August 26th 2017


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Articles from this issue:

CANBERRA OBSERVED Crikey, is nobody a true dinks Aussie these days?

SAME-SEX MARRIAGE Hundreds of doctors call on AMA to withdraw defective statement on same-sex marriage

EUTHANASIA What disability advocates say about assisted suicide by Daniel Giles

SAME-SEX MARRIAGE Triggs' one important contribution to rights by Greg Walsh

ENERGY High prices 'destroying the economy': Glencore

ENERGY Renewable energy barely even a fair weather friend

ECONOMICS The world it is a-changin': globalisation in crisis

SAME-SEX MARRIAGE Gay Liberals' push out of step with LGBTI realities

INTERNATIONAL AFFAIRS South Africa is losing its rainbow nation credentials

MUSIC A moral scale: Does 'good' music make us better?

CINEMA War for the Planet of the Apes: Best-laid plans of apes and men

BOOK REVIEW Risk nothing; gain nothing

BOOK REVIEW The most infamous crime in history

MARRIAGE The issue, Bill, is transgender marriage

POETRY

LETTERS

MORAL EDIFICATION A cartoon

SAME-SEX MARRIAGE The media, champions for free speech and rights (for the media), demonstrate predictable inability to contain bias on postal vote

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ECONOMICS
The world it is a-changin': globalisation in crisis


by Colin Teese

News Weekly, August 26, 2017

The changes taking place in most of the Western countries are happening so fast and running so deep it is hard for even the most determined observer to keep up. More importantly still, the changes seem to have reshaped the way ordinary people evaluate economic and political performance. Nothing like it has been seen since the end of the Great Depression of the 1930s.

Back then, more or less by popular acclaim, confidence in what was regarded as orthodox economic and political wisdom had been shaken to its foundations. The outbreak of World War II postponed what would have otherwise been its certain, and probably disorderly, demise.

In recognition of this, even before an Allied victory in the war had been secured, plans were being made, under United States leadership, to reshape world economics and politics into a more agreeable package. The outcome of those efforts was to be profound.

New international disciplines were put in place to manage finance and trade, building on what had been done badly before. Perhaps for the first time, an effective – borrowing from current jargon – “rules-based” order was put in place.

This held the West together until the 1970s.

With it came a new reality – the U.S. in a leadership role for most of the “free world” in terms of security. In foreign policy a security blanket against the power of the Soviet Union, and domestically a new approach to the wellbeing of ordinary people. Alongside well-paid, reliable jobs, came the beginning of the so-called welfare state, covering health and old age.

Partly, this derived from a recognition of the need for “hands on” involvement in the management of the economy and its politics.

Much of this change was underwritten by the economic philosophy of great British economist John Maynard Keynes as expressed in his masterpiece, The General Theory of Employment, Interest, and Money. Keynesianism thus provided the economic and political signposts that, in greater or lesser degree, guided the Western world from the end of the war until the 1970s.

To this day experts disagree as to why Keynesianism collapsed. But what followed was a radically different economic and political vision, cooperatively advanced by then British Prime Minister Margaret Thatcher and U.S. President Ronald Reagan, emanating from the economics profession under the principal guidance of Milton Friedman, then professor of economics at the University of Chicago. The new way – these days called “neo-liberal economics” – turned Keynesianism on its head.

Swept away were the commitments to full employment, to the welfare state, along with the legitimisation of the role of government intervention.

In its place came the belief – expressed as certainty – that incomparably better outcomes would follow to the extent that economies wholeheartedly embraced the idea of market dominated, totally liberalised economics. The effect of these changes would be to turn everything into a commodity.

Part of the package was unqualified support for free movement of goods, services and capital across national borders, minimum government involvement in economic management, diminishing power for trade unions, and deregulation of worker rights and conditions of employment.

The new economics redefined the meaning of “employed”, which made it possible for governments to defend much higher levels of permanent unemployment. Not immediately obvious was the fact that these changes had effectively swept away most of the social and economic “securities” put in place immediately after the war.

Lower business taxes became the centrepiece of the changes. “Trickle down” economics, as it came to be called, gave the rich tax cuts on the assumption that some of the benefits would trickle down: both high and low-income earners would be better off.

