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Do Not Obsess About Debt, Obsess About the Vitals

By Darren Quinn  

Professors Edmond, Holden, and Preston are mistaken in that Modern Monetary Theory (MMT) says we should not worry about budget deficits. The effects of budget deficits are significant. As Stephanie Kelton, the most well-known MMT economist in the world, says, we should focus on the deficits that matter. The jobs deficit, the environmental deficit, the deficit of affordable housing for homelessness, and many more. The financial deficit from the budget is the private sector surplus, the money in your pocket and mine.

Keynes used financial praxis to argue for fiscal stimulus in severe recessions, and since financial praxis is always and everywhere an MMT phenomenon, Keynes used MMT.

The professors are also mistaken to say that it is a well-accepted idea that the spending comes first. Many politicians and commentators who talk as if the government spending is like a household budget are economists or have worked in the central bank and Treasury, among other public service jobs. So the television talking heads like financial commentators and public-facing economists such as Stephen Koukoulas and Saul Eslake are not saying these things.

The professors have not been paying attention if they think MMT proponents and economists do not explain when the inflation constraint binds. Every time MMT talks about real resources and their availability, MMT proponents are talking about inflation constraints. The real resource constraint is the inflation constraint.

It is a truth universally acknowledged that central banks do not have a working theory of inflation. Therefore, they must be in want of an excellent post-Keynesian economist like Joan Robinson or an MMT economist like Australia’s Bill Mitchell. After all, those economists have a working theory of inflation that matches reality.

The professors claim that conventional economics has a comprehensive analysis of what causes inflation; however, they would have to elaborate on this to prove that claim. Perhaps the professors are just thinking of the debunked monetary and neoclassical theories of inflation. Daniel Tarullo, a former Federal Reserve Bank board member in the United States, explains [The Financial Times, paywalled] that central banks do not have a working theory of inflation.

MMT has always acknowledged that inflation can occur below full employment, as currently demonstrated through the coronavirus pandemic and the Russia-Ukraine conflict, with Australian unemployment at 3.5% and still 1.3 million people looking for work. As the professors should know, bottlenecks can occur in various sectors from spending before full employment is reached. This congestion can occur in the form of a resource shortage in a greater supply chain of production. It is currently being demonstrated by the lack of oil and natural gas supply in the Australian production chain.

If the Ukraine conflict had not affected oil supplies, then automotive fuel would not have been ever-increasing in price. The price increase was alleviated by the temporary excise cut in fuel. Who would have thought that reducing prices reduces inflation? Inflation is a measure of prices, so of course, lowering prices reduces inflation.

What about price rises for natural gas? These rises have occurred because we have sold our industries off to foreign owners who demand world prices for our gas instead of us owning our energy industry and setting our own prices. Putting aside environmental concerns with these fossil fuels, we are not in control of our energy resources. What we need is an Australian strategic reserve of our energy, owned by Australians and priced in Australian dollars. We briefly saw this achieved when the government activated the Gas Supply Guarantee Mechanism.

As stated earlier, we should focus on the deficits that matter, so yes, if you want to implement policies from the Green New Deal or a larger social safety net with increased social security payments, they should be argued for on their own terms. This conflicts with the professors agreeing that spending comes first (meaning that there is no purely financial constraint) but then saying that implementing any given progressive policy may cause politically unacceptable inflation. MMT explains that keeping an eye on resources and/or expanding capacity in domestic production can minimise inflation risk.

It is worth noting that neither Treasurer Chalmers nor Finance Minister Gallagher has formal training in economics or finance, but they have public service experience in these fields. These Labor ministers have concerns about increased expenditure on Health, NDIS, Aged Care, and Defence. It is an exaggeration to say these are a political concern. As the professors have previously explained, they are reasonable goals that the public can argue for on their own terms.

The professors have not disputed nor disproved Modern Monetary Theory but, in effect, agreed with it. It is clear that Modern Monetary Theory’s time is now. The time to flick the switch is now!

Darren is a leader in educating people in modern macroeconomics. He played a founding role in educating Australians via social media channels and has engaged some prominent Australians on commentary about Modern Monetary Theory. Darren is a member of Modern Money Australia, Australian Real Progressives and has been involved with the Modern Money Network. You can see more of his work at https://www.darren-quinn.net and https://www.realausprogressives.com

You can find him on Twitter @AusMMT @dquinn03

 

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Raising interest rates as a strategy to deal with inflation is problematic at best

By John Haly  

In July, Treasurer Jim Chalmers announced an independent review of the Reserve Bank of Australia, and in September, the Bank Review panel released Issues Papers and calls for Public Submissions. The Review Panel – comprising Renée Fry‑McKibbin, Carolyn Wilkins and Gordon de Brouwer. As I said to the panel, I have written it as though writing to Treasurer Jim Chalmers. The closing date was the 31st of October, and because this will make for a long article, I will simply say, what follows, is my submission.

* * * * *

Dear Minister Chalmers,

Thank you for the opportunity to contribute to this review of the Reserve Bank of Australia.

Themes

This submission covers Monetary policy frameworks such as adherence to the NAIRU and neoclassical “gold standard” mentality over that of monetary sovereign fiat economies. It covers RBA and Government communications about the Finance Franchise myths on Banking, in general. It is critical of the Board composition based on bias in inappropriate neoclassical education and the selection of business representatives instead of economists trained in the issues of fiat economies. Finally, it reviews the Interaction of monetary and fiscal policy with respect to RBA’s performance in applying monetary policy where fiscal policy is more appropriate. As a former employee of the Reserve Bank, I have some knowledge of the inner workings of the Reserve Bank.

I understand the review of the Reserve Bank of Australia is underway to improve monetary policy and its success at realising its goals, governance by the Board, culture, leadership, and recruitment practices. Such a broad range of objectives has yet to be approached since the smaller incidental 1981 Campbell inquiry and before that, presumably at its inception in 1960.

Curtin

Over the last century, Australia’s Central Bank and economy have undergone many changes. In the previous World War, the Curtin Government asserted Commonwealth power over banking, which led to Ben Chifley’s later decision to legislate to nationalise the banks, effectively asserting Commonwealth control over money and credit as per the Commonwealth Bank Act of 1945. However, such nationalisation was later defeated in 1949, as the book “Curtin’s Gift” by John Edwards says on Pg 141.

Though the postwar Menzies Government amended Chifley’s central banking legislation to reintroduce a board, the Commonwealth’s last-resort power to direct the bank was retained in the legislation and remains today. The Commonwealth Treasurer has conferred on the bank an independent authority to make monetary policy, but it is a conditional independence to pursue a policy of low inflation, sustainable output and employment growth.

Curtin had also argued for two other changes,

  1. Commit to a full employment policy to improve living standards and raise national development.
  2. a floating exchange rate to free Australia from the fixed exchange rate with the British pound

Ben Chifley implemented the Full employment policy following Curtin’s full employment paper being submitted to Cabinet in March 1945. Until the rise of Neoliberalism in the 1970s, unemployment would remain dominantly at 2% (notably without substantial inflation).

Unemployment rate and NAIRU

This leads to the Reserve Bank’s first failure, which is its commitment to the NAIRU. Interestingly Albanese’s claim of the Job Summit was to seek a “Full Employment Summit”. But unfortunately, the neo-liberals of both the political Party and the Bank adhere to the conservative myth of the NAIRU. Instead of a NABIER – as a better alternative perspective, the Bank incorrectly suggests we are already “fully employed”. [See Prof Mitchell’s analysis: Never trust a NAIRU estimate]. A goal that has been achieved if you conclude ABS measures domestic unemployment, which, as you can see from the graphs and my articles covering what should have resulted from the Job Summit [my article and graphs: Stagnating Summit’s Shortfalls]. This is why “what gets measured” is essential. I will not go into detail about the shortcomings of the ABS statistics as they are probably already well known, and if not, the article aforementioned herein, should inform you.

Raising interest rates as a strategy to deal with inflation is problematic at best. The link between spending and interest rates is unreliable and unpredictable. Interest rates affect both supply and demand. Economic modelling of “supply and demand” is only relevant to highly atomised markets with many participants, like the primary sector. Secondary and tertiary sectors of the economy follow different models. Changes in interest rates can have a reverse effect on inflation. Higher interest rates only affect people with variable interest rate debts. They don’t affect fixed interest rate debt and people with no immediate financial obligation. Higher interest rates increase the income of creditors and redistribute income to the wealthier, rentier class, exacerbating inequality. Fourth, higher interest rates reduce the incentive to undertake debt and may cause “distress borrowing” to service existing debt or keep businesses afloat. The resulting Ponzi balance sheets do a disservice to the economy, and all of the above, risk yet another recession. The government should be applying fiscal, not monetary, policy to these issues rather than letting the Reserve Bank’s adherence to a disproven NAIRU theory collapse the economy into greater inequality.

FIAT economy

Paul Keating’s floating of the Australian currency in 1983 meant Australia entered a new economic space. We became a monetarily sovereign, fiat economy no longer tied to another currency or a gold standard (which even America had abandoned with the collapse of the Brenton Wood decisions in 1971). The implications of which even the Bank of England acknowledges even if neither our government’s political rhetoric nor Reserve Bank acknowledge. [Bank of England video: Money in the modern economy: an introduction – Quarterly Bulletin].

Instead of shifting into this new space and engaging with this new paradigm of fiat economies, the neoclassical economic conversation stayed with the decades-old “gold standard” economics model. Still, neoclassical economics guides the decisions of the Reserve Bank’s mission to “pursue a policy of low inflation, sustainable output and employment growth.” [“Curtin’s Gift” by John Edwards pg 142]

Problematically, even Board members of the Reserve Bank need to understand the basics of a modern monetary system. [Prof William Mitchell: The RBA has no credibility and the governor and board should resign]. The Reserve Bank’s role as the currency issuer for the government has been misunderstood by business board appointees blinded by the tunnel vision of their experience as currency users in the business community.

Most of the Board are business people (five in number), three are neoclassical economists (Dr Lowe, Michele Bullock, and Ian Harper), and Dr Steven Kennedy is economics adjacent given his Doctorate was in the Economic Determinants of Health, which is not precisely about the Banking systems. None of the Board has any formal training in the economics of fiat economies or Modern Monetary economies, although that isn’t to say their experience on the Board has yet to give them insight. Some suggest the RBA is best served with Board members selected based on expertise in modern monetary fiat economics rather than as political appointees because of their relationships with former Prime ministers.

To this day, neoclassical economics still guides the decisions of the Reserve Bank’s mission to pursue a policy of “low inflation, sustainable output and employment growth” but has universally failed to achieve what Curtin (and even Menzies) did for nearly three decades.

Banking is widely misunderstood as a heavily regulated franchise industry acting as an intermediary between scarce private capital and borrowers. Modern finance is relatively scarce, and depositors are the source of money supplied to borrowers. [Cornell Law School paper: “The Finance Franchise”].

Misperceptions

This is among many common public and media misrepresentations of the banking system. In these areas, it should be incumbent upon the government to educate the public through public broadcasting so that the expectations upon the Reserve Bank are properly evaluated. These myths include:

  • Banks can only lend out money they have from depositors.
  • Credit is an extension of a money multiplier based on deposit reserves.
  • Quantitative Easing is printing free finance into the money supply.
  • Federal Treasury deficits are a liability to taxpayers.

At a Keystroke

Money in Australia’s economy has two sources. First, that which the Government Treasury supplies through its fiscal agent, the Reserve Bank. In short, that money is spent into existence by the Federal Government. This money is called “Vertical” money, which exists as an Exchange Settlement Account between the Reserve Bank and the Private banks. As the public is not a joint holder of that account, it is not available for lending to the public. Its only purpose is for interbank transactions.

Secondly, a larger pool of credit via lending is generated “ex nihilo” in the economy through private banking, referred to as “horizontal” money. [Also, the Bank of England video: Money creation in the modern economy – Quarterly Bulletin]. When banks lend, they create deposit IOUs within that bank. Bank’s customer deposits are their liability, and the loan is their asset created by keystrokes. Deposits are fundamentally an IOU from the bank. Similarly, when a bank makes a loan, they generate an IOU deposit for the lender at that bank. The complementary asset for the bank is the loan. Banks create money for borrowers and profit (the interest) for themselves.

Unlike the banking franchise myth, deposits or reserves do not create or limit loans. The perpetuation of this myth in public debate and political pronouncements does a disservice to the public good.

Deposits/Reserves relevancy

Credit creation is simply about a bank finding a credit-worthy customer with whom it can create a digital deposit as an account with that bank with the expectation of future interest payments. The loan to the borrower becomes a bank asset, with an accompanying liability created by a computer entry, which generates the deposit for the borrower. None of the aforementioned Bank reserves is touched, and neither are deposits. The exchange settlement Account reserves are used only when the borrower spends that deposit in another bank. The reserves held at the Central Bank of the lending bank are transferred to the account of the person being paid in the other bank. This is how all bank transfers work; by using the central bank’s reserve accounts.

Instead of adequately describing this in High School and economics education, the government needs to explain how the monetary system works adequately. The government and a properly educated Board of the Reserve Bank need to address these realities.

Regarding my familiarity with this, I worked at the Reserve Bank between September 2001 and October 2002, where I worked on both the operations and technical security teams at the Reserve Bank. In that capacity, I aided reversing the RITS system’s previous outsourcing of AlphaServers operating OpenVMS, previously managed by AustraClear/SFE. Back then, the money churned between banks via their reserve accounts oscillated between $9 to $16 billion daily. The monitoring of that transfer between private bank accounts is the RITS system at the Reserve bank running on an Alpha-VMS mainframe that monitors all account exchanges between banks, which is the system I helped bring back in-house.

Quantitative Easing

In a financial crisis – such as the Pandemic – excessive needs for Exchange Settlement Reserves become evident. The overused strategy of Central banks globally during the Pandemic has been Quantitative Easing. Despite the talk of “printing money”, that is a red herring. Printing money depends on the demand for cash in the private sector – generally around 3% – and never reaches a point where it even approaches a small portion of the digital money supply. Hard currency demand during the Pandemic reached 17%. Digital money is the normality between the Reserve Bank and the private banking systems.

