matter of seconds, Tony Abbott’s right-hand man dropped a whole swag full of clunkers right there. For starters – Joyce’s rant rode roughshod over official Coalition policy on foreign aid, forcing the Opposition Leader and his Deputy to issue terse “corrections” on his behalf. It also raised serious questions about his ability to be the senior spokesperson for such a broad, sensitive policy portfolio. To compare the problems that Australia has with access to food to the problems that countries in the Third World have with access to food is quite simply, outrageous. That Joyce saw fit to raise the prospect of abandoning or reducing Australia’s small obligations to the international needy smacks of narrow, parochial self-interest, reflecting quite poorly indeed upon his character.

The Shadow Finance Minister’s financial credentials also warrant some serious questioning. Particularly in the wake of the financial crisis experienced over the last couple of years, national governments across the world have surged into debt. Some national governments are worse off than others, but what is readily apparent is that Australia’s net financial position, considering our projected ability to repay outstanding debt, is superior to just about any other nation out there. It is not strange, wrong or inadvisable for Australia to be in debt; certainly not any more the case than it is for Harvey Norman or Woolworths to borrow money, or for you or I to take out a mortgage to purchase property, at home or abroad.

Joyce seems to be suggesting that it may be inadvisable to borrow money “overseas” if the money is to be spent “overseas”, ostensibly on people who are not Australians. What sort of short-sighted, hermit kingdom mentality does that betray? What miniscule price does Joyce put on the lives of people that Australia’s aid assists, let alone Australia’s international reputation and renown as the land of the “fair go”?

Frankly, it was a Sarah Palin-esque moment, with a dash of Pauline on the side. As this year’s federal election looms large, Tony Abbott is likely going to come to rue the day that he decided that he wanted Barnaby Joyce to serve as one of his right-hand men. If, as Palin famously suggested, she can see Russia from Alaska, then this week’s events have proven (for any still in doubt) that Barnaby Joyce can really, truly, indubitably see the Third World from rural Queensland.

Evidently, if Australia is in debt, it can all rot.

ELSEWHERE: It’s hard to go past Damien Kingsbury’s surgical dissection of Joyce’s folly folly, also in The Age. To summarise:

Without any prompting, Joyce appears to have wandered off into policy whacko-land.

Whatever you do, don’t say billion

Posted on by
4

It was getting a little absurd and starting to backfire dramatically, so the Prime Minister and the Treasurer were forced to halt their “billion ban” charade in parliament today.

As has been previously observed:

It’s been suggested Kevin Rudd would not utter the phrase ”$300 billion” for fear his words will be used in coalition advertisements during the next election campaign.

…

Mr Rudd said debt would peak at “around about 200, our gross debt at about 300” in 2013-14.

Asked to explain 200 or 300 of what, Mr Rudd responded: “These are billion figures.”

The genius (whoever they are) in Federal Labor’s leadership team who seriously believed that the government could get away with its senior members not saying the word “billion” for the next 18 months or so must be living on Planet Wacky. It’s a little disturbing that this wacky idea was even successfully sold to the men who are overseeing the nation’s response to the financial crisis, and that they ran with the “billion ban” for a day or two. The Coalition would be nuts not to make fun of the Prime Minister’s use of “200″ and “300″ in their election campaign next year.

Madness.

Our very own red rooster and his big red numbers

Posted on by
4

Over the course of the last week, the expression on Treasurer Wayne Swan’s face has been even more deadpan than usual; so deadpan, in fact, that its as if someone from Treasury has swung an almighty great frying pan across his gloomy mug. In a sense, that is of course just what has happened. There is no tougher gig to have at the moment. Even before one considers all the election promises that Rudd Labor made back in late 2007, and the bold stimulus measures introduced during the past six months in an attempt to ward off the worst of the GFC, the government is starting behind. The tumultuous financial conditions have reduced profits, spending and incomes across the country, wiping a sizable $210 billion from the government’s anticipated revenue. Let’s be clear: whether the federal government was headed by Labor, the Liberals, or anyone else, it would have delivered a budget in the red in 2009-10 like the Rudd Government has. The buck must stop with the Treasurer, (if not he, then who else?), but its fair to say that a significant portion of the big red numbers being bandied around are not Mr. Swan’s or indeed Federal Labor’s fault.

Casting a considered eye over the opinions flying around in the mainstream media, it would seem that this is a Budget that is hard for people to support. It mixes almost evenly boosts and blows, to the point that some commentators believe it to be a confused budget, a budget that tries to stimulate the economy even as it withdraws funds from some, possibly lulling it back to sleep. There are welcome measures, such as the significant increase in payments to single pensioners, the introduction of parental leave (even if it is delayed until 2011), and the urgently needed $22 billion package of infrastructure measures. On the flip side of the coin, there are a few downright bafflers. The planned lifting of the pension age to 67 is a positively nutty idea, and gives credence to the accusation that Treasurer Swan is living blindly on the teat of the bureaucrats in Treasury. The means testing of the private health rebate is a questionable measure, given that it is likely to encourage people to ditch private health insurance and increase load on the public system. For once, Malcolm Turnbull might be on the right track by suggesting that raising excise on tobacco is a more sensible measure and can deliver the same amount of revenue.

