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Tag Archives: IMF

Upside down downunder

We sure do things upside down downunder.

Tony Abbott’s chief business adviser first tells us we are unprepared for global cooling, followed by lashing out at the UN response to the Ebola outbreak and labelling the world body a “refuge of anti-western authoritarians bent on achieving one-world government”.

Newman wrote an opinion piece for the Australian newspaper in which he said the UN’s “leanings are predominantly socialist and antipathetical to the future security and prosperity of the west”.

“The philosophy of the UN is basically anti-capitalist,” he writes. “Countries that pay the most dues, mostly rich Anglo countries, are those to which the world body shows the greatest disdain.”

Is he suggesting that we should receive foreign aid in thanks for using up all of the world’s resources while killing the planet?

Aside from Maurice Newman’s bizarre ravings, our inaction on climate change, our inadequate response to the Ebola crisis, the chief executive of Whitehaven Coal telling us that coal “may well be the only energy source” that can address man-made climate change, and the sheer bastardry of cutting real wages and entitlements to defence personnel as we send them off to war…..we are also ignoring the call from the rest of the world to take action to address income inequality.

Despite being one of the richest nations on earth, one in seven Australians are living in poverty. Thirty per cent of Australians who receive social security payments live below the poverty line, including 55 per cent of those on unemployment benefits. Fifteen per cent of aged pensioners live in poverty.

So it seems unfathomable as to why these people would be targeted when the government is looking for savings.

Since 1980, the richest 1 percent increased their share of income in 24 out of 26 countries for which the IMF have data.

In the US, the share of income taken home by the top one percent more than doubled since the 1980s, returning to where it was on the eve of the Great Depression. In the UK, France, and Germany, the share of private capital in national income is now back to levels last seen almost a century ago.

The 85 richest people in the world, who could fit into a single London double-decker, control as much wealth as the poorest half of the global population– that is 3.5 billion people.

With facts like these, it is no wonder that rising inequality has risen to the top of the agenda—not only among groups normally focused on social justice, but also increasingly among politicians, central bankers, and business leaders.

Our politicians are telling us that they want to provide the opportunity for each person to be their best selves but the reality is that we do not have equal opportunity. Money will always buy better-quality education and health care, for example. But due to current levels of inequality, too many people in too many countries have only the most basic access to these services, if at all. Fundamentally, excessive inequality makes capitalism less inclusive. It hinders people from participating fully and developing their potential.

Disparity also brings division. The principles of solidarity and reciprocity that bind societies together are more likely to erode in excessively unequal societies. History also teaches us that democracy begins to fray at the edges once political battles separate the haves against the have-nots.

A greater concentration of wealth could—if unchecked—even undermine the principles of meritocracy and democracy. It could undermine the principle of equal rights proclaimed in the 1948 Universal Declaration of Human Rights.

Redistributive policies always produce winners and losers. Yet if we want capitalism to do its job—enabling as many people as possible to participate and benefit from the economy—then it needs to be more inclusive. That means addressing extreme income disparity.

One way to address this is through a progressive tax system but instead, our government is looking at regressive measures like increasing the fuel excise and the GST. These will impact far more greatly on low income earners.

Another avenue is to expand access to education and health but instead, our government is cutting needs-based education funding, making the cost of tertiary education prohibitive, and introducing a co-payment to discourage people from seeing the doctor.

Abbott, Hockey and Cormann assure us that if we make the rich richer we will all benefit. Everyone from the Pope to Rupert Murdoch knows this is rubbish.

Two weeks ago In Washington, in a speech to the world’s most powerful finance ministers and central bankers, Rupert Murdoch accused them of making policies to benefit the super rich.

In it, he blamed the leaders for increasing inequality, said the ladder of generational progress was now at risk, and warned that a moment of great global reckoning had arrived.

I note that his criticism of poor policy does not stop him from taking advantage of said policies. “I’ll only be as good as you make me be” seems to be the prevailing principle.

