By Henry Johnston
Earlier this week my neighbour asked, “Is America a democracy?”
I replied, “America is a republic which aspires to democracy via its Constitution and Bill of Rights.”
We continued our discussion from the perspective of white and non-white U.S. citizens, but our conversation eventually ended in stalemate. We agreed Shakespeare’s line, now is the winter of our discontent, best sums up the mood of Republican United States which, if you believe the commentators on MSNBC and CNN, is as far from a democracy as it has ever been in that nation’s history.
But this drift from democratic exceptionalism is not confined to the United States.
On Thursday 6 December 2018 Australia demonstrated the extent of its slide from idealism to the ignobility of brute force. The occasion was Prime Minister Scott Morrison threatening to go nuclear if Labor did not support yet another measure to battle the ongoing war on home-grown terrorists.
I leave the detail of that debacle which ended the Australian Parliamentary year to others. Suffice to say as a democracy our nation seems on the verge of a summer of discontent.
But what triggered this negativity? The answer I believe is the fallout from the Great Recession of 2008, and its most stubborn legacy; deflation.
The fact Australia survived this debacle is thanks to the text book application of Keynesian economic theory, universally derided by Liberal economic rationalists. In my opinion their continued scorn of the finest management of an economic crisis in contemporary Australian history, constitutes perilous wilfulness.
The Liberal Government let the 10th anniversary of the Great Recession of 2008 pass without so much as a mention.
Earlier this week a slew of financial pundits predicted the Reserve Bank of Australia might cut interest rates next year. If this eventuates, Australia is on the precipice of deflation.
In psychological terms deflation deprives individuals of a sense of well-being. No matter how hard people work their goals remain out of reach. Think low pay, the gig economy, casualisation, the marginalisation of women in the work force etc.
One way or another deflation is entrenched in other parts of the world, especially England. But despite a chronically sluggish economy, Brexit looms large for the Old Dart.
The Bank of England recently warned of a catastrophe if an unprepared Britain turns its back on Europe. But gleeful Brexiteers, led by the Conservative Party, insist the winter of our discontent will be made glorious summer by this son of York. This quote by the way is from the play Richard the Third by William Shakespeare.
The deformed body of Richard the Third was recently found buried beneath a car park somewhere up north.
But Europe too is wracked by turmoil, caused by deflation and stoked by the knuckle-duster fists of far-right thugs. And in Eastern Europe there is a real prospect of a full-scale hot war between Ukraine and Russia, over access to the Sea of Azov. Both Ukraine and Russia are also experiencing deflation. Even China with its command economy is sliding backward.
There are thousands of definitions of deflation, but this simplified version sums it up in a way that can be traced back to our disgraceful Liberal government, which continues to embrace a discredited economic rationalist model without question.
Deflation occurs when supply is high and demand low. In other words when people stop buying. Think the current housing market in Australia.
Deflation can also come about when the supply of money decreases, often in response to a financial contraction created by bad investment or a credit crunch. Think the recent Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, with its sensational revelations of predatory lending practices.
Too much competition can also trigger deflation as can and too little market concentration.
Japan is trapped by its quicksand, and no matter what economic tricks it conjures, Japan cannot free itself from its grip.
The last time the world endured a lengthy period of deflation was between 1918 and 1939, when democracy waned to the point where its beacon was almost extinguished.
This must never happen again.
As the season of good will looms, I find it hard to believe there will be a change for the better next year unless Australia rids itself of a truly awful conservative government, and prepares once more to deploy the economic levers devised by John Maynard Keynes.
But this will not happen if the Liberal Party of Australia remains in power in 2019.
Economic rationalists around the world, Scott Morrison and Treasurer Josh Frydenburg among them, hate Keynes for many things, none the least of which is this pithy bon mot: “capitalism is the astounding belief that the wickedest of men will do the wickedest of things for the greatest good of everyone”.
Henry Johnston is a Sydney-based author. His latest book The Last Voyage of Aratus is on sale at Brays Bookshop in Balmain an at Forty South Publishing.