It will be interesting to observe how Messrs Rudd and Swan react to Turnbull’s suggestion, and indeed to see how the public reacts to the Federal Opposition’s constant carping about the level of national debt. One does get the sense that the broader public is quite concerned about the hundreds of billions of dollars of public debt that Australia is now swimming in. This is a real concern, but it is a concern that is being simplistically tended by the Coalition. For his part, Malcolm Turnbull seems determined not to utter a word about the possibility (nay certain fact) that his team would also find itself in billions of dollars of debt if it were in government now. What remains to be seen is whether or not the sheer magnitude of the red numbers here are enough to get some people to lose faith and start to consider the opposition as a viable alternative government.

Make no mistake, this is the start of Malcolm Turnbull’s big chance.

Nobody has got the bazooka

Posted on by
2

As the media breathlessly awaits the anti-climactic results of the G20 conference in London, you really have to pity the poor sods that we have charged with saving the global economy. I don’t think there is a living soul out there who truly believes the cream of the world’s leaders have what it takes to put capitalism back on track, but doubtless we all still hope. It’s a pretty thankless task. It seems that just about every journalist and economic commentator doing the rounds has some advice in hand for the likes of Barack Obama and Gordon Brown and their colleagues, as a pocket full of chaos descends on the square mile. Eminating from about 20 metres from where I emerged from the tube every weekday morning for about a year during 2007/08, the media is beaming in images of blood, death, and stupidity on all sides; the smashing of windows, attacks on police, and the flippant teasing of protesters by office workers.

But wait! There’s more. The Keating watchers among you would no doubt have noted that our beloved former Prime Minister intervention’s into public debate have been rather more rabid and senseless than usual in recent times. The former Member for Blaxland, has emerged once more with some fairly radical advice for President Obama:

“The problem with the Americans is this: that they have a great body of large, systemic banks which are barely solvent or maybe insolvent.

“They have to decide which are insolvent and shut them and for those that are solvent, take them over and recapitalise them.”

…

“The Japanese took eight years before they put any recapitalised money into banks, foolishly,” he said.”The Americans at least are doing it in year one but nobody has got the bazooka and no one wants to fire all the rockets.”

One suddenly gets a mental image of Messr Keating, bazooka balanced precariously on his shoulder, firing a barrage of rockets into the heart of the dreaded GFC. One wonders what Mr. Keating would have thought about all this latter day nationalisation talk of his twenty years ago, when he was flying the flag of centre-right economic policy in government?

Ideology is such a lonely word

Posted on by
2

Kevin Rudd’s 7700 word essay on the global financial crisis, published in this month’s edition of The Monthly, was a remarkable contribution to serious political debate by a sitting Prime Minister. What isn’t remarkable given its length and lack of humor is that it appears to have gone down like a lead balloon. Mentions of the essay in the media seem generally restricted to pointed criticisms of it from members of the Opposition or their sympathisers. A few journalists (such as The Australian‘s Matthew Franklin) have even had a go at “Julie Bishoping” the Prime Minister, on the somewhat flimsy pretense that 26 words of the essay’s 7700 words were almost identical to a passage that appeared in an recent Foreign Affairs article. Err… ouch [wet noodle limply falls to ground].

For the benefit of those who haven’t splashed out on the magazine, I am going to try and offer a hopefully more level-headed summary over the fold.

Continue reading →

Well I’ll see your stimulus, and I’ll halve it!

Posted on by
3

Like the Opposition, I actually do believe that the Rudd Government’s blockbuster $42 billion stimulus package should be subjected to a reasonable degree of scrutiny. I don’t buy the government’s line that this stimulus package is so incredibly urgent that the Senate should not be permitted to conduct an inquiry, bargain or make contrary recommendations. On the other hand, given the economic climate, I do believe the Senate should be seeking to maximise both robustness and swiftness of deliberation when tackling the package – mutually opposing principles perhaps, but then we live in rather difficult times.

This is where I part company with Opposition Leader Malcolm Turnbull. I honestly believe that Turnbull’s rhetoric on the stimulus package is out of whack with the majority of his economic policy peers globally, and the general mood out there in the electorate. In most other scenarios, I would agree that tax cuts are a vastly more sensible means of passing excess government funds back to the electorate than one-off handouts. The scenario that the Rudd Government and the rest of the world faces today, however, is somewhat unique. The economy needs additional activity to be fostered now, not incrementally over the coming years. The results are in for Federal Labor’s December 2008 stimulus package, and they seem positive. The Coalition has painted itself into a corner now, with a series of ugly budget blowouts in the coming years the only possible saving grace for their position.

This leads us neatly to the other quirk in Turnbull’s rhetoric. By proposing that the government’s stimulus package be halved, Turnbull is gambling that the fear of the economy tanking as a result of government inaction is less than a fear that the deficit in the budget is going to get out of control and plague federal governments in the years to come. Some folks in the media and Liberal operatives are already trying to frame the current situation as the “deficit we had to have”. This is strangely enough true, although perhaps not in the way that some are trying to frame it. The abrupt reduction in projected tax receipts for the Federal Government as a result of the global financial crisis could not have been predicted in May last year, and even if the Coalition won at the polls in late 2007, it would find itself in the midst of a budget deficit today. This is a deficit that is not of Federal Labor’s making. It may be somewhat extended by their actions, but given their actions are quite closely tied with the prescriptions of the world’s economic orthodoxy, the Rudd Government has some defences in reserve if it needs them.

Politically speaking, this was not the right time for Turnbull to skimp. Unless the Opposition punches some serious holes in the Rudd Government’s package over the next week or so, it is not going to gain any political capital from this odd little diversion into one-downsmanship. I also don’t believe for a moment that the Coalition caucus unanimously backs Turnbull’s stance. They seem to just be biding their time and hoping that Turnbull is going to somehow get lucky by pursuing this approach.