Hockey’s response to Murdoch’s barrage was interesting.

“Certainly, as he says, loose monetary policy has helped people who own a lot of assets to become richer, and that’s why loose monetary policy needs to be reversed over time, and we’ll get back to normal levels of monetary policy, normal levels of interest rates,” Mr Hockey told AM’s presenter Chris Uhlmann.

“Governments, on the other hand, have also run out of money and can’t keep spending money – particularly on the credit card – to try and stimulate growth.

“So, if loose monetary policy is not available and actually makes the rich get richer, and governments have run out of money, how are we going to get growth going in the world economy over the next few years? And the only way to do it is through structural changes that make us better at what we do.”

The structural changes suggested by Mr Hockey will increase inequality and send more people into poverty which is indeed what Coalition governments are good at doing.

Pope Francis recently tweeted “Inequality is the root of social evil.”

In last autumn’s essay, Evangelii Gaudium, Francis wrote that: “Just as the commandment ‘Thou shalt not kill’ sets a clear limit in order to safeguard the value of human life, today we also have to say ‘Thou shalt not’ to an economy of exclusion and inequality. Such an economy kills … Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalised: without work, without possibilities, without any means of escape. Human beings are themselves considered consumer goods to be used and then discarded.”

The claim that human beings have an intrinsic value in themselves, irrespective of their usefulness to other people, is one that unites Christianity and socialism. But if you think the market is the real world, it makes no sense at all, since in the market, value is simply the outcome of supply and demand.

A recent article by Lissa Johnson (on Ne Matilda) discusses decades of research into political psychology.

“Another ubiquitous finding is that conservatism is inversely related to the pursuit of social and economic equality. Conservatism correlates strongly with a preference for fixed social hierarchies entailing inequality between social groups, along with punitive attitudes towards marginalised and/or non-conforming members of society, who are seen as destabilising elements that threaten social cohesion.”

Australia is indeed a wondrous place where coal will save us from climate change, where helping the rich to get richer will make us all happier, and where the poor will be asked to pay off the nation’s debt.

Invisible ink

Image from abc.net.au

Image from abc.net.au

If you are looking for Tony’s signature PPL policy in the budget you will need “a scanning electron microscope” according to John Daly of the Grattan Institute. It only appears in one paragraph.

We are told that the government will cut the company tax rate by 1.5 percentage points (to 28.5%) from 1 July 2015. For large companies, the reduction will offset the cost of the Government’s 1.5% Paid Parental Leave levy but we are not told how much the levy will raise. We are told that provision has been made for PPL in the contingency reserve, a bucket of money reserved for decisions taken but as yet not announced by government, decisions too late to be included in portfolio estimates and so on, but no specific figures. We are told the cap reduction to $100,000 has made a small change in the cost, but not how much.

And that is the only thing that you will find in terms of references to paid parental leave – apart from a single line in the Treasurer’s speech – in literally hundreds and hundreds of Treasury documents about the budget.

Tony’s signature policy is written in invisible ink.

The official Treasury explanation is the Commonwealth is still negotiating with the states about their contribution to the scheme, and the funding is included in the budget’s contingency reserves. The same response has come from Treasurer Joe Hockey.

“We are still negotiating with the states about the scheme and, as you know, we’ve reduced the threshold from $150,000 to $100,000 in relation to the PPL,” he said. That might prove a little more difficult than expected considering how the Premiers are feeling right now.

Mr Daley does not buy this excuse.

“I would note that there are lots of other things about which there are uncertainties which, nevertheless, go into the budget, particularly at the point that they are formally government policy. What that doesn’t explain is why there is so little airplay for an important policy. Even if there are plenty of uncertainties around it, it’s already in the numbers in effect.”

When costing the Coalition PPL scheme, the Parliamentary Budget Office said that its estimate of the cost of the paid parental leave scheme is only of low to medium reliability because it is subject to assumptions including working women’s fertility rates, female labour force participation, the wages parents earn and how much leave parents take after the birth of their children.

