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May 31, 2006
the task of state government is...
Two comments about the function of state governments in Australian federation which arise from commentary about Victoria's 2006 budget. The Brumby budget is described by Tim Colebatch op.ed. in The Age as following the well-worn formula of John Brumby's previous five budgets:
There's some increased spending on schools, hospitals, public transport and other government services: enough for voters to notice, but not enough to alarm the ratings agencies. There are modest tax cuts to show business that this Government wants to keep Victoria a competitive business environment. And the bottom line is always a modest surplus, ensuring that the Government retains its AAA stamp as responsible economic managers
The new formuale of living within very ample financial means by by progressive State about governments is better than the alternative one of paying off debt and watching the infrastructure decay, justified by the need for sound fiscal policy and economic responsibility.
Colebatch then says that:
These days federal politics is where the ideological battles are fought, even if one team sometimes seems to be fighting itself rather than its opponent. State politics is essentially about management, delivering services fairly and efficiently, and making sure everyone gets a decent share.
Kenneth Davidson, in his op ed about the Victoria's budget in The Age, confirms this view. He says that the primary function of state governments is economical service delivery in areas such as education, health, roads and public transport. Hence we have the debates about efficiency in service delivery and social justice and that's about it. On this centralized model of federalism, state government is becoming more and more akin to local government.
Is there not scope for state government to lead the reform process in Australia? To act, as opposed to talk about, for the long term. To shape the way we live in these states in a more ecologically sustainable direction. Are not ideological and political battles about reiorm also fought at a state level?
Posted by Gary Sauer-Thompson at 10:07 AM | Comments (1) | TrackBack
May 30, 2006
the pathway of assimilation
The conservative account of the best way to address indigenous disadvantage is to highlight law and order solutions, criticise the use of cultural factors as a mitigating factor in sentencing, withdraw subsidies to dysfunctional and uneconomic outstation communities, and place the emphasis on assimilation.
Geoff Pryor
A new strand has been added to the conservative policy bow--compulsory education by Gary Johns in a paper entitled 'Aboriginal Education: Remote Schools and the Real Economy', published by the Menzies Research Centre. Johns summaries the argument in an op ed. in todays The Australian:
There are solutions [to indigeneous disadvantage] and they lie in recognising that some Aborigines use the "cultural curtain" as an excuse to avoid participation in schooling and in the economy. Further, they lie in recognising that there is no real economy in many remote communities; and, in the few where an economy does exist, welfare and other incentives lead people to not work. In short, it is time to draw back the cultural curtain in Aboriginal policy and bring back economics. Incentives to work must change if education is to save lives...Culture has been used as a curtain, drawn by those who seek to avoid responsibility for their actions. It is used as an excuse by parents to take children from school, by children to leave school and by teachers to teach to a lower standard.
Let's grant this analysis for the sake of the argument. What is the policy approach?
Johns says it is compulsory schooling:
Compulsory schooling is well known and has been accepted in the wider community, especially among the poor and non-English speakers. It should be equally accepted in remote Aboriginal communities. If that smacks of paternalism, then so be it...The correct policy response to failure at school will be determined not simply by additional programs at school but by how various issues of transition to the real economy - work, individual obligation, mobility - are managed. The transition will be better managed if educators and governments understand that education is essentially an instrument in economic integration, and that many remote communities are not viable and schools should not be used as pawns to keep them afloat.
Skills are needed to work and live in a free market economy. Many programs within the education sector should be been used to improve the chances of children succeeding at school and moving into the workforce. However, educational outcomes are deteriorating from an already low base. Poor school attendance as a direct cause of poor learning, and this is exacerbated by high teacher turnover and long-term systemic failure. It is important for Indigenous children to develop their English language oracy, literacy and numeracy skills while maintaining their own language, cultural heritage and Indigenous identity.
Johns, however, dumps the indigenous culture/educaiton bit when he says that 'teachers and governments should understand that Western education cannot and should not preserve Aboriginal culture.' So it is compulsory schooling as a tool for assimilation.
Posted by Gary Sauer-Thompson at 12:31 PM | Comments (1) | TrackBack
May 29, 2006
the imperial highway to chaos
A description in the Washington Post of the bloody chaos of the imperial highway as it passes through Iraq:
I once though that Shi'ites and Sunni 's would ally themselves to fight the US occupation. No more, after reading this passage from Nir Rosen's op.ed "Iraq is the Republic of Fear":
Even shared opposition to the Occupation couldn't unite Iraq's Sunnis and Shiites, and perhaps that was inevitable given their bitter history of mutual hostility. Instead, as the fighting against the Americans intensified, tensions between Sunni and Shiite began to grow, eventually setting off the vicious sectarian cleansing that is Iraq today.
Iraq is now a Hobbesian world ruled by militias, or a vicious civil war. Take your pick.
The Bush/Blair news conference in Washington. The talk is about celebrating the historic moment of the formation of a new Iraqi government, a new beginning for Iraq, and the United States and Great Britain working with Iraq's new government to strengthen a young democracy and achieving victory over our common enemies. Who are the common enemies these days, given that the US control of the capital itself is in doubt? The US really controls the Green Zone since the guerrillas have taken over many of Baghdad's suburbs.
The imperial road is signposted by Bush's disastrous policies in the region, which have produced an Iraq in flames and under the domination of fundamentalist parties; a deadlocked peace process and a Hamas government in Palestine; and a dangerous escalation of tensions with Iran.
Posted by Gary Sauer-Thompson at 5:06 PM | Comments (1) | TrackBack
fostering democracy?
In the wake of Hamas's assumption of power President Bush declared: "We support democracy, but that doesn't mean we have to support governments elected as a result of democracy." Consquently, his administration set about engineering Palestinian "regime change" in reverse. The idea was to get the Palestinians, through collective punishment, to repudiate the very people they had just elected. The US's weapons were sanctions---the starving of a whole people--- and fostering the conflict/war between Hamas and Fatah:
The result of regime change---undemocratically removing a Hamas-led Palestinian government---would be chaos in the territories, that would then open the way to militants, jihadists and suicide bombers from the rest of the world.
Posted by Gary Sauer-Thompson at 1:55 PM | Comments (1) | TrackBack
May 28, 2006
two peoples
A good article on the crisis in East Timor. The finger is pointed at Prime Minister Mari Alkatiri, an increasingly unpopular leader lost the support of the people, the military, the police, the Church and potentially the country's most important foreign allies.
Bill Leak
From an article in the National Indigenous Times about Mal Brough, Minister for Indigenous Affairs, who had travelled the countryside saying what he was going to do to save Aboriginal Australia:
If Brough truly wants to save Aboriginal kids in Wadeye and beyond from aimless lives dominated by violence he doesn’t need to don a cape and use blue language. What Brough needs to do is invest the necessary money into Indigenous education, housing, health and regional infrastructure as the nation’s experts - and the Wadeye community - keep telling him. A level playing field is always a good start. But of course, come last week’s budget, no such thing happened. Despite touring the nation and handing out promises like candy, Brough and the federal government merely announced less than the barest minimum in funding, just like it has done at every budget for the past decade.
Why spend the money? It won't win the Government votes.
Update 29 May
The conservative response can be seen here in this op. ed. by John Pasquarelli in The Australian. Directing his attack on "the architects of separatism" he says:
For the past 40 years a policy of separatism has been promoted by a pious and self-satisfied crew of misguided missionaries, pompous judges, academics, politicians and the usual camp followers drawn from the ranks of the arts and media. The result? Stranded in remote areas and the worst parts of our cities and country towns, Aborigines are the victims of a cultural apartheid. Relentlessly pursued by all sides of politics, separatism spawned the scandalous shambles that was ATSIC and led so-called Aboriginal leaders to denounce assimilation as genocide. Separatism has not only divided black and white, it has set black against black in a terrible orgy of brutality and degradation.
Funny, I though that many aborigines wanted to return to living in their country. His solution is assimilation:
Aborigines who are not seriously damaged must be encouraged to live in the same places, go to the same schools, the same hospitals and the same government agencies as the rest of us. The sick and the hopelessly wounded will have to be protected and nursed the rest of their days.
No mention of refugee shelters for women and children to proect them from domestic and communal violence.
Posted by Gary Sauer-Thompson at 2:37 PM | Comments (7) | TrackBack
May 27, 2006
a crook story
There is an essay in the weekend Australian Financial Review by Clive Crook, a journalist for National Journal that takes a big swing at J.K. Galbraith. Crook's charges against Galbraith are poor scholarship, being a central planner and advocacy of socialism.
Crook's judgement is that Galbraith compares very poorly with Milton Friedman in the intellectual grunt stakes. That judgerment is undermined by the claim that Hayek's 'Road to Serfdom' tract is up with Keynes' 'General Theory', whilst Galbraith's 'The Affluent Society' is up there with 'The Earth is Flat.' That indicates the trashy nature of the article.
For another example, consider this passage:
Much of the left still longs to sneer at the very idea of capitalism, especially at the claim that it has real ethical foundations (all the more so in comparison with the attempted alternatives).There is still a wish to regard the whole thing as a scam: gulled and witless consumers; scheming and rapacious businesses; phony markets and bogus "competition"; politicians, media hacks and other assorted apologists for "the system" all cosily in the pockets of the people in charge. It is a comprehensively false diagnosis.
It's a straw dog argument, given the acceptance of capitalism by social democracy for over a century. The welfare state is about social justice and the failures of the market, not the replacement of capitalism with socialism. The American and Australian left has called for the regulation of capitalism so that it serves the needs of people better.
And the content of 'ethical foundations of capitalism' are not even mentioned. What are they? Justice? Utility? Freedom to choose? Negative liberty? Autonomy? Trust or social capital? Personal responsibility? Efficiency? Private property? Ascetic Protestantism? Survival? Individual rights? The intrinsic value of the market, as an ethical justification? These foundations for the moral basis of the free market are not one and the same are they? We have deontological accounts (the intrinsic moral superiority of autonomy and freedom (in the market), and consequentionalist ones.