Quantitative Easing affects the money supply by increasing the banks’ ESA reserves at the Reserve Bank. This is done by the Reserve Bank repurchasing Treasury bonds from the private non-bank sector (i.e. pension funds and asset managers) and the private banks. The purchases from the private banking sector rise in digital money extend the ESA reserves. Many private sales of Government Bonds mean more money is circulating in the private sector that may be used to pay off bank loans, reducing the likelihood of borrowings. Technically, increased reserves, while facilitating extensions of interbank transactions, have no direct impact on any credit creation expansion.
Precisely what area of the economy Quantitative Easing serves is also of concern, as “employment growth” wasn’t one of them. The inequality of protecting financialised assets amongst the wealthy ruling class financial markets rather than the working class who lost jobs in the millions. As Adam Tooze, in his recent publication, “Shutdown”, observes

For the central bank, that meant holding interest rates down. Once again, it came down to financial markets. As far as anyone could figure out, QE worked by driving government bond prices up and yields down. Lower interest rates helped to encourage borrowing for investment and consumption. Lower yields also prompted asset managers to reallocate funds from Treasury markets, where prices were driven up by central bank buying, to riskier assets, like equity and corporate bonds. This boosted corporate borrowing and the stock market. It increased financial net worth and boosted demand.

The supportive cooperation between central banks and treasuries in the common struggle against the coronavirus was thus, the central bankers adamantly insisted, no more than an incidental side effect of their frantic and clumsy efforts to manage the economy by way of financial markets. Despite the relentless accumulation of government debt on their balance sheets, the central bankers insisted that this had nothing to do with financing public spending. Their priorities were to manage interest rates and ensure financial stability, which in practice meant underwriting the high-risk investment strategies of hedge funds and other similar investment vehicles. Rather remarkably, they insisted that tending to financial markets was a more legitimate social mission than openly acknowledging the highly functional, indeed essential role they played in backstopping the government budget at a time of crisis.” [pg 149]

When Financial markets become more important to the Reserve Bank than the well-being of the vast majority of Australians, then the bank’s philosophy is served and managed by too many businessmen and women with a neoliberal ideology to serve the interests of the few above that of the whole economy. As Curtin espoused, the Reserve bank’s original social mission is to “pursue a policy of low inflation, sustainable output and employment growth”. This mission has evidently fallen, by the way, because of the people chosen to run the Board of the Reserve Bank.

Taxpayer’s money?

Finally, It can be demonstrated simply by viewing the balance sheets (irrespective of the accuracy of dollar amounts) of the entities known as

  • the Treasury,
  • Reserve Bank,
  • the collective private banks and
  • the collective non-bank private sector

that the federal deficit of the Treasury is the surplus of the Australian economy’s private (and foreign) sector. Deficits are just the government’s way of provisioning the private sector. If a government wishes to pull the spending of an economy back and throttle the growth of an economy, it pursues a surplus for the Treasury, depriving the private sector of funds. John Howard, for example, achieved that when he throttled back the economy to provide the Treasury with a surplus. Consequently, the private sector, desperate for money, borrowed heavily from the Banks. Private debt expanded considerably under John Howard. [See here: The Howard impact or here: Debt, home repossessions portent for Australia poll]. But of course, Mr Chalmers, you should already know this.

 

Simplified Australian monetary system

 

Taxpayers are not on the hook for a government’s treasury deficit as that deficit just boosted taxpayers’ finances. The government’s debt is your problem, not ours, since the Treasury and Reserve Bank issue the dollar (which taxpayers don’t because that is a crime called “counterfeiting” with which you would charge us). The currency-issuing government can pay their debts off any time they choose by issuing the dollars to cover them. Admittedly the wedging by political opponents and the Murdoch media would require of this government political courage, not financial inability.

Knowledge is power

The problem is, if submissions for a public review of the functions of the Reserve Bank are to be effective, it is incumbent on the reviewers to have a realistic appreciation of how the banking system works and the Reserve Bank’s role in our financial system. Holding to the public franchise myth, the NAIRU myth, and the Taxpayer funds myth, as many in the media (and possibly members of the Bank Board), will limit the usefulness of any submissions. Providing faulty recommendations to politicians who frequently use the analogy of a household budget to describe how fiat economies work is a recipe for disaster and subsequent legislative policies that will hamper the workings of the Reserve Bank to aid post-pandemic financial recovery.

So we need governors and heads of departments within the RBA who know and understand inflationary causes, recognise the differences between supply vs demand causation and know that raising interest rates is an over-zealous intervention that cures symptoms by killing the patient.

Thank you for the opportunity to submit this letter for your review.

Yours sincerely,

John Haly.
(Auswakeup Media)

This article was originally published on AUSTRALIA AWAKEN – IGNITE YOUR TORCHES.

[Correction: An earlier version of this article was not “absolutely pedantic accurate” as inflation from 1945 to 1970 was so small compared to what followed, as to be negligible, but as it wasn’t nonexistent, the phrase at the end of the section on Curtin has had the word “substantial” added.]

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Partying in 2022

By John Haly  

Climate change takes centre stage in Australia’s election” was proclaimed in 2019, but then the party of Climate scepticism took the stage. The polls failed to predict the election outcome on the 18th of May 2019, and “climate” wasn’t on the agenda. Even more of a climate denialist than Tony Abbott, denialist Scott Morrison held all the Aces and dealt Bill Shorten a knockout blow few saw coming.

Here we are in 2022. The French are casting an eye across the Indian Ocean, where once submarines they might have manufactured were to travel to their final destination in Australia. France 24 proclaims, “Australia’s federal election: Climate change becomes top concern for voters“. They noted, “The environmental crisis is high on voters’ minds, and smaller parties and independents are gaining momentum by riding a wave of disillusionment over the conservative coalition’s lack of climate action.” But, after suggesting minor parties succeeding and hung parliaments are the future of the Australian parliament, one must wonder, do these minor parties really have the policies that could shake the foundations of our nation?

Single issue agendas

It is easy to find articles that review how the major parties will address Climate change. But perhaps less so conspicuous is the position of all the parties. But pick an issue that you rate as necessary, such as Queer Rights, and you can find a particular interest group ready to “dish the dirt” on your favourite issue. So, is there someone in your circle of associates prepared to do it on various topics? If you are looking for that someone, you have come to the right article and the correct author.

Multiple Parties and Issues

 

The political Compass reading of Australia political positioning in 2022

 

Think again, though, if you thought one should give any credibility to the ABC’s vote compass. I have previously addressed the errors of the ABC tunnel vision in my “Voting values” article. I refer to the international perspective from “The Political Compass“, which does it for every national election in western democracies. They represent their analysis of the classic Right-left / authoritarian-progressive abscissa and ordinate graph. Their results for Australia in 2022 came out recently. They placed the main parties in that two-dimensional framework for any party that has previously received a seat at the political table.

These evaluators did not look at every party that sought a guernsey at the political table (irrespective of their likely success).

The AEC informs us that, fundamentally 37 registered parties are seeking to place candidates into parliament. When the Morrison government introduced legislation that lifted the membership threshold for registering a federal political party from 500 to 1,500, some 40 parties found themselves in trouble. Some parties ceased to exist, such as the Australian Workers Party, which I evaluated as having the best range of progressive policies in 2019. Other parties (Science, Pirate, Secular, and Climate Emergency) deregistered their original name and formed their own coalition as the new Fusion Party. Others like the TNL (The New Liberals) went on a successful membership drive. So just like the last election, I began the long task of assessing the policies of 37 parties, some of whom did not exist when I last devoted myself to this task. Some old parties developed new guidelines there were no signs of three years ago, and others dropped policies I had assumed were entrenched from 2019.

In this election, I evaluated 24 specific ideological premises, starting with Climate Change mitigation and ending alphabetically with Worker’s Rights. The list of issues I evaluated from each party was:

  1. Climate mitigation
  2. Drug Reform
  3. Economy
  4. Education
  5. Employment
  6. Energy
  7. Environment
  8. Gender equality
  9. Government accountability
  10. Healthcare
  11. Housing and cost of living
  12. Immigration & refugees
  13. Indigenous
  14. Industrial relations
  15. Infrastructure
  16. LGBTQ rights
  17. Media Management
  18. Monetary principles
  19. Poverty and inequality
  20. Public transport
  21. Security/ Foreign & Domestic
  22. Social justice
  23. Superannuation & pensions
  24. Worker’s Rights

 

The ABC’s Overton Window on politics in 2022

 

Some of these issues came from a list of policies generated by ABC’s vote compass analysis of what participants were interested in from back in 2019. I then added a few other policy agendas or, in some cases, split issues. For example, I split climate issues into direct mitigation separate from environmental issues.

I documented how I defined each of these with a series of questions about each issue and assessed the contents of each party’s policies. You can find that at: http://auswakeup.info/issues/election-issue-2022.pdf.

Another table was created with columns for 37 parties with 24 rows for each issue.  From this, I began writing notes or abbreviating the lists of policy positions each party gave to that issue. That took a good while, as parties don’t necessarily neatly describe their policies in the categories I generated. In some cases, they had policies whose classes I didn’t evaluate. The PDF for that is at http://auswakeup.info/issues/party-comments.pdf, but you will have to zoom in to get all the detail. Don’t try examining this on your tiny smartphone screen. It is important not to mislead you. I have not listed all the party’s policy positions, and I may have missed some. Some party’s policies are very comprehensive, and when I realised I had enough to make a reasonable assessment, I moved to the next issue. It took me over a week to do what I have done, so I did not wish to get bogged down in extraneous detail.

As I completed the assessment to the point where I had a broad summary for each party, I scored the results and moved to the next party’s website.

Pecuniary Interests Register

First off, I should address my allegiances. As a Journalist, I am a current member of a registered political party that, while still in existence, has no stake in the federal election. I am a founding member of the Arts Party. They voluntarily deregistered from the national sphere well before Morrison changed the rules. They are still registered at the State level, where the executive decided to focus their efforts. I also spent two and a half years on the executive of the Real Democracy party developing and building it. It was a social democratic party that based its economic policy on Modern Monetary Theory. In 2019 we gave up on the hope of ever getting it registered.

My philosophical framework

I would consider myself a socialist, although the family that brought me up, would be better described as “Small-L” liberals. When at 18 I went off to vote for the first time, my Father, after telling me how they voted for the local Liberal candidate, asked me for whom I voted? My disrespectful reply was, “Well, at least I cancelled out one of those votes!” My Father was aghast but fortunately loved me enough not to disown me.

This is the lens through which I evaluated and scored each party. You can take my notes and re-evaluate how you might score them per your own principles.

Scoring

I rated each party’s position on the 24 issues from minus one to three.

  • -1 : my assessment of the party’s position is that I hold it is deleterious to our society, economy and country. For example, climate denial/recalcitrance always got a minus one, as did evident anti-vaxxer ideologies and support for the crime of offshore refugee detention positions.)
  • 0 : means no policy was mentioned on this issue or was either relatively insignificant or aspects were so mixed between deleterious and reasonable as to cancel one another out. For example, Katter’s lousy policy on creating a new class of Blue Card that applies only to Indigenous communities. Still, he also has an excellent approach to inalienable title deeds issued to First Australians.)
  • 1 : represents the bare minimum or basically a reasonable approach but nothing to write home about. For example, Kim for Canberra says, “religion should not be used to discriminate against others in any context” which, while good, is the bare minimum for Social Justice issues)
  • 2 : it means good but needs improvement or doesn’t cover the entire scope of the issue. The Reason party has good pro-renewable energy policies and divestment from fossil fuels. Still, there are no specific strategies around subsidisation, phasing from one to another, and energy security, which is a commonly missing aspect.
  • 3 : a great set of policies for this area, perhaps complete or so little missing as to suggest the party would likely progressively fill any gaps in the future. For example, the comprehensive policy for Indigenous people comes from the Indigenous Aboriginal Party of Australia.)

Integrity

Evaluating a policy position has to assess the integrity of the claim. If the party lacks integrity or has a record of lying to gain a political advantage, that has to discredit their claim to a policy. So, for example, when the Liberal party claims to have a policy to “back small businesses with tax incentives”, I have noted that is not so if they are removing the Low and middle-income earner tax offsets. If you want a good laugh at Josh Frydenberg trying to spin it, watch Richard Denniss disassemble his claims on YouTube.

An alternate example might be the new housing policy for young first time home buyers to use 40% of their superannuation. I noted in my matrix that Morrison had already “allowed superannuation depletion by 3 million people” when he permitted people to access these funds during Covid in lockdowns rather than funding them through Job Keeper. Now Morrison suggests taking even more out of superannuation to support the housing crisis. Which even the “Investment Magazine” thinks is a bad idea. They expressed their concerns in their article “Deposit dipping into super not the answer to housing crisis” Sufficient to say, despite what Morrison claimed was a good policy, on the issue of “housing and cost of living“, I awarded the Liberals a negative one rating.

Weighting the results

In addition to direct scoring, I have weighted my scoring also. I have doubled my initial scores for four policy areas I believe are crucial for this election. Those four areas are:

  1. Climate mitigation.
  2. Economic monetary principles (MMT).
  3. Corruption and accountability management.
  4. The Rights of the Working Class.

This should be the climate election; 2019 was not. Catering to the neo-liberal economic principles based on the Monetarism theories of economic models developed by Adam Smith, Friedrich Hayek and Milton Friedman and promoted by Alan Greenspan, Robert Murphy, Paul Krugman and Jonathan Hartley is deplorable. It fails to recognise that we are an economically sovereign nation that issues our currency that everyone else uses. Instead, we should be following the post-Keynesian theories based on John Maynard Keynes and regenerated as the Modern Monetary models promoted by Prof Bill Mitchell, Stephanie Kelton, Pavlina Tcherneva and Warren Mosler. Books to read on this include “Doughnut Economics” as espoused by Kate Raworth, Stephanie Kelton’s “Deficit Myth“, “Reclaiming the State” by Prof Bill Mitchell and “Job Guarantee” as written by Pavlina Tcherneva. Corruption in politics costs society and business, and a Federal ICAC with teeth and divestment from corporate political donations are research subjects my wife specialises in and about which she has written extensively. As for Worker’s rights, well, I am, after all, a socialist, so I think that is important. However, while no Australian party declares the workers should seize the means of production as they did in Spain in 1936. Some of us see the value of a less violent uprising that might achieve that goal.

