Wednesday, April 30, 2014

A name for Australia's bloody bewdy economy?

Do we have a name for the unprecedented period of uninterrupted growth that Australia has experienced since the Hawke/Keating era, which now spans longer than two decades? I can't find one. We need a name for it.

Paul Krugman and others talk a lot these days about a New Gilded Age, referencing the first Gilded Age in America during the last decades of the 19th century, and with French economist Thomas Piketty's new book on inequality there are more mentions of the Belle Époque covering a similar timeframe in France leading up to World War I. Both of these eras were characterised by solid economic growth based on technologically-driven resources booms combined with massive inequalities between rich and poor - something the world is seeing a lot of at the moment, but particularly in Australia where we haven't experienced a recession since 1991 and we have to put up with the political meddlings of the nouveau supérieur-riche like Gina Rinehart and Clive Palmer.

The first Gilded Age was built on the back of the advent of corporatisation, industrialisation and the development of a middle class through the actions of entrepreneurs dominating new markets acting in organised oligarchies. The gild in the Gilded Age was the rich enjoying the fruits of others' labour in highly disproportionate amounts, enabled by a corrupt system. The Belle Époque was the last Indian summer of the imperial era in Europe, only ended by the final death throes of 19th century-style colonial empire in WWI. The époque was truly belle only for the rich, who did very little to uplift the poor as the bohemians enjoyed opulence previously confined to French royalty.

Australia's period of economic glory has not been sullied by nearly as much inequality, but it does share the resources boom element - albeit that the demand has not been domestic as the boom only came because we were able to act as China's quarry while they engineered their way out of agrarianism. We had a gold rush back in the 1850s, and the notion that Australia has been riding "on the sheep's back" through wool exports surfaced as early as 1894, apparently. The current long boom was started by Keating's reforms in floating the dollar and promoting competition in export industries, and policies to support productivity and competitiveness have been continued through governments of both stripes through a bipartisan commitment to sound Keynesian management of the economy that continues to this day (which supporters of Tony Abbott are only just now discovering).

"NSW disease" - the sort of cynical, closed-shop, oligarchic corruption that the Fitzgeralds and ICACs of the world periodically bust - continues on at a state level across Australia, and has done so since the Rum Rebellion. At a federal level, though, the reforms that Keating started have served the country well for more than two decades. It would be tempting for a leftist like me to name the era after him, but that wouldn't stick and would elevate his role higher than it deserves, given how many fingerprints were on the blueprints that he and others implemented.

I feel a sporting reference here would be most appropriate, and the sport that unites all parts of Australia like no other is cricket. People say of a person who died at an old age that they had a good innings, and while there will undoubtedly come a time when Australia's economic run feast does come to an end and we finally hole out to cow corner after spanking the aggot about the park with gay abandon to our heart's content... for a long time now, it has been a Good Innings.

Tuesday, April 29, 2014

Abbott Disappointment Syndrome: the banality of conservatism

We were promised a lot of things by Tony Abbott. Specifically, on the eve of the 2013 election (via the Herald-Sun, HT Catallaxy):
Whether it’s a stealth tax (like) the emissions trading scheme, whether it’s an upfront and straight forward tax like a carbon tax, there will not be any new taxes as part of the Coalition’s policies.
A trial balloon is being floated, as is customary in pre-Budget times. This time, it's a "debt levy" which would only apply during times of budget deficit - which according to all credible forward estimates means it would be ostensibly permanent. (NOTE: the payment figures are wrong, see below.)
Taxpayers in the 37c tax bracket — on incomes of $80,000 to $180,000 — are likely to pay an extra 1 per cent.
Those earning above $180,000 are likely to pay an extra 2 per cent.
Like the Gillard government’s flood levy, the debt tax will also be temporary, applying only while the Budget is in deficit.
Under the new levy:
* A taxpayer on $80,000 will pay an extra $800 a year — around $15 a week.
* Someone earning $150,000 will pay an extra $1500 a year ($29 a week).
* A worker on $200,000 will be slugged an extra $4000 a year or $77 a week.
* A taxpayer earning $400,000 will pay a thumping $8000 extra tax, or $154 more a week.
As I was saying flippantly before the election, Abbott is going to be an excellent Labor Prime Minister. His strategy is to run all of Labor's policies - including Gonski, NDIS and the NBN - because the people like them, as per pretty much every poll on these issues. He only thinks he can get a mandate to actually change anything in the subsequent election when he enjoys the benefits of incumbency.

The debt levy is a classic progressive leftist tax, and is only being floated up to save face from the confected "budget emergency" hoo-hah. If the Canberra press gallery had been paying attention to Cabinet factionalism, they might be telling is whether this balloon had the name of Joe Hockey on it, or whether it was a sly Sinodinos idea in a brown paper bag, or whether it had the sticky fingers of the heavily medicated Andrew "Skippy" Robb all over it. But no, internal political intrigue is only for Labor governments it seems, and all we have are grumblings from unsourced backbenchers.

Abbott is not a new broom to usher in a renaissance of unfettered liberty, as the right had been hoping. His major selling point was that he was not going to sell papers with bad news like Gillard and Rudd, whom the rightwing media did a slap-up job of portraying as incompetent. As part of the statification of federal politics, Abbott's core promise was to keep himself out of the news as much as possible, like a good state Premier. No gnus is good gnus, as Gary Gnu put it so eloquently. As the flip side of this lowering of expectations, though, evidence to date shows that Abbott is nothing more than a state-level conservative in his competencies, no more skilled than the recently departed Barry O'Farrell.