Presumably, the ethical foundations need to be consistent with the Homo Oeconomicus model, which assumes that agents are simply self-interest-maximizing beings deploying an instrumental reason. On that model desires trumps reason. Presumably the ethical foundations also need to be consistent with the conception of the economy as a clockwork mechanism.
Saying, along with Milton Friedman, that capitalism nurtures individual freedom, is different to the ethical foundations talk. The latter implies that free markets are necessary for individual liberty. How then is individual liberty grounded? Do liberty and economic rules reside in nature?
Since pure economic rationality does not take persons and other institutional structures into account, and if economics is not value-free, and the institutional structure of capitalism is not value-free, then economic ethics cannot uncritically accept capitalism and economics as foundational givens.
Why the appeal to foundations and not ethos? Foundations implies bedrock as natural and not historically evolved, doesn't it. Capitalism is not natural. It's a historical mode of production. Though the market is a spontaneous order, is not a natural datum, but an artifact, albeit a very complex artifact as it is the non-intentional fruit of actions brought into being by the actions of self-interest-maximizing beings capable of reflection and of choice. ont hsi account decentralised planning by a multitude of individuals making free economic decisions produces better results in regard to a more organized, efficient, and productive economy, than does a centrally-planned economy.
Posted by Gary Sauer-Thompson at 4:33 PM | Comments (4) | TrackBack
May 26, 2006
limits of power
It would appear that the 'Coalition of the Willing' won the battle for the control of Afghanistan but not the war. The Taliban are resurgent, are conducting a spring offensive that is turning into a strong resistance against the foreign presence all over Afghanistan, with the possibility of the simple Taliban-led insurgency to evolve into a powerful Islamic Afghan movement. An ugly aftermath looks sure to follow. It has been 4 years into the neocon project and it is still ongoing conflict in Iraq and Afghanistan, with Iran casting a dark shadow in the background.
This should raise questions about the whole military enterprise. It does for Andrew Bacevich, who says:
For those who believe in the American imperial project, and who see military supremacy as the foundation of that empire, this ought to be a major concern: What are we going to do to strengthen the sinews of American military power, because it's turned out that our vaunted military supremacy is not what it was cracked up to be. If you're like me and you're quite skeptical about this imperial project, the stresses imposed on the military and the obvious limits of our power simply serve to emphasize the imperative of rethinking our role in the world so we can back away from this unsustainable notion of global hegemony.
Tis imperial overreach with little direction or rationale after the ballon of triumphalism has been pricked.
The overreach discloses the expansion of the American empire and the limits of American military power and the capacity of the Bush administration to shore up, expand, and perpetuate U.S. global hegemony that is dependent on Persian Gulf oil. What the Muslim nations see is empire & power; the US trying to establish relations that maximized the benefit to the United States and American society.Theirs is the narrative of Hiroshima, Nagasaki, Dresden, Hanoi, Haiphong, and Abu Ghraib.
Bacevich says that the crusading neoncons really:
..believed that American omnipotence, as well as know-how and determination, could imprint democracy on Iraq. They really believed that, once they succeeded in Iraq, a whole host of ancillary benefits were going to ensue, transforming the political landscape of the Middle East. All of those expectations were bizarre delusions and we're paying the consequences now.
The situation now, with respect to the imperial strategy, is that any relationship having any discord or dissonance requires a security -- i.e. a military -- response. Hence the containment of China through alliances with India and Australia.
Bacevich says that neo-con imperial strategy needs to be replaced with one of the US learning to live within its means. I cannot see that happening.
Posted by Gary Sauer-Thompson at 1:53 PM | Comments (0) | TrackBack
May 25, 2006
the nuclear debate
It would appear that the ALP states and territories are going to fight any commonwealth proposal to build a nuclear power industry in their territory. Federal Labor has ruled out nuclear power plants under a Labor Government-- but not uranium enrichment. Isn't energy regulation in the Australian federation primarily a state responsibility, not a federal one?
The Howard Government, of course has changed tack in a sudden and ad hoc manner. Is this due to the winds blowing from Washington? Suddenly, global warming and climate change are seen as serious and potentially catastrophic problems. Serious scientific research is no longer being misrepresented as a left-wing beat-up propelled by religious greenies and anxious scientists. Nuclear power is now clean and green and spruiked as the only solution to climate change.
Geoff Pryor
So we have nuclear power instead of the pricing path of Kyoto with its market for emission permits or a steadily increasing carbon tax on pollution.
What has happened to coal? What has happened to all the talk about the development and adoption of geosequestration technology that will resolve the problem of excessive emissions? Is that what we suspected--wishful thinking?
Mike Steketee writing in The Australian puts the debate into a domestic context. He says:
The urgency for Howard is not climate change or an early decision on building a nuclear reactor but next year's election. Nuclear power will not make economic sense in Australia for a long time, if ever. Nor is it a silver bullet for tackling climate change, given electricity generation supplies only about 30 per cent of the world's greenhouse gases and that it would take too long to expand the nuclear industry by an amount sufficient to make a large difference to carbon dioxide emissions.
Howard was firing the shots on the run from Ottawa & Dublin whilst trying to play statesman and his Ministers were left playing catchup. It looked blatant politiking, given that Australia has cheap coal-based energy Australia, and has little reason to enthusiastically embrace a much more expensive source of power.
Update 26 May
Peter Hartcher in an op. ed. in the Sydney Morning Herald builds on this account in terms of Howard's trap. Hartcher says:
Howard's best prospects of damaging Labor are to create the circumstances for it to damage itself. And that is exactly what he has done. Nuclear issues are deeply divisive for Labor and always have been. The party is currently committed by its platform to support the so-called "three-mines" policy, an anachronistic nonsense.This policy marked an uneasy truce between Labor's anti-nuclear Left and its pro-uranium Right.
Will the ALP tear itself to pieces over this? So far it has indicated it will revise the "three-mines" policy, thereby appeasing the party's pragmatists, yet ruling out a nuclear power industry, satisfying the party's anti-nuclear forces. Will this hold until its its national conference?
Posted by Gary Sauer-Thompson at 6:27 PM | Comments (0) | TrackBack
bad indigenous governance
As I understand it Clare Martin, Chief Minister of the Northern Territory Government and Minister for Indigenous Affairs, wants to address the violence in towns such as Wadeye with more housing to ease overcrowding.This is in contrast to the tough law and order approach of the federal government.
Allan Moir
If the federal government wants to put more indigenous people in jail for longer, then what would those policies achieve in circumstances where the normal progression from school to paid work is the exception rather than the rule? The implication is that incarceration as a destructive mode of growing up has little connection to enabling Aboriginal people to join the market economy. Some hold that the fundamental cause of criminal activity in remote Aboriginal communities is the lack of economic growth. If so isn't education necessary to enter the market economy?
If this points to support for Clare Martin's position, then what is increasingly coming to the fore is the way the Martin Government diverts federal funds marked for Aboriginal services elsewhere --to the northern Darwin suburbs.
A report, written by a Darwin lawyer, Sean Bowden, states that the :
Territory Government is underspending by tens of millions of dollars a year on indigenous communities that resemble Third World refugee camps [and is] The Chief Minister, Clare Martin, who is also Minister for Indigenous Affairs, is facing increasing pressure over her Government's failure to deliver basic services to remote areas such as Wadeye. Residents of Darwin had access to first-class infrastructure and services, with modern schools, hospitals, libraries, parks, pools and community centres while indigenous people in remote areas faced low life expectancies.
Federal grants account for about 80 per cent of the territory budget and the report states that there was a:
growing body of opinion and evidence [that] the territory Government was redirecting money from where it was meant to go, like the regions, to where its own spending priorities lay, like Darwin's northern suburbs. When the residents of the northern suburbs scream, the NT Government acts - to not do so would be to risk handing government to the Opposition.
The Territory Government has blood on its hands with respect to the aboriginal hellholes.
Jack Waterford in the Canberra Times says about palces such as Wadeye:
There's no real work, or prospect of any, the health and education system is a shambles, housing is appalling, and the cost of delivering services is phenomenal. The communities are artificial anyway, composed of different and antagonistic groups, and there is a lot of drunkenness, fighting, domestic violence, trauma, suicide, imprisonment, apathy and despair.They may be within their own traditional lands, but there is little evidence even of sustained cultural, let alone, economic use of that proximity, and even less evidence that it is producing life, liberty, happiness and good health.
The question of why such hellholes are sustained is a quite legitimate one. It has long been asked by critics of the past 40 years of failed policies. It is increasingly being asked by others.
He pmentions that some have placed a question over the viability of the outstation movement. So where do they go? To the fringe camps around Alice Springs and Darwin. Waterford asks:
Life in these fringe camps is the more difficult because of the constant influx of such visitors. A typical dwelling - of perhaps three bedrooms - might contain 20 or 30 people, half of whom will be children.And where's the work? And if there were work, how are these people, many of whom barely speak English and few of whom have any education, going to get it in competition with everyone else?
Doesn't that imply that there would have to be decent housing proportionate to the people's needs, and real money spent in upgrading local services to meet the extra burdens such an increase in population might cause? Can we see that happening, given the track record of the Northern Territory Government in diverting funds.
Posted by Gary Sauer-Thompson at 2:09 PM | Comments (0) | TrackBack
May 24, 2006
Fred Argy, inequality, social intervention
A quote from Fred Argy's article in New Matilda entitled Equality of Opportunity: levelling the playing field.The article is based on a paper over at the Australia Insitute (Discussion paper no. 85, April 2006). Argy says:
Australia’s social policy environment is changing in very fundamental ways. Increasingly, we are embracing American social norms---and the American experience suggests that these norms lead to less, not more, social mobility. Already, the interaction of market forces and policy developments in Australia is creating a two-tier society in employment, health, education, housing and public transport, as well as wide regional disparities in opportunities and growing poverty traps. And the outlook is more of the same. For people with individual market power, the recent spate of workplace and welfare reforms will offer wider choice and greater scope for income and occupational mobility. But for the more disadvantaged in our community, the new policy environment will mean less choice and less scope for upward income mobility. Without countervailing social initiatives, this might lead to profound community disillusionment with the realities of equal opportunity.
