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Keating enters the carbon debate « Previous | |Next »
July 17, 2011

Paul Keating on Lateline last week highlighted how a carbon pricing will enable the allocation of capital to the new growth industries that will emerge from the increased price on carbon. These represent Australia's future, whereas the coal fired power stations are part of the old industrial revolution.

Keating's argument is that it is prices and markets that shift the big things and that the new industries are the key new growth industries:

We won't have them here. I mean, the idea here that we turn our back on the new country, on the new transforming Australian economy, by not letting carbon be priced and therefore capital allocated properly is nonsense .... Manufacturing's moved to the east. It's the service industries are the new growth industries. So, to turn your back on the mechanism which allocates the capital out of the old industries and into the new ones is to turn your back on your future.

That is the big picture argument that keeps being forgotten and is rarely explored or evaluated in the media.

Keating also raises the issue of the media's poor performance in the analyzing this big reform with its "he said she said" style of reporting and adds that News Ltd is campaigning for regime change in Australia. Tony Jones avoids the issue of the media's poor performance in analyzing this reform to talk about Murdoch.

When is the media in Australia going to become self-critical about its obvious flaws? Apart from its "How much will you pay, and how much will you get back?" response to the carbon tax package a lot of of the media has more to do with mass deception of the public than with truth---isn't the media's motto the fearless advocacy of the truth?

It is true that the carbon package on its own will not bring big reductions in emissions in the short term, but it can be seen as the first step on the long road to a lower-carbon economy.This is a long term reform process.

| Posted by Gary Sauer-Thompson at 1:33 PM | | Comments (13)


Jones and Keating [and Abbott off camera] happily recite a list of "achievements' of the Hawke-Keating era.

They are the reasons [amongst others] I stopped voting ALP.

My gods, how far to the right into the mire of neo-liberalism have we sunk that we regard these things as positives?

I support Keating's view that "price allocates capital in the market."

what is wrong with whole new industries popping up as a result of the floating exchange rate?

Keating mentions international tourism which we never had before. Then the international wine industry, then a new domestic financial industry. Then international education services.

I cannot what wrong with this shift to service industries in the Australian economy.

I expected to get a sceptical and critical response.

So well have we been besieged by neo-liberal ideology that we think several ALP supported, even initiated, policies of the HK [hawke/Keating] era are good. Its the accepted paradigm now, sadly, usually accompanied by the phrase 'necessary reforms".
So offline in the last half hour I started making a list of the negatives that flowed from the deforms of HK which have been sold and praised by the neo-libs, the likes of the MSM, including 'The Australian'/AFR [and that by itself should suggest that the real picture is not the one painted] and capitalist economists.
Too many to go into in detail.
So I'll confine myself to 'price allocates capital in the market" and the floating dollar/tourism memes.
Firstly ask the question, do we [as in you and me and most working Aussies] want the market to be the detirmining factor in setting value and investment and all that flows from that?
Who gains and who loses when we allow the market mechanisms [all hail the gods of the holy and sacred 'free market forces'] to gain extra economic and political power?
We don't.
There are better alternatives, those the ALP turned its back on.

Thats a bit brief but hopefully might start a train of thought that throws doubt on the concept of the ALP giving market forces greater power being a social positive.