My results

So now that all my caveats, preferences, prejudices, etc., are loudly proclaimed, here are my resulting scores. Presented both with and without my weighting, which is published in the PDF located at http://auswakeup.info/issues/party-policy-scores.pdf.

You can print it off, and using the data in http://auswakeup.info/issues/party-comments.pdf, you can restore it in accordance with your own values. (Note: you will need to print the latter on A2 sized paper for it to be readable)

Preferences

Some results were unexpected. Parties I scored highly in 2019 have dropped better policies for poorer ones, by which I was disappointed. But then parties that were fair before have lifted their game in 2022. Due to this exercise, I have changed my mind about which parties and the sequencing I will vote for them. “What gets measured, gets managed“, as my small-liberal voting Father often said. He was right in some things, and I honour his memory by respecting that advice.

 

Use the power of preferential voting

 

The last warning or advice from this article is, for heaven’s sake, Australians, stop being so lazy as to abdicate your choices to party preferences, and choose your own preferences – number all the boxes. Understand how preferences work and use them to your advantage. Even if your best choice doesn’t receive a place at the political table, they might get enough funding from the AEC to keep going. Your preference vote will move to the next party in your choice of preferences until it settles on a winning party. That is the power of preferences, so don’t buy into this propaganda that you can’t vote for minor parties because this is a crucial election (they all are). It is not necessary to vote first for a likely winning party as that constitutes bandwagon voting and diminishes the power of your Australian preferential vote.  Your vote will still get to that party! With all the potential corrupt corporate donations, the duopoly of Labor and Liberal doesn’t need the AEC money, but a smaller party with better policies does.

Summary

My three highest-scoring parties, irrespective of my weighting (but also including it), are TNL (The New Liberals), Socialist Alliance and the Reason Party. Conversely, the three lowest scorings, all of which have accumulated a negative score over 24 areas of evaluation, are Pauline Hanson’s One Nation, the Nationals and the Liberal Party.

Saturday the 21st of May 2022 is upon us this week. Choose wisely!

This article was originally published on AUSTRALIA AWAKEN – IGNITE YOUR TORCHES.

 

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Modern Monetary Theory and The Great Fraud of Neoliberalism

The time has come to expose the great fraud that has been perpetrated on the West in the last forty years. Once we have even a surface-level understanding of Modern Monetary Theory (MMT), the great lie that is Neoliberalism will come crashing down.

Now, this has been outlined and discussed in detail by far greater minds than my own; this is not original to me. But I thought it might be useful to offer a brief description of MMT, how it works and then use these basics to expose the great Neoliberal fraud.

MMT, Part One: Currency and Its Relationships

In every economy that has its own currency (Australia, the US, the UK etc), every entity in that economy has one of two relationships to that currency. One is either a user or an issuer. Obviously, the federal government is the monopoly issuer of currency (hence counterfeit money laws). So the government issues the currency, and everyone else (including state and local governments and the citizenry) uses the currency.

Currencies such as the Australian Dollar, the US Dollar, the Pound etc are called Sovereign Currencies or Fiat Currencies. This means that when the government goes to do something, it simply goes to the central bank (the Reserve Bank in Australia or The Federal Reserve in the US) and says ‘we need this amount of money to be created’ and the bank, through several keystrokes, brings that currency into existence. Similarly, the relevant bank accounts of the recipients are also augmented using keystrokes. This may seem counterintuitive, but think about it this way. Consider the recent spending of $3.5b on tanks. Are we to believe that the government went to a physical bank vault filled with stacks of $100 notes? In light of the amount of money spent by the government on the regular, this would be impractical. Government spending is essentially EFTPOS on a grand scale.

MMT, Part Two: Tax Does Not Fund the Government

Since the government simply creates (issues) the currency it uses, government spending is not ‘paid for’ in that sense. It does not need tax to fund its spending since it is spending currency it issued itself. Tax revenue, I say again, does not fund the government. This lays to rest the zombie lie that a government has to ‘live within its means’ or ‘has a budget like a household’. Households do not issue their own currency, so this statement is a lie. Government ‘living within its means’ is naught but a lie designed to justify cutting funding for things neoliberals do not like, such as universal healthcare, education, pensions and generally anything that benefits anyone making less than $250k per year.

I should be clear: taxation does not fund federal government spending. It is true that tax does fund state and local government since these entities are still currency users (recall it is the federal government that issues the currency).

MMT, Part Three: The Purpose of Taxation

A natural follow-up might be to ask

If  tax does not fund [federal] government spending, why have tax at all?

I think the best answer to this was provided in a New Economic Perspectives article

[Another] reason to have taxes is to reduce aggregate demand. If we look at the United States today, the federal government spending is somewhat over 20% of GDP, while tax revenue is somewhat less—say 17%. The net injection coming from the federal government is thus about 3% of GDP. If we eliminated taxes (and held all else constant) the net injection might rise toward 20% of GDP. That is a huge increase of aggregate demand, and could cause inflation

What this seems to mean is that the act of ‘taxing’ a unit of currency serves to eliminate it from the economy. Taxation seems to have the purpose of being a sort of ‘inflation break’, removing a certain amount of currency from the economy to prevent too much currency from flying around which could lead to inflation.

The Other Great Zombie Lie: How Will You Pay For It?

You have doubtless heard some version of this whenever a policy is proposed that would help the peasants. Any talk of, for instance, raising Newstart is met with loud screams of ‘HOWYIGONPAYFRIIIIIIIIIIT’ (how are you going to pay for it) or ‘we cannot afford it’. It is unclear whether those asking making these asinine statements are not aware of the fiat currency the Australian Federal Government uses, or if they are being deliberately deceptive. I leave that decision up to you all individually.

Not only is ‘how will you pay for it’ a ridiculous statement, but its application is also highly selective. Have you ever heard this question, or some variant of it, asked around, say, the military budget (pick your country, but the Americans are the most egregious)? How about corporate subsidies? How about politicians’ own outrageous perks and entitlements?

It is almost like they know that they have a fiat currency and intentionally lie to the people about ‘debt and deficit’ whenever they do not like something, typically for ideological (or corrupt) reasons. Whether it is funding Medicare (consider Mr Morrison’s recent removal of more than 900 items), investment in renewables or anything else the Liberal National Coalition is (in my opinion) paid to oppose, they become penny-pinchers when their ideology gets in the way. Yet hypocritically when it comes to war, corporate looting of the treasury and their own perks, they are reckless. Enough.

Conclusion: The Great Fraud

Since the advent of Reagan and Thatcher, politics in the west has taken a very selfish, individualistic turn. Pulling yourself up by your bootstraps is a popular Neoliberal mantra. Government has to live within its means is another. MMT shows that the very idea that a government has ‘limited means’ has narrow basis in reality. It is a monopoly currency issuer. It is, in a very real sense, not possible for a government with a fiat currency to ‘run out of money’.

I have said this before, but it is worth repeating: When it comes to helping the people, it is not money these sociopaths lack, it is the will to do it.

Governments with fiat currencies have all the money they could ever need. They could do so many wonderful things to improve society in so many ways. Means is not the issue. Conviction is. MMT, with its focus on fiat currencies, helps to expose the great hypocrisy at the core of the Neoliberal disaster of the last four decades. In an economy with a fiat currency, the use of fear-mongering about ‘debt and deficit’ to suppress policies that could help broad swaths of the population is dishonest beyond measure.

Epilogue: Still Learning

I am very much still learning about MMT, and doubtless, I have gotten some things wrong here. I encourage you to check out this podcast for detailed discussion of the theory and its applications. I hope this piece has provided a basic discussion of MMT and given some insight into the rot that is Neoliberalism.

 

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Modern Money: A New Hope

By Darren Quinn  

Is Modern Monetary Theory (MMT) radical? Yes. It is especially radical if we go to the roots of the word ‘radical’ which itself means ‘from the root’.

Is MMT innovative? Only in the sense that it is a synthesis of different strands of heterodox thought, though not all heterodox economists are on board.

Is it a ‘trap for the left’? No, not at all.

Is it difficult to work out what Modern Money Theory is? Only, it seems, if one has been trained in the ‘New Keynesian’ tradition that forms the so-called New Economic Consensus (NEC) in mainstream economics.

While these New Keynesians are vulnerable to the charge that their ideas are ‘not new and not Keynesian’, they are willing to recycle the line that Modern Monetary Theory is ‘not modern, not monetary and not a theory’. Unlike the New Keynesians, however, the MMTers are in on the joke.

Some may complain about the word ‘modern’, as the term can refer both to Keynes’s joke that money has been a creature of the state for ‘the past 4000 years … at least’, and to the period since 1971 when the Bretton Woods standard began to break down.

The word ‘monetary’ is used in MMT to describe the monetary system, not monetary policy – although it does have implications for the conduct of policy.

The word ‘theory’ is used by MMT in the scientific sense. A theory is a fact-based framework for describing a phenomenon.

As a fact-based framework, MMT can be harnessed by political actors of all stripes. For progressives, MMT can embolden governments to deliver an ambitious policy agenda or Green New Deal over time. The original New Deal or the Reconstruction in Australian parlance took place over more than a decade.

MMT can also appeal to conservatives. The MMT insight that government spending must precede taxation can give rise to the ‘vulgar’ – and incorrect – interpretation that taxation is altogether unnecessary in modern monetary economies. It could be argued that the New Economic Consensus and its derivatives are forms of applied right-wing MMT.

Taxation serves many important functions according to MMT. The most important is to drive demand for government money. Taxes can also be used to discourage undesirable activities or to reprofile the distributions of income or wealth.

Crucially, taxation removes spending power from groups, but it does not place any claim on real resources. Only spending claims real resources. Increasing taxation can make it easier for governments to spend on public policy by freeing up the potential for other groups to claim real resources, but taxes do not directly pay for government spending in the way this is conventionally argued.

Any discussions of how increasing or raising tax revenue is required to facilitate spending are quite misleading and misdirect the public on how to think about public money.

 

 

What has been called ‘movement MMT’ is inseparable from ‘academic MMT’ and any so-called schism is a political choice of the critic. MMT advocates do not engage in ‘motte and bailey’ strategies, so much as adherents to NEC models cannot think outside of those models. It is like fitting a square peg in a round hole. If you succeed, you will either be left with gaps or a square peg so warped that it no longer appears to be square. If you succeed in getting MMT into NEC models and there are gaps, you have missed many things MMT says, and if you succeed you have so warped MMT, it no longer resembles MMT.

As Max Planck put it:

“a new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.”

MMT is one of those new scientific truths that does not fit into older models.

A major stumbling block for NEC economists is in thinking that MMT has a simplistic view of inflation, specifically that governments can increase spending as much as they like with no need for an offsetting increase in tax revenue if there is little to no risk of politically unacceptable inflation. However, as MMTers have consistently argued, inflation is more a resource distribution issue than a monetary issue. As Modern Money economist Pavlina Tcherneva puts it, when inflation arises, you find the source of inflation and ‘slay that beast.’

 

 

Raising interest rates or taxes is a rather blunt distributive tool. It is there Australia erred in trying to deal with stagflation which the result of a battle of cost mark-ups between unions and businesses in response to a supply-side shock – an increase in the price of oil.

The other issue in the eighties, shortly after stagflation was Volcker’s experiment with targeting the money supply, which was copied by many central banks around the world that led to the high interest rates of that period. It only began to settle when central banks began using inflation rate targeting on a narrow band, two to three percent in Australia.

MMT’s emphasis on real resources enables it to focus on ‘the deficits that matter’. In the current economy, the preference of progressive MMT advocates is to put idle resources – which include unemployed and underemployed people – to productive and fulfilling work. The ABS estimates that labour underutilisation is as high as 13 per cent of the labour force, and this excludes discouraged workers who have abandoned looking for work altogether. The National Australia Bank measure of capacity utilisation indicates that the Australian economy has operated with between 15 and 25 per cent spare capacity since 2008.

 

 

It is nonsense to say an ambitious policy agenda like the Green New Deal (GND) will reach capacity almost immediately and cause politically unacceptable inflation. Just like the reconstruction after World War II, it will take time to implement recommended policies and should be done within resource constraints. Whilst it is true that we do have finite resources, the human species is innovative. In the transition to green production, some resources (remembering resources include people and their skills) – say, coal workers – can and will be repurposed.

We can also create new productive capacity within available resources, and these include the skills learned by the people on the job in many GND programs building their personal productive capacity.

I started this piece by agreeing that MMT is radical, and it is. It examines modern monetary systems at their root. MMT fits the pieces of economic operations into a coherent and consistent body of knowledge. Once you learn MMT, and think in MMT terms, you know more than most media talking heads on the subject of the economy. How you use that knowledge is up to you.

Darren is a leader in educating people in modern macroeconomics. He played a founding role in educating Australians via social media channels and has engaged some prominent Australians on commentary about Modern Monetary Theory. Darren is a member of Modern Money Australia, Australian Real Progressives and has been involved with the Modern Money Network. You can see more of his work at https://www.darren-quinn.net and https://www.realausprogressives.com

You can find him on Twitter @AusMMT @dquinn03

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Covid exposes the reality of fake debt.

When treasurer Josh Frydenberg abandoned the Tony Abbott mantra that “you can’t fix the economy unless you fix the budget,” it was clear that something within the mindset of the treasurer and the government, had changed. They realised that the reverse was true.

No longer do they believe that debt is a disaster, or that deficits are bad. Not now, under the current Covid climate. Funny how things you do for the sake of expediency and political advantage, finally catch up with you.

Long gone is the soft target of Labor’s predilection for high spending there to exploit. Not even the Murdoch press can play with that one anymore. Covid has blown that one right out of the window.

No longer will the mantra, “how are you going to pay for it,” work either. Funny how both the conservative press and the ABC are now running spending stories without referring to the levels of sustainable debt.

Economic gurus everywhere are now reviewing and revising their reporting strategies to accommodate the changed circumstances that reflect more closely the MMT reality of sovereign debt…that it isn’t debt at all!

The government balances its books by issuing bonds to cover spending that exceeds taxation revenues, but knows all too well, that those bond sales are no more than a smokescreen to hide the fact that the Reserve Bank provides the money for all government spending, regardless of the outcome of any bond sale. It simply creates the money out of thin air.

There is no difference between a $1 trillion debt and a $2 trillion debt. It’s what you spend it on, that matters.