This is about right isn't it. That places the emphasis on countervailing social initiatives. Those that make the observed market inequality fairer, more economically rational, more politically legitimate and more socially acceptable. What these initiatives look like?
Argy says:
Governments can, as they have done in the past, use social security transfers to temper the harsh effects of rising market inequalities. Such passive redistribution would ease the pain for some but do little to alleviate the underlying structural barriers to mobility. If we want both economic prosperity and substantive equality of opportunity, we need more ‘active’ forms of social intervention – the kind which develops human capabilities and mobility at the low end of the income spectrum while at the same time putting obligations on benefit recipients to change their behaviour.
Posted by Gary Sauer-Thompson at 8:00 PM | Comments (3) | TrackBack
Wadeye
Wadeye, formerly called Port Keats, has become a warzone as gang members fight each other in a turf war that has made its streets unsafe. Yet, just recently, it was touted as a place on the mend, a disturbed town where hope finally shines after years of disruption and neglect. So when I listened to some of the parliamentary budget debates yesterday in the House I picked up my ears when the MPs touched on aboriginal spending, and inevitably, the recent events in Wadeye. I was suprised by the hostility shown towards the outstation or return to country movement and the underlining ethos of aboriginal autonomy/self-determination. To hell with culture, the remote communities are uneconomic, and their people should be persuaded to move. What came through was a tough Australian law and agenda:
Leunig
Law and order is required to ensure that the perpetrators of these crimes against women and children are removed so they are not left in the community continue their violence, to spread fear, and to intimidate those who have been strong enough to speak out.
Malcolm Fraser makes some good points in his op ed in The Age. He says that more police in Aboriginal communities and prosecuting wrongdoers is only a small part of the solution.
Wadey, he says, grew because:
... government policies pushed Aboriginal stockmen off the stations, yet our governments have done little to find employment for those who now live in Wadeye. Apart from community development employment projects, there are only 25 paying jobs in a community of 2500. This is a recipe for social disaster, and that is what we are seeing.The Canadian Government accepts this responsibility for its indigenous communities. Their officers sit down with the leaders of remote communities and work out enterprises appropriate to each. They then provide the infrastructure, and the training. Remote communities in Canada are now running their local railways, managing forestry and other enterprises.
Fraser agrees with Noel Pearson that a welfare mentality has developed in many Aboriginal communities and governments are responsible for this policy.
Fraser refers to the Canadian experience to point a way beyond the punitive approach taken by many MPs on the conservative side of politics. For instance:
In the late 1970s the government of Alberta inquired into the causes of social disaster in aboriginal communities. It found that one cause was the large proportion of those giving leadership in these communities who had an alcohol problem. In response, they established the Nechi Institute in Edmonton. This institute is run by indigenous people, using indigenous methods, and during the past 20 years has trained 4000 indigenous people in drug and alcohol work. Today a majority of those giving leadership in indigenous communities are non-drinkers, and non-drinking has become an asset in the elections for community leaders. This has been achieved by education, not by alcohol bans.
At this stage Australia probably needs both---bans and education. But we get the former not the latter.
Posted by Gary Sauer-Thompson at 8:59 AM | Comments (0) | TrackBack
May 23, 2006
Gillard on politics and health policy
In launching the Tim Wright (ed.), Time for Change book at the Paperchain Bookshop in Manuka, Canberra, Julia Gillard, Labor's health spokeswoman, said that the reporting of politics tended to focus on the personalities at the expense of promoting discussions around public policy. She said:
...politics has been narrowed down to a political contest with personalities....there is a sense of who won, who lost and who made the play of the day. But this is not politics at all---the real stuff of politics is a contest of values and ideas about how to make a better nation.
This is the politics as a sporting contest view of politics of the Canberra Press Gallery that is based on reading minute signs and moods:
Allan Moir
The Sydney Morning Herald reports that in her chapter in the book Gillard argues for fresh thinking in health policy and that progress is being paralysed by a conservative Howard Government's resistance to change.
Gillard says hospital delays, inadequate services for the aged and mentally ill, and a health system straining under layers of administration show the need for a thorough rethink of health. She then argues broadly for a more patient-focused system that places more emphasis on preventative care to reduce chronic illnesses, and rebuilds what she calls the "public realm".
Gillard says that Australia should be doing more to combat diseases like diabetes, cancer and cardiovascular disease, all of which were at least 50 per cent preventable.This could be done by developing population health measures to ensure that people did not go to the doctor when feeling ill but have appropriate continuing contact to manage their health, identify risk factors and to be screened to help early diagnosis.
She says that if we are to surmount the situation of health services under pressure, overworked staff and governments shifting blame, the we must open our minds to new ways. Rather than addressing poor co-ordination and service delivery, or barriers to alternative types of care, spending had been focused "on short-term political fix-its".
Posted by Gary Sauer-Thompson at 4:36 PM | Comments (6) | TrackBack
May 22, 2006
Stiglitz on the IMF
Joseph Stiglitz has written an article on the credibilty of the IMF as an international financial institution concerned with global economic govenance. The article is entitled the 'IMF's Problem Called America'. In it Stiglitz asks a good question:
The International Monetary Fund’s (IMF’s) recent meeting was lauded as a breakthrough, with officials given a new mandate for "surveillance" of the trade imbalances that contribute significantly to global instability. The new mission is crucially important, both for the health of the global economy and the IMF’s own legitimacy.
Stiglitz asks: 'But is the fund up to the job?' He answers thus:
...the U.S. bears responsibility both for trade imbalances and the policies that might quickly be adopted to address them. The IMF’s response to its new mission of assessing global imbalances will thus test its battered political legitimacy....If the IMF’s analysis of global imbalances is not balanced, if it does not identify the U.S. as the major culprit, and if it does not direct its attention on the U.S.’s need to reduce its fiscal deficits, through higher taxes for America’s richest and lower defence spending, the fund’s relevance in the 21st century will inevitably decline.
I cannot see the IMF identifying the U.S. as the major cause of global imbalances frankly. So it is going to struggle to regain legitimacy as an international institution. And I cannot see the Bush Administration directing their attention to reducing the fiscal deficit. That is not included in the Republican talking points.
Things aren't going that well economically speaking in the US. according to Paul Krugman. In his column in The New York Times he says that ecconomic growth in the US:
...over the past three years was driven mainly by a housing boom and rapid growth in consumer spending. ... As I summarized it awhile back, we became a nation in which people make a living by selling one another houses, and they pay for the houses with money borrowed from China. Now that game seems to be coming to an end. We're going to have to find other ways to make a living--- in particular, we're going to have to start selling goods and services, not just I.O.U.'s, to the rest of the world, and/or replace imports with domestic production. And adjusting to that new way of making a living will take time.
How long has the US got I wonder?
Posted by Gary Sauer-Thompson at 4:06 PM | Comments (0) | TrackBack
May 21, 2006
Immigration: the other side of globalization
The voices from the front line on national borders and immigration in the US:
The Republicans are deeply divided and its a bitter, divisive debate. The conservative case for a wall. East Germany indicates that a wall is a pathway that can lead to an ugly situation.
The House conservative's “securing our borders” with fences conflates foreign terrorists with illegal immigrants who are only in the US for economic reasons.
More considered responses to this issue can found at the Becker-Posner Blog --here and here.
Australia has, to all intents and purposes a guest worker programme, which sounds as if the likelihood of substantial inequality among the second class of non-citizens imported for labour is already happening with lower wages and worse working conditions. Ther seems to be no pathways whereby workers who came in legally under a guest worker program will be able to earn citizenship, with all attendant equal rights. The door is firmly closed on foreigners legally becoming a citizen after a few years of guest work.
Posted by Gary Sauer-Thompson at 9:54 PM | Comments (0) | TrackBack
May 20, 2006
violence in indigenous communities
Bill Leak has only got the chronic violence in Aborginal communities half right:
Bill Leak
The bit missing is the child sexual abuse. That is where the debate is: should child sexual abuse in idigenous communities be treated as we treat alcoholism--- as a public health issue, with treatment programs in place?
Or is it basically a problem with law and order? Not enough police in the local communites and townships? Shoudn't vulnerable children, those at risk, be removed, as was suggested by Mal Brough, federal Indigneous Affairs Minister.
This was latter endorsed by both Peter Costello, the federal Treasurer, and supported by Senator Chris Evans, the ALP's Indigenous Affairs Shadow Minister. (Neither supported or endorsed Brough's very odd paedophile rings claim).
Why not safe houses for women and children? Why not take the abuser from the home, not the child, and offer treatment in lieu of prison?
Posted by Gary Sauer-Thompson at 4:41 PM | Comments (20) | TrackBack
May 19, 2006
spruiking nuclear power
The cartoon is about Tony Blair's new either or moral imperative that nuclear power save us from climate change. Blair has become a spruiker for nuclear power and willing to continue government-funded R&D, and huge subsidies to fund the cost, uranium enrichment and security systems, as well as insurance from accidents.
But it applies to the other nuclear-power-can save-the-day spruikers, doesn't it? The ones who ignore the way that energy efficiency, renewables and co-generation reduce green- house gas emissions, provide greater employment and cost less. They reduce the energy debate to coal versus nuclear.
One of the spruikers is Australia's Prime Minister John Howard . Acknowledging that Australia is the holder of the world's largest-known uranium reserves he adds that 'Australia will eventually build a nuclear power industry, and that day could be closer than some people would have thought a short while ago'. He wants Australia to get into the urnanium processing business (value adding) and for Australia to become a nuclear power.
What is notable about Howard's new foudn enthusiams for all things nuclear is the silence on figuring out what to do with the radioactive waste -- even though that is a question that has dogged the nuclear industry for decades.
Another spruiker, the chief one, is President Bush . His message is that America needs domestic sources of clean, affordable electricity. To maintain our economic leadership and strengthen our energy security, America must start building nuclear power plants. Going nuclear is being pushed by US state-- in the form of a global nuclear energy partnership.
Why? Why not solar? Isn't renewable energy the only sustainable and relatively cheap energy option for Australia?
