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Tag Archives: Economic

Who Put The Thorazine In The Economist’s Ovaltine?

You’ve got to love MSM economics editors/experts/commentators. They all sing from the same depressing song sheet – ‘The Deficit Dirge’ or the ‘Surplus Serenade’.

The only thing missing in the lyrics is the refrain of ‘need ya baby, wantcha baby, lurv ya babeee…’

What they lack in vocal skills is usually made up of  through interpretive dance.

This is usually performed wearing a bespoke suit while clutching a pointer, and features a dazzling array of signs arrows and graphs – gotta have graphs, otherwise the audience may cotton on to the fact that what they’re peddling is a slightly more up market version of tea-leaf reading.

Without exception, they all state what is known in common parlance as the ‘bleeding obvious’.

The economy isn’t in too bad a shape, the first phase of the mining boom is over, climate change could be a problem in the future (no kidding???) and that the trade deficit is okay but could be better.

From ‘Kochie’ to Kohler, Greenwood to Gittins, the message rarely varies.

The depressing thing about listening to this flannel is the knowledge that every last one ’em studied economics at tertiary level and understand the premise of fiat currency and how it operates.

They know that government ‘deficit’ is not debt, that pursuing budget surplus is not beneficial to the economy but in fact is detrimental and most importantly, that creating unemployment to have a ‘buffer stock’ of surplus labour in order to suppress wage demands and control inflation is a recipe for disaster.

Nonetheless, like a drunk at a Karaoke night they keep slurring the refrain of ‘freeing up the economy and the job market’ ad nauseam.

In fairness to MSM economists, much of their research material is sourced from the Reserve Bank of Australia reports, and it would seem that at the RBA there’s been liberal doses of Thorazine in the boardroom Ovaltine.

This week, there have been tea-leaf readings from two of the eminence gris of this august institution, John Edwards, who served as an economic adviser during the Keating years (hardly something to boast about), and Chris Kent, an assistant governor at the RBA. Kent has made the amazing discovery that the buffer stock of available unemployed labour so treasured by supply side economics, is actually declining as available jobs disappear!Kent traces this shrinkage to many of the unemployed simply giving up looking for work as they become discouraged by an ever shrinking job market.

The notion that this is usually what happens when there are fewer and fewer jobs available doesn’t seem to have crossed the good assistant governor’s mind.It may also be argued that this is the end result of creating a permanent pool of unemployed when taken to its logical conclusion. Any downturn in the economy, a high dollar and weakening growth in government spending means that the private sector has to make up the shortfall, and the usual method is to reduce labour and cut wages in order to survive.

Nevertheless, under Hockey’s budget the ship of fools sails on toward disaster while the captain and crew are tranquillized to the eye-balls by the cloying miasma of supply side economics and ‘market forces’.

Rather than continue with the notion of a buffer stock of unemployed and underutilized to curb wage demands and inflation, the intelligent solution is to turn this ‘buffer stock’ into employed workers in a ‘Job Guarantee’ program which pays the minimum wage and thereby circumvents the worst social aspects of long term joblessness, while at the same time is able to control both wage demands and inflation via the fixed minimum wage.This buffer stock would expand during times of private sector downturn, and contract when the private sector recovers.

In a recession, the Job Guarantee would serve as a back-stop against rising unemployment and maintain a stimulus for aggregate demand.In times of economic expansion, participants could leave the Job Guarantee scheme for higher paid positions in the private sector.

A Job Guarantee scheme would also replace the current NAIRU (Non Accelerating Inflation Rate of Unemployment) with a NAIBER – Non Accelerating Inflation Buffer Employment Rate through control of the overall wage rate by allowing participants to transfer from an inflating sector to a fixed wage rate sector.

As the architect of the scheme Bill Mitchell argues, this would ultimately attenuate the inflation spiral. Mitchell’s scheme makes immanent sense. It provides not only a humane solution to unemployment, particularly long term unemployment and underutilization but also serves as both buffer zone and stimulant in times of private sector downturn.

In stark contrast, the continued application of supply side economics and ‘free market forces’ merely exacerbate a widening gap of social dislocation and unrest.

Similarly to Thorazine, Chicago School economics has had the long term effect of stultifying employment in Australia to the point of atrophy.

It is well past time that MSM economists, not to mention assistant governors of the Reserve Bank threw out the dregs of the Thorazine in the Ovaltine and embraced the truth of the need for a new economic strategy based on Keynesian economic theory.

As politicians such as Chris Bowen and Tony Burke are aware, nations which issue fiat currency have the means well within their grasp to create a system of full employment and that the commencement of schemes such as the Job Guarantee are only a key stroke away.

If they don’t know this, then they certainly should as should the Greens.

All that is really required to bring about change especially in the light of the current governments mendacious and draconian ideology – is the political will to do so.

If what is termed ‘The Left’ cannot find this will, then perhaps it’s well past time for the public to insist on replacing the Thorazine with Benzadrine and find a replacement brand for the Ovaltine.