Now, some in the press, have woken up to that reality too. So, what is the government doing now? They are embracing the reality that full employment is the key to a successful economy. Who would have thought?

Up until now, the thought has been that a certain level of unemployment was necessary to combat inflation. Not anymore. Employment is now the key driver.

Get people back to work, manufacturing, producing, distributing, delivering, servicing,  and voilà! No longer does one need to worry about balancing a budget. Over time, that will happen automatically. Who would have thought?

For a government who won an election in 2013 on the flimsy fantasy of a “debt and deficit disaster,” this 180-degree turnaround seems to have been achieved without a scintilla of a backlash. What a stroke of good fortune that has been.

‘’How good is that’,” we could imagine the PM, Scott Morrison saying to his cabinet as they engineered the dismantling of the job keeper program.

There is a certain irony here, that journalists are struggling to address because in doing so, they reveal their own shortcomings.

Notwithstanding the insensitivity the government has shown towards the needs of various sectors within the national framework, they are now happily prepared to dole out the dollars to those very sectors they despise, knowing full well that their hypocrisy in a Covid-conscious electorate, will go unnoticed.

How good is that? And it is all because the conservative side in the political arena has adopted the “don’t worry about the debt” mentality. Why have they done this?

Because they now realise that it is not real debt!

The problem for Labor in this otherwise snippet of good news, is that those who would most likely change their vote and punish the government for their dishonesty, are currently so self-obsessed with their larger bank accounts and wondering what to spend it on, that they are blind to this fundamental policy reversal, or couldn’t care about it anyway.

Comment bon est ca?

 

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Ministerial phlebotomy: Evasion of the bleeding obvious

Ministerial phlebotomy: Evasion of the bleeding obvious. Oh no, now we are being told how to think about it – doing the hokey-pokey!

Political leaders, chief medical officers and journalists who think that they can defend the position of giving the same vaccine safely to everyone, regardless of the evidence emerging that people with certain blood clotting disorders (and possible heart conditions, other blood and circulatory disorders and treatment regime interactions) or unknown genetic predispositions by comparing the risk of death in road traffic accidents or contracting COVID-19, need to go back to school and learn about basic human bioethics, if not the process of scientific inquiry itself.

And as for sermonising desperate marketplace or ‘legal eagle’ politicians like Morrison and Hunt, they should just keep their ministerial phlebotomy and mouths shut on the subject, since if you have no empathy for others’ true-life experiences you are not going to learn them in a mandatory training module, just as you won’t learn ethics and how to manage ethical dilemmas from not listening to other people’s including women’s concerns. You just don’t have the goods, the prerequisite character and traits to learn it in the first place, other than pretending you do, yes, Mr Morrison I am speaking particularly to you.

The difference between an RTA statistical probability or a public health COVID-19 risk analysis of death or serious harm/injury and reality, is:

(1) they are statistical probability calculations not individual real life events, assessment of medical risk or causation analysis (not even an RCA we might be familiar with in our public health system). They are politically manufactured probability statistics and guesswork to advise politicians when the facts are not known;

(2) You can choose to drive defensively, carefully or minimise your exposure to the risk and stay at home, use public transport or practice good social distancing, use of PPE and mediate your risk;

(3) if you are in a known or emerging risk group, you can be provided with an alternative risk management strategy like another vaccine, rather than just be told to grin and bear it; and

(4) if by consequence you have no choice on an alternative vaccine which doesn’t expose you to that risk, you have no choice but to continue running the gauntlet, restricting your life choices and freedoms vicariously for everyone else’s benefit or die at a calculated probability much higher than the general population either through a ‘one size fits all’ vaccination program (with 4-20 day blood clots) or heightened exposure to COVID-19 vulnerability (no government acquired vaccinated immunity).

The real problems Morrison and our compliant and captive Chief Medical Officer are facing are:

(a) burying their heads in the sand to start with and maintaining their stance, telling us we are still acquiring the facts when they should know full well that certain facts are already known – There is clearly a problem with AstraZeneca and blood clotting for certain people no matter how small this group may be and initial large sample phase 3 trials comparing clotting and death outcomes to a control group of the general population (unvaccinated) do not eliminate the possibility of cause and effect such as VIPIT (vaccine induced prothrombotic immune thrombocytopenia). To date this is all we have and any decent researcher would know public announcements declaring public safety for all is flawed scientific reasoning, advice and conclusion till we test the relevant variables at play. The fact that the time interval between AZ administration and reports of clotting are consistent is highly significant, not pointing to false conclusions of random probability or unrelated events, which Morrison with his new found medical knowledge and chief buddy have been ignoring. The fact that these events have not arisen or been reported in other common vaccines like Pfizer, Moderna or Johnson and Johnson are also significant. The fact that a host of nations have raised their concerns only with AstraZeneca in the light of this emerging data – these are all facts which a well briefed and responsible Prime Minister would know;

(b) sliding down their explanation from ‘denial’ to ‘defensive rationalisation’ and now ‘we are exploring’ or the excuse ‘the situation is fluid and changing’ over the time it has taken for them to acknowledge there is a problem, is blind arrogance and hypothesising after the horse has bolted, yet still not providing us with a rational or viable provisional risk management strategy, is just morbidly fascinating and unacceptable. Still, they hustle and bustle as one nervously glances to another and the other smiles smugly prattling on about ‘facts’ – actually just one random and irrelevant fact of non-supply; and

(c) constantly telling us or distracting us with an unrelated issue of breakages in supply chain, focusing on blaming the EU for blocking exports when they have nothing to do with this issue. When in fact the real problem is government ordering and procurement – they put all their eggs in one basket and banked their money and investments (with a whiff of corruption, quiescence, incompetence or neglect at least) on AstraZeneca and CSL domestic manufacture. They should have ordered and secured an alternative supply of vaccine a long time ago, even if relatively tiny but hugely practical, Moderna or Johnson and Johnson for instance, or even now dispense a small portion of Pfizer for medical determination, but are too pig-headed to admit or consider it, while still they procrastinate. But choice, biodiversity and intelligence aren’t among Morrison’s marketing strengths, especially when it comes to the horror of empowering others or advancing Australia’s interests.

Let’s face it they both fucked up! Anyone with an ounce of intelligence knows they fucked up, so admit it. But don’t short-change us on ethics and coercion by telling everyone they have a duty to take the AstraZeneca vaccine because it is the only one we’ve got other than those to whom there is close to zero risk, which is most of the population who have little to worry about.

Do not scapegoat the few as ‘anti-vaxers’ or tell them they are jeopardising the national vaccination program or quash their voice because they happen to be a nurse, a woman or just someone who has capacity to show critical thinking, ethical reasoning and empathy with the worried few, and stand up with courage in the crowd – especially when you choose only to face a camera or the Opposition at Question Time, where you can control or dictate the conversation, rather than face that friendly crowd.

Print: Ministerial phlebotomy – John Bull c.1808, British Museum

Do not sweep the tiny ‘unknown’ group under a bus for the sake of the majority for that is not responsible democracy, that is in point of fact a microvariant of medical iatrogenesis and public health neglect – it is the application of poor and flawed scientific and ethical reasoning which the Liberals are so renowned for on almost every issue from climate change, employment, coal, health and disability to MMT. You do not sacrifice the safety of a minority for the majority (or the inverse for that matter which the Liberals do all the time) when there are clear practical mediating social strategies and solutions available. That is just rampant ignorance, populism, propaganda and evasion of the bleeding obvious, not to mention a corrupted interpretation of social ethics, morality and informed government.

But what the fuck would Morrison (or Hunt) know when it comes to medicine, nursing, women, ethics or anything in the universe let alone intelligence or life on earth?… Perhaps Morrison should talk it over with Jen!

Oh no, even journalists and editors are telling us how to think about it, what’s next tourist directors, lawyers and government regulators, bankers and TV celebrities on sunrise telling us how to do the hokey-pokey? Of course, everyone has an opinion on something, it’s all John Bull!

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A chink of light in the darkness

In a recent Letter to the Editor of the NT News, I mentioned my weekly sessions outside NT Parliament House.

[As an aside, it never ceases to surprise me that most of my letters get published in a Murdoch paper, and it is interesting to see how the resulting complaints about my views on the need for climate change action are slowly reducing, as the reality becomes more and more widely accepted.]

On another contentious issue, Alan Kohler’s Insight in today’s paper (21/10/20) drew attention to the tacit acceptance by international authorities of Modern Monetary Theory (MMT) while, in the same article, reporting ‘“I don’t subscribe to MMT,” Treasurer Josh Frydenberg said last week.”

Anyway – back to the chink of light – our youth!

On session 38 today, I had a visit from a very articulate 20 year old who had noted mention of my sessions and came to see me – expecting a 20 – 30 something year old!

He still stayed, and we had a very lively conversation!

We had a long chat, during which he asked me how I saw us making progress. When I mentioned the need to persuade governments to act, he countered with a plan for people power.

He drew attention to the idea that if everyone with bank accounts with the Big Four, or with superannuation and/or other investments, including shares, in dirty fossil fuel industries, and who wanted change, were to move out into clean investments, the pressure against the fossil fuel entities would be sufficient to completely change the viability of fossil fuels.

That is crudely worded, but I am sure you can see that if shareholders sensed that the winds of change were blowing, they would dis-invest in fossil fuels and – BINGO!

I am sure we overlook the potency of people power – it is the power of many individuals, acting in unison to achieve a common good.

Although not recommended as a perfect model, and I am not a promoter of violence, but the French Revolution worked, because enough people had had enough of being downtrodden and impoverished.

I am not normally a fan of the dirt file mentality but there comes a time when exasperation at people’s ignorance of the deception and downright evil behaviour of those in power has to be highlighted.

Many of us are convinced by science that global warming is really happening, that we must take action on it, but those currently in power appear to have no concern about anything which adversely affects their god – the economy.

Many of us are aware that the longer we wait to take effective action, the less likely it is that rising global temperatures and the resulting and increasingly adverse climate events, will be consistent with a truly acceptable lifestyle for future inhabitants of the planet.

We are, I am sure, all aware that climate disasters to date have done massive damage which is far from having been remedied. And please note – THAT HAS DAMAGED THE ECONOMY!

Those made homeless or having their livelihoods destroyed by last southern summers’ fires are yet to get back on their feet, despite promises from on high!

(I stress the ‘southern summers’ because in the tropics we have the ‘Wet’ – which is not always wet enough to replenish the dams and the groundwater – and the ‘Dry’ – which has been getting both hotter and more humid.)

Does your bank have shares in fossil fuels? What sort of interest rates does it pay? I suspect that for most of them it is next to nothing unless you have really large amounts invested. How about a local credit union? How does it compare?

Many of us have shares in Telstra – suckers! – but if you or your superannuation or pension fund have shares in other investments, do they include fossil fuels?

If we personally cannot be bothered to do our own due diligence, then we are being hypocritical if we complain about others failing to act appropriately.

Perhaps the finance advisers in some of the charity organisations could assist in this one, by doing some research and providing the resulting information to the public.

But – to return to the dirt file – we have all listened to members of the Coalition throw accusation after accusation at the ALP. And we are all resigned to the fact that politics is a dirty game and many politicians are out and out sleazy.

But have you checked this out?

It is a long read, and might have been better constructed, but it reminds us of much that we have – and should not have – forgotten.

Before I close – a reminder: sun and wind and hydro are far from being the only sources of renewable energy. So much of the Australian population live on or near the shore line, yet how much use do we make of tidal power – particularly in the NW of Australia where the tidal range is really significant?

Stop talking about piping water and gas about the continent and start thinking seriously about piping renewable energy!

Start by looking at some of this guy’s ideas and let your imaginations roam freely! And then act to save the only planet we already have!

Please remember – ‘time is of the essence’ is a good legal saying which is very pertinent as we near the end of another year without action!

 

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‘Supply Side’ Budget Stimulus – Government could have done more for ‘Battlers’ and Women

The 2020 Federal Budget projects a deficit of some $213 billion – a far cry from the previously projected surplus. An already sluggish economy – hit now by Covid-induced economic collapse – left no option but massive stimulus – lest the nation sink into a Depression.

In a way it is encouraging that the government has thrown away the book on neo-liberal orthodoxy to some extent. A contractionary budget would have been disastrous. A notable amount of the stimulus (about $6 billion) comprises wage subsidies aimed at the young – with the aim of supporting some 450,000 jobs. The plight of the older unemployed – thrown onto the Jobseeker scrapheap – is another question. In the largest single measure over $26 billion in tax breaks will be delivered to business to write off the value of new investment by June 2022. There will also be a $4.9 billion “loss carry-back scheme” enabling businesses “to claim refunds or offsets on taxes in previous years.” Importantly, the third round of tax cuts – aimed at high income earners – has not been brought forward – in a win for Labor and the Greens. But the business sweeteners are not consistently tied to job creation and job retention – so for all that money there are no guarantees for workers. According to ACTU President, Michelle O’Neil, the government also projects zero wage growth even if there is economic growth in the coming years.

In Aged Care, $1.6 billion will provide 23,000 home care packages. But this is below demand, and there are no big plans to reform residential care. Perhaps this will come with the final findings of the Aged Care Royal Commission and the next election: but the need is urgent and ought not be put off. In fact it is dubious the Conservatives will find the money for comprehensive Aged Care reform: Home Care and Residential packages to meet demand; with quotas for Aged Care Workers and registered nurses, a winding back of user pays, exercise and GP visits for all residents, and an emphasis on quality of life. It will be up to Labor and the Greens to put up a fight, though disappointingly Labor has known about these problems for over a decade, and is only making the right noises now with the focus provided by the Royal Commission. We are talking many billions of dollars annually to make a difference over the long term.

‘The Age’ reports that “about 11.5 million workers will get up to $2745 more in their pay packets this financial year.” Though the raising of the threshold of 32.5 per cent to $120,000 from $90,000 is arguably badly targeted.  And support for pensioners and the unemployed is insufficient, with a total of $500 in payments to Aged Pensioners meant to bring relief and fuel spending. More for those on  low incomes and welfare would have a greater stimulatory effect, and would contribute to fairness. On the other hand the low income tax offset will rise from $445 to $700 in a modest but welcome measure.