I guess the nuclear energy boys think in terms of massive scale, national grids and centralized power. So how does nuclear power deal with greenhouse emissions from transport, commercial buildings and industrial processes?
What is interesting is how the nuclear industry has gone from being an energy pariah, and the most expensive and dangerous form of energy to becoming the world's solution to climate change --its happened in less than 3 years. John Howard may have signed up to Bush's global nuclear energy partnership but the waste (spend fuel rods) and the exorbitant cost still count against this form of energy.
Posted by Gary Sauer-Thompson at 7:31 PM | Comments (0) | TrackBack
May 18, 2006
A living Murray?
Remember that water has described by the PM as Australia’s greatest environmental challenge, was a high spending priority and there was a need to put a bomb under the process' of returning water to the river. Well there was an additional $500 million in the 2006 federal Budget, which was committed to water conservation measures in the Murray-Darling Basin---ie., to conserve water and preserve the iconic ecological sites, which are the focus of the Living Murray Initiative.
The federal Government had to step in given the failure of the Murray-Darling Basin State Governments (NSW, Victoria, South Australia and Queensland) to agree to adequately fund essential Murray-Darling Basin infrastructure work. The Australian Government's investment will allow the Murray-Darling Basin Commission to accelerate the full range of capital works across the Basin which it has identified as necessary to ensure the river system is operating at optimal efficiency. These include:
• Advancing construction of salt interception structures and systems to reduce salinity and maintain water quality for Adelaide, regional communities and irrigators;
• Completion of the sea to Hume dam fishways by 2011 to allow our native fish populations to reconnect along the River Murray;
• Maintenance and renewal of River Murray water delivery infrastructure, which is currently being run down; and
• New infrastructure to maximise the environmental benefits of water recovered for Living Murray initiatives, providing greater confidence that recovery of important ecological sites along the system can be achieved.
What of environmental flows? How much is being returned?
The $500 million injection will also fund additional projects under the Living Murray Environmental Works and Measures Programme and provide additional resources to ensure the return of 500 gigalitres per annum by 2009 for the Living Murray’s environmental flows. The time line keeps being pushed out, even though 500 gigalitres is one third of what is needed to make the River Murray a living river as opposed to an irrigation channel. The river has been reduced to the point whereby it needs dredging more often than not just to leave the mouth open.
Its time to move beyond recoverying water from water efficiency and infrastructure measures and start to look to the market to start buying water entitlements by engaging in water buyback schemes. There in lies the limit of water refom as understood by Malcolm Turnbull.
Of course, Jennifer Marohasy, Director of the IPA's Environment Unit, reckons that the river has already been saved.
Posted by Gary Sauer-Thompson at 7:38 PM | Comments (6) | TrackBack
Australia needs new nuclear power stations?
Everywhere you turn these days you hear the siren calls of the nuclear power industry. It's the answer to greenhouse, energy security, etc etc. This message is increasingly being coupled to the claim that the nuclear option is back on the agenda with a vengeance. The criticism of the position is being pushed to the margins of public debate--to the little magazines and the blogs. This is the effect of the force of power in the public sphere.
This talk is even prevalent in Australia where coal is plentiful and cheap. And it's not just about selling uranium to China or India, or even becoming a dump for the radioactive waste for other nations. The talk is about a nuclear power in Australia. Nuclear power is even becoming the new Labor energy message in NSW---with the suggestion of building a new generation of power stations. In doing so they want to give the green light to nuclear power. Little mention is made of the unsolved waste problem; the occupational and public-health risks; the difficulty of making uranium work for peace without making it available for war.
As Tom Burke argues in The Guardian it is economic to build nuclear power statations:
Nuclear power stations are financially very risky projects. You spend hundreds of millions of pounds for at least a decade before you start to recover any earnings. Since you have to pay for the financing as well as the direct construction costs, this makes nuclear much less attractive to investors than other forms of electricity generation. This is especially so when you cannot be sure of the price you will get for that electricity in the 30 years or so it will take to recoup your investment. Nor can you be sure what the station might cost.
Burke adds that the nuclear industry will build new nuclear power stations provided the government makes it attractive for them to do so. This means paying for its higher costs. There are only two ways to do this: either the taxpayer pays or the consumer pays.
Since a neo-liberal government would rule out the first option, that leaves the second. As the nuclear industry will build new power stations if the revenue from selling its electricity is guaranteed for the next 30 years or so, then this means commiting Australian businesses and households to paying more than they might otherwise have to for their electricity.
Chris Scanlon in Arena Magazine has another argument. Referring to James Lovelock he says that:
Lovelock doesn’t regard nuclear power as a silver bullet that will eliminate CO2 emissions. Rather, he views it as a stop-gap measure, allowing us the breathing space to address the heating of the planet. Lovelock’s is an authoritative argument, but nuclear power isn’t a solution to global warming. As Alan Roberts argued in issue 78 of this magazine — the original, expanded version of which can be found in issue 23 of Arena Journal — even if it were possible to convert all the power stations in the world to nuclear power stations without adding to the levels of greenhouse gases, the impact would still be marginal, since generating electricity plays a ‘significant but subsidiary’ role in generating greenhouse gases.
Scanlon ends by saying that far from being a band-aid, nuclear power is an infected dressing, polluting the wound that it was intended to heal while causing new sores. And then we have this:
The only tenable solution to climate change is a change in the culture of unfettered consumption and unending development that has produced it. Or, as Lovelock succinctly puts it, ‘As always, we come back to the unavoidable fact that there are far too many of us living as we do now’.
Presumably he means there is a pressing need to make the shift to more ecologically sustainable forms of development?
Posted by Gary Sauer-Thompson at 1:43 PM | Comments (2) | TrackBack
May 17, 2006
the dark side of a resource boom
Ken Henry, Secretary to the Treasury, gave a speech to the Australian Business Economists in Sydney the other day. The speech explores explore some of the implications for the Australian economy, and Australian economic policy, of the re-emergence of China as an economic power.
The immediate consequence of China’s impact on the price of energy and of commodities in general for Australia is extraordinarily high terms-of-trade. Other economies are having their terms-of-trade hammered. Henry says that:
High terms-of-trade should be good news. But it is the sort of good news that has policy makers sitting on the edge of their seats. And for good reason: earlier terms of- trade booms have not always been comfortable times for Australian policy makers...The present high terms-of-trade might turn out to be short-lived. Yet, in thinking about the implications for the Australian economy of the re-emergence of China, India and others, it would not be prudent to ignore the possibility that the terms-of trade remain well above historical levels for a considerable period of time.
What is the consequence of that?
Henry's speech explores 'what might happen to the Australian economy if it turns out to be the case that the terms-of-trade are permanently higher, even if not quite as high as at present.' The picture is one of a two-speed economy as resources shift away from the south eastern Australia to the mineral states. We have booming mining activity in the west offsetting sluggish manufacturing growth and employment in Australia's east. That means depressed wages, stunted manufacturing, job losses and an exodus of workers and investment from Sydney, Melbourne and Adelaide to the mining states.
Posted by Gary Sauer-Thompson at 8:20 PM | Comments (4) | TrackBack
Iraq: neo-con dreaming
An interesting insight into energy and geopolitics in the Middle East by Peter Kiernan in Asia Times online. He says:
For the Bush administration, the ousting of Saddam Hussein removed a potential threat in the vital Persian Gulf region, but the subsequent instability in Iraq has severely constricted its ability to exercise leverage in the region. For example, Iran is not worried about the substantial US military presence in Iraq as long as US forces are preoccupied with battling a persistent insurgency. And Persian Gulf oil supplies remain vulnerable; not from an Iraq as a hostile state actor, but from Iraq's internecine violence with its regional implications.Meanwhile, neo-conservative expectations that post-Saddam Iraq's oil could be used as a weapon to lower oil prices, undermine Saudi Arabia and Iran, and bust the OPEC cartel wide open have not been realized. Iraq's deteriorated security environment has played on oil-market fears that have contributed to higher oil prices. Iraq is producing less oil than it did before the invasion, leaving the market share of the region's two big oil powers, Saudi Arabia and Iran, unchallenged. And both those states are also enjoying near-record-level revenues. The grand dream of an Iraqi oil boom fueling transformation in the Middle East has gone bust.
It sure has. What has replaced it is an Iraq simultaneously descending into both a civil war and a war of resistance against foreign occupation. The US’s view of the polarised the insurgent landscape, makes a clear-cut opposition between terrorism and national liberation movements. The counter-insurrection strategy of the US aimed to wipe out the foreign jihadists (al-Qaida’s) whilst bringing the Iraqi (mostly Sunni) resistance back on side.
The Sunni resistance see Iraq’s government as Shia, sectarian and in cahoots with, or subservient to, Iran the foreign jihadists are becoming homegrown, and both wings of the resistance are working together despite the US's attempts to divide and conquer them.
Posted by Gary Sauer-Thompson at 4:02 PM | Comments (3) | TrackBack
May 16, 2006
emasculating the CIA
Sidney Blumenthal has a fine article at Salon.com on the marginalisation of the CIA and the concentration of power and intelligence gatheing in the Penatgon under Donald Rumsfeld. Blumenthal says:
Acting on the president's charge, Goss in effect purged the CIA.....No president has ever before ruined an agency at the heart of national security out of pique and vengeance. The manipulation of intelligence by political leadership demands ever tightened control. But political purges provide only temporary relief from the widening crisis of policy failure.
Some are calling it an intelligence reorganization but the reorganization represents the militarization of intelligence.
Posted by Gary Sauer-Thompson at 11:12 PM | Comments (0) | TrackBack
Defence strategy: old wine in new bottles
One perspective on defence strategy after the events of September 11 is that the threat to Australia is more likely than not to be unconventional or asymmetric. This holds that geography is not crucial, that Austalia is a powerful country with global concerns and that Australia is a deputy sheriff in the US empire. Australian forces operate around the world now in different circumstances and so they need to be properly equipped to meet the different tasks give to them by the government.
The ADF is increasingly likely to be deployed well beyond Australia due to the need to make a meaningful contribution to US-led coalition capabilities. That is where Australia's national interest lies and it implies the further integration of the ADF with the United States military. This will result in the protection of Australian interests under the security umbrella of the super-power.
