For anyone looking for a sign that the Turnbull government, and the man charged with leading its economic agenda, Treasurer Scott Morrison, is doing some reflection in the wake of its political near-death experience, the return of Pauline Hanson, the surge of NXT, Brexit and the rise and rise of Trumpism, Morrison’s latest comments are rather alarming.
“We need to double down on trade, investment and innovation, ‘entrepreneurialism’, on the ways we collaborate to improve the financial architecture and share data to facilitate the new digital economies,” Morrison told the Financial Review’s Jacob Greber. Along the way, he dismissed further monetary and fiscal stimulus for sluggish economies (fiscal stimulus is just borrowing from future generations), and also dismissed policymakers talking about greater equality and inclusion, preferring to talk instead about “participation”.
The first thing to note is that this is some weapons-grade bullshit from the Treasurer. His government — both the Abbott and Turnbull versions — is pumping tens of billions of dollars of fiscal stimulus onto the Australian economy via deficit spending, which has blown out dramatically on its watch. Morrison this year is still spending almost 1.5 percentage points of GDP more than Labor was spending in its final year. That deficit spending — which, every budget, gets extended another year — has been coupled with an extended period of historically low interest rates from the Reserve Bank. Morrison’s statement that “monetary policy and fiscal policy don’t provide a sustainable path for medium to long-term growth” appears to contradict his own economic plan, which is to continue deficit spending into the 2020s.
As for “investment and innovation, ‘entrepreneurialism'”, this government’s primary investment and innovation plan is to blow tens of billions of taxpayer dollars on keeping less than 3000 jobs going building naval vessels locally in a naked display of good old-fashioned protectionism — while propping up local steelmakers with loans and anti-dumping measures. That’s while actually reducing infrastructure spending and trashing the NBN. And that’s on top of National Party-inspired measures that, as the Productivity Commission explained last week, actually reduce foreign investment in agriculture.
But leave aside the inconsistency and Morrison’s words are troubling from another perspective. It’s true that Australia, where liberal economics have been implemented more successfully than other counties (primarily because it was driven by Labor, which was acutely aware of retaining the support of traditional Labor voters while doing so), faces a less immediate threat from populism than the UK and the United States. But it is nonetheless gathering momentum in the success of NXT and One Nation, who now join Bob Katter as parliamentary advocates of a dramatic reversal of economic direction. The bizarre response of some on the Right (like Nick Cater) is to propose accommodation of the bigoted posturing of Hanson and co in the hope they’ll support further economic deregulation, the very thing that has helped created a sub-class of bitter, Hanson-supporting old men angry about their loss of socio-economic status.
In this context, Morrison’s suggestion that we merely “double down” on globalisation suggests a profound disengagement from the political challenge posed by the resurgence of economic populism. The big challenge facing economically liberal policymakers — whether in Labor or the Liberal Party — is merely to hang on to what we have and prevent the erosion of free markets and limited government intervention. “Doubling down” is a fantasy for a world in which the Liberals just won government by a landslide, don’t need the Nationals, and Hanson, Xenophon and Katter aren’t in parliament.
Morrison’s own personal challenge is to start convincing voters that a retreat into protectionism will lead to a loss of income in the future, through poorer growth, lower employment and less investment. Playing ideological games about refusing to say “equality” because “participation” fits the neoliberal playbook more neatly plays directly into the populists’ hands — a huge driver of populism is the perception that the wealthy, and large companies, do far better out of liberal economics than ordinary people do. And that’s a problem the government and business cheerleaders like the Business Council and the Australian Chamber of Commerce and Industry are exacerbating by demanding corporate tax cuts so that the world’s largest corporations pay even less tax — often less tax than ordinary citizens.
The achievements of the last thirty years are under attack more now than at any stage in recent years. Both major parties have been infected with economic populism; those prepared to speak out against government interventionism and protectionism are becoming fewer and fewer. Morrison, like him or not, has the most important task in this battle, and at the moment he doesn’t even appear to realise he’s in one.