Importantly, of the new spending measures only $6.7 billion is going to the states for new infrastructure. Including other infrastructure measures the figure is closer to $10 billion extra over ten years. The government’s main emphasis is in providing support and incentives to ‘kickstart’ business as opposed to measures directly supporting consumption at the low and middle ends; although increased business confidence would support jobs. The Budget measures emphasise the ‘supply side’ but neglects the ‘demand side’ when it comes to low income earners, the unemployed and pensioners. The opportunity to permanently raise Jobseeker appears to have been neglected, and many jobs will be lost with the premature withdrawal of JobKeeper.

Of most concern, stimulus is not a ‘black hole’. Getting people spending and back to work is part of a ‘virtuous cycle’ which can restore growth and rejuvenate the government’s balance sheet. With record low interest rates the time has never been better for investment, and the Government could have done more here.

The economy’s pre-existing weaknesses have not helped; but a Labor Government could not have avoided a Covid recession. As Labor has argued it will be putting the case for ‘better bang for our buck’ in the stimulus. This should mean more emphasis on those on low incomes and welfare, and providing support where it will grow spending and investment in jobs most vigorously.  Too many businesses will be pocketing these ‘sweeteners’ without necessarily creating jobs.

In response to the Budget, Anthony Albanese has committed to further child care subsidies and half a billion to refurbish public housing. We need wage subsidies for child care and early education workers as well however. And also subsidies for consumers of child care and early childhood education. Both as a matter of fairness (for child care and early education workers – and women workers more generally); to get more women working, and to attract talented educators into the field. Also with housing out of reach for so many people a big investment (into the billions) in public housing now could both stimulate the economy and promote affordability.

Modern Monetary Theory supposes government can issue currency to ensure a ‘full employment guarantee.’ Such stimulus is part of the picture, but can be limited by inflation and currency devaluation. Though inflation seems unlikely in the current environment. Redistribution can’t be done properly and fairly without tax; but MMT has something to contribute to this debate. The government’s projections on unemployment are nowhere near ambitious enough.

If Labor was in government this kind of stimulus would be derided as an ‘irresponsible’ ‘cash splash’. Consensus that stimulus is part of the way forward in times of economic weakness is at least a good thing in itself. It sees Conservative arguments against the Rudd stimulus of the Global Financial Crisis (GFC) blown metaphorically out of the water. Labor governments of the future will be able to point to the current effective consensus on SOME form of stimulus to help justify their own efforts when governing in times of downturn or stagnation. Which will inevitably come as part of the capitalist cycle.   But this government’s emphasis on the ‘supply side’ of the equation is nowhere near discriminatory enough.

This article was originally published on ALP Socialist Left Forum.

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Prevention is better than cure

I was reminded of this old adage, when I heard it reported this morning, on ABC radio, that the new approach to mental health should be to prepare people to cope better with the adverse effects of the present stressful situation, as compared with treating those who have already developed mental health issues.

Then, later in the day, I read Alan Kohler’s Insight article on page 33 NT News, (12/08/20), Covid-19, needs inquiry, fiscal fix – which should be compulsory reading for anyone with any involvement in economics. (I am sure this article can be easily obtained from other News Corp publications, even though it is probably pay-walled for non-subscribers.)

If I were to be unkind, I would suggest that Scott Morrison is deliberately waging war on universities because he thinks he knows all the answers and does not want to admit that there might be – let alone really are – many people who are far more knowledgeable than he is, on the areas which are vitally important in establishing a new order which might deliver us from the current crisis situation.

To a large extent, since everyone has grown up knowing that doctors know more about the human body than do most laypeople, expert medical advice has been accepted in relation to the COVID-19 pandemic.

Because it is caused by a novel coronavirus, approaches to controlling the pandemic have changed as knowledge has grown. To wear or not to wear a mask has become a contentious issue, partly because of the reasons put forward for doing so.

An infected person wearing a mask is less likely to infect others if wearing a mask. And people can be infected without showing symptoms.

Wearing a mask will reduce the probability of becoming infected – but not guarantee total success.

PPE is worn by most health care workers, yet even some of those become infected, sometimes because removing PPE carelessly can enable the virus from infected patients to be transmitted.

It really is a silent enemy.

Look at what has happened in New Zealand after 100 days of no infections!

It is hard to change the habits of a lifetime. In many cultures, greeting a family member or friend automatically involved making contact. Yet this is the quickest way to pass on an infection.

Human beings, by their very nature, mostly enjoy company, yet one person in a group may be infectious and pass on the infection to all within the group. The larger the group, the greater the number of infections.

Then we come to the issue of needing to be concerned about others, not just ourselves.

If you unwittingly get infected, before any symptoms show – if they ever do – you can pass that infection on to everyone you spend time with.

Without a mask, every time an infected person breathes out, they send a spray of microscopic particles which can be inhaled by anyone in their vicinity – or land on their skin, clothing or nearby surfaces and find their way into the bloodstream of those nearby.

Insisting on having fun, in company, risks spreading a virus which not only might kill someone, particularly but not exclusively an older person, or it might infect someone who goes through a nightmarish illness from which full recovery is not guaranteed.

And that is just the medical side.

In order to reduce the extent of infection spread, the Commonwealth government closed down many business and social activities and tried to persuade mortgagors and landlords to allow mortgagees and tenants some latitude in relation to payments due.

Not all states have necessarily followed up on necessary directions and legislation and not all mortgagors or landlords have seen fit to comply.

Given the thousands who are currently out of work or struggling with a reduced income,  I do not know who gains anything if mortgages are foreclosed or tenants evicted.

Hold it!

Remember how reducing taxes and allowing millionaires to pay minimum tax has led to a massive wealth gap?

Millions – probably billions or even trillions are stashed away in tax havens, ready to be poured into buying property in a market where house prices will be dropping, at least initially.

The buyers can still make use of negative gearing and can afford to sit on their property empire as long as it takes.

They will recoup little in the short term, but that is no problem as they have more than enough to ride out the crisis.

Government MUST intervene to ensure this currently hidden wealth is put to better use than further impoverishing the already poor!

Alan Kohler’s article is important in at least two regards.

One is the point about re-thinking the whole economic approach and the other is the issue of Modern Monetary Theory.

We are hearing too many horror stories about debt and disaster without realising that the solution is in our hands.

When I studied economics, two early units were microeconomics and macroeconomics – simplistically the household and business aspects vs the issues affecting countries and governments.

I am fortunate in being retired, with an adequate pension from a secure source which is topped up by a portion of the Age Pension.

When I received my two $175 relief payments, I was not in desperate circumstances and I understood that the money was intended to go back into the national economy to stop the wheels from grinding to a stop.

So I passed it all straight on to the Asylum Seeker Refugee Centre.

Kon Karapanagiotidis, CEO of the ASRC, and his valiant group in Melbourne are struggling to help many who have no other means of support, having been continuously ignored and ill-treated by government…Every cent I sent will have already been well spent!

I tell this story, not to make myself out as a do-gooder, but because the government desperately needs people to spend, while the stagnant wage issue, preceding people’s losing their jobs, means that people can barely afford to buy necessities, let alone spend up big to boost the economy.

I do not doubt that some, not necessarily all, of the really wealthy, are also philanthropists, but there is a mass of wealth – in property and tax havens – which will not get back into circulation, unless the government persuades those holding it, that now is the time to invest in the country’s future.

We have accepted medical advice.

We need to accept advice from climate scientists, because, while a reduction in travel (including by aircraft) and industrial has serendipitously reduced greenhouse gas emissions, it is not enough to allow us to postpone action to further reduce levels.

Gas is a fossil fuel. It might pollute slightly less than coal but fools rush in!

Alan Kohler has provided a very valid suggestion as to how to get some effective economic advice – which is incredibly important at this stage of the crisis.

To be talking now about reducing support payments, without first analysing the impact on rent and mortgage payments, and making more certain arrangements with the banking industry, would be negligent to a possibly criminal extent.

What good are empty houses which people cannot afford to live in?

Get real!

Some of you, reading this, might agree with the underlying theme but assure me that it will never happen.

I am maybe a foolish optimist, but I cannot see any government brazenly pursuing policies that will end in the destruction of society.

If enough people with appropriate expert knowledge can show them that investment for the future, using money held by the already wealthy, plus using MMT approaches to issuing bonds, in order to ensure people can receive enough to survive AND enable the economy to recover, then the government might even survive the next election – perhaps the message might get through!

I end as always – this is my 2020 New Year Resolution:

“I will do everything in my power to enable Australia to be restored to responsible government.”

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Covid 19 has hit the economy hard; But where is the Recovery going to come from?

COVID-19 has hit the Australian economy hard. By some estimates the Australian economy will shrink by approximately 7 per cent in 2020. Maybe more. That’s a virtually unprecedented recession.

Shutting down workplaces: hospitality and tourism, higher education and some manufacturing: comes at an enormous cost.

We can’t put a price on peoples’ lives and peoples’ health. But many people will need to sacrifice to ‘spread the burden’ of funding recovery.

Some have suggested a ‘HECS-style loan’ for those unemployed as a consequence of this crisis.

Because this discriminates, it is unfair. Richard Denniss – speaking on ABC radio – is correct about this. Though I think he is wrong about HECS more broadly. Income contingent loans to pay for government support of individuals during the crisis would mean a veritable ‘labour market lottery’ as to who was left with debt. Denniss agrees with this much. But also ‘income contingent loans’ have a longer history of losing their progressivity as governments reduce thresholds to help pay for other endeavours – such as ubiquitous corporate welfare.

Also, will the government temporarily increase corporate tax during the recovery period to service debts incurred supporting the private sector during the crisis?

The government’s stimulus has provided a lifeline for many.

But one rational assumption is that the economy won’t simply ‘snap back’ at the end of a six month period; and as a consequence the government cannot afford to ‘step back’ and just let the private sector ‘fill the breach.’ The real economy doesn’t work like this.

Richard Denniss of The Australia Institute thinks the Economy will not simply ‘snap back’ after the COVID-19 Crisis. A long term government role is required (Image from thenewdaily.com.au)

In hospitality and tourism, the structural effects on the economy could last quite some time. We don’t know whether there will be a ‘second wave’ or whether we will ‘break the back’ of the spread in this country. But global travel will take years to ‘get back to normal’, and the US and the UK are still deep in crisis. The ACT and Northern Territory also understandably want to reap the benefits of wiping out the virus, and don’t want it reintroduced from interstate.

On the other hand, the crisis provides an opportunity to broaden and deepen the public sector to create the ‘economic infrastructure’ around which recovery will occur. Make strategic infrastructure investments, as well as structural improvements in public services; unemployment services; in Health, Aged care and disability services; in welfare, transport, communications, arts. The NDIS needs to be more accessible, with ‘consumers’ interests protected more vigorously. The CES (or ‘Centrelink’ these days) should be refunded as a ‘one stop shop’ for job-seekers – but without the usual harassment and humiliation. Homelessness could be addressed ‘head on’ with a big investment in public housing. Fix the NBN with ‘fibre-to-the-home.’ A big public investment in renewables. And coming out of the crisis: Have an active industry policy which strategically supports and invests in high wage manufacturing.

This is also an ideal opportunity to progressively reform welfare across the board; and lift job-seekers out of poverty.

On ABC radio high speed rail was inferred as perhaps a ‘dubious investment.’ But it could drive growth in the regions, with a flow on of jobs and affordable housing. As well as containment of urban sprawl and the transport crises that ensue from that.

The simple truth is that the public sector might have to pick up the slack on the economy for some time to come if there is to be any chance of a recovery. And if we navigate this in the right way it can present an opportunity.

Modern Monetary Theory (MMT) holds that as the issuer of the currency the government can create money at will to invest and ensure a ‘full employment guarantee.’ Though this is limited by real economic constraints concerning the scale and nature of goods and services actually produced in the economy at the end of the day. In some instances there might also be inflation; and you cannot ‘create money’ to fund an infinite influx of imports.

But full employment is in everyone’s interests: so long as there is an ‘efficiency dividend’ which provides benefits for all; and so long as consultation with unions ensures there is no endless ‘wage-price spiral.’ Higher employment has a ‘multiplier effect’ on the broader economy that also makes debts easier to service. At the same time, the wage share of the economy has been falling for decades; and long term there is a need for a structural correction which could also create extra demand in the economy.

As part of this picture there should be reform of the labour market improving compensation in low-paid jobs – either with regulation, or through the social wage (or both). Modern Monetary Theory has been somewhat skeptical of the role of taxation, claiming it ‘takes money out of the economy.’ But this need not be the case if all that money is spent; if indeed there is a stimulus. Taxation also allows for a much more finely targeted redistribution of wealth: which should be desirable for progressives.

As MMT theorists also recognise, state governments in Australia cannot issue currency.

The current public health crisis is going to cause much more pain before it is overcome. But the right kind of policies on investment, industry policy, welfare and stimulus can minimise that pain, and even help ensure in the end we come out of the crisis stronger.

This article was originally published on the ALP Socialist Left Forum.

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On Socialism Today – Planning a Way Forward

Socialistic sentiment can be traced back to the slave revolt of Spartacus and Peasant uprisings in Europe; for instance that led by Thomas Muntzer in Germany. But ‘modern socialism’ began with those labelled as ‘Utopians’ by Karl Marx. Figures like Robert Owen – who personally wanted to convince the bourgeoisie (and nobility) of an egalitarian, communal society based around the means of production (specifically communes of up to 3,000 people). And all those others who depended on a ‘socialist vision’ to convince people of the desirability of a socialist order; as opposed to Marxists who based their approach on ‘the fact of class struggle’.

Generally, socialists preferred equality; an end to exploitation; extension of democracy to the economy. Marxists wanted to socialise the means of production to end both exploitation and the destructiveness and wastefulness of capitalism and its boom-bust cycle.

But Marx had another criticism of capitalism; and that was the way in which the division of labour and demanding nature of much work traumatised workers. This was his theory of Alienation. Today in Australia for instance we are a world away from the working conditions of the 19th Century. But in call centres, offices and factories the division of labour can still exclude creative control and work fulfilment. Indeed, work conditions can still be traumatising.

In Germany where the class struggle was advanced the Social Democrats arose as a combination of the Marxists (Eisenachers) and the Lassalleans. Lassalleans (led originally by Ferdinand Lasssalle) believed in industry-wide co-operatives with state aid. Eventually Marxism became dominant. But by 1914 in Germany right-wing ‘socialists’ had come to predominate in unions and the parliament, and those people eschewed internationalism and supported the First World War.