Ovaltine

Also by Edward Eastwood:

Galileo, Modern Monetary Theory and The Job Guarantee

ABBOTT, ANZUS, AND THE DILEMMA OF THE MID-SIZED SUPER POWER ALLY

Conscription by stealth: is cordite the new fragrance for the unemployed?

It’s Always Been Hard Labour for Labor

A guest post by Dan Rowden

Photo courtesy of thegaurdian.com

Photo from thegaurdian.com

There are some contentions that can be made in the political sphere that can’t really be proven but which we may intuitively feel to be true.  The points made in support of any such contention will either resonate with an individual or not.  The following is an example of such a contention:

It is generally more difficult for the Labor Party to gain and maintain Government than it is for the Coalition.

This is something I feel intensely.  Is it just my loony leftie leanings or is there some substance to this impression?  Here’s how I’d defend it:

Apart from specific anomalous moments in history, such as Murdoch’s support of Whitlam in 1972, the Labor party has always had to navigate the forces of a generally unsupportive mainstream media.

This is unsurprising as the major media enterprises in this country, and elsewhere in the developed world, will always be owned by the wealthy who will be ostensibly conservative in their political proclivities – sometimes quite openly, if not aggressively.

Gina Rinehart comes to mind as a case in point, even if she’s fairly new to the game.

Of course, media outlets will always vociferously defend their independence and integrity, and it can indeed be difficult to pin them down when they appear to fail, but consistent editorial themes cannot be hidden from view.

The media is also guilty of pushing, peddling and promulgating  – without proper critical analysis – certain cultural perceptions that make life endlessly difficult for the Labor Party:

It’s a thing deeply ingrained in the Australian psyche, almost as strongly as the mythical notion that John Howard was a Conservative, that the Coalition are naturally better economic managers than Labor.  Is this true?  Are they?  Is there any objective, factual and historical evidence to support this deep-seated belief?

Put simply, no.  In fact, for either major Party to assert they are better economic managers is largely meaningless.  Economics doesn’t exist in a vacuum.  It is not a science with objective criteria and rules.   Everything about it is value-based and ideologically driven.

With the exception of extreme examples such as Greece, there is no objective standard by which to judge economic performance and capability when different and competing socio-economic ideologies and theories are butting heads.

When the Coalition vaingloriously claims the mantle of superior fiscal managers, what they are in reality claiming is that their socio-economic ideology is superior.  That’s literally all they’re doing, and we are free to dispute such a claim.

But how did this feckless fable come about and what drives and supports it?  In my view it’s nothing more complex than the close relationship the Coalition has to the business world, big and small.

This relationship engenders a belief in people’s minds that if the Coalition are all about business and are so closely aligned with business that they must be good financial managers and know more about it than the Labor party.

This is reinforced by the largely uncritical reverence with which this Nation regards the business world, small business in particular.  This, despite the fact that half of the businesses started in this country, don’t make it past 4 years – a fact that doesn’t exactly lend itself to the view that business people are naturally endowed with unwavering commercial acumen.

The Coalition’s perceived and continually self-affirmed status as the brass hats of the financial world is a phantasmagorical myth so entrenched in our psyches that even some Labor supporters are inclined to be a little spellbound by it.

Governments of every political stripe have their successes and failures in the course of their economic tenure.  But success and failure are subjective and contextual judgements.

For some, the large budget surpluses of the Howard years were a testament to sound economic management.  To others, those same surpluses were a sign of the exact opposite, given they were mostly built on the back of asset sales, a Great Big New Tax and a near complete absence of investment in infrastructure and services.

A budget in healthy surplus when schools have to hold raffles to afford toilet paper is, for many, an economic and moral travesty.  But the reality is such judgements are always made along ideological lines and within the parameters of a given economic theory.  There’s no real truth to be found there.

But Labor has to constantly confront and try to scale the obstacle of the insidious cultural fable that they are the subordinates in the field of economic management.

Another pointed political thorn in Labor’s side is the perception that it is a puppet of the Unions and rank – maybe even file – with factionalism, branch stacking, and miscellaneous management malfeasances.  The Conservative Parties, for their part, mostly get a free ride on such issues.

Now, let’s be entirely frank.  It’s absolutely true that the Unions significantly influence Labor policy and its political dynamics; it’s also true Labor has factional and pre-selection donnybrooks every single election at every level of Government.

What is not true is that such problems are Labor’s alone and that no equivalent exists for the Coalition.  The Coalition is subject to pressures from the business community, lobbyists and the religious right to the same degree as Labor are subject to pressure from Unions.

The Coalition is not free from factionalism, nor from pre-selection dramas, branch stacking and so forth.  The Liberal pre-selection battle for the Seat of Greenway is a glaring example of this.

And let’s not forget that the Coalition partners wage their own, sometimes fierce, internal election battles, such as in the seat of Mallee, held since Moses fell ill and was put on tablets, by the Nationals.