The Productivity Commission found that PPL schemes like Abbott’s with “full replacement wages for highly educated, well-paid women, would be very costly for taxpayers and, given their high level of attachment to the labour force and a high level of private provision of paid parental leave, would have few incremental labour supply benefits”.

Studies done by the Grattan Institute showed that for every dollar you spend on paid parental leave, you would get double the impact on female workforce participation if you spent it subsidising child care.

A study last year by the OECD on drivers of female labour participation found PPL schemes definitely did improve participation, but the increase in participation from increased spending on such leave schemes is less tangible.

What it did find, however, was that the link between increased spending on childcare and improved female participation was “unambiguous”.

It compared spending on PPL and childcare and noted that “policies to foster greater enrolment in formal childcare have a small but significant effect on full-time and part-time labour force participation – and these effects are much more robust than the effects of paid leave or other family benefits”.

This reflects the work of the IMF last year, which found that “if the price of childcare is reduced by 50 per cent, the labour supply of young mothers will rise on the order of 6.5 to 10 per cent.”

But participation isn’t everything. If female participation is high, but women are mostly working in low-paying jobs with little chance for advancement, that is hardly a good result. A 2012 study attempted to examine the situation from a broader context.

It looked at the “inputs” each country had in place to improve female participation – from steps that governments and the private sector did to improve the economic position of women to the education attainment of women as well as maternity leave and childcare access.

It then looked at the “outputs” of women’s participation in the national economy – such as the ratio of pay between women and men, as the proportion of women among technical workers and also numbers of senior business leaders.

According to these measures Australia, it may surprise you to know, is ranked equal highest with Norway.

On the “Access-to-Work” input, which included pay childcare access and maternity leave provisions, Australia ranked 6th.

The current PPL scheme is not poor in comparison to most other nations. And some nations with smaller PPL schemes like Canada and New Zealand actually have higher female participation rates among 15-64 year olds than does Australia.

Currently 58.4% of all adult women participate in the labour force (ie. as workers, or looking for work); compared with 70.9% of adult men.

The reason for the gap is because of the decline in participation of women aged 25-34 compared to men.

In the early 1980s the drop in participation for women after 25 years of age could be up to 18 percentage points. And it would never recover. Now there is virtually no difference – in fact the age bracket with the highest female participation rate is the 45-54 age group.

The reality is that given our current position, any gains in women’s participation are always going to be at the margin – our big steps in women’s participation occurred in the 1980s and 1990s owing to societal changes as much as anything else.

Despite all the evidence suggesting that affordable childcare is far more important than increasing paid parental leave, the current review of childcare conducted by the Productivity Commission stipulates any recommendation must “consider options within current funding parameters” – ie. no extra funding.

It seems apparent that in this, like so many other areas, we are ignoring the advice and experience of experts to waste a lot of money satisfying the PM’s vanity.

To be rich is indeed glorious…

tony-abbott-and-xi-jiinping And there we have it – a snapshot of our Prime Minister from his own lips.

“TONY Abbott has described his visit to China as the most important ever undertaken by an Australian leader and has congratulated the Communist country for its pursuit of wealth.”

As Abbott echoed Deng Xiaoping’s advice that “to get rich is glorious”, 700 Australian businessmen are about to sit down with their Chinese counterparts to determine just how glorious they can be. They won’t be discussing climate change or pollution. They won’t be discussing human rights abuses or health. And they most definitely will not be discussing those inglorious poor.

Pope Francis may have a different idea of glory. He recently warned that the existing financial system that fuels the unequal distribution of wealth and violence must be changed, and he begged the Lord to “grant us more politicians who are genuinely disturbed by the state of society, the people, the lives of the poor.”

“How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points?” Pope Francis asked an audience at the Vatican.

In an apostolic exhortation he wrote:

“As long as the problems of the poor are not radically resolved by rejecting the absolute autonomy of markets and financial speculation, and by attacking the structural causes of inequality, no solution will be found for the world’s problems or, for that matter, to any problems.