This imperial “forward defence” position is seen as a counter position to the diminishing concentric circles around our coastline approach to national security. The concentric circles strategy was defined in terms of a conventional threat (invasion) to Australia and so the first responsibility is to defend Australia. Hence the strategy needed to think from mainland Australia outwards. This was deemed to be a flawed strategy since an attack on northern Australia by a hostile nation-state is highly unlikely.
Things are not that simple are they?
The historical background is that the Nixon Doctrine and withdrawal of United Kingdom forces from East of the Suez persuaded Australia to develop a more independent strategy, which attempts to develop regional balances of power and cooperative security agreements. Australia's defence forces are required to become self reliant, but within a framework of alliances. Although contemplated throughout the 1970s, this strategy was first articulated in 1986, and was most recently reinforced through the release of the 1994 Defence White Paper "Defending Australia." The dated "concentric circles" views on Australia's defence has been closely associated with strategic analysts Paul Dibb, Hugh White and Kim Beazley.
The strength of the concentric circle approach is that it focuses on the region---East Timor, Solomon Islands, Papua New Guinea, Vanuatu and Fiji, and the instability in Indonesia's Papua province and its ‘arc of instability’. Paul Dibb, wriitng in todays Australian, states this well:
In terms of priorities for the allocation of resources, closer is more important, something former defence minister Robert Hill seemed not to understand when he proclaimed that geography was no longer important. Guinea-Bissau in Africa will never be as crucial to our national interests as PNG.
The stability of the archipelago to our near north will be a central security preoccupation for Australia in the years ahead. Dibb states that the problem for Australia will arise if we face two important contingencies in our immediate neighbourhood simultaneously. But the way events are unfolding, we could soon be faced with two simultaneous crises on the ground in the Solomons and East Timor. He adds:
None of this is to argue against our modest deployments in Iraq and Afghanistan. It is merely to observe that regional crises must by necessity command our first priority, particularly where the lives of Australians are at stake and the stability of democratically elected regional governments is threatened. We have more than enough troubles looming on our doorstep to keep us occupied for the indefinite future. No one else is going to look after our interests in our immediate neighbourhood for us. In terms of our strategic geography, closer is more important.
The stability of the archipelago to our near north will be a central security preoccupation for Australia in the years ahead.
Posted by Gary Sauer-Thompson at 10:49 AM | Comments (11) | TrackBack
May 15, 2006
Republican troubles
National Journal has good account of the difficulities the Republicans face in the upcoming US congressional elections. Written by Carl M. Cannon, it is entitled How Republicans Can Get Their Groove Back. Can they?
I don't reckon they can. Some of them are even fantasizing that they can get their groove back by returning to their roots---- small government and fiscal restraint---at a time of budget and current account deficits. Things are bad when the how the broad decline in public approval for President Bush and the Congressional Republicans is beginning to cut into their core supporters:---the angry Christian Right.
Will the "angry white male" of the 1990s come to the Republican's rescue? Isn't the impassioned anger of white male populism the Republican groove these days?
So we have President Bush proposing to send thousands of National Guard troops to help seal the U.S.-Mexican border against illegal immigrants to settle down the angry socially conservative Republican base. Historically the American border with Mexico has acted as a dam to regulate the supply of labor, not to close it off completely.
But the screws are being tightened, even though American capitalism is dependent on cheap immigrant labour from the south. Bush supports, in principle, a Senate-backed plan that would provide immigrants who have lived here for five or more years a clear path to citizenship if they pay a penalty. But the Republican-controlled House so far has been hostile to the emerging Bush plan. Conservatives in that chamber are pushing for legislation that would tighten the borders but would not allow any route to citizenship that does not require first leaving the country.
Will the angry socially conservative Republican base see through the Rovian smoke and mirrors?
Posted by Gary Sauer-Thompson at 11:34 PM | Comments (10) | TrackBack
media fluff
The news and commentary on Radio National this morning was full of description about the Washington event below. It was all media fluff on the AM program. The Canberra press corp were shirking their responsibilities to democracy once again.
There was no digging around to mention Donald Rumsfeld's long war, Afghanistan where it is becoming clearer that the Taliban insurgents' spring offensive is now underway, or the covert operations against Iran. Iraq is just one campaign in the long war with the Bush Administration is looking at the Middle East as a huge war zone
President Bush's approval ratings are a low low 29% not 31%, and going downwards. This slide will be difficult to fix and Republicans know it.
While the Iraqi insurgency continues undiminished and political support for the war ebbs in the US, we have American commanders saying publicly that they still believe they can win the war. The Australian Prime Minister is quoted as supporting the standard Washington line by saying that the new Iraqi PM is the right man for the job. As if that is going to make much of a difference to the sectarian tensions between Sunnis and Shia, or to the insurgency. There is still no Iraqi government. No matter. Bush and Howard will just continually repeat 'staying the course' over and over again.
There is little in the Australian media about the scope of the domestic telecom surveillance going on in the US, or what it means for the national security state.
The Australian media doesn't give you much idea of what is happening in US politics. If you want to find out about the surveillance of citizens by the national security state you have to read the US media. Nor does ithe Australian media give much idea of what is happening in Iraq. Is the US' central intention to ensure a completely independent and democratic Iraq? Or is it to ensure a permanent occupation by building gigantic military facilities to enable it fight the next war in the Middle East? Don't look to the corporate media for answers.
Posted by Gary Sauer-Thompson at 9:04 AM | Comments (2) | TrackBack
May 14, 2006
the neocon discourse around Iran
The pro-war discourse around the Iranian crisis and potential nuclear threat goes beyond the standard clash of civilisations, which says "Islam is Evil", "they hate us and our values" and that Islam promotes violence. It is constructed in terms of the following frames:
(1) that Iran is a dangerous theocratic state, with an irrational and unstable political and clerical leadership that has supported terrorists and threatened Israel and is therefore not to be trusted with a nuclear program; (2) that it has been secretive about its nuclear program, has not been fully cooperative with the inspections program of the IAEA, and that the reason for this secrecy is Iran's intention to develop nuclear weapons; (3) that its acquisition of a nuclear weapons capability would be intolerable, would destabilize the Middle East if not the whole of Western Civilization, and must be stopped.
The neocon version of the pro-war discourse that is offered to, and hardly contested in the corporate media, suggests that there is a threat of "appeasement" of Iran, and that if the world is "to avoid another Munich," and the "Security Council fails to confront the Iranian threat," then it is up to the United States to "form an international coalition to disarm the regime" and ensure "regime change."
There is a sense of deja vu in the U.S. government's rhetoric concerning Iranian nuclear enrichment. It is a repetition of the rhetoric employed before the Iraq war. If you remember there was the exaggeration of Iraq's military might, which was seen as a "threat" to its neighbors -- most notably Israel -- and U.S. regional interests. Then came the sanctions that were meant to "contain" the Iraqi regime and impede Hussein's alleged incessant drive for chemical, biological and nuclear weapons.Then there was the muscle flexing and awesome military deployment. Finally came the showdown: war, forced regime change and occupation.
The realist account is that the real objection to Iran's becoming a nuclear power is that Iran would impede the larger US ambitions in the Middle East - the Bush administration's "project of transforming the Middle East". to ensure US hegemony in the region. Iran directly thwarts this project of regional transformation", as Iran demands recognition of its central status in the power hierarchy of the Persian Gulf region. The geopolitical strategy of the US is to reorder the power hierarchy in the Middle East further in favor of the United States. So the US missions in Iraq and Afghanistan are necessary to contain the threat "emanating from Iran". It is unlikely that US forces will leave the region in the near future. The grand strategy to overthrow the Islamic Republic of Iran.
The Bush administration's standard operating procedure for dealing with "axis of evil" members has remained remarkably consistent: - no direct diplomatic contact; attempts to corral and coerce other countries into supporting its efforts to isolate and unseat unfriendly regimes; Washington druming up support for concerted action outside the UN context. So the concerted action against Iran will involve sanctions "outside the UN" by a so-called "coalition of the willing". The sanctions would be contrary to international law, and would include freezing the foreign assets of Iranian officials, closing export credit lines, closing Iranian government bank accounts, and freezing Iranian government assets.
Such economic sanctions against Tehran would inevitably lead to a reduction in Iran's oil exports, and could easily drive international oil prices above US$100 per barrel.
Posted by Gary Sauer-Thompson at 11:45 AM | Comments (9) | TrackBack
May 13, 2006
global imbalances: the blame game
Global economic imbalances cause tensions amongst nation states. The most notable tensions are those between China and the US, which arise from the former pegging the yuan and the latter's record current-account and budget deficits.
What is commonly accepted is that the US is running large fiscal and current account deficits while the rest of the world is running large current account surpluses. The flow of capital that is financing these US twin deficits is mostly (three quarters or so) coming from foreign central banks - mostly in Asia but not exclusively - that are aggressively intervening to prevent an appreciation of their currencies. The differences arise around the causes and solutions.
Since these imbalances are deepseated and difficult to resolve we have a blame game. William Pesek Jr., a columnist for Bloomberg News, outlines the state of play in the blame game.
He says it looks like this:
For a record $805 billion current-account deficit that's clearly unsustainable, the U.S. blames China and Japan. If only officials in Beijing and Tokyo would let currencies rise, the U.S. argues, all would be well. The U.S. almost seems to think it's over-consuming out of a sense of global altruism.Asians blame the West, especially the U.S., for Asia's policy of parking more than $1 trillion of savings in U.S. debt. Officials in this region claim the U.S. has created a global system to help fund its way of life, and that Asians have little choice but to play along.
Europe blames Asia's mercantilist ways for its declining competitiveness. It seems Europe's weak demand, high unemployment and worsening fiscal position are caused by Asians pushing the euro higher with their dollar purchases.