And yet the Coalition’s Good Ship Lollypop sails along in untroubled waters.  Firstly this is because it has become cemented in too many heads that internal ructions are uniquely Labor party problems, aided and abetted by a media that is far more willing to report such things on Labor’s side of the political equation.   Secondly, most don’t see the influence wielded by the business community in the same negative light as that of the Unions.  Business people are saints and unionists are sinners.

This is demonstrated most pointedly by Kevin Rudd’s failure to implement his version (the version that would have raised actual money) of a Mining Tax in the face of a corporate campaign to curtail it.  It should have been the simplest thing in the world to sell: National tax equity. It was surely a square political peg headed for a square hole.  

Instead, Big Business exploited our pious devotion to the spurious notion of their prudence and virtue with an expensive and seductive advertising campaign, leading to the ridiculous sight of a nation full of blue collar workers believing that their obligation to pay tax was greater than that owed by the nation’s wealthiest.  This left Rudd with his square peg painfully forced into his star-shaped hole.

Now, I know the general thrust of my point is going to be characterised by Conservative types as a typical Leftie Labor Lamentation, but years of observation of the political universe in Australia leads me to conclude, on the weight of evidence, that my contention is a reasonable one.

As a nation, we tend to vote conservatively.  We really only vote Labor into power after our Coalition Conjugals become too stale and we look around for a bit on the side.  The left side.  The Hawke years stand as an interesting exception to the “rule”, but it’s hard to vote out a Prime Minister who is famous for swilling beer, cries at press conferences and says “bloody” on television.  It’s also interesting how many times boats have figured in furthering political careers.

I don’t think it’s possible to stand before all the impediments to re-election facing the current Labor Government and not see an overall trend; a history of folklore and fables that no doubt fuels the Conservative Parties’ obvious sense of electoral entitlement and makes it a daily burden for Labor in terms of communicating policy visions and philosophy.  You cannot meaningfully engage in conversation about matters of genuine importance to Australians when you constantly have to defend yourself against petty distractions like “Does this guy ever shut up?”.

And on that note . . .

Dan Rowden

Dan Rowden is a freelance writer and philosopher who has been active in philosophical and political discourse since Malcolm Turnbull invented the Internet in Australia. For the last 15 years, he has contributed to and administered Internet philosophy forums. Politics is a secondary interest, but he recognises moments of significance in Australia’s political history and for him, this is very definitely one of them.

 

ANDEV: the Tony Abbott policy announcement when you don’t have a policy announcement

Mining companies are one of the biggest Liberal party donors. Is it sheer coincidence that some of Abbott’s known policies reflect what Gina Rinehart and the big mining companies want?

We are all aware that Abbott has promised to repeal the carbon and mining tax; two taxes that Gina Rinehart (and others in the resource industry) have been publicly opposed to. However, the coincidence between Abbott’s policies and what Gina and the other big companies want, does not end with the repeal of these two taxes.

Gina Rinehart, besides being possibly the richest woman in the world, is also chairperson of a group called ANDEV and ANDEV want their own special economic zone in the north of Australia; an area where most of our mineral wealth is situated. Gina’s father had a similar vision.

On the ANDEV website, under the title “What needs to be done” there is a list and this list is eerily similar to some of the policies and ideas that Abbott has made public:

  • Special Economic Zone in the North
  • One-stop-shops for regulation (to cut “green-tape”)
  • Regional skilled migration visas (457 visas).

Abbott has given indication to a “One-stop-shop” for environmental approvals to cut “green tape” and even used the same terminology that is on the ANDEV website (as have the state LNPs).

Abbott has also indicated that he will consider expanding the 457 visa program and recently the Liberal party blocked a bill that would have ensured that 457 visa workers are only employed as a last resort, when suitably qualified local labour is not available.

Special economic zones (SEZs), while good for wealthy investors-do not offer any benefits for others, due to SEZs avoiding many of the costs of taxation, labour standards, safety and environmental regulations, to which other sectors in the same country must adhere to when doing business.

Another concern with SEZs is the displacement of locals. The host country and the developer require land, and this land is often taken from locals at very low prices. This is a concern, as a large percentage of land in the Northern Territory is Aboriginal owned.

Sadly, it appears that Tony Abbott and the Liberal party are putting the economic concerns of the big mining companies and multi-national oil and gas corporations ahead of our needs and the protection of the environment. If Abbott is elected, do not be surprised if all of the land north of the Tropic of Capricorn is made available to Gina and Co. as a tax free haven that is free from environmental regulation and has a lower standard of employee rights and conditions.

Thanks to The Daily Telegraph Pole Facebook group for this post. The aim of this group is to expose, and provide balance, to the bias and lies being spread by Politicians and the Media.

Update: It is interesting to note how consistent this ‘vision’ is to one of the IPA’s radical ideas to transform Australia:

42 Introduce a special economic zone in the north of Australia including:
a) Lower personal income tax for residents
b) Significantly expanded 457 Visa programs for workers
c) Encourage the construction of dams

The IPA (Institute of Public Affairs) is a free market right wing think tank that is funded by some of Australia’s major companies and is closely aligned to the Liberal Party. It’s members include Rupert Murdoch and yes, Gina Rinehart.

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