On the floating dollar etc, try this.
Our Aussie dollar is the 4th or 5th most speculated currency on the world financial market.
Big enough for the speculators to make money on, small enough to manipulate for their, not ours, benefit.
Its value has fluctuated wildly in the last 20 years, up and down. Not just recently but erratically over the last few decades.
And that is a mixed blessing, good for some [besides the speculators[ and bad for others.
Good for exporters eg the farmers and the miners, when its down. They were significant lobbyists behind getting it floating [its usually at a lower level than its 'true' valus, whatever that means its such a nebulous concept].
But not good for importers. That's us, you and me.
Not just consumer goods such as China etc produced stuff [and the offloading of manufacturing to the East via international capitalism is partly related to the floating dollar and to our detriment] which cost more here than they do elsewhere [people get surprised when they hear that, we are told how cheap China TVs etc are but a lot of products cost more here than overseas, as buyers on the internet are well aware]. But we also have lost a large chunk of our value added manufacturing capacity and all the positives eg employment that go with that. And yes, we could have, still can, compete with 'cheap' overseas labour despite the myth that we can't.
On top of that the heavy equipment, high tech, high value added stuff that we still import cost us more cos of the value added overseas with us paying for that and until recently we had a negative balance of trade because of it. That includes the stuff that industry needs as capital investment in new plants, or replacing old, and that costs us more and contributes to our loss of manufacturing in this country. Industry didn't particularly mind cos they are mainly foreign owned anyway and can import from themselves [car industry is a classic example of that] and besides which they benefited from other HK deforms [eg deregulation, tariff reduction on vehicles, subsidies for the local car industry -yeah I know thats contrary to common belief, break up of the industrial unions, creation of 1.4 million unemployed/underemployed/marginal labour force participants - all good stuff for them and directly related to HK deforms such as the Wages Accord.
Getting long isn't it. so I'd better zap to tourism.
Who benefits from tourism?
Well the tourist industry of course, and ancillary folk.
Which tourists?
The ones coming in who bring the dollars?
Or the ones going out who take the dollars with them and, because we pay more [generally, this last year or so has been a bit of an aberration] constitutes an exactly opposite loss that PK ignores when he takes the credit for tourism.
Tourism works in 2 ways and the benefits are not as shiny as always painted.
Low paying jobs, de-unionised [except for a couple of right wing powermonger fellas] short term, casual, erratic in employment just to try to balance the rosy picture with a few negatives.

That'll do.
See there is a lot more to this than PK, and the business media mafia generally, have let on. We have had decades of very superficial [see I didn't even mention the super fiasco or several others PK and Jones prudly listed] analysis from a right wing neo-liberal perspective only.
HK [Hawke/Keating] were a disaster for Australia.

fred writes re Keating's argument that '"price allocates capital in the market"

Firstly ask the question, do we (as in you and me and most working Aussies) want the market to be the detirmining [sic] factor in setting value and investment and all that flows from that? Who gains and who loses when we allow the market mechanisms [all hail the gods of the holy and sacred 'free market forces'] to gain extra economic and political power?
We don't.There are better alternatives, those the ALP turned its back on.

I'm not sure whether Fred's comment applies just to Keating reforms of the 1980s or to the carbon tax of the present or to both. With respect to the former I supported the tariff reductions by both the Whitlam and Hawk-Keating governments to force Australian manufacturing to provide better quality as a result of increased competition from overseas car companies.

If the reference is to the carbon tax of the present, then it's not a case of the free market rules with respect to a carbon price. The nation-state is intervening in the market. It is "redesigning" it, so that the price of carbon dioxide is increased to address the negative market externality of pollution (greenhouse gas emissions) currently being unpriced and impacting negatively on the commons.

Its a step towards to a Pigovian tax, which is a tax imposed that is equal in value to the negative externality to improve market efficiency. The Gillard Government will not go that far--it is shifting to a cap trade system, which is another way to redesign the market to address the negative externality of greenhouse gas emissions.

The intervention is to overcome a major flaw in the market: one in which prices do not reflect the full costs of producing electricity from coal fired stations. The market-driven approach to correcting this negative externality is to "internalize" third party costs by requiring a polluter to begin to pay for the damage caused.

The free market economists (eg., those at the IPA) are opposed to this intervention by the state because they, unlike those in the social democratic tradition, do not recognize the existence of negative market externalities.

Re:"I'm not sure whether Fred's comment applies just to Keating reforms of the 1980s or to the carbon tax of the present or to both"

Oh definitely the HK era, Gary.
As regards carbon reduction now I'll take anything that floats the boat and a price on carbon is an eminently appropriate mechanism for this circumstance.
No argument there at all, well it could be a higher price, less compo, less exemptions and I'm guessing you would go along with that.
Go Gillard and the Greens!

Its just that when watching PK and listening to the list of 'achievements' of that era I was stuck by how we have unquestionally accepted how good they were without considering the context or the alternatives or the long term impacts as capital was favoured at the expense of labour.

I question your support for the tariff reductions of "Australian" industry, car in particular.
For starters most industry then and now was foreign owned and the overseas companies were able to play one country off against another.
We lost.

Then we had the big 3 car mobs and whilst our so-called 'local' industry has not prospered other countries have started and maintained their local manufacturing from virtually scratch despite less native resources with respect to raw materials, capital [potentially], technology and skilled work force and potential market both domestic and international.
Think Kia, Proton etc.
We have always been captive to overseas manufacturing companies' policy who extracted the most they could from us for their benefit, Mitsubishi recently being a good example.

