April 4th 2020


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Articles from this issue:

COVER STORY The world has changed: Now for the new order

FAMILY AND SOCIETY Move to curtail underage online porn epidemic

CANBERRA OBSERVED ScoMo's delicate balancing act in extraordinary times

NATIONAL AFFAIRS Time and timing are crucial to Cardinal Pell's appeal by Peter Westmore

NEW ZEALAND Political divisions polarise across the Ditch

NEW ZEALAND Victorian Road Map smooths way of NZ anti-life clique to abortion 'reform'

FREE SPEECH Intolerance brigade at UQ attacks professor of Law

NATIONAL AFFAIRS Victoria lifts moratorium of gas exploration

CHINESE HISTORY The Soong Dynasty: Three sisters who rules China

LAW AND SOCIETY Guilt by accusation: The kangaroos are roaming freely through Australia's legal system

GENDER POLITICS Dr Quentin Van Meter's Australian talk is opening eyes in the U.S.

INTERNATIONAL AFFAIRS Australia is not safe in the borderless globalised world

SHOPPING AND SOCIETY The Ubermensch in the aisles

MUSIC We seem to have lost the point of counterpoint

CINEMA The Current War: Industrial miracle workers

BOOK REVIEW A dark trade that continues unabated worldwide

EBOOK READ THIS Both sides to this old story

LETTERS

AS THE WORLD TURNS

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COVER STORY The world has changed: Now for the new order

by Patrick J. Byrne

News Weekly, April 4, 2020

By the time this editorial goes to print, Australia may be under lockdown, with the Government running a command economy as it has in other crises, like World War II. Covid19 spells the end of globalisation as we have known it.

The promise of what economist Dani Rodrik calls “deep globalisation”, also known as the Washington consensus, was that free (unregulated) flows of money, industries and goods around the world would see a rising tide lift all boats.

In reality, it led to the failure of the international financial system in the 2007 global financial crisis (GFC). This resulted in the largest bank bailouts (corporate welfare) in history, which even then failed to restore global growth and full employment.

Thirteen years later, the covid19 pandemic has caused a crisis in the globally integrated productive economy, threatening a depression. The disruption of supply chains has left de-industrialised nations like Australia inadequately supplied with medical products (90 per cent come from overseas) and other essential goods for their own citizens, because governments have allowed a vast array of domestic industries to shut down or shift offshore in the name of globalisation.

Both crises represent the failure of four decades of globalisation policies, which were consistently and intelligently opposed by the NCC and its founder, B.A. Santamaria.

These failures illustrate the well-known economic trilemma outlined by Rodrik in The Globalisation Paradox (2012). Nations can have only two out of three things: be a democracy; have economic sovereignty with the ability to decide your own economic policies; deep globalisation, that is, free flow of capital, industries and goods across national boarders.

China has economic sovereignty and is deeply globalised, but it’s an authoritarian state.

Australia is a democracy, but its radical commitment to globalisation has been at the expense of the nation’s economic sovereignty, causing the demise of rural and manufacturing industries.

As the current situation dramatically shows, we can export vast amounts of coal, iron ore and gas, but in a pandemic people don’t turn to global markets or global institutions to ensure their intensive-care needs, or to pay their unemployment benefits, or to subsidise their struggling business. No, they turn to the federal and state governments.

Prime Minister Scott Morrison’s $1 trillion commitment for the crisis (forget balancing the federal budget) is indicative of fundamental changes as people demand the Government acts: that is, that the Government reasserts it economic sovereignty.

For example, every Australian would applaud the Government announcing an industry policy to ensure essential medical supplies were to be produced by Australian companies.

What is needed now? Anatole Kaletsky, chief economist and co-chairman of Gavekal Dragonomics succinctly argues that governments must guarantee unlimited compensation (as close to 100 per cent as possible) for lost wages to workers affected by quarantines and lockdowns and lost revenues to businesses (at least small business). Almost all advanced nations could raise their debt-to-GDP levels by 25 per cent without undermining their currency.

Central banks like the Reserve Bank of Australia could expand the money supply by 25 per cent for this purpose.

Kaletsky says that full compensation is far from unprecedented. “Farmers are regularly compensated for agricultural disasters.” And following the GFC, “insurance companies, and financial markets have received effective fiscal transfers in many countries amounting to far more than 25 per cent of GDP”.

In addition, should the housing market fall substantially, the Government needs to do more than reduce interest rates and stretch out payments to keep people with mortgages in their homes. Economist Alan Blinder, Writing in the Wall Street Journal, pointed out in 2009 that during the Great Depression, the United States had a Home Owners Loan Corporation, which purchased mortgages at discounts and refinanced them.

Longer term, it is clear that the Federal Government will need industry policies to secure, and in many cases, rebuild, strategic industries. These include agriculture, key defence industries, telecommunications, energy and rail. Some will need to be in public hands.

New trade policies will need to ensure domestic industries are not undermined by imports.

A new development bank will be needed for both infrastructure and industrial development.

If our leaders don’t grasp the new reality, they risk repeating the mistakes governments made in the Great Depression, with catastrophic effects on the lives of millions of people

Patrick J. Byrne is national president of the National Civic Council.




























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