From a policy standpoint, all Abbott has changed is some irrelevant culture war window-dressing like knighthoods. His attempts at hollowing out Gonski, the NBN and the ABC without actually lowering their funding levels appreciably is the definition of his incompetence - he annoys the left by dismantling the structures built by Labor to carry out the productive processes of government, but he also annoys the right by failing to do anything meaningful about spending. Witness the massively humongous spending on F-35 Joint Strike Fighters. This is pure Abbott: a complete waste of time and money for no clear reason whatsoever. This is why he is being called Labor Lite. He spends like Labor, but his active sabotage of delivery of government services through the ideological actions of his underlings means everyone goes home unhappy. His credo is that government is failure, and he intends to make it fail as a measure of his own success.

All of this was utterly predictable before the election. Many voters may roll their eyes but be glad that their TV news can be devoted to MKR cross promotions and royal visits, instead of whinging about change. Disengaged and oblivious is how many voters would prefer to stay during this Great Interregnum. That can only benefit the right.

UPDATE: Greg Jericho in the Guardian points out that the Herald-Sun got the figures wrong in the above quote, as the 1% would not apply to income below $80,000 and the 2% would not apply to income below $180,000. Thus, the real figures should be:
Under the new levy:* A taxpayer on $80,000 will pay an extra zero dollars a year — $0 a week.* Someone earning $150,000 will pay an extra $700 a year ($13 a week).* A worker on $200,000 will be slugged an extra $1400 a year or $27 a week.* A taxpayer earning $400,000 will pay a thumping $5400 extra tax, or $104 more a week.
I note there's some joker called Dan bleating over at Catallaxy about his tax bill of $140,000 going up, leading him to defect from the LNP to the LDP. This implies his taxable earnings are $370,000 and he takes home $230,000 per annum now, and would have to cough up an extra $4800 a year, or less than a hundred a week from his pay packet every Friday of $4423. Poor diddums, he might have to knock off one less bottle of Grange per week. How selfish can one man be?

Monday, April 14, 2014

Elder Scrolls Online's Dodd-Frank economy

I am always fascinated by the market economies built inside multiplayer computer games to exchange virtual goods among players, and the recently released Elder Scrolls Online (ESO) has some interesting twists on usually accepted norms.

As a MMOG (massively multiplayer online game), ESO follows in the footsteps of Everquest, Dark Age of Camelot and World of Warcraft (WoW), as well as more recent iterative efforts like Guild Wars 2 and Diablo 3. In all of these games, the fantasy milieu of swords, staves and sabatons has to include a way of crafting and trading the tools of the medieval swashbuckling trade in the fictional world of Tamriel.

Without going deeply into the history of such things, the crucial point here is that in the most successful of these games, WoW, the economic system had evolved to a point where there was a universally accessible "auction house" (AH) for ethereal items which acted in much the same way as globalised stock markets do in the real world. You could put your imaginary halberd up for sale on the AH in WoW and if it was priced competitively, it could be sold in a matter of seconds to one of millions of customers browsing newly listed goods in real time. An analogy can be drawn with the high frequency trading systems on the "real" Wall Street, which have revolutionised the financial sector in recent years. The HFT systems behind the AH were developed over many iterations, to streamline the processes and ensure the broadest and most efficient market possible.

Now comes ESO, which seeks to reverse some of these innovations as discussed in the fanbase's Tamriel Foundry forums. Instead of a global AH, trading is only possible face to face, or in guilds of a maximum of 500 members. You can only be a member of five guilds, so instead of millions of potential trading partners, you can only max out at 2,500. In addition, instead of the best items in the games being rare drops from powerful boss monsters which would drive demand on the auction house, each and every player can conceivably make the best items themselves by spending time levelling up their own crafting skills.

Why would Zenimax, the developers of ESO, seek to turn back history like this? The reaction of one ESO player to the whiners illustrates the reasons:
What’s hilarious too is the fear mongering from the AH banker wannabes.
“This will ruin the game” “the game will be unplayable!” ect ect.
REALITY CHECK: No auction house in favor of trading and crafting means PLAYING THE GAME IS THE MOST REWARDING ACTIVITY and sitting around and flipping items (ie not really playing) IS NOT.
Get that through your wow heads. You don’t deserve to be rich sitting in town like a silk swaddeled merchant, if you want to be rich you have two options:
1. Do something! Go be an adventurer.
2. Create something! Be a master crafter.
Or do both,
The adventurers drive the economy needing gear, they supply mats and demand. The crafters foster the economy by creating gear, they supply mats demand and items.
Where does a AH flipper fit into this system exactly? They don’t. They are a parasite that creates nothing but inflation and raises the price (workload) for both crafters and adventurers through the illusion of convience, which is easier to click through but costs twice as much gold, ie workload on the real players.
If you want to sit in one place and click through one menu while creating nothing but more work for other players you do not deserve to be powerful or rich, you deserve to be ostricized for the parasite you are.
This economic design by Zenimax reminds me of the Dodd-Frank reforms on Wall Street after the global financial crisis, which were passed to put a handbrake on the speculators who caused the crisis. You could argue about how successful Dodd-Frank has been, but we're talking here about intention. Just as Dodd-Frank was an attempt to encourage economic actors to abandon speculation in favour of investment in the "real" economy of making things, ESO has carefully planned its guild trading system to reward those who play the game of fulfilling quests, slaying monsters and storming keeps, rather than the meta game of playing the markets.

That is not to say trading is dead in ESO, far from it. The meta game now, such as it is, is to find the best trading guild - or perhaps in the longer term, to find the best guild for player versus player combat which nurtures its master crafters for the benefit of the rest of the guild. This kind of mercantilism is possibly more genuinely medieval than the HFT systems of WoW, but will it hold up over time? Only those playing in Tamriel have the power to complete that destiny.