If the phrase “No Country Ever Taxed Its Way To Prosperity” seems familiar, it’s probably because a number of Liberals have used it over the past couple of years. Mind you, like most of their policies – they did borrow it from the Tea Party in the USA. I’m not sure who the Tea Party borrowed it from but I’m sure someone will enlighten me.
Of course, Paul Krugman had a different version of this in an article on Greece where he suggested that “no country ever cut its way prosperity”. Krugman is a rather interesting economist in that he seems to actually be aware when things aren’t working, whereas many economists have a particular theory, and, when real world events contradict that theory, they either explain how the real world got it wrong by not behaving as it should, or suggest that their theory wasn’t applied as vigorously as it should have been. You can probably think of plenty of cases of the latter, but the “trickle-down effect” is probably my favourite: “We cut taxes to the rich and that hasn’t reduced unemployment so obviously we didn’t cut them by enough. In fact, it’d probably be good if the government paid people earning more than a million dollars a year a bonus to give those on the bottom an incentive not to be homeless!”
Krugman takes the rather unusual view that “doing the same thing over and over again and expecting a different result is the definition of insanity”. (A quote often attributed to Einstein, but was in fact, first said by Benjamin Franklin). As Krugman writes:
“Yes, the Greek government was spending beyond its means in the late 2000s. But since then it has repeatedly slashed spending and raised taxes. Government employment has fallen more than 25 percent, and pensions (which were indeed much too generous) have been cut sharply. If you add up all the austerity measures, they have been more than enough to eliminate the original deficit and turn it into a large surplus.
“So why didn’t this happen? Because the Greek economy collapsed, largely as a result of those very austerity measures, dragging revenues down with it.”
And there’s the basic problem. The austerity path which is demanded of Greece doesn’t actually contain a plan for the turnaround of the Greek economy.
I could make the cheap point that the Europeans have demanded that Greece raise taxes and “no country ever taxed its way to prosperity”. Just ask genius Joe and the Tea Party. (I can say “genius Joe” because irony hasn’t been declared illegal… yet! Besides,the judge only found the headline and tweets were defamatory, not the story itself.)
Yes, austerity sounds like a good idea when times are tough. It appeals to our sense of morality. You’re in trouble because you’ve been bad, now you need to go without. And, up to a point, there’s some sense in working out if some spending can be cut. However, an economy is not a household. It’s not even a business. In terms of analogies, it’s just as reasonable to compare it to a human body. It may be ok to apply a tourniquet to stop the bleeding but one has to be selective and make sure that the tourniquet isn’t applied to the the neck.
With Greece, of course, simply taking up a collection from the rest of the world and paying off their debt would be the most sensible thing to do. Yes, yes, I know that offends our sense of right and wrong. Why should they get off like that? What about other countries with debt? Well, there’s two points here:
- Concern about the Greek default took $40 billion of the Australian sharemarket last Friday. That’s just Australia, and that was before any decision was made. So if everyone share transaction was charged a tenth of one percent for a week throughout the world, we’d certainly be able give Greece the money to make the next few repayments. And those with shares wouldn’t actually lose because the shares wouldn’t be dropping in value by so much, making the small surcharge irrelevant. (Yes, I know logic like that was almost as bad as Abbott’s the PPL won’t cost anything because we’re adding a one percent surcharge to Big Business and as we’re dropping company tax by the same amount it won’t cost them a thing…)
- Countries default frequently. For example, Pakistan defaulted in 1999 and Ecuador in 2008. It’s not just third world countries either. Russia partially defaulted in the 1990’s. While it has a history of defaults going back to the the nineteenth century, Argentina most recently defaulted in 1989 and again in 2001. Economically speaking, it’s not the end of the world.
So this is where we move from the economics to the morality of the situation. Economically speaking, the Greek default is merely a hiccup. The threat of the default will cause more money to be wiped off sharemarkets worldwide than Greece actually owes. No, it’s the idea that the Greeks shouldn’t away with it that’s the problem. Their pensions were too generous, not enough tax was collected, they weren’t austere enough! They need to take their medicine.
But, perhaps, it’s time that they left the Euro and had a fresh start with the capacity to devalue the drachma or dollar or whatever their new currency is. In spite of the panic in the stock markets, this shouldn’t be another GFC. Certainly, one could argue that it’s reached the point where it’s worth trying something new. As I quoted earlier, doing the same thing and expecting a different result is the definition of insanity.
Mm, why do I suddenly think of the Abbott Government at this point?
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On a side issue, it’s interesting that activities in Bill Shorten’s union – albeit after he’d left in some cases – were enough for a few front page stories with Shorten’s photo in the Murdoch press, while concerns about organised crime figures connections with politicians hasn’t been regarded with the same importance. Still as failed Opposition Leader, Malcolm Turnbull said the other day, private media organisations “an be as opinionated as they like”. No need for the objective reporting of events. Let me remind Malcolm what “opinionated” means:
characterized by conceited assertiveness and dogmatism.
I wonder if he’s aware of the Press Council’s Statement of Principles, particularly points 3 and 4:
The Statement of General Principles
THE FOLLOWING GENERAL PRINCIPLES APPLY TO MATERIAL PUBLISHED ON OR AFTER 1 AUGUST 2014.
Publications are free to publish as they wish by reporting facts and expressing opinions, provided they take reasonable steps to comply with the following Principles and the Council’s other Standards of Practice:
Accuracy and clarity
1. Ensure that factual material in news reports and elsewhere is accurate and not misleading, and is distinguishable from other material such as opinion.
2. Provide a correction or other adequate remedial action if published material is significantly inaccurate or misleading.
Fairness and balance
3. Ensure that factual material is presented with reasonable fairness and balance, and that writers’ expressions of opinion are not based on significantly inaccurate factual material or omission of key facts.
4. Ensure that where material refers adversely to a person, a fair opportunity is given for subsequent publication of a reply if that is reasonably necessary to address a possible breach of General Principle 3.
Privacy and avoidance of harm
5. Avoid intruding on a person’s reasonable expectations of privacy, unless doing so is sufficiently in the public interest.
6. Avoid causing or contributing materially to substantial offence, distress or prejudice, or a substantial risk to health or safety, unless doing so is sufficiently in the public interest.
Integrity and transparency
7. Avoid publishing material which has been gathered by deceptive or unfair means, unless doing so is sufficiently in the public interest.
8. Ensure that conflicts of interests are avoided or adequately disclosed, and that they do not influence published material.
Nah, Turnbull’s Minister for Communications! Why would he know anything about this? Besides it’s only a guideline, isn’t it? It’s a free country and we should be free to ignore it. The ABC, on the other hand, has a “higher duty” and should be impartial at all times, which means that putting on people that the government would prefer to send out of the country demonstrates that they’re not on “Team Australia”.