The coming Australian recession...?

I buried my prediction of the first Australian recession in decades in a post back in May, because I wasn't quite sure it would come to pass. Today, in the light of the most recent quarter having growth of a measly 0.2%, Fairfax runs an Ian Porter piece laying out the reasons for believing that the recession will come in the next year or two, which boils down to the delayed effect of the Abbott decision to cut off assistance for the car industry and its subsequent withdrawal from the Australian economy.

The timing is interesting electorally, because the process of up to 200,000 automotive workers losing their jobs is due to be completed in 2016/17, with a full Abbott term due to finish in November 2016. We are already in some hinky territory with the Chinese slowdown, albeit currency devaluation has solved a lot of problems for our exporters and there's probably more room to drop below the current ~70c.

The last budget was a cash splash so large that it caused many pundits to think it was priming the Keynesian pumps for an early election, yet the economy is barely escaping contraction as it is. Far from a budget emergency, now we have a growth emergency, which will be followed by an employment emergency. Hockey hasn't really got any more gears to shift up fiscally, so when the automotive fecal matter hits the Centrelink air circulation equipment, the job of stimulating the economy is going to fall to the RBA, which has only 200 base points to play with and would only be forced to burn them under great duress given the housing market is already hubba-bubba-double-trouble. Then we hit the zero lower bound, and we're cactus in a Mad Max Fury Road scenario.

This is playing out a bit like George W. Bush's last days, where all of his dud decisions culminated in a massive economic and political collapse. Just as Dubbya is now seen as a contender for the worst US President in history, Tony Abbott is shaping up to be the worst Australian Prime Minister in history if these doomsday detentes come to pass. All we could do was sit back and enjoy the hot licks from the Doof Warrior.

Reform, and other lies told by rent seekers

An excellent if highly cynical piece on yesterday's Reform Summit by Liam Hogan in the Guardian:

The one thing I would not have expected out of our democratic, parliamentary, capitalist system in 2015 is how much a lot of its managerial politics would resemble 1970s Soviet “actually existing” socialism.

As a hearkening back to the glory days of the Hawke summits which led to the Accord, it was history repeated as farce: special interest groups and other rent seekers reciting their laundry lists of demands, talking past each other and agreeing only to a meaningless and non-binding communique which was rightly pilloried by Catallaxy Files as being largely pre-arranged. Hogan's cynicism doesn't go far enough.

The appearance of many of the usual suspects from the stable of right-wingers employed by The Australian at an event organised by Labor's Craig Emerson was not all that surprising in view of Nick Cater's summary of the day's festivities, which consisted of listing all the wonderful ways that the Summit would enable Labor to give in to the Right's policy agenda of lowering Australian worker living standards to match those of Asia in the name of "productivity", "flexibility" and "competitiveness" - i.e. to line the pockets of the capitalists in ye olde Reaganite fashion.

If there is to be an actual bipartisan reform platform in this country, it has to be built with a view to the effects of the 1980s reform and how its effects have played out in the intervening decades. Primary among these is how workers were stiffed by the decision of Labor to put a dampener on real wages, because workers have not enjoyed the benefits of their own productivity gains since the 1980s. Meanwhile, capital productivity has lagged considerably even as executive pay has skyrocketed and share dividends have fattened. Multifactor productivity has been dropping over the past decade, by almost a full percentage point, despite labour productivity rising by 1.5% p.a., because capital investment has proved to be wasteful, particularly in mining.

Hogan makes some compelling arguments for the Soviet metaphor, but I also detected some Chinese influence in what is these days an outpost of the Chinese mixed economy. Kevin Rudd may not have been present to speak Mandarin to the assembled mandarins, but there were parallels to the five-year plans by faceless man in the central committees of those other modern faces of the jerry-rigged communist/capitalist hybrid experiment. There was no Xi, or Che for that matter, but one hopes the feng shui of the room was tickety-boo.

Now that the AUD is back within more regular historic parameters, the bleating about international competitiveness should stop. We should not lower our wages and workplace standards to match those of Asian countries, as that is short-term thinking. The next major growth source for Australia is the burgeoning Chinese middle class - and that of India to a lesser extent - and if we are to ride that wave for another boost to prevent recession post the mining boom, we have to work towards an economy which can sell to it.

"Reform" in this country is too often conceived as a zero-sum game where workers and employers fight over the scraps of the world economy in a race to the bottom to serve the lowest common denominator. That is not Australia's natural role in the Asian century. We can't be the Singapore or Hong Kong of the region because those trade hub positions are already filled, and we can't be Taiwan or Bangladesh either with their focus on manufacturing. We can supply the Chinese bourgeoisie with small amounts of high-quality shipped goods and large amounts of low-cost digitally-delivered services. Whatever policies are attuned towards building that scenario are the ones that will underpin our future growth. I doubt anything will come out of the Reform Summit that would come anywhere near towards that.

