31 January 2009


Look, I'm sick to death of hearing how the answer to everything from bank collapses to child molestation is tax cuts.

Can everybody just get it through their heads that the extent of systemic failure of the world's financial systems means that before we do anything, we need to take a deep breath and realise that simple answers to complex questions are invariably wrong.

One would hope that the world learned a lot from the Depression and you wouldn't do the same things again. So while I get a bit thing when I hear "we must not fall into protectionism", it's a correct thing to say. It's just that I've been hearing it a lot for the last 20 years.

However, we we may have learnt from the Depression the fact is that the global trade and financial architecture is very different now than it was in 1929. You can start with the establishment of the Bretton Woods institutions if you like but abandonment of the gold standard, floating of currencies and subsequent substantial liberalisation of trade and investment (both direct and indirect) have yielded an interconnected world unlike anything we've seen before (I think, anyway).

Economics is not a science and it barely qualifies as an art so the shrill (and online at least, offensive) objections to anything that Kevin Rudd and Barack Obama have done or might be thinking are off the mark by a long way.

Most people think their governments are there to do something for them and at times like this with jobs and savings being lost, that expectation rises and not unreasonably so.

In most cases whatever the question, the answer is somewhere in the middle so I doubt that all the Christmas handouts got spent at the pub, TAB and on the poker machines. Some would have, some would gone onto the mortgage, some would have paid off other debts, some on Christmas presents and some saved. Treasury would have done some numbers but - like I said - economics is not a science.

It may be populism for Barack Obama to lay into the Wall Street bosses for paying mega-bonuses even as the firms went under, but those multiples of ordinary wages were, like the price earnings multiples of many companies, patently unsustainable.

A government should be governing for the whole country and unless everyone was happy to head into a "let them eat cake" moment, when many Americans were working two and three jobs just to stay afloat and someone's on $20m a year - then something's got to give. It's just not feasible for any government to sit back and watch its society splinter so dramatically.

Right, what was my point? Governments need to act. There are various responses including cash handouts, repairing or building infrastructure as well as tax cuts. Each intervention has positive and negative aspects and no single aspect will solve the problem in either the short or long term.

The global capitalist system hasn't failed (IMHO) so I'm out of step with the PM on that at least it would seem but, inevitably in my view, the whole shebang got out of kilter. In any case, we've yet to see the whole article that the PM has written so flying off the handle at any excerpt seems a bit premature.

Self-regulation, "light" regulation, and abolition of regulation was eventually going to lead to the situation we now find ourselves in.

One specific area where the so-called "neo-liberal" model did fail was in infrastructure and that's where I would hope a good proportion of the restorative spending goes. Many of Australia's cities were growing too fast for infrastructure to be provided, let alone maintain was was already existing. Add to that the belief that there were markets for public goods and failure was inevitable. PPPs were too-clever-by-half ways for governments of all persuasions to attempt to provide infrastructure while abiding by the neoliberal holy grail of budget surpluses and triple-A ratings. How anybody ever expected that to work I don't know.

(end of rant)

No not quite: it'll take more than tax cuts, OK?

On another and far more pleasant subject, I am about to go and bottle the latest batch, a Coopers Australian Pale Ale. It seems to have fermented according to the book and the last batch (Coopers Canadian Blonde) ended up being a very drinkable brew indeed.

Here's to the global recovery, step by step!


Ann oDyne said...

hang on a sec?

you've just done the Marx & Engels memorial lecture, and finish by describing home brewed Cooper'sAle?

which price, if I purchase it at Liquorland, comprises a hefty swag of TAX to the revenuers ...

which is a reason why ...many people home-brew.

phil said...

Guilty as charged, yer 'onour.

Lord Sedgwick said...

"Guilty as charged, yer 'onour."

Wot?! I'm related to her and I know she has no 'onour - but possesses a mean left hook, so moderate this comment with due regard to this "waving not drowning, weaving not ducking" old codger.

phil said...

Busted by the self-appointed representative.

A colony founded indeed.

Don't you have any voles that need strangling?

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