As with so many revolutionary movements, ideology took hold of common sense; arguments questioning the new economics – however reasonable – were simply ignored.

The case for “free trade” provides a perfect example. Theory decreed, and proponents of free trade still believe it, that, in the absence of tariffs on imports, consumers would always enjoy the benefits of cheaper imports.

Theoretically true, but not necessarily so in practice. Sellers, for example, may not always face the competitive pressures needed to ensure that lower prices would be passed on to consumers rather than contribute to swelling profits.

Beyond that, the changes to taxation carried further potential to undermine the “theoretical” gains available to consumers.

Business taxes were reduced, along with tariffs. Both of these changes negatively affected governments’ total revenue collections. As a result, new sources of revenue had to be developed. The chosen path, indeed the only path available, was to tax consumption.

A tax on consumption siphoned off more of the benefits of cheaper imports. Worse still, the design of the consumption tax meant that it would fall most heavily on lower-income groups.

Over time, these adverse possibilities have become widely understood realities. Put bluntly, mainstream political parties attempting to mount a defence of neo-liberalism are no longer believed. But while ordinary voter dissatisfaction with neo-liberalism can be said to be pretty much universal across the Western world, its political consequences for individual countries have not always been the same.

In Continental Europe certain special factors seem to be in play. The European Union has had to fight the battle on two fronts: neoliberalism and nationalism. The EU’s difficulties with neo-liberal dissatisfactions have coincided with its attempts to deepen political integration. The response of the member states that see this as a means of undermining national sovereignty, has been to push back hard.

Thus resistance in Europe against the ruling forces in Brussels feeds into both left and right. The left mostly on economic grounds, for example, in Greece; and the right on nationalistic grounds, as in France, the Netherlands and Austria. Nothing much has been done about the left, but European optimists believe that the threat from the right has been contained. They are almost certainly mistaken.

The European integration movement continues to be threatened on both fronts; more seriously than ever now that the United Kingdom is in the process of separating from the European Union in what might turn out to be a protracted, bitter and consequential separation.

In a voter reaction against mainstream political elites, the U.S. has chosen a president who is inexperienced, nominally Republican, yet politically maverick. Unfortunately, the world places unreasonable demands on the quality of U.S. leadership, in what it does at home as well as in world leadership. Thus far Donald Trump has fallen short of those expectations.

As for Australia, we have a government that seems no less dysfunctional than that of the U.S.

By contrast, conservative governments in both New Zealand and the United Kingdom seem to be doing much better. They have successfully tackled the need to change direction, especially on economics, while holding on to the essence of a conservative philosophy. Specifically, they have retained their policy focus on the fundamentals of daily political life. Think housing affordability, energy prices, wages, health and education.

In New Zealand, and to some extent in the United Kingdom, the mainstream parties are capable of working together on enough of the basics to provide sound government. And sound government in this context means that the economy is working in ways that deliver equitable outcomes across the political classes.

What are the lessons we might draw from these various observations? Above all, that fundamental changes are taking place in our world. These changes are set to alter ideological positions shaped more than a generation ago but they will manifest themselves differently according to country circumstances.

At this point it is possible to conclude that the countries that are having the most difficulty in adjusting to the new arrangements are the European Union, the United States and Australia. In all cases political functionality is being affected by the inability to recognise the need for change.

Europe is important and its special difficulties are associated with overambitious plans for European integration. Australia’s problems are perhaps less important globally but they are important domestically.

The United States is, however, vitally important because of its leadership position in world economics and politics. The fact that its Government is not functioning as well as it needs to is not entirely, or even principally, Mr Trump’s fault.

Curiously, its dysfunction can be traced back to the same problems that afflict Australia. The mainstream political parties are at loggerheads over almost everything. The U.S. Government worked best when the parties were closer together; as when they put together the political and economic consensus after World War II. This leadership held the Western world together for more than a generation.

Perhaps it was the need to cooperate in the face of a Soviet threat that is no longer present. Perhaps it is the belief (mistaken) that with an economic deity in charge of the world there is no need of politics. If the latter is correct, it is certainly misguided. The world needs leadership and it is not the unguided missile of free-market economics subordinating human needs to economic domination.




























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