The “achievements” of the last thirty years include a growing gap between the top few and most Australians in terms of wealth and income. These “achievements” include a loony attempt to pretend that economies work better when they get closer to an imaginary economic world in which there is a market for every good and service that can possible be brought to market, there is competition that forces everyone to be price takers and there is perfect knowledge of the future for both buyers and sellers.
True, this ideological rubbish has gone along with some worthwhile reforms over the last thirty years. These worthwhile moves pale in comparison with the ideologically justified policy contraptions that have been inflicted on Australians and their children, like the phoney national electricity market, with privatisations to create imaginary competitors, phoney competition policy between hospitals and doctors, and phoney creation of education markets in which universities, who should aim at cutting edge research and practice and passing these on to new generations of researchers and professionals, are told to aim at imitating businesses bringing products and services to market.
If you ask why there is all this “populism” Bernard, it is because people are becoming disillusioned with the rubbish peddled as part of neo-liberal economics, which Bernard clearly refers to as “liberal economics,” which would be another fish if it ever managed to replace neo-liberal ideology. Let us look forward to a new era in which fake competition is recognised for what it is and people stop pretending that anything is improved by getting nearer to an imaginary world in which equal players all bring their products to market, leaving only security and social order to government.
Well said Ian, economic rationalism has not done us mainstream folk much good. It’s all very well to say that we should concentrate on doing what we do ‘well’ in a global sense and forget about the rest like manufacturing, but brought to its logical conclusion economic rationalism results in a race to the bottom for wage earners, and a huge imbalance in wealth as a side effect.
Ian Hunt forgets to mention the fake gas market, which sees us paying more for gas than Japan, or the fake TAFE market, where private education providers have siphoned off billions for returns that the old TAFE system would have provided for millions.
I’m no fan of protectionism, but the trade agreements aren’t about free trade, they entrench protectionism however the forms of words changes, so that patents for medicines keep getting blown out another decade, patents for intellectual property largely stifle competition while providing protection only to multi-nationals with pockets deep enough to preserve their rights.
And while globalisation sounds like a great idea, it has brought minimal benefits to the populace, and maximum benefits for huge corporations that dodge tax obligations. In other words, people don’t benefit much from it (excepting the CEO’s with their huge and unjustified bonuses)
It’s high time we implemented rational economics, as Keating would say, what is our choice. But the idea of what is rational needs to be thought through, and just because something is good for a particular company doesn’t mean it’s good for people. If it ain’t good for people, they won’t buy it, even if it does take them 40 years to work out.
We need another PC report, looking at what markets are real and which ones aren’t, and start breaking down the oligopolies. Gas, Electricity, Financial services, the Banks, Insurance, etc. Our system is sclerotic.
I wanted only to cite a few examples. I agree entirely that there are more , possibly even more horrifying (e.g. TAFE)
Yeah, not correcting you Ian, just jumping on your bandwagon. There is sense to found in all this, but accepted tenets just aren’t working, and the evidence is in. I like Loz’s idea, and there may be much to it. The loss of sense of self and community is at the very heart of globalisation, which hasn’t brought the expected benefits but has destroyed the sense of community, of commonwealth. Free trade probably works best at the local level. The further away from ‘humanity’ that you get, the worse it ends up. That seems to be the lesson of the times.
Like what your saying DB. I would like to add that I believe FTA’s destroy local community economies. What would lift employment, slash corporate profits are sustainable small economic communities. Where ie 50% of consumables come within a 250km range. Of course this is not practical in many places in Australia. But there are many that could pull it off, and that would knit the communities together, and employ local to produce local to consume local. And kill our demand for hepatitis berries from China.
Oh look, you got your communicator and it turns out the message sucks. Funny that.
As the Marshall of McLuhan didn’t imply, the massage is the message.
There’s a lot of Cousin Jethro about Scrott – doing a can-can while he sings a torch-song.