Before World War One both the European and British socialists supported the class struggle and the fight for universal suffrage to advance workers’ rights. But Britain was relatively liberal; and this resulted in less emphasis on revolution and more emphasis on incrementalism.

Fabianism arose in the 1880s; and came to represent a movement to influence opinion in liberal and progressive circles. Especially in the Labour Party in Britain. Beatrice and Sidney Webb (prominent British Fabians) expressed sympathy with the achievements of Soviet Communism – but that view did not last. Some Fabians would focus on practical public policy; others on the more radical aim of incrementally replacing capitalism. Again: Generally Fabians were gradualist rather than supporting a ‘sudden rupture’.

Modern Australian Fabianism shared the British Fabian principles and was formed organisationally in 1947. The height of Fabian influence was in the Whitlam Labor Government.

After World War One the broad Left was generally divided into Communist, Social Democratic and Labourist Camps. Although pockets of Social Democracy remained highly radical – as in Austria in the 1917 to 1934 period. (Austro-Marxism). These sought a ‘middle path’ between Bolshevism and ‘mainstream’ international social democracy. And there were anarchists and anarcho-syndicalists – who were significant in the Spanish Republican forces and the fight against the Nazi-backed fascist insurgency of Franco in the Spanish Civil War.

From the 1940s through to the 1980s Swedish Social Democracy enjoyed remarkable success (replicated to various degrees in other Nordic countries) with full employment, active industry policy, strong unions, and a strong welfare state. For the overwhelming majority of this period Social Democrats held government. Basically workers received social security in return for a ‘corporatist settlement’ including wage restraint. The full employment achieved under the ‘Rehn-Meidner model’ also made a stronger welfare state possible. Though Walter Korpi conceived of the  Swedish situation differently:  as a ‘democratic class struggle’, involving mobilisation of ‘Power Resources’ and compromise depending on the balance of class power. But in the 70s and 80s Sweden also had to respond to the Oil Shocks and devalue the Krona. The ‘Meidner Wage Earner Funds’ plan sought to compensate workers for wage restraint by giving them collective capital share. But this implied a radical redistribution of wealth over time. Also – because it appealed only to workers and not to citizensit could be argued that the funds could have included a wider base (which is democratically preferable anyway). Capitalists went on the offensive: socialists on the defensive. And there has been a slow retreat since.

Up until and including the 1970s and 1980s there remained strong pockets of radicalism in many Labourist and Social Democratic Parties. But the Oil Shocks of the 70s and the drive to restore profits divided the Left and led to Socialist retreat. Also the Soviet Collapse during 1989-1991 had an enormously demoralising effect on the Western Left; despite the fact the Western Left had long distanced itself from Stalinism. It’s not unreasonable to see the Gorbachev reform movement as a window of opportunity; and a missed opportunity.

From Hawke and Keating onwards Australian Labor has broadly internalised neo-liberal ideology. Small government, privatisation, free trade, limits on the liberties of organised labour, trade agreements which give capital an effective ‘veto’ on regulation and public sector expansion. Marxism used to have a strong base in the Socialist Left. But increasingly the factions have lost ideological cohesion; and have been subsumed in the mainstream political discourse.

Indeed, the experience of Hawke and Keating inspired Tony Blair and Antony Giddens with their ‘Third Way’ or ‘Radical Social Democratic Centre’. In the 19th and early 20th Centuries ‘Centrism’ had been a largely Catholic phenomenon including limited support for trade unions, labour market regulation and welfare. Since Giddens and Blair the ‘Third Way’ has come to represent ‘neo-liberalism with  a human face’. Punitive welfare on the one hand, but also the principle there should be an economic and social ‘floor’ below which no-one should be allowed to fall. Blair also marginally increased tax (will Australian Labor still consider tax reform for the next election?) But he would not retreat an inch in opposing any re-socialisation – no matter how badly privatisation had failed (eg: of railways). In Australia more recently ‘Centrism’ as epitomised by the ‘Centre Alliance’ struggles to maintain a credible liberalism – let alone any kind of social democracy. For instance there is conditional support for the ‘Ensuring Integrity’ union-busting legislation. Today ‘Centrism’ in Australia can mean a shallow populism cashing in on broad disillusionment with the two party system.  Significant parts of the ALP Right consider themselves ‘Centrist’ after the Blairite model. Blairites also generally accept capitalism as a given.

Fast-forward to 2019 and ‘What is to be done?’

Capitalism remains more vulnerable than people think. There is much focus on public debt, but private debt is a ‘ticking time bomb’ that could lead to loss of confidence, panic and collapse. In Australia, the US and much of the world private debt is many times the level of public debt. The Australian economy especially has come to rest on the housing bubble. Millions are locked out of home ownership; but sudden and radical devaluation would cause panic and collapse. The boom-bust cycle remains a fact: but governments focused on public debt are less likely to engage in counter-cyclical measures. This could one day mean recession (or Depression) as the ‘solution’ to indebtedness. Modern Monetary Theory (MMT) has it that government can ‘create money’ at will ; but this is not without limits. It involves a  degree of redistribution which capitalists hate – but also inflation. Progressive tax is still more effective at redistributing wealth in a targeted and progressive way. But certainly the MMT crowd are on to something.

The Labor Party today is probably inclined to want to ‘save capitalism from itself’. The welfare state and higher minimum wages can assist by boosting expenditure and demand. A return to a meaningfully mixed economy can help by reducing cost structures via natural public monopolies. This could flow on to the private sector as well. As well, this could counter oligopolistic collusion – for instance in banking (actually promoting competition). Higher government expenditure can also add money to the economy; increase demand; and ameliorate the explosion of private debt – which is a ticking time-bomb for the economy (here and globally).

An expanded social wage, welfare state, collective consumption and social insurance – can also provide social justice and social security. Think reformed pensions – easing means testing and increasing payments. Public housing. Better-funded schools and hospitals. More money for the Pharmaceutical Benefits Scheme. More efficient public provision of infrastructure (because of a better rate of borrowing and a ‘public interest test’ rather than share value and dividend maximisation). Also consider National Aged Care Insurance and a withdrawal of regressive user-pays mechanisms. As well as a retreat of user-pays in Education.

These are ameliorative reforms that can improve peoples’ lives. But Australia is still captive to the global economy and will suffer along the rest of the world in any ‘general downturn’ or ‘collapse’.

Over the long term we still need to think about an alternative to capitalism. Sub-Prime and the Global Financial Crisis did not only reveal instability – It also revealed the gap between Use Value and Exchange Value as Marx would put it. That is: there was an abundance of housing amidst widespread destitution and homelessness. This is a real capitalist failing and vulnerability.

Marx’s weakness was that he did not propose any concrete alternative vision to capitalism. He assumed ‘the class struggle would take care of things’. So maybe in part the ‘Utopian Socialists’ were on to something? The context of class struggle had to be engaged with; but also concrete visions for the future. Today perhaps we need ‘provisional utopias’. We cannot afford to be ‘a force of pure negation’ with no vision for the future. Especially after the real historical experience of Stalinism.

But capitalism is a globally-reinforcing system. You can’t just ‘go it alone’ in revolutionising the entire economy. There are economic and political constraints.

But what can be done is to begin a process of ‘revolutionary reforms’. Say in the spirit of the interwar Austrian Social Democrats. Even today in Austria there is a legacy in Vienna of 60% public housing – and overwhelmingly high quality public housing. A ‘democratic mixed economy’ would stabilise capitalism (through strategic socialisation and redistribution) while at the same time advancing towards an alternative. As in Austria this would also involve a counter culture: a rebuilding and reassertion of the labour movement; but also a coalition with other social movements. What Gramsci would have called a ‘counter-hegemonic historic bloc’. That also involves establishing online presences; other publications; public meetings; progressive radio and television; social events of various kinds; plays; workers’ sport; radical music etc. Establishing footholds where-ever possible.

Importantly the decline of industrial labour (with ‘deindustrialisation’) has widely meant a decline in class consciousness. Service sector workers can be just as exploited; but are more likely to think themselves ‘middle class’ or lack class consciousness. We can and should fight this. But the industrial working class might not any longer be seen (in the Marxist sense) as a ‘finally redemptive’ ‘universal historic subject’. The labour movement is central: but the modern Left also needs alliances.

And should another Global Financial Crisis occur the big finance houses should not be ‘bailed out at the public’s expense’. Where the public sector steps in (if that occurs) it should retain a share in ownership.

Of course when it comes to advanced socialist transition bourgeois economic and political resistance has to be expected.

The ‘democratic mixed economy’ should be the short to medium term model. That includes a key place for natural public monopolies, strategic government business enterprises, consumers and workers co-operatives of various sorts (including multi-stakeholder co-ops which bring workers, governments and regions together), mutualist associations. As well as ‘collective capital formation’. (The Meidner Funds were such; In Australia superannuation was a very pale imitation which may actually endanger welfare into the future by narrowing its base). ‘Multi-stakeholder co-ops’ are an important idea – as they could enable expansions of economies of scale to retain competitiveness under capitalism. All these are part of a concrete alternative.

There is also a need to restore and consolidate industrial liberties; to increase organised labour’s power; its ability to deliver; and hence its coverage, strength, and ability to contribute to change.

Furthermore: how do we tackle ‘alienation’ today in Marx’s sense? Even with deindustrialisation, workers still find themselves alienated in modern professions – for instance call centre workers. The ‘post-industrial utopia’ has so far failed to emerge. At the least we can improve wages and conditions for the most exploited and alienated workers with low-end labour market regulation (and maybe government subsidies where the market will not bear higher wages). Perhaps enabling a reduction of the working week for many (though others would crave longer hours). ‘Free time’ is perhaps one alternative (for now) to Marx’s vision of a communism where workers regained creative control; and labour becomes ‘life’s prime want’ (a quote from Marx). But ‘alienation’ is a feature of broader Modernity and not only capitalism. The rise of co-operatives could at least facilitate worker control – also ameliorating alienation.

In the final instance we need to think of where improvements in productivity could lead. Either to greater equality, plenty and free time for everyone. Or in the capitalist context only the intensification of growth, profit and exploitation. And possibly greater inequality if we do not socialise much of the gains of productivity. What Marx called the ‘coercive laws of competition’  means that competition forces a focus on productivity for capitalist profit and short term economic advantage. The problem is finding a way out of this ‘circuit’ (as well as the intensification of exploitation; and a ‘lagging behind in wages’ in labour intensive areas where productivity improvements are hard to come by). We need to think where free trade and internationalism fit in to this problem. There are environmental implications as well. Capitalism by its very nature will trend towards the ‘endless growth’ option. Perhaps if the emphasis is on information and service industries it could be more environmentally sustainable.

But Sweden is also a warning. Again: there has been retreat since the Meidner Wage Earner Funds. The ‘corporatist consensus’ delivered for several decades in Sweden. But since the bourgeoisie ‘got cold feet’ and organised more overtly against Swedish social democracy – there has been a retreat. Swedish social democracy now has to work with Swedish Liberalism to keep the right-wing parties out; and the price has been a retreat of the Swedish welfare state and progressive tax. In short: Socialists and social democrats have to be ready for capitalist backlash.

Class struggle creates change. That remains true. But so too do broader coalitions, cultural and electoral strategies. The Fabian Society in Australia is placed to mount cultural interventions; and hence influence the electoral strategies of the Labor Party and the broader Left. We won’t get all that we want all at once. But we need a critique of capitalism. We have to be prepared for future crises. We have to think what a transition would look like: under what circumstances and what time frame? But all the time considering the reality of power – economic and political ; including the power of the State. And all in a global context: where global progress remains limited without global consciousness and organisation. Which is something the Fabians also need to be thinking about. Building ties with Democratic Socialists of America, for instance, could be a fruitful endeavour.

The Fabian Society re-embracing its place as an organisation of democratic socialism means engaging with these problems. For the short to medium term it is to be hoped we have an important strategic place in developing a ‘democratic mixed economy’; critiquing capitalism; and imagining ‘revolutionary reforms’ which could decisively shift economic and political power over the long term.

This article was originally published on ALP Socialist Left Forum.

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The spying on Timor-Leste case … et cetera (part 5)

By Dr George Venturini  

(Much of the material in this page is drawn from the work of La’o Hamutuk, the Timor-Leste Institute for Development Monitoring and Analysis, which has monitored and campaigned for Timor-Leste’s rights for two decades. For more detailed information on this and related issues, see www.laohamutuk.org. Current and updated information on the maritime boundary dispute with Australia is at  https://www.laohamutuk.org/Oil/Boundary/18ConcilTreaty.htm).

It has been calculated that, since 1999 and up to the end of 2015, Australia has received nearly US$5 billion in government revenue from oil and gas fields in Timor-Leste’s territory from Laminaria-Corallina, Kitan, Bayu-Undan and Elang-Kakatua. During the same period, Australia provided military aid – through Interfet (International Force in East Timor) and I.S.F. (International Stabilisation Force) – costing US$0.6 billion, and another US$1 billion in ‘bilateral assistance’. Timor-Leste has thus given Australia more than US$3 billion.

On 27 November Hamish McDonald criticised Timor-Leste’s strategy on boundaries and the Tasi Mane project, expanding on a similar article he wrote for Nikkei Asian Review the previous week. (The Saturday Paper, 27 November 2015).

The Lateline news programme on A.B.C. television covered the spying scandal in three in-depth reports on 25-27 November, including interviews with Timorese leaders and Bernard Collaery, former advisor Peter Galbraith, attorney Nicholas Cowdrey and Senator Nick Xenophon. (A.B.C., Australia-East Timor spying scandal: senior lawyer says ‘crime was committed’, 26 November 2015). Following this extended exposure of alleged illegal activity by Australian officials and intelligence agents, Senator Xenophon called for a royal commission and Crikey.com dubbed the lack of accountability “an international embarrassment.” (‘We need to hold East Timor spies to account’, Crikey, 26 November 2015) However, when Senator Xenophon and Greens Senator Scott Ludlam tried to have the Senate resolve to return Witness K’s passport, the government blocked it. (S. Ludlam, ‘Government denies justice to East Timor’, Media release, 1 December 2015).