Several other deforms mentioned by PK and Jones [with Abbott cheering in the background apparently] have warts under their glossy shine.
The Wages Accord, deregulation, privatisation etc for example.Since then wage and salary share of prductivity compared to profits has declined dramatically, poverty in Australia has increased significantly [despite Bob's promise], productivity [from the workers' POV not that of the usual criterion] has declined thanks to the casualisation of labour which has roughly tripled [and which impacts mainly on women] since then, inequality of wealth and income has got worse [the gap between rich and poor is widening], conditions of work have progressed little if at all [think LSL, sickness, holidays, penalties] eg 700,000 industrial accidents per year and we have, as mentioned in passing, about 1.4 million workers who are unemployed or underemployed or only marginally attached to the labour force and yet the conservatives have the nerve to tell us we have virtually full employment!

And HK paved the way for Howard and workNOchoices and today he and that topic reared their ugly heads again.

Nup, I'm not a fan of Hawke and Keating, we were sold a pup.

Thought the paras concerning re "redisigning" from Gary were a shrewd guess at social engineering and the ethical problems that poses. Also the allusion to moneterism was astute.
As to the para of Keating included, it is pretty fair, but what a defeatist (opportunist?) conclusion.
If you want to take people back to the eighties, try Hawke's Clever Country, an idea since decimated on the rack of neo liberalism, or the slapdash Lousiana style government version of it running the country patented and nationalised since Bjelke Pietersen and perfected in different ways by the NSW Right and Howard.
What a thing is memory!

One reason why the political, business and media elite are hostile to the Greens is because the Greens do not buy into the neo-liberal agenda of economic deregulation that has prevailed for 30 years and has led to the worst economic crisis in 75 years.

fred says

I question your support for the tariff reductions of "Australian" industry, car in particular.For starters most industry then and now was foreign owned and the overseas companies were able to play one country off against another. We lost

The ownership of manufacturing companies is different from tariff reductions for the manufacturing industry (cars, textile and clothing, steel etc).

Ownership of the car industry for instance, became largely foreign owned (ie. US, then Japanese) under the Menzies Government in the 1950s. The car companies were largely branch offices of Detroit, turning out bad production using old technology for a high price in a small market. 20 years of steadily increasing protection had produced an inefficient and uncompetitive industry

The tariff reductions in the 1980s under Hawke and Keating were designed to use market competition to get Ford and GMH to lift their game or go under. Under the Button plan they lifted their game, improved their product and started exporting it. Keating + Co gave manufacturing in Australia a new lease of life.

it is true that Keating's reforms in the 1980s to open up the Australian economy to the global one has meant the market is now far more dominant in our lives; that the market's logic since the 1980s has caused greater inequality in the Australian population; and that there has been winners and losers from these reforms.

The social democratic tradition has responded to this state of affairs by:

(1) helping workers in the declining industries to retrain
(2) pushed for increased superannuation levy from employers
(3) used the economic reforms to facilitate the growth of the service industries and diversify the economy
(4) encouraged tradies to become self- employed businesses.
(5) argued that in a global economic workers need to upgrade their skills if they wanted to find decent work.

Maybe the ALP didn't civilize global capitalism enough; but they did try to do so. The question becomes how could they have done it better given that they had to adapt to the pressures of global capitalism knocking down the old walls of protection.

I agree that Hawke's Clever Country of the 1980s has never been realized. Today it means a high skilled information economy. Gillard on getting an education for a job is still on about apprenticeships and trades and manufacturing --not a university education to skill people in a digital economy. The latter is the future.

Sounds corrosive.
What Fred decribes is part of the same overall process which has become difficult to separate from its negative aspects, to me globalisation as neoliberalism or globalisation as multiculturalism; the two seem so opposite in the current climate and to function as its theoretics demand.
Gary's gritted comment concerning the appalling lack of understanding of education and parallel lack of imagination in policy, brings the motif for education over the last ten or fifteen years to the level of the remarkable Asian student scams of a couple of years ago.

fred is right.
The anti-democratic forces in the press, finance, the super-wealthy and all the currents called "globalisation" have made democratically elected governments too weak and markets too strong.

Currently we have a democratically elected Labor Government being crushed by the might of the right wing press and Big Mining. They are intimidating. Politicians in the past have been willing to sell their soul for good media coverage.