Pesek offers a gloomy perspective on resolving these imbalances. He says that 'the G-7 can't act as referee because its members are part of the problem. The International Monetary Fund is too busy trying to remain relevant in a world devoid of crises to offer much direction. Of course, if today's imbalances get out of hand, the IMF's bailout abilities won't be up to the challenge. The world economy isn't too big to fail, but too big to save. '
An account of the different interpretations of the causes of the global imbalances and what to do is offered by Nouriell Roubini. He ends his account by saying that the emerging consensus view on the multiple causes of these global imbalances and the need for a cooperative solution requires each major region of the world to do its part. Roubini concludes:
The main obstacle and problem is that the fiscal policy stalemate in Washington: the administration and the Republican Congress live in the delusional dream that the fiscal deficit can be meaningfully reduced without any tax increase (and actually via aggressive and reckless moves to make all the tax cuts permanent). Such reckless policy stance makes the probability of an orderly rebalancing smaller and increases the chances that the global rebalancing will be disorderly and occur through a hard landing of the US and the global economy.
That's not the view of Canberra.
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May 12, 2006
Canberra Gaze
As Alex Millmow points out in the Canberra Times the Costello Budget announced the impossible - tax cuts and spending increases. Milllnow says:
Economics was never supposed to be like this. Making do with less, not coping with superabundance was what it was all about. This is the fourth successive budget when the electorate has received some form of income tax cut or increase in welfare payments. Many now have the embedded belief that a budget surplus means tax cuts.The "gimme, gimme" budget has arrived. And there will be a repeat of the magic pudding next year, and, all going well, on an even bigger scale. The thought of using the surplus for the social good, for infrastructure, for training and education, will become more outlandish over time. Were the Government ever to renege on the transfer of the booty, the electorate would sulk.
Such a budget does not leave much room for the ALP to respond in the Budget reply. All eyes were on Labor, given its self-destructive tendencies. Would it build on its message about needing to lift the nation's productivity by offerring some policies as opposed to carping?
Unfortunately I missed Kim Beazley's address in reply on free-to-air televison last night. Reading it this afternoon his 'Pact with Middle Australia' he homed in on the nation's skills shortage, lack of places in parents' child-care and the failure to develop a high speed broadband network for businesses and households. Apparently it was a good performance with an emphasis on security: the government will protect you from changes in the workplace and in the market.
So Beazley differentiated himself on education and child care, but where was health? Is not a squeezed Middle Australia also concerned about health and wellness?
What was not addressed by both sides of politics was a strategy to rein in the current account deficit, which is running regularly at more than 6 per cent of gross domestic product and which has led to a national debt of about $500billion, still rising. Both sides of politics seem to think that we don't need to worry about these huge imbalances.
We should. As Millnow points out:
Recall how the British used up their North Sea oil bounty with nothing much to show for it in the end. Sure, Australia has oodles of resources, but our external account is forecast to be in deficit this year at 6.25per cent of GDP. This is when we have the best terms of trade in 30 years.Our actual trade deficit - exports minus imports - has been in deficit for 48 months straight.You'd think that with record export prices, this, at least, would be in the black. But no, the income effect arising from the terms-of-trade bonus encourages a spate of spending on imports.
Yet we have silence.
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May 11, 2006
a diplomatic letter
Iran's President Ahmadinejad, who is currently in Indonesia in response to American efforts to isolate Iran, has written an open letter to President Bush.
The opening paragraph of the letter poses a good question:
Can one be a follower of Jesus Christ (PBUH) [praise be upon his name], the great Messenger of God, feel obliged to respect human rights, present liberalism as a civilization model, announce one's opposition to the proliferation of nuclear weapons and WMDs [weapons of mass destruction], make war and terror his slogan, and finally, work towards the establishment of a unified international community - a community which Christ and the virtuous of the Earth will one day govern, but at the same time have countries attacked; the lives, reputations and possessions of people destroyed and on the slight chance of the ... of a ... criminals in a village or city, or convoy, or for example the entire village, city or convoy, set ablaze.
That gives you the flavour. It puts lots of uncomfortable questions on the table as it ranges across an array of international issues, including Third World poverty, superpower militarism, multinational exploitation, the plight of Palestinian people and, of course, Iran's right to civilian nuclear technology.
The letter opens up a different front in the war to the stance of defiance---an ethical critique of US foreign policy. The US is being judged by its own Christian values. The criticism is also pointed: United States' global policies, particularly in the Middle East, have made "people of the region increasingly angry with such policies".
Have a read of the letter if you have a moment. It is an interesting document. Some commentary.
Posted by Gary Sauer-Thompson at 5:12 PM | Comments (16) | TrackBack
May 10, 2006
today and tomorrow
The editorial in the Sydney Morning Herald says that the 'overwhelming emphasis of the budget is on tax cuts, to be introduced from July 1. At the height of a once-in-a-lifetime boom in commodity exports it is a risky strategy, devised under pressure. It reveals a Treasurer who may want to make gestures towards building Australia's coming years, but whose focus is fixed on the politics of the present.'
Alan Moir
A fair enough comment? The Canberra Times says that 'Peter Costello has gone further than most commentators expected in attacking tax rates, and in lowering top rates, but the fundamental task of reform is still ahead of him, something manifest as well in the way government has plenty of money in the kitty for later stages of the electoral cycle.'
There is a developing consensus on this is there not? It provides plenty of oportunities for the Opposition Leader to use his budget reply to talk about the economy's long-term future, education and the need to tackle structural weaknesses in the economy, especially in the area of skills. Or will the ALP be left exposed?
Update:11 May
Tim Colebatch in The Age makes some good points. He says:
What we needed from this budget, now more than ever, was a policy shift back to basics. We needed to build up the country's capacity to earn its way in the world, after the worst period of export growth in its post-war history.That means increasing spending on skills, education and training, export support, industry development and infrastructure, the drivers of future growth.This budget spends $11.6 billion of new money in 2006-07 alone, but hardly any of that is being spent where it will increase Australia's capacity to export. There is $400 million of new investment, mostly on highways, $20 million a year extra for apprenticeships, nothing at all to lift exports, and apart from more generous depreciation rates, little for manufacturing.
By contrast, there are income tax cuts worth $9 billion a year and hundreds of new spending initiatives cumulatively costing us billions of dollars in such areas as defence, security, and fraud control.This is a Government in economic drift. It is awash with tax revenues, yet it is so obsessed with buying votes that it is prepared to burn our future rather than build it. What a waste.
A good critique isn't it.
Posted by Gary Sauer-Thompson at 6:55 PM | Comments (8) | TrackBack
May 9, 2006
Canberra awash with cash
The budget sell has begun as the Howard Government gears up for the next election and positions itself for political advantage over the ALP.
It's a spending spree by a government awash with cash from the soaring tax revenues from mining profits and strong employment growth. And the big-spending budget will not put further pressure on interest rates by overstimulating the economy through fuelling consumer demand:
Bruce Petty
This message from all the showbiz is that this is a responsible budget as it will deliver a strong surplus and position the country for a prosperous future. That should open the gate for the ALP to reply in terms of the lack of fumdamental reform, the low investment in human capital, and t budgetary policy and interest-rate policy pulling in opposite directions - increasing the possibility the risk of further rate rises.
Will the core of the Beazley response be to finance the capacity of the economy to keep exp[nding for the next generation? I wonder if this issue will be addressed in any substantive way?
My guess is that there will be little about climate change in the Budget---no mention of pricing carbon emissions to reflect accurately the cost of the damage they inflict. We will end up in the same way as we did with the Murray Darling Basin--spending more and more money to repair the damage caused by ignoring the envirornmental consequences of resource based development.
Posted by Gary Sauer-Thompson at 12:56 PM | Comments (0) | TrackBack
May 8, 2006
a ho hum Costello budget?
Judging by all the leaks and hints the Costello 11th Budget doesn't look like much of a reform budget does it? Nor does there appear to be any rabiits in the hat that Paul Keating used to regularly pull out on budget night.
The budget surplus is around $5 billion greater than expected (it's around $17.6 billion) due to the commodities boom, with the money going to spent on tax cuts (to offset bracket creep), family benefits to working families. This will pump up the economy at a time when the Reserve Bank is reining in excess demand as the economy's capacity limits tighten and the current account deficit soars.
This will ensure a solid political base amongst 'Howard's struggling battlers' for the Coalition in the lead-up to next year's election.
Bill Leak
Oh, there are reports of a billion or so of dollars being spent on enhancing the nation's rail and road networks and new incentives for working mothers.
Systematic tax reform is off the agenda, as is a substantial investment in education and training to increase skilled workers with different skills, school education or the implications of an ageing Australia. The investment in the infrastructure is minimal, there is little by way of competition policy reform, and no overhaul in health care.
The mantra of good economic management by the Coalition is now starting to look more than a little ragged.
Posted by Gary Sauer-Thompson at 12:09 PM | Comments (4) | TrackBack
May 7, 2006
Tony Blair: a dead duck
It sure looks like the beginning of the end for Tony Blair, the British Prime Minister.
S. Spring, Telegragh, UK
Blair's recent 'bloodletting' reshuffle, at the time of a savaging at the local election polls was a sign that Blair has no intention of resigning gracefully; yet we do seem to have reached the stage of the leadership endgame. Since the Conservative opposition does not look ready for office, Labour is still the only party that has a chance of gaining an overall majority at the next general election.
Labour is split on the strategy for rejuvenation.
The split in this Government is between competing analyses. On the one hand, there are those, like Hazel Blears, the new and staunchly Blairite party chairman, who believe that only the Prime Minister is capable of bringing about "renewal". On the other hand, there are those MPs - some of whom are now circulating draft letters - who believe that a "timetable" for Mr Blair's departure is now the party's only hope. That means Labour rejuvenates itself by replacing Blair with Gordon Brown the Chancllor of the Exchequer.
Posted by Gary Sauer-Thompson at 11:52 AM | Comments (1) | TrackBack
May 5, 2006
addressing obesity
Tony McMichael, director of the National Centre for Epidemiology and Population Health, at the Australian National University has an interesting op.ed. on obesity in todays Sydney Morning Herald. It is one of the better articles on obesity in the corporate media.