The zero lower bound government

Another budget has been and gone. Instead of the steaming turd that was the last budget, which was largely blocked by the Senate, this time we have zero. The Abbott government has spent the intervening period announcing bad policies, extracting the maximum amount of negative reaction as the public gradually and painfully rejects them, and then quietly dropping them. What they are proceeding with are much the same settings as were left by Swan, but adding a bunch of conservative nudge items which blow the deficit out. Hockey is deliberately doing nothing in the hope that revenues will rebound naturally from historic lows under Swan.

For me, the most astounding stat from this year's budget is that despite a projected deficit of over $35B, it will actually create an annual lag on the economy of as much as 0.5% of GDP (read it somewhere yesterday, now can't find the link, grr), and will do nothing to help slowly creeping unemployment. From a Keynesian macro perspective, it is the worst outcome possible. Most worryingly, it is based on assumptions that are rosy at best.

I have been feeling for a while that it is only a matter of time before Australia joins the rest of the Western world in hitting the zero lower bound of interest rates. All it is going to take with the current budget settings is one big assumption to be wrong - China hiccuping, the iron price plummeting below $35 as Rio Tinto and BHP Billiton squeeze out competitors, opportunistic currency markets persisting in inflating the $A - for the RBA to be faced with the prospect, given that fiscal policy is so pissweak, of having to further cut rates down close to zero where it is in America, Japan and Europe. And once you reach the zero lower bound and bring on all of the weirdness that happens in an economy as a consequence, it's very hard to raise them again, as Japan showed us from the 1990s on.

Australia under zeroed interest rates would be a scary place, given how our economy is structured so strongly around housing as a speculatory tax haven. If, as some pundits are saying, this budget is a precursor to an early election, that may be the last chance to avoid the unhappy fate of the ZLB. The Liberals don't have any ideas.

Club Troppo, Parishioners and High Broderism

When I first started taking interest in Australian poliblogs a few years ago, my first thought was that the Club Troppo web site sounded interesting, based as it was on the self-professed "political centrism" of Ken Parish and Nicholas Gruen. Back then, you had Larvatus Prodeo on the left (now deceased) and Catallaxy Files on the right, and Troppo nominally in the centre as the major group blogs in the Australian political scene. To me, group blogs are the most interesting variation of the form as they encourage dissemination of a range of ideas and viewpoints, producing a variegated editorial line instead of a blaring one-note foghorn. I wish I was part of one of these collectives, and indeed I did contribute a piece on the NBN to Club Troppo in my early time as a poliblog watcher.

As you may glean if you read the comments to that piece, my encounter with the resident Troppodillians was less than successful. Nicholas ended up calling me a mercantilist, which in the modern context is an implacable insult by a liberal Western wonk - never mind that Chinese mercantilism has been kicking the West's butt in the 21st century (that's for another post).

Anyway, one of the Troppo's latest is by Parish, and he engages in some classic "both sides do it" high Broderism to attempt to lay blame for mindless federal obstructionism at the feet of Labor:

... the cycle of retaliatory fiscal mischief goes back decades. I would date the phenomenon back at least to Paul Keating’s cynical and unprincipled demolition of John Hewson’s Fightback policy in the lead-up to the 1993 election, a tactic that Keating pursued relentlessly notwithstanding that he himself had advocated a GST only a few years previously and that John Howard by contrast had had the guts and integrity (not words that most on the Left would associate with him) to support most of the Hawke/Keating government’s necessary deregulatory, market-based reforms over the previous decade.  The gloves were off on fiscal policy from that moment on.

There were many valid and principled reasons for a centre-left leader to oppose Fightback!: slashing of welfare, abandonment of awards, cutting Medicare to ribbons, tax cuts for the rich and widespread privatisations. Yes, the GST was the issue on which the election was won and lost, but it would be disingenuous to concentrate solely on the media frenzy over it and ignore all the other Reaganomics elements which should be anathema to a centrist wonk, as Ken is. Wonks look at the whole policy picture, not just the media sideshow. Fightback! would have kickstarted the pure Reagan/Thatcher model of gutting the social safety net and widening the inequality gap between rich and poor, which Hawke and Keating had implemented while preserving many elements of the Australian social contract that were hardfought over many decades by unions and the rest of the left.

The rest of the article attacks Labor for insufficient adherence to its own ideals, especially around privatisation in the context of Paul Keating's defence of privatisation in the lead up to the NSW election, and then puts the hard word on Labor to establish a Troppodillian idée fixe, the Independent Fiscal Authority. Little to no mention is made of the Liberals in all of this. There is no responsibility for reform laid at the feet of Tony Abbott or any other Coalition leader. The implicit assumption is that the right's position is not even worth discussing.

