Guy Beres » Economics

David Cameron’s socialism by some other name

Guy — Sat, 28 Jan 2012 11:09:16 +0000

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.

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Occupy London: radical or conservative?

Guy — Sun, 04 Dec 2011 22:28:07 +0000

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.

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Barnaby Joyce, policy whacko esquire

Guy — Sat, 06 Feb 2010 06:45:00 +0000

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.

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Whatever you do, don’t say billion

Guy — Mon, 25 May 2009 10:05:08 +0000

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.

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Our very own red rooster and his big red numbers

Guy — Thu, 14 May 2009 10:59:44 +0000

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.

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Nobody has got the bazooka

Guy — Thu, 02 Apr 2009 11:49:10 +0000

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?

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Ideology is such a lonely word

Guy — Thu, 26 Feb 2009 11:07:47 +0000

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.

If I was going to try and distill the key message in Rudd’s essay down to a single argument, it would be that the global financial crisis has delivered the tangible basis necessary for social democrats to push their natural agenda. Kim Carr was unhelpfully exaggerating when he suggested on radio today that “no one’s job is safe”, but the emotion of the comment sits smugly alongside the current mood of the nation. Every day seems to bring some new economic bad news, some new unfortunate turn of events that will result in financial trauma for some. If the public of Australia had every reason to think during the Howard boom years that there is no reason why the good times could not last forever, the last six months have surely smashed that expectation completely.

In his essay, Rudd describes the current crisis as (p.22):

… the culmination of a 30-year domination of economic policy by a free-market ideology that has been variously called neo-liberalism, economic liberalism, economic fundamentalism, Thatcherism or the Washington Consensus.

This assertion seems like a bit of a distortion; I think it’s fair to say that the neo-liberal consensus created the conditions necessary for the current crisis to eventuate, but that would be the extent of it. Rudd goes on to highlight a more tangible manifestation of this (p.23):

In the United States, the pursuit of financial deregulation crossed the Rubicon with the repeal of the Glass-Steagall Act, which had been established in the wake of the Great Depression. In the heady bubble years of the 1920s, American commercial banks, whose traditional function was simply to take deposits and make loans, plunged into the roaring bull market, trading on their own account, underwriting new stock issues and participating in reckless speculation. When the stock-market bubble burst in 1929, it took commercial banks with it, causing a devastating chain reaction which affected the entire economy for a decade.

…

After a $300 million lobbying effort by the financial-services industry, Glass-Steagall was effectively repealed in 1999, removing the prohibition on commercial banks owning investment banks. The door was now open for the creation of huge financial-services conglomerates.

Someone who has maintained a closer watch on the financial services industry than I have over the last few decades would be probably be in a better position to judge if this event really was the straw that broke the camel’s back. This nevertheless seems an incisive point. If the global economy is underpinned by the smooth functioning of banking systems in the world’s financial centres, is it really a good thing that they have been given a license to gamble the prosperity of the world on the rise and fall of global financial markets? Is it a good thing that banks are permitted to trade widely in financial instruments that are based on ill-offered loans? Does anybody seriously believe that these are not, given recent months, rhetorical questions only?

There are a few points in the essay in which Rudd does get a little bit political. When singing the praises of the “social democratic project”, the Prime Minister is careful to highlight the Hawke and Keating (but not Whitlam) Governments as prime examples of social democracy in sublime flight (p.25). Many of us would of course recall things seeming a little less than sublime at the time. After pointing out, correctly, that neoliberals have had their beliefs tied in knots by this latest crisis (e.g. particularly with respect to part-nationalisations, pp.25-26), Rudd makes an attempt at tying the Liberal Party in closely with the neoliberal school of thought (pp.28-29). It is a bit of a half-hearted attempt, to be honest; of the nine demarcated passages in the essay, just one makes any substantive reference to Labor’s direct political enemy. This passage also represents the weakest part of the essay, and somewhat over-emphasises the extent that our local Coalition schmucks actually endorse the neoliberal agenda in the American sense. No neoliberal government worth its stripes would have presided over the massive welfare churn machine that the Howard Government presided over during its decade in office.