McMichael states what we know: the proportion of overweight and obese people in Australia has doubled in the past quarter of a century, and now includes more than half of all adults; the proportion among schoolchildren, about a quarter, has risen even faster. He then argues that 'this trend, evident in populations around the world, signifies that something fundamental is changing in how we live. Our daily energy balance is out of kilter.'
He notes that much of the public discussion mostly focuses on strategies to intervene, correct and counsel at the personal level, either in terms of "fatness genes" or personal behaviour, and then critiicizes this approach.
The "fatness gene" approach he says:
might explain why some people become obese. Such reports reinforce the idea that solutions lie with correcting or compensating for individual biological abnormalities. In like vein, many view the basic problem as one of aberrant individual behaviour. The Health Minister, Tony Abbott, argues that preventing weight gain is essentially a matter for personal and family discipline, and not a matter for governmental policy.
The flaw with the personal approach - both biology and behaviour--- is that this individual-focused thinking misses the point, which is the population perspective.
McMichael argues that though genes and behaviours are very relevant, in relation to the rise of obesity their main importance is at the population level, not at the individual level:
If we cannot understand that the problem has a systemic source that arises from recent radical changes in our way of living, in human ecology, then society is unlikely to find effective solutions.Our way of living is no longer attuned to our basic biology....Inadvertently, then, we have created an evolutionary nirvana in which, at last, abundant (and energy-dense) food is within easy reach and its purchase or acquisition requires little exertion.
Being overweight is one of the several main new penalties of modern urban ecology. As McMichael argues that as, such an environment is a man-made cultural artefact, creating an environment far removed from the conditions that shaped our biology and psyche, so it is not surprising that there are some health penalties.
He locates this in the public narrative of governing the health penalties of urban-industrial life (the airborne and waterborne infections, including tuberculosis, measles, diphtheria, cholera and other diarrhoeal diseases) which have largely been controlled, via the joint processes of public-health intervention and social modernisation:
Two of the greatest health endangering consequences of the late-industrial urban environment are, first, overweight as a manifestation of this radical shift in human ecology and, second, the increasingly huge contribution of the world's cities to greenhouse gas emissions with all that they portend, via climate change, for future risks to safety, health and survival.
McMichael rightly argues that solving such problems requires well-informed, imaginative population-level strategies. That is not nanny statism; it is enabling statism:---enlightened, government-supported, collective action.
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a winter discontent
The Reserve Bank's decision to raise interest rates was line ball--it could have gone either way. Presumably, it is justified on the grounds that it headed off more drastic increases latter. It's an insurance policy against the inflationary pressures that are formimg, and presumably gaining the upper hand. As the economics of the decision goes it's a cautionary move, a minimal step and in step with the actions of central banks in other countries (eg., Canada). It's good economic governance--and so on.
The politics is another matter entirely. It's not just a question of the Treasurer being grumpy and taking issue with the Reserve Bank's analysis of the trajectory of growth of the world economy It goes deeper than this.
Bill Leak
Leak exaggerates but the exaggeration contains a truth. The RBA decision places a question mark over the Howard Government's economic management, which fought the last election on the promise of keeping interest rates rates low and the fear of rising interest rates under a Latham-led ALP government. Despite the resource powered boom, the new message is one of economic restraint and belt tightening; especially when coupled with rising petrol prices, warnings about more interest rates rises in September. Merge that with the stories about reduced wages and working conditions from the industrial relations reforms, and we have a winter of discontent for debt burdened households.
A winter that may shift into the Howard Government facing a federal election in late 2007 with high interest rates depressing the economy.
This is new political terrain for the Howard Government---a question mark over its economic management credibility. That question mark fuses with what others are saying: that the blame for limited spare capacity, scarce suitable labour supply, an underfunding of education and the lack of investment in infrastructure can be directed at Costello and Howard. Costello is not much an economic reformer. Reform deficit is the mantel he now wears.
Sitting in the background is Australia's widening trade gap with the rest of the world---it widened in March to $1.5 billion. This is the 48th consecutive monthly shortfall in Australia's trade balance---and the longest run in the red in 20 years----and is due to declining exports. The Treasuer patting himself on the back about his budget supluses and paying off debt---the message is always that deficits and debts are the height of economic irresponsibility--- cannot disguise the worsening trade deficit.
The commentariat continues to remain silent about the trade deficit.
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May 4, 2006
media corruption
Richard Flanagan gave a speech on the media when launching the new online version of the Tasmanian Times. The question he asks is: 'Why is it that our media has become so captive to power and money?' Though his argument refers to the corruption of the media---corporate and public--- in Tasmanian, his argument has relevance across Bass Strait.
Flanagan says that the exception is the Tasmanian Times, as it ' has been the one consistent, courageous voice raised in determined questioning of the deals, the relationships, the curious path of big money in Tasmania; the only vehicle trying to report not only what is happening in Tasmania, but also seeking to discover why it is happening.'
What of Murdoch's tabloid The Mercury? Despite my interest in Tasmania , this is one of the corporate media I don't bother to read because of its lack of online editorial commentary.
What Flanagan describes is corruption that is deeper than The Advertiser being on the Rann Government's drip feed. He says:
the Pravda-like grovelling of the Mercury to the Lennon government in recent weeks. Hardly a day seems to pass without another large profile on yet one more gifted, hard working and highly intelligent Tasmanian cabinet minister. One wonders at such riches: not one moustache-bordered jowl waiting for another free dinner to dribble down its puffy declines belongs to other than that of a horny handed son of the people who understands the ordinary Tasmanian; not one dull eyed, guppy mouthed woman on the Labor benches can be described by the Mercury as anything other than ‘a rising star’ and ‘possible future premier’. If the Mercury is to be believed, not since Churchill assembled his war cabinet has such brilliance graced a Westminster parliament.
The Mercury is part of the corporate state In such a state the Tasmanian media happily plays the part of a Greek chorus: repeating lies, deriding truth, denouncing critics of power. Flanagan says:
It is no secret that in a climate of fear and intimidation where the government now seems to exist only as a client and standover man for big business, the Tasmanian media has been both cowed and duchessed to kill some stories and to run puff pieces in their place. But like any beggar at the gate they enjoy their occasional proximity with power and confuse it with shared knowledge and commonality of interest. For the Tasmanian media not only celebrate the powerbrokers but crave intimacy with them and their opinions; they laud rather than question their projects; they join with them in mocking any voice raised in questioning. Their record is beyond pitiful.
In consequence, almost every major story about Tasmania is broken not in Tasmania’s mainstream media but either on Tasmanian Times or in the mainland media. Thank heavens for the Tasmanian Times.
This article--- Mind Games --- by Daniel Schulman places this media corruption in wider perspective of the war on terrorism. It shows how the media was used as a tool in the information wars conducted by the military.
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May 3, 2006
hard, dirty times
According to this report in Asia Times Online the Wilsonian freedom/democracy agenda of the beleagured Bush administration is giving way to the traditional realist concerns of geopolitics, and the realpolitik that goes with it.
This is unsuprising really, given the messy chaos in Iraq, the country falling into disorder and becoming stuck in ethnic passions and loyalties. It still looks as if Iraq will be a very loose federation of three big ethnic enclaves rather than a united nation-state.
Geoff Pryor
Washington's geo-politics is about energy (ie., oil and gas resources) with the emphasis on stability and co-operation with those "friendly" autocrats who have both plentiful oil and gas resources and strategically placed real estate with regard to emerging foes, be they Russia, Iran or China. Good old realism: the world is a dangerous place, good intentions don't mean very much, and the key to international order is a balance of power among armed nation-states.
The Bush Administration could sure do with a dose of realism about starting a war with Iran. If the US lived with a nuclear Soviet Union, and currently lives with a nuclear Communist China, then it could live with a nuclear Iran. Iran is nowhere near being a greater military threat to the United States than Communist China. Is that not so?
Surely Washington’s current fixation on preventing Iran from pursuing its nuclear energy research under the Non -Proliferation Treaty is not due to pressure from the Israel lobby? Mearsheimer and Walt longer footnoted paper is archived at the Kennedy School of Government.
The Israel Lobby? A critical response An interpretation and assessment by BTC News of the historical background. An interpretation by Juan Cole of the excellent Informed Comment.
Certainly, Israel and its hawkish supporters are strongly advocating sanctions and military strikes against Iran. Is this another example of the close US alliance with Israel damaging American relations with other nation-states?
It was once held by the Washington neo-cons that the road to peace in Israel/Palestine led through Baghdad. By that it was meant that if give Israel a greater sense of security then you can solve the Palestinian issue later. Does the road to peace now lie through Tehran? Does the new concern with geopolitics, and the realpolitik that goes with it, mean that the US will no longer identify its interests with those of Israel? Surely there is more to the U.S. opposition to Iran possessing nuclear weapons than the protection of Israel?
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It's Australian values and rights
The op.ed by Abdullah Saeed in today's Australian is an important contribution to the ongoing public debate around both integration and Australian values and the citizenship test proposed by Andrew Robb, the Parliamentary Secretary to the Minister for Immigration and Multicultural Affairs, in his speech to the Sydney Institute.
Saeed rightly says that there is a widely held belief among Australians that Muslims as a group are the most reluctant to integrate into Australian society:
...the perception persists that it is only Muslims who do not want to integrate or are reluctant to commit to Australia's fundamental values. This view has a lot to do with the simplistic notion that Muslims are a homogeneous group of people who are on the whole unemployed, who form ghettos, detest our freedoms, want to live under sharia law and cannot accept our fundamental values such as democracy, rule of law, equality of the sexes and religious and intellectual freedom.
Saeed shows that this perception does not accord with reality and that it is only that a small minority of Muslims who adopt a position of not wanting to integrate or are reluctant to commit to Australia's fundamental values. He says that the vast majority of Muslims who call Australia home have adopted fundamental Australian values, argues that Islam both affirms this acceptance and supports a legal legal system based on justice, fairness, equity and non-discrimination.
These points have been made before in public debates---repeatedly and consistently. So why all the current fuss about integration and a commitment to Australian values? What's going on here?
