If there was ever a time for a government to take the bit between its teeth and achieve great things, this is the time. The coronavirus has essentially picked up the chessboard, and thrown all the pieces up in the air. Now is the opportunity to produce a better world, with plenty of goodwill from the community, and a general feeling that the excessive and aggressive capitalism of the recent past has not delivered the benefits that it promised. Time for a fresh start, perhaps?
Will there be a re-set?
Scott Morrison is the person making the policy choices right now, with Josh Frydenburg as his willing side-kick. Will they choose a green re-imagining of our economy? Will they follow the expert scientific advice and invest in a renewable energy revolution? Will they attempt to re-set Australia so that systemic inequality and perilous employment conditions become a thing of the past? Will they embark on a massive social building programme?
Don’t hold your breath. Do not expect such a re-think from the leaders of this Australian Government. Consider the decision to allow Australians early access to their super. 11% of the $23 billion withdrawn early in the scheme was spent on gambling. Every cent of that $23 billion, plus interest, will now have to be provided, by the government of the future, as a pension. The treasurer is comfortable with that amount of debt being deferred. He thinks his books will look better, in the short term. What a marvellous plan! It reeks of trying to return the budget to balance early, notwithstanding the harm it will yield.
They have already started cutting entitlements. They are signalling lack of affordability. They are talking of throwing two million into poverty. They are oblivious, and they are personally sitting comfortably, fully employed, but not actually going to work. They are not accountable, because Parliament is closed. How did we get here?
A return to supply side economics?
Frydenburg’s statement at the Press Club this week also says much about the way he and Morrison think. Say something to soothe the people, but proceed regardless. “We are not a government of austerity. We are a government that will support the economy at a time that it needs it, but we will also be disciplined.” Verbal acrobatics, which no-one believed. He then removed all doubt by revealing his boyish enthusiasm for Margaret Thatcher and Ronald Reagan. He even expanded on this idea, explaining how much he admired them both.
She is famous for saying that there is no such thing as society. She destroyed Britain’s manufacturing industry and her policies led to mass unemployment. Reagan is famous for the largest tax cut in American history, as well as increased defense spending, which tripled the budget deficit in eight years.
Thatcher and Reagan ended the recession in their respective countries, but destroyed the employment opportunities of a generation. They are also notorious for stripping away environmental and regulatory safeguards, which could be said to be the fore-runners for the hyper-capitalism and deeply unfair and flawed societies which followed. It is an awful, but fair, charge to make; they were the political parents of Boris Johnson, and Donald Trump. Wow!
Supply side economics, better known as trickle down theory, is their preferred economic model, where every time a billionaire saves money on reduced taxes, he eventually spends some of it. So he buys a large yacht, or any other luxury item, and the odds are a poor person gets the opportunity to work on making it. This is the part that trickles down. Like crumbs from the rich man’s table.
The problem is that very little does trickle down. It is known to reduce services, because government revenue shrinks, and it also reduces employment, because it does not take many working people to make that yacht. So with reduced employment there is a contraction in demand, because working people only spend their money on food and rent. Without a job, they cut back on both.
So there is a tension between what Morrison and Frydenburg say, and their political preferences. They want to lead the country out of recession by creating jobs, but the political and economic theory they practise is the antithesis of expansionary. All it does is punish the poor and the unemployed, while giving tax cuts to the rich.
Should they stimulate the economy?
Instead of providing continued cash to the unemployed, who spend it immediately, their first instinct is to give tax cuts away. That means even less tax revenue, less stimulus, and the vain hope that the money saved will be spent on worthwhile investment.
Morrison is currently riding a wave of personal approval, precisely because he has done what we wanted, and expected. He turned up on most days, and he only took a short domestic holiday during the opening up in July.
He has followed medical advice, and he has spent money to keep the wheels on the economy turning. This is not a radical departure from economic orthodoxy. He has followed the Keynesian model, because he had no choice. Everybody was doing it, because everybody knows it is the only way through a crisis.
Notwithstanding his personal preferences, he has allowed the state premiers to call the shots on opening and/or closing down the states. He has had a shot at showing some empathy, but that always looks confected, coming from him.
On matters like re-opening the schools he pushed, but he eventually deferred to the premiers. That was sensible, because as Donald Trump has discovered, parents ultimately decide whether to send their kids to school.
But if you scratch a neo-liberal like Morrison, you will find them unable to bear government spending, because underneath it all they cannot escape the straight-jacket of treating the money as if it is a household budget. And there is a wicked contempt for those who have lost their jobs. Perhaps they were not having a go. Remember Frydenburg’s comment that he is “favourably disposed to continue jobkeeper”.
I’m not sure what the Australian people will tolerate from these politicians, who are lucky not to have been thrown out on their ear last year. We all know it is our money, we all know we need stimulus to grow back the economy, and we have the boy-treasurer ‘favourably disposed’ to support the community through a once in a century pandemic. I suggest he make up his mind.