Planning Minister Xanana Gusmão reiterated Timor-Leste’s position when he received an honorary doctorate from Melbourne University on 7 December, 40 years after Indonesian invaded Timor-Leste with Australian diplomatic support: “The Government of Timor-Leste has made the permanent delimitation of maritime boundaries a national priority as it is the final step in our long struggle for full sovereignty.

Indonesia and Timor-Leste have commenced maritime boundary negotiations and have agreed to abide by the principles set out in the 1982 United Nations Convention on the Law of the Sea and international law. Australia on the other hand has refused to negotiate a maritime boundary with Timor-Leste and Timor-Leste cannot refer the issue to be determined by an independent umpire. This is because in 2002, on the eve of Timor-Leste’s independence, Australia withdrew from the compulsory dispute mechanisms set up under the United Nations Convention on the Law of the Sea for any disputes relating to the delimitation of its maritime zones.

Like your new Prime Minister Malcolm Turnbull, I am an optimist. And so, I look to the new Australian Government to recognise that it is in Australia’s national interest to have a clearly defined permanent maritime boundary in the Timor Sea. From the Timorese perspective we are fighting for justice in the Timor Sea so that we can finish the work of our struggle for independence and achieve our rightful sovereignty under international law. We are continuing to be idealists.” (Democratic Republic of Timor-Leste, Acceptance speech on the award of an honorary Doctorate of Letters from the University of Melbourne by His Excellency, the Minister for Planning and Strategic Investment and former President and Prime Minister of the Democratic Republic of Timor-Leste Kay Rala Xanana Gusmão, Melbourne, 7 December 2015).

On 8 December the Australia Timor-Leste Business Council reported on their meeting the previous day with Australian ambassador to Timor-Leste Peter Doyle, whom they had asked to reduce sovereign risk by agreeing to a permanent maritime boundary. Their press release prompted comments from Asia Pacific Analysis (‘Regarding talks between East Timor and Australia’, 11 December 2015).

On 1 March 2016 The Sydney Morning Herald reported that Australian Prime Minister Malcolm Turnbull had rejected Timor-Leste P.M. Rui Araujo’s request to begin maritime boundary negotiations, although Turnbull did agree to continue discussions. (T. Allard, ‘P M Malcolm Turnbull disappoints East Timor on talks on maritime boundary’, 1 March 2016).

On 4 April Timor-Leste’s Parliament unanimously resolved to support the negotiation process for maritime boundaries. (RDTL National Parliament, Draft Resolution n. 26 / III (4), Support for the negotiation process for the maritime boundaries of Timor-Leste, 4 April 2016).

On 11 April Timor-Leste announced that it had just notified Australia that it was initiating “compulsory conciliation proceedings under the U.N. Convention on the Law of the Sea, U.N.C.L.O.S., with the aim of concluding an agreement with Australia on permanent maritime boundaries.” (‘Timor-Leste launches United Nations Compulsory Conciliation Proceedings on Maritime Boundaries with Australia’, Media release, 11 April 2016).

The action, explained by a government fact sheet, raised complex legal issues as it involved, inter alia, U.N.C.L.O.S. dispute resolution provisions, Australia’s unilateral 2002 withdrawal from U.N.C.L.O.S. processes for maritime boundary disputes, and the ‘gag rule’ in C.M.A.T.S. Article 4, especially paragraph 6. Nevertheless, as a spokesperson for Timor-Leste explained on Australia’s Radio National, Timor-Leste is frustrated with Australian intransigence for the past 14 years, concerned that ‘provisional’ arrangements could evolve to become permanent, and seeks to look toward the future and accelerate the eventual settlement of the maritime boundary as foreseen in the existing revenue-sharing agreements. Timor-Leste’s initiative, which is the first time ever that this process has been invoked, was reported by the press and the A.B.C. (T. Allard, ‘East Timor takes Australia to UN over sea border’, The Sydney Morning Herald, 11 April 2016).

The Australian Government sharply criticised the move, and announced that there would be no further discussions. However, the Australian Labor Party and the Greens Party welcomed Timor-Leste’s action, promising to negotiate a new and fair maritime boundary with Timor-Leste, and Special Broadcasting Service compared contrasting party policies. (H. Sinclair, ‘Contrasting party policies emerge over maritime boundary with East Timor’, 14 April 2016).

On 13 April former Prime Minister and Chief Boundary Negotiator Xanana Gusmão brought the issue to the attention of the Secretary-General Ban Ki-Moon at the United Nations in New York. Xanana Gusmão issued a press statement there, and the Government issued a press release in Dili (‘H.E. Kay Rala Xanana Gusmão meets with UN Secretary-General Ban Ki-moon as Timor-Leste initiates Compulsory Conciliation under UNCLOS’, Media release, 14 April 2016).

Several Australians with long connections to Timor-Leste, including academics, journalists and geologists, wrote articles to place the current dispute in historical context. Timorese veterans, diplomats and negotiators reached out to people in Australia and the region. Former President Jose Ramos-Horta wrote “Australia needs to negotiate not litigate with neighbours” in major Australian newspapers. (Jose Ramos Horta: Australia needs to negotiate not litigate with neighbours, The Sydney Morning Herald, 24 April 2016).

The Sydney Morning Herald carried a column titled: ‘Australia is a bad neighbour and we should be better than this’ (2 May 2016) and reported that East Timor’s Xanana Gusmão says small nations angry with Australia, and will put bid for UN seat in peril (by T. Allard, 1 May 2016).

When Timor-Leste filed for Compulsory Conciliation on 11 April, it named Judge Abdul Koroma (from Sierra Leon, who had sat on the International Court of Justice from 1994 to 2012) and Judge Rüdiger Wolfrum (from Germany, who had been on the International Tribunal for the Law of the Sea since 1996) as their chosen members of the panel. On 2 May Australia selected Dr. Rosalie Balkin (an Australian, and a retired Assistant Secretary-General of the International Maritime Organization) and Professor  Donald McRae (a Canadian/New Zealander who was teaching law at the University of Ottawa) as its two representatives. These four were to elect a fifth member to chair the Conciliation Panel.

Still, Australian continued its  scare tactics, suggesting that Indonesia “may be drawn into Timor talks”, yet conveniently forgetting that, in Article 4 of the 1972 Australia-Indonesia Seabed Boundary Treaty, the signatories agreed to “cease to claim or to exercise sovereign rights with respect to the exploration of the seabed and the exploitation of its natural resources beyond the boundaries so established.” Furthermore, Indonesia had ceded what became the J.P.D.A. and the area east and west of it to Australia through that treaty.

Whistleblower Witness K, who exposed Australias bugging of Timor-Leste’s Government offices during the C.M.A.T.S. negotiations, was recognised at the ‘Blueprint Prize for Free Speech’ awards in London (‘Witness K gets international recognition’, Crikey, 9 May 2016).

In May 2016 Mr. Marc Moszkowski published an updated version of his map presentation ‘Maritime boundaries of  East Timor: a graphical presentation of some historical and current issues’. Mr. Moszkowski is highly qualified for the position. He is the President of Deep Gulf Inc. of Florida, USA; an engineer and master mariner with superior experience in the Timor Sea and has led projects for the first detailed bathymetric survey of parts of the Timor Sea, as well as surveys commissioned by the Secretary of State for Natural Resources of strategic parts of the southern shore including Beaco and Suai for the Tasi Mane project of the Government of East Timor. He updated his Timor Sea Maritime Boundaries with a presentation for the ICJA/ILA Colloquium, held at University of New South Wales, on 16 August 2014.

The very complex and highly documented work contains an interesting slide reproducing the boundary claimed by the East Timorese Government on 29 February 2016.

In the slide a median line between Timor-Leste and Australia is drawn. The median lines with Indonesia are not shown. Several I.C.J. case examples were provided (Libya v. Malta, Romania v. Ukraine, Bangladesh v. Myanmar, Nicaragua v. Colombia, and Peru v. Chile).

In June several feature articles, actually too many to list, tried to explain the context and analyse Timor-Leste’s and Australia’s perspectives. Most of the articles were quite unflattering. (T. McDonald, ‘Australia row hampers East Timor’s oil ambitions’, B.B.C. News, 13 June 2016; T. Iltis, ‘How Australia is screwing East Timor’, Green Left Weekly, 25 June 2016; Rob Wesley-Smith asked some important questions, re various conferences on Timor Sea matters, 30 June 2016).

Before the Australian Parliamentary election on 2 July 2016 the Foreign Minister and shadow Foreign Minister debated Australia’s policy toward Timor-Leste. Both women were re-elected to Parliament, but neither party had an absolute majority, so the composition of the new government in Canberra remained unclear. Two weeks later, it was agreed that Malcolm Turnbull would continue as Prime Minister.

On 12 July the Permanent Court of Arbitration ruled against China’s claim to most of the maritime territory in the South China Sea, upholding the Philippines’ argument that the claim violated the U.N. Convention on the Law of the Sea, and countries in the region reacted. Timor-Leste supporters pointed out the parallels with the Timor-Leste v. Australia dispute, and Australian Foreign Minister Julie Bishop displayed her government’s inconsistency.

The Sydney Morning Herald emphasised that ‘Australia is guilty of same misconduct as China over our treatment of East Timor’, by T. Clark, 14 July 2016.

International lawyers analysed ‘The Shifting Sands below the Sea, The landmark decision on the South China Sea, and it implications for Australia and Timor Leste’, by Gilbert & Tobin, 13 July 2016, while the Timor-Leste Government reaffirmed its commitment to U.N.C.L.O.S. (‘Government reaffirms commitment to UNCLOS as the ‘constitution of the sea’ ’, Media release, 15 July 2016).

The Compulsory Conciliation Panel had not agreed on the choice of their fifth member by 18 June, and Timor-Leste’s spokesperson told local papers that U.N. Secretary-General Ban Ki Moon would probably have to select him or her. Ten days later, however, the four members reached agreement on Ambassador Peter Taksøe-Jensen (a Dane and at the time Denmark’s ambassador to India and former U.N. Assistant Secretary General for Legal Affairs). The panel held its first procedural meeting in The Hague on 28 July, as announced by the Permanent Court of Arbitration and by Timor-Leste’s government. (‘The Conciliation Commission Concludes First Procedural Meeting’, Media release, 30 July 2016).

The next hearing was to be held on 29-31 August on “the background to the conciliation and certain questions concerning the competence of the Commission.” As announced by the P.C.A. and echoed by Timor-Leste and Australia, the opening statements were web-streamed live, 29 August  2016.

The Saturday Paper published Hamish McDonald’s interview with José Ramos-Horta who said that Xanana Gusmão “was never very supportive of the 2002 and 2006 treaties.” (H. McDonald, ‘Q&A with international pacemaker José Ramos-Horta’, The Saturday Paper, 30 July 2016).

As the opening of the Conciliation Process drew near, Timor-Leste’s Government announced its delegation: the Minister of Planning and Strategic Investment and Chief Negotiator for Maritime Boundaries, H.E. Kay Rala Xanana Gusmão, and the Minister of State and of the Presidency of the Council of Ministers, H.E. Agio Pereira. (‘Members of Government to attend Conciliation Commission hearing next week’, Media release, 23 August 2016).

The Government also presented a policy paper to the Council of Ministers. The 92-page paper was announced by the Government and launched by Prime Minister Rui Araùjo in Dili just hours before the Conciliation process opened in The Hague. (‘Speech by His Excellency the Prime Minister of the Democratic Republic of Timor-Leste, Dr. Rui Maria de Araúio, at the launch of the Timor-Leste policy paper on maritime boundaries’, Dili, 29 August 2016).

The Timor-Leste’s Government Maritime Boundary Office prepared a Fact Sheet on the conciliation process: ‘Timor-Leste Conciliation with Australia on Maritime Boundaries.

Australia’s position on the upcoming conciliation was confused when Foreign Minister Julie Bishop stated that Australia accepted rule of law for boundary disputes, but reversed that position in relation to this process. (M. Skulley, ‘Aus govt defends status quo in Timor Sea’, 29 August 2016) However, But Professor Ben Saul pointed out that the conciliation was a new opportunity for Australia to do the right thing. (B. Saul, ‘On Timor, Australia looks it’s denying an impoverished neighbour its birthright’, 29 August 2016). The A.B.C. News put the upcoming hearing in context. (‘East Timor-Australia maritime border dispute to be negotiated at the Hague’, 29 August 2016).

On 28 August Timor-Leste and Australia made their opening statements to the Conciliation Commission. (Permanent Court of Arbitration, Case No. 2016-10, Conciliation Proceedings between the Government of the Democratic Republic of Timor-Leste and the Government of the  Commonwealth of Australia, pursuant to Art. 298 and Annex V of the U.N. Convention of the Law of the Sea, Opening Session, Monday 29 August 2016, Commissioners: H.E. Mr Peter Taksøe-Jensen (Chairman), Dr. Rosalie Balkin, Judge Abdul G Koroma, Professor Donald McRae, Judge Rüdiger Wolfrum).

Timor-Leste urged Australia to negotiate a boundary, while Australia rejected the Commission’s power to engage in this issue. (D. Flitton, ‘Australia rejects jurisdiction of East Timor’s bid to broker maritime dispute’, The Sydney Morning Herald, 29 August 2016).

The map is a demonstration of the dispute of the contending parties according to maps prepared by Timor-Leste and Australia at the opening of the Conciliation process in August 2016

After the opening hearing, the Australian Foreign Minister summarised her government’s position, while the Australian Embassy in Dili published answers to frequently asked questions, and Timor-Lestes Maritime Boundaries Office summarised the public session.

The Commission met in closed session for a few days, issuing a press release on proceedings. (Press release, ‘Conciliation between the Democratic Republic of Timor-Leste and the Commonwealth of Australia’, The Hague, 31 August 2016, Commission Holds Public Opening Session in Conciliation Proceedings).

The conclusions of the process were reported by the Australian press. (D. Flitton, ‘Special commission quizzes Australia and East Timor in bid to broker sea dispute’, The (Melbourne) Age, 2 September 2016), which emphasised that  East Timor deserves a fair hearing. (‘East Timor deserves a fair hearing on maritime boundary’, The (Melbourne) Age, 5 September 2016).

The positions of the parties on the conciliation process were amply commented upon. (Prof. D. Anton, ‘Right but wrong: Australia is using a legalism to delay resolution of the Timor sea boundary dispute’, WAtoday, 31 August 2016; H. McDonald, ‘Timor-Leste backing oil development before Hague ruling’, The Saturday Paper, 3 September 2016).