Saeed highlights a key issue:
Doubts about Muslim commitment to Australian fundamental values have arisen also partly as a result of some Islamic religio-cultural practices; for example, the hijab, which an increasing number of Muslim women wear. For such women, it has nothing to do with a failure to commit to Australian values. Rather, they are enjoying the freedom available for them to wear any type of clothes they want, just like other Australians. Similarly, other practices related to food, dress, hairstyles and coverings, religious affiliation and worship have nothing to do with fundamental Australian values.
It is a key issue as it goes to the heart of Australia's secular liberal democracy--the freedom of citizens to practice their religion. It is here that there should be a priority of individual right over the collective interest, as these religious practices do not infringe on the rights of others or offend against the constitutional order or public morals. Fundamental Australian values include religious freedom, this freedom is understood to be a fundamental right, and only "compelling interests" are sufficient to justify infringements of the right to religious freedom.
Saeed's argument is that Muslims should accepts the citizenship test as this means that Muslims will help change the perception that they do not support fundamental Australian values. Fine. What is "missing from this is a contribution from the government --they need to affirm the right to religious freedom by Australian citizens, and to clearly distinquish the policy concern for integration from assimilation. Since Andrew Robb did the latter, not the former, the suspicion remains that the Howard Governmet is willing to sacrifice the religious freedom of Australian Muslims to enhance the general welfare (upholding public order and security).
I appreciate that 'rights' stick in the throat of many Benthamite act utilitarians causing them to choke on the nonsense on stilts; but rights are 'shields' providing strong protections against demands made by the political community dealing with war on terrorism. Something protected as a matter of right--religious freedom--means that it may not be overridden by ordinary considerations of public policy justified in the name of general welfare of the nation. The problem with the utilitarian's consequentionalist conception of the general welfare is that it rides roughshod over individual freedom. This is a flaw in terms of substantive political justice in a liberal democracy--and a well known one.
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May 2, 2006
Downer's intellectual bankruptcy
No doubt you have read Alexander Downers' recent intervention into the history wars in todays Australian and the various comments in the Australian blogosphere, and you've made up your minds about what's going.
Downer's op ed. is even worse than I 'd thought. Downer is not interested in taking a knife to ALP mythology. He is attempting to rewrite, nay distort, the historical record to paint the ALP as the party of pacifism, appeasement and little Australia. Try this for starters:
Curtin's view was that Australian soldiers should never be engaged in Europe under any circumstances. It was a view based on a blind commitment to pacifism and underpinned by the notion that Australia was "but a minor power, a small nation remote from the great centres" and incapable of playing any substantial role in the international fights against tyranny.
The historical fact is that it was John Curtin who stood up to Churchill's attempt to reinforce the imperial Burmese force with Australian troops (without air support or sea control) , and he successfully fought to bring Australian troops home to defend Australia from the Japanese threat in 1942. (See the comments in this post.) What Downer should have done--if he was intellectually honest---is undercut the myth of Curtin as a great war lord saving Australia from the Japanese on the grounds that the Battle of Australia never took place.
What we have is this--the main thust of the op.ed:
The Labor Party has continued the Curtin policy of pacifism and isolationism to this day. When it comes to great international challenges, be it Nazism or global terror, the Labor Party has adopted the position that Australia is a tiny, isolated backwater that has no responsibility to do any of the heavy lifting. Labor has lacked the courage to combat evil. It clings to the vain hope that by shrinking and hiding Australia may avoid the firing line of tyrannical regimes and terrorists.
Downer makes no mention of the ALP's historical commitment to a liberal internationalism, that is mixed into Labor's acknowledgement of Australia's reliance for its security on the British or the Americans. This mix cashes out through Gough Whitlam as placing a greater emphasis on a more independent Australian stance in international affairs.
And then Downer says this:
Kim Beazley sits squarely in this Labor tradition of weakness. Whereas Curtin said that it didn't matter if Germany was run by Nazis, Beazley thought that we should have left Saddam Hussein in power; we were wrong to help our allies get rid of him. "We are a small country in a world of giants," Beazley says. Can you hear Curtin's echo?
No I can't. What I hear is the fact that it was the deeply entrenched tradition of liberal internationalism that informed the ALP's decision to oppose a war against Iraq without an unambiguous UN mandate.
More can be found at Polemica
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Galbraith on the new economy
John Kenneth Galbraith died on the weekend.
An institutional economist, he became one of America's best known public intellectuals. He was an economist, professor, government official, journalist, ambassador, novelist, antiwar activist, and he is known for his "private wealth and public squalor" analysis of American capitalism.
It's a nice turn of phrase that captures the way that the liberals desire for market capitalism to work for the benefit of the people is thwarted by the big corporation looking out for its market share.
Far from the economy consisting of small, competitive firms whose decisions were determined by consumer choice, as the textbooks held, the economy was actually ruled by big corporations, independent of the market, and run by managers who were able to fix prices and control sales through advertising.
However, the effect of globalisation has meant that monopoly power within a national market has been exposed to international competition.
Yesterdays Australian Financial Review had an edited extract from a speech John K. Galbraith gave in 2002 on the new economy. In it Galbraith says that the idea of the new economy had three main elements, all of them articulated in offical documents of the late 1990s, expecially by the US Federal Reserve. Galbraith says:
The first held that new technologies were generating a permanent boost to growth. The second held that government need play no major role in economic life, and that government debts could be eliminated through budget surpluses. The third held that economic management, in the short and medium term could be entrusted to the Fed. High rates would cool inflationary ardour. Lower rates, when required, would fuel the investment to keep the country at work.
These are familar ideas in Australia are they not? In the extract, Galbraith goes to work on them in the context of the American economy. He argues that the new economy began to expire around 2000 as the prosperity of the techno boom gave way to the current slump.
More importantly, Galbraith's argument is that you cannot rely on monetary policy run by the Fed (or the Reserve Bank of Australia) to get you out of a jam. By themselves lower interest rates cannot rekindle the info-tech boom, nor induce most households to buy new durable goods. He then says something that applies to Australia now:
... monetary policy would support growth only as long as households and business were willing to expand their debt loads. When debt loads become high, rising interst rates become especially dangerous. And once the willingness to take on new nerw debts declines, lower interest rates can provide only minor relief of a reduction in servicing costs.
Australian housholds currently have high debt loads and the media economic talk is for the Reserve Bank to raise interest rates to contain local inflationary pressure due to petrol prices, workforce shortages, and foreshadowed tax cuts in the 2006 federal budget.
I was much taken with Gralbraith's economic realist texts: The Affluent Society (1958) that criticized the myth of "consumer sovereignty"; the New Industrial State (1967) which argued that firms were oligopolistic, autonomous institutions vying for market share (and not profit maximization) which wrested power away from owners (entrepreneurs/shareholders), regulators and consumers; and Economics and the Public Purpose (1973) that explored political capture by firms. As an institutionalist Gailbrath desribed and analysed the capitalist economy as it was, as distinct from the simplifying assumptions and the mathematical models that were fundamental to both the liberal and conservative economic orthodoxy of his day. His questioning of many of the basic assumptions of orthodox economic theory can be seen in this quote:
In making economics a non-political subject, neoclassical theory destroys the relation of economics to the real world. In that world, power is decisive in what happens. And the problems of that world are increasing both in number and in the depth of their social affliction. In consequence, neoclassical and neo-Keynesian economics regulates its players to the social sidelines. They either call no plays or use the wrong ones. To change the metaphor, they manipulate levers to which no machinery is attached.
That phrase 'they manipulate levers to which no machinery is attached' has real bite, hasn't it.
Update: 2 MayAn assessment of Galbraith's legacy can be found here, the one by by Evan Jones is at Alert and Alarmed. Robert Skidelsky, professor of political economy at Warwick University in Britain, says in the Canberra Times that Galbraith position was:
a non-Marxist version of class struggle, with the intelligentsia as the engine of social innovation and carrier of the "public purpose". His position seemed to be that as long as the Democrats were in power and advised by the right people, the state could be trusted. This is dangerously close to the Marxist belief that the problem of the abuse of power, and the need to build safeguards against it, would disappear when the dictatorship of the proletariat was established.
It's a form of statism quite at odds with the neo-liberalism of today.
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May 1, 2006
Keating: the ALP and economic management
The political wisdom is that the ALP lost the last election (2004) because it failed to contest the Coalition on economic management, and so feel victim to the interest rate scare that appealed to fear about the ALP not being able to manage the economy.The ALP did not respond to the fear that suburban Australia would lose their homes. Those on $70,000 a year, with the highly geared McMansions, and two kids in private schools vote for 'keeping the economy strong'. They vote Liberal.
This is not the Tory working class scenario. Informing the 2004 election are the background changes flowing from the economic reforms of the pro-market Hawke and Keating Government and globalization. This is transforming the economy, and it created a whole new class of economic agents--subcontractors, consultants, home-based office workers etc are the big winners in the 'new economy'. This new middle class has become agents of their own economic future and they vote Liberal.
In an extract from George Megalogenis', The Longest Decade, Paul Keating and John Howard, published in today's Australian Paul Keating, the former ALP leader, says:
What's happened to the Labor Party since 1996? It has gone back to the old anvil. It's walked away from financial innovation, from the opening up of the economy and the whole meritocracy model of widening its own appeal to single traders, to sole operators of business, small business.
The post-1996 ALP has given away the economic credibility it had earned during 1983-1996, and it failed to modernize its policies under Beazley.
Megalogenis' says that the former prime minister argues that deregulation created a new type of voter, the former blue-collar worker turned small businessman. But Labor, in vacating the field of economic reform, allowed this socially conservative voter to move into the Liberal camp. As Howard observed to Megalogenis the new upwardly mobile middle class rejected Keating's social policies for a republic and reconciliation:
They're [the self-employed voter] are a natural fit for me. The thing is, a lot of those people are socially conservative, they don't like all this trendy stuff.
They're now rusted on Liberal and they listen to Howard's language of national unity. That is the significance of all the values stuff in contemporary politics. The new upwardly mobile middle class is the new moral middle class.who live in a world bounded by their experiences of work, families, the neighbourhood and a taken-for-granted nationalism.
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