The essay concludes with Rudd lauding the role of government (p.29):

How could it possibly now be argued that the minimalist state of which the neo-liberals have dreamt could somehow be of sufficient potency to respond to the maximalist challenge we have been left in the wake of this most spectacular failure of the entire neo-liberal orthodoxy? Government is not the intrinsic evil that neo-liberals have argued it is. Government, properly constituted and properly directed, is for the common good, embracing both individual freedom and fairness, a project designed for the many, not just the few.

Fine words – but words that now need to be transmuted into action. Governments like those lead by Barack Obama in the United States and Kevin Rudd locally need to deliver on the promise they are offering. Here’s hoping that the next significant step in this new “social-democratic project” that Rudd spruiks in his essay is constituted of something more than mere words.

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

Guy — Thu, 05 Feb 2009 11:17:08 +0000

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.

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Rudd’s reaffirmation of the Third Way?

Guy — Sun, 01 Feb 2009 09:06:26 +0000

There’s been quite a bit of buzz in the media over the weekend about a 7700 word essay on the challenges posed by the global financial crisis that the Prime Minister has produced for the next edition of The Monthly magazine. Apart from being quite a uniquely direct intellectual contribution to debate by the sitting leader of a nation, the essay looks set to revive hostilities along traditional ideological lines. In seeking to frame the global financial crisis as a signal that the neoliberal economic doctrine popular in recent years is fundamentally flawed, the Prime Minister is opening the door for Federal Labor to make a return to its social democratic roots. One could almost believe that Tony Blair’s nerdy antipodean brother is alive and well and living at Kirribilli House.

Those lovers of ideology over at The Australian have already produced not one but three opinion-based pieces on Rudd’s essay, together with a video analysis from Dennis Shanahan. Both Paul Kelly and Lenore Taylor see the essay as an opportunity for a new era of distinction between Australia’s major parties to begin, with Rudd’s Federal Labor visibly leaning a little towards socialism, and Turnbull’s Opposition staunchly defending the free market liberal agenda. There is more than a hint of the suggestion in both pieces of an unspoken truth; these guys really want Turnbull back in the game, and Rudd’s Labor tarred with the old-school, old Labor brush. Of course, they don’t really give away whether or not they have actually seen the complete essay.

As someone with a fairly inherent social democratic bent, I don’t really see a problem if the Prime Minister makes an attempt in the essay to use the fallout of the global financial crisis to push for a more balanced economic agenda. In an time when the leader of the free world is engaging in large-scale nationalisation programs and propping up insolvent giants, surely only the most deluded observer could believe that something was not a bit rotten in the state of the global economy’s regulatory regimes. At least for me, the need for greater balance in the nation’s economic affairs has been apparent for some time; it’s just plain common sense given the problems we know the world is facing today – an absurd patchwork of rich and poor, and a subliminal devaluation of the common good. To a large extent, Rudd may be seen as getting on the bus far too late, if he really does believe that it is only the global financial crisis that has engendered a need for significant systemic change. I will however reserve judgement on the essay until it is published in full.

The magazine will be available in newsagents this Wednesday. You can read the first 1500 words of the essay online here.

ELSEWHERE: Mark has more at Larvatus Prodeo, as does Jason Soon at Catallaxy.

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Must be funny, in the rich man’s world

Guy — Mon, 08 Dec 2008 13:00:34 +0000

This afternoon I visited the local Westfield shopping uber-complex to finish up (okay, inch closer towards finishing up) the Christmas shopping. Even considering the season, and that there are now only sixteen shopping days until Christmas, it really did seem as though the place was just a little bit more nuts than usual.

Interestingly, the handouts started dropping into the accounts of punters today. While I am a little sceptical about the format and actual worth of the government’s stimulus package, its effects are in some respect already plain to be seen. Judging by some of the most popular Google terms that found their way to even this little blog over the last twenty-four hours, it does seem that there are a few excited people out there:

which people receive rudd gov. stimulus
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I only hope that if there is a second round of stimulus measures next year, it is delivered by the Prime Minister rolling through towns in the back of an open-top car, throwing handfuls of banknotes out of bulging hessian sacks. For the moment at least, that is the image that sticks in mind for me in relation to the government’s response to the financial crisis.

Let’s just hope for the sake of the national economy and those who are really struggling that it goes someway towards delivering the goods. Of course, if the December 2008 consumer spending figures suggest otherwise (even allowing for the usual Xmas boost), the government might just have a bit to answer for in the new year.

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