A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules. To all this we can add widespread corruption and self-serving tax evasion, which has taken on worldwide dimensions. The thirst for power and possessions knows no limits”

He goes on to explain that in this system, which tends to devour everything which stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market, which has become the only rule we live by.

“Just as the commandment ‘Thou shalt not kill’ sets a clear limit in order to safeguard the value of human life, today we also have to say ‘thou shalt not’ to an economy of exclusion and inequality. Such an economy kills,”

The World Economic Forum in Davos identified the large and growing income gap between rich and poor as the biggest risk to the global community in the next decade. The WEF said its annual survey of 700 opinion formers had identified the income gap, extreme weather events and unemployment or underemployment as the three threats most likely to cause major cross-border damage in the next 10 years.

Jonathan D. Ostry, the I.M.F.’s deputy head of research, and Andrew Berg, another economist at the fund, published a study three years ago suggesting that inequality makes growth less durable. A flatter distribution of income, the study concluded, contributes more to sustainable economic growth than the quality of a country’s political institutions, its foreign debt and openness to trade, its foreign investment and whether its exchange rate is competitive.

Economic policy cannot be only about promoting low inflation and robust growth. Healthy, stable economies also depend on a reasonably equitable distribution of the rewards.

Hugh Evans, the Australian founder and chief executive of The Global Poverty Project (GPP), told an audience at the International Monetary Fund-World Bank Spring Meetings on Thursday that Tony Abbott “broke his promise” after his election victory.

“He slashed the foreign aid budget dramatically which will have far-reaching consequences for the world’s poor,” Evans, standing before World Bank President Jim Yong Kim and United Nations Secretary General Ban Ki-moon, told the audience. “We don’t want this single act of political indecency to undo the great work Australia has done to help end extreme poverty.”

Meanwhile, Joe Hockey criticised delays in implementing changes agreed by the Group of 20 bloc of advanced and developing nations in 2010, which he said were letting down the international community and were entirely the fault of the U.S. Congress.

“I am deeply disappointed that the IMF quota and governance reforms that the G20 agreed to in 2010 have still not been implemented and that the path forward for ratification is now highly uncertain,” he said at an event organized by Johns Hopkins University.

“The failure to finalize this issue diminishes America’s global standing instead of enhancing it.”

I wonder how that compares to Abbott’s refusal to support the green climate fund supported by the United Nations. In the Commonwealth Heads of Government Meeting in Sri Lanka, Australia joined with Canada in snubbing the green climate fund. Mr Abbott called it the “green capital fund” while calling the profitable Clean Energy Finance Corp. the “Bob Brown Bank” after the former head of the Australian Greens.

The government of a democracy is accountable to the people. It must fulfil its end of the social contract. And, in a practical sense, government must be accountable because of the severe consequences that may result from its failure. As the outcomes of fighting unjust wars and inadequately responding to critical threats such as global warming illustrate, great power implies great responsibility.

Government economic responsibility is linked to protection from the negative consequences of free markets. The government must defend us against unscrupulous merchants and employers, and the extreme class structure that results from their exploitation.

Governments argue that people need to be assisted with the economic competition that now dominates the world. But the real intent of this position is to justify helping corporate interests, siding against local workers, consumers and the environment.

This government has tossed out its job description and is on a corporate crusade. They are capitalist fundamentalists who believe all things public are bad and all things private are good, and they are determined to use their time in power to sell off Australia and to further the interests of their wealthy donors.

According to Tony Abbot’s description, Gina Rinehart must be the most glorious person in Australia – although I think she lives in Singapore? For me, the glorious people are those that care for others – the carers, nurses, social workers, teachers, paramedics, firemen, charities, volunteers, environmentalists, animal protection activists. Our scientists are glorious with their amazing research into a sustainable, healthy future, as are our artists and musicians who speak to our senses and our souls.

I used to think Australians were a pretty glorious race in general. Now I am not so sure.