On 9 September the Permanent Court of Arbitration adopted Rules of Procedure for the arbitration case under the Timor Sea Treaty which Timor-Leste had initiated in April 2013. (P.C.A. Case Nº 2015-42, in the matter of the arbitration under the Timor Sea Treaty of 20 May 2002 between the Democratic Republic of Timor-Leste and the Commonwealth of Australia case concerning the meaning of Art. 8(b) – Rules of procedure).

On 26 September the Conciliation Commission released its 41-page unanimous ‘Decision on Australia’s Objections to Competence’, affirming that it did have jurisdiction and would have continued to hear the case over the following twelve months. The decision was applauded by Timor-Leste (‘Timor-Leste welcomes Conciliation Commission’s landmark decision to proceed’, Media release, 26 September 2016) and accepted by Australia (‘Timor Sea Conciliation’, Joint media release, The Hon. Julie Bishop, Minister for Foreign Affairs Senator the Hon. George Brandis QC, Attorney-General, 26 September 2016) It was widely covered in the international media.

On 13 October the Permanent Court of Arbitration announced, on the Conciliation Commission’s behalf, that Optimism Pervades Recent Meetings with Conciliation Commission, saying that both Australia and Timor-Leste delegations are actively participating and consider the meetings “very productive,” although confidentiality prevents either party from commenting publicly. (P. C. A., ‘Conciliation between the Democratic Republic of Timor-Leste and the Commonwealth of Australia’, Press release, Optimism pervades recent meetings with Conciliation Commission, Singapore, 12 October 2016) Yet the process would continue in 2017.

When António Manuel de Oliveira Guterres was elected U.N. Secretary-General, the  former President José Ramos-Horta explained that Guterres could not use his new position to tilt the playing field towards Timor-Leste in the boundary dispute. Horta later appealed to Australia’s sense of a ‘fair go’. (T. Moore, ‘Nobel laureate calls on Australia to show ‘fair go’ over $40b Timor Sea oil’, The Sydney Morning Herald, 27 October 2016).

In November The Australia Institute released the results of a poll of Australians conducted he previous August. Of the 10,271 Australian residents polled, 56.5 per cent supported establishing a maritime boundary according to international law, while only 17 per cent opposed this change.

The November issue of the R.D.T.L. Maritime Boundary Office Newsletter summarised its recent activities.

In December 2016 Timor-Leste and Indonesia discussed opportunities for cooperation in the oil and gas sector. (‘Exchange between Timor-Leste and Indonesia in the area of oil and gas’).

On 9 January 2017 Timor-Leste, Australia and the Conciliation Commission issued a joint statement. The two countries agreed to terminate the 2006 C.M.A.T.S. Treaty in its entirety, including the “zombie clauses” which would have kept parts of the treaty alive after “termination” and resurrected it when Sunrise production began. The termination was to be effective as from 10 April, three months after Timor-Leste legally would  notify Australia that it was exercising its right to terminate under the treaty. The 2002 Timor Sea Treaty would expire on its original date (April 2033), rather in 2057 as defined by C.M.A.T.S. The two governments also committed to negotiate permanent maritime boundaries, and the C.M.A.T.S. ‘gag rule’, that Timor-Leste had been defying for the previous three years, was no longer in effect. (‘Joint Statement by the Governments of Timor-Leste and Australia and the Conciliation Commission constituted pursuant to Annex V of the United Nations Convention on the Law of the Sea’).

By the decision both governments had finally agreed on the following points: 1) Any bilateral treaty could be changed or voided at any time by mutual agreement of both countries; 2) The ‘gag rule’ which prevented recourse to diplomacy, advocacy or international mechanisms was ill-considered and bad for Timor-Leste; 3) A permanent maritime boundary, rather than temporary revenue-sharing agreements, would more likely respect the sovereignty and national interests of both countries.

Unfortunately, the joint statement did not address another key point: that a binding ruling by an impartial third party – through arbitration or a judicial process – is the only fair way to settle a boundary dispute between two very unequal countries. Since Timor-Leste restored its independence in 2002, closed-door bilateral negotiations had produced results biased towards Australia, which has far more wealth, experience, flexibility, resilience, oil and gas, and economic and political resources. Timor-Leste would continue to urge Australia to return to the binding dispute resolution mechanisms under the International Court of Justice and U.N.C.L.O.S. from which it withdrew two months before Timor-Leste became a sovereign nation.

The 9 January joint announcement was widely reported by international media. (D. Flitton, ‘Spying fallout: East Timor to tear up oil and gas treaty with Australia’, The (Melbourne) Age, 9 January 2016).

On 10 January Timor-Leste’s Parliament resolved to cancel the C.M.A.T.S. Treaty, and President Taur Matan Ruak promulgated Resolution 01/2017 six days later. (Jornal da República, Série I, N.° 2A, Página, 2 Segunda-Feira, 16  de  Janeiro  de  2017, Resolução do Parlamento Nacional N.º 01/2017 de 16 de Janeiro) Prime Minister Rui Araùjo told local journalists that oil and gas exploration in the Timor Sea would be temporarily suspended until the boundary was settled.

According to the A.B.C., Woodside was hopeful that a boundary settlement would allow its Sunrise project to move forward, while another A.B.C. report cited economic opportunities for Timor-Leste. (A.B.C., E. Stewart, ‘Woodside Petroleum [was] waiting on Australia-East Timor maritime deal to develop Greater Sunrise’, 10 January 2017; A.B.C., K. Gregory, ‘East Timor to capitalise on economic opportunities’, 10 January 2017).

However, a few days later, a contributor to the A.B.C. explained that Sunrise would have faced a long road, with political and economic hurdles, while The Australian Financial Review discussed the problems for Darwin LNG caused by “fresh uncertainty.” (A. Macdonald-Smith, ‘Timor Sea turmoil complicates life for Darwin LNG’, The Australian Financial Review, 12 January 2017).

It was back to the drawing board for a maritime agreement between Australia and Timor-Leste.

Journalists with long Timor-Leste experience gave deeper explanations, as did – among others – an Australian academic. (M. Leach, ‘A line in the water, Inside story’, 12 January 2017;  see also: P. Kelly, ‘Australian government agrees to negotiate East Timor maritime border’, World Socialist Web Site, 11 January 2017).

On 18 January Al Jazeera’s The Stream hosted a half-hour TV programme  on the issue, with José Ramos-Horta, Tom Clarke, Juvinal Dias and Mark Mozkowski. The Australian government declined to participate. (On The Stream: The Stream takes a look at Australia and East Timor’s long-standing maritime boundary dispute, The Stream – Maritime row in the Timor Sea’, Al Jazeera English, published on 19 January  2017).

There followed another statement by the two countries, in which the two countries “reaffirmed their commitment to work in good faith towards an agreement on maritime boundaries by the end of the conciliation process in September 2017.” (‘Joint Statement by the Governments of Timor-Leste and Australia and the Conciliation Commission constituted pursuant to Annex V of the United Nations Convention on the Law of the Sea 20 January 2017’). The statement was reported by the international media. (D. Flitton, ‘East Timor dumps spying case against Australia for ‘good faith’ oil, gas boundary talks’, The Sydney Morning Herald, 24 January 2017).

Timor-Leste had dumped its spying case against Australia in the international court, raising hopes of an eventual end to the bitter stand-off over $ 40 billion in oil and gas fields. Two months later the arbitration panel formally ended the process. Specialized international publications explained the issue to their constituencies.

In February Inter Press Service published Maritime Boundary Dispute Masks Need for Economic Diversity in Timor-Leste by Stephen de Tarczynski.

Continued Wednesday – The spying on Timor-Leste case … et cetera (part 6)

Previous instalment – The spying on Timor-Leste case … et cetera (part 4)

Dr. Venturino Giorgio Venturini devoted some seventy years to study, practice, teach, write and administer law at different places in four continents. He may be reached at George.venturini@bigpond.com.au.

 

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Japan: a shining example

Professor Bill Mitchell’s blog, dated 22 November 2018, “Japan still to slip in the sea under its central bank debt burden” gives MMT advocates all the ammunition they need to present a case for greater fiscal participation in the economy.

It signals quite clearly that government spending, not monetary policy (RBA interest rate management), is the more effective tool to bring about full employment and maximise the use of Australia’s available resources.

For nearly 30 years now, the Bank of Japan, the nation’s central bank, has been buying government debt (deficit spending), to the point where its current holdings are now greater than the country’s GDP.

However, despite massive injections of ‘created money’ into its monetary base, Professor Mitchell says, “inflation (in Japan) remains low and despite low interest rates, economic activity is hardly booming.”

Mainstream economists seem unable to connect this reality with their more dire predictions that Japan’s fiscal policy over this period, must lead to hyperinflation. It has done nothing of the sort.

For the past 30 years, mainstream macroeconomists the world over, have been predicting the demise of the Japanese economy, claiming it will slip into the sea, that its debt burden is unsustainable, that there are limits to the amount of assets the Bank of Japan can buy.

What has happened is that, “the Bank of Japan continues to demonstrate the categorical failure of mainstream macroeconomics and, conversely, ratify the core principles of Modern Monetary Theory (MMT).”

Each time their predictions have been proved wrong they have been forced to invent excuses, such as closed markets and cultural peculiarities. It’s all hogwash!

What these Economists are really concerned about, is that by buying government debt and keeping interest rates low, the Bank of Japan is effectively preventing the commercial banks using the bond market to make profits.

By not issuing bonds to offset government debt, it is depriving the commercial banks off a risk-free asset from which they can make money. The BOJ has “effectively killed regular trading in the once lucrative bond market.”

It has defied claims that currency-issuing governments like Australia, are captive to the yields in play on secondary bond markets.

How terrible is that?

Australia currently has 5% of the workforce, or 700,000 people looking for work with a further 800,000 working less hours than most would prefer. This represents a huge underutilisation of available resources, yet our government and the media, via their economic “experts” claim our economy is humming along nicely. More hogwash! Our economy is underperforming.

By way of comparison, Japan’s unemployment rate as at September 2018 was just 2.3%

To the further detriment of our underperforming economy, it is just what our government wants. It might appear that they are concerned at the slow rate of growth and the low wages growth, but deep down, captive as they are to the demands of the big end of town, they do not want full employment, or any significant wages growth.

Such economically beneficial activity would impact on the profits of commerce and industry, the source of their political funding. It is corporate welfare by stealth. The state of the Japanese economy, proves that decades of deficit spending and huge injections of money into what was a stagnant economy, does not risk inflation when the injection is correctly targeted.

There is no reason why we, in Australia, cannot do this and achieve full employment, a higher GDP, which itself will attract further private investment and in the process, improve living standards for all Australians.

We can do this, if we can change the mentality that dominates current mainstream economic thinking. But, at the moment, our prime minister is so intent on fuelling an outbreak of anti-Islamic sentiment, for no other reason than to attract votes, that our economy is destined to continue underperforming.

As Bill Mitchell says, “All those commentators who claim that accelerating inflation would result if governments abandoned debt-issuance but continued to run deficits, have been repeatedly shown to be wrong.”

What will it take to get this simply message across to those in treasury who have the power to change government thinking?

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WEALTH AND POWER KEEP ON WINNING

As a committed advocate of Modern Monetary Theory and one who thinks it should be renamed, Modern Monetary System, for reasons I will explain, there have been occasions when I have felt a sense of futility, trying to explain something so simple, but finding myself unable to convince even those who should know better.

Firstly, MMT should be referred to as MMS because it is no longer a theory. It is the way our fiat economy was set up to operate and does operate today. Its implementation took place in 1983 and the fact that it has never been used as it was intended, does not mean it is theoretical.

The fact that we still fear deficit spending, strive to balance budgets, lust for surpluses and consider bond issues as debt, is a hangover from a past era, that of the gold standard.

The fact that we fail to fully utilise our available resources, consider 5% unemployment near full employment, shy away from providing the necessary infrastructure for our industries and neglect our national health and education needs, when each of these represents real jobs and growth opportunities, is a travesty of mismanagement and failed leadership.

Last night’s Q&A which highlighted the difficulties experienced by those reliant on the NDIS, gave us a clear indicator that the government is not even spending its own budget allocation on this vital piece of infrastructure. The NBN rollout is just another example of this failed leadership.

And it seems that no matter how clear and concise we are in explaining the economic reality of MMT, successive governments still cling to the gold standard mindset. Why?

Michael Pascoe’s article in ‘The New Daily’ today, sheds some light on the truth of the matter. In discussing the latest on the never-ending tax debate, something the entire country is heartily sick of hearing, he points to what the government is really doing in pursuing this matter.

He writes, “In the short term, it’s a formula in keeping with the Institute of Public Affairs’ prescription for a new Australia – an Australia with less government, richer rich and fewer controls on markets – especially the labour market.”

He goes on to say, “The IPA has emerged as not just the favoured right-wing think tank, but the government’s guiding light. It is too tempting to not again repeat one of John Kenneth Galbraith’s many golden quotes:
“The modern conservative is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.””

We have known from the beginning of the Howard years, and perhaps from some of Paul Keating’s decisions, that it is the rich who run the country. They run it for the rich and they get the best results by supporting conservative leaning parties and their politicians.

Trying to establish a tax system, using confected figures to present fairness and equality, as Scott Morrison has done suggesting average workers are expected to earn six figure sums in a few years’ time, displays a height of arrogance as bold as his government’s self-serving aspirations.

It is a disgrace. But, we know that if you tell a lie, big enough and often enough, people who don’t know any better, will be inclined to believe it. And therein lies the difficulty with people like me who are trying to explain MMT to the average person in the street. How could anything so simple be right. It must be more complicated than that, surely. No, actually it isn’t.

As Michael Pascoe says so eloquently in his article, “In the longer term, flattening our progressive tax system is a tiny part of one of history’s repeating cycles: wealth and power being used to entrench and extend wealth and power until it becomes unsupportable.”

Notwithstanding the difficulties of explaining MMT, there is progress. But it is painfully slow. Much like the NBN. However, one day we will get there, even if it is only a partial implementation. The alternative is the status quo, which, for those who haven’t yet worked it out, is all about keeping the average worker at arm’s length from the rich.

And that really is an unsustainable option.

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