High Broderism is a term related to Washington Post columnist David Broder, who is the premier exponent of the Beltway village theorem of a controlling group in the centre defining what is and is not acceptable policy according to the conventional wisdom set by an elite of influencers and policy professionals, with anything outside this window labelled as "extremism" and denounced across the press and "respectable" broadcast media. In America, this elite is an unelected and unaccountable set of media commentators and political operatives effectively working as a team, with tenured columnists at the WaPo, NYT and WSJ spruiking for those insiders whose policies they agree with and shunning those with other ideas, with little reference to their popularity with the actual public.

In Australia, we don't really have a "Beltway" as such. Power is more concentrated around Collins St and Sussex St, and Capital Circle just doesn't have a ring to it. Nevertheless, we do have an unelected "controlling group in the centre" in this country which traditionally has sat above political cycles, but it's not made up of pundits and apparatchiks: it's the public service. As befits a country more built along Westminster lines, public servants are the rocks around which the political tides rise and fall, guiding the country with Appleby-esque aplomb past this or that faddish though bubble. As academic advisers to and occasional employees of various governments over the years, Gruen and Parish are part of the wider cadre of public sector policy wonks, which gives their position in the Australian poliblogosphere some quantum of extra weight.

There is a good reason why the likes of Parish address their criticisms solely to Labor: it would be useless to ask the right to pay him any attention, because the local yokels are following the trend in the rest of the West of abandoning all pretence of scientific method in favour of hokum, humbug and junk economic theory. More to the point, Parish and his wonkmates are not only not going to get a gig advising any Coalition mob, the Liberal razor gang has been conducting a quiet pogrom to purge the public service of those not deemed sufficiently discipular to wingnut orthodoxy, from the head of the Treasury on down. His natural role, and that of the reality-based community within the public service - the Parishioners? - is to advise Labor because advising the Liberals on policies backed by traditional Keynesian theory is a fool's errand. This leads to a tendency for he and his posse to lecture Labor and let the Coalition off the hook.

That is not to say Parish et al do not criticise the Liberals. High Broderism denotes opprobrium directed at all sides. The responsibility for fixing the mess thus described, however, is left to the Left to get right to the right-thinking job of giving in to the Right.

One foot in the nursing home, the other in his gob

I am still reading a lot of poliblogs in between childrearing, just not posting much. I really should learn how to do shorter posts.

In that vein, I can't help but note how comprehensively stupid this piece is. Steve Kates, the most foolish man in Australia, not only posts complete faff from Ohanion and Cole attacking FDR's role in saving America from the Great Depression, he treats the linked press release as if it is new when it was written more than ten years ago, and the poliblogosphere's absolute smashing of the thing to pieces occurred three years ago when the authors got some undeserved WSJ publicity.

And if you don't like that repudiation, try this much similar C&O article mere days after Obama's inauguration, no doubt intended to scare him off any FDR-like heroics in the face of another Republican-created economic disaster, and compare it to actual reality since its publication in 2009. Wherever austerity has been tried, it has only exacerbated the pain. Wherever stimulus has been applied, it has worked (until, as in Japan recently, sabotaged by further austerity). Austrian economics teaches us nothing about how to solve today's problems. While no one is trying anything like the New Deal these days - more's the pity, because that's a lot of what we need right now - Keynesianism is still the best way to understand and address the situation in which we find ourselves.

It's as if Kates is not actually a professor of economics at RMIT at all, but some emaciated hermit who lives in a deep, dank hole, is fed via a bucket on a rope by Sinclair Davidson and for education is only allowed access to dot matrix printouts of Powerline and Drudge links. He's a cross between a victim of Buffalo Bill and a Japanese holdout. It's the only lucid explanation for his ongoing display of economic Aspberger's syndrome. Nobody can be that clueless.

Post-liberalism in Australia?

As a poliblogosphere, Australians probably pay less attention than is warranted to British politics and too much to American politics when it comes to detecting long term trends that will affect our politics. While there are links between the Democrats and Labour and the Republicans and the Liberals which are useful perhaps more for practical matters - e.g. Obama's start of the art campaign management and GOTV machines, and the Tea Party's ability to suck money out of billionaires - it is the Old Dart where our federal politicians most often look for ideological inspiration.

In this vein, former Bill Shorten staffer Nick Dyrenfurth had a screed published in the Fairfax press on the weekend extolling the virtues of something called post-liberalism (the Chifley Research Centre published a non-edited full version). The premise of it as an ideology is hard to define, which is why articles on it tend to call it a "disposition" rather than a coherent creed. Its very elusiveness is part of its construction at this point. The final paragraph of a Financial Times article from May 2012 from one of its architects from the Demos think tank perhaps summed it up best:

The story of British politics since Margaret Thatcher has been described as the right winning the economic argument and the left winning the cultural one. Starting from where we are today the reverse would make better post-liberal sense and, if the current fiscal orthodoxy fails, it may be the only way to unstick British politics.

The following are the core tenets of post-liberalism, that I can figure out. Thatcher and Reagan, with Francis Fukuyama as their John the Baptist, were supposed to have heralded the end of history by establishing economic and cultural liberalism as the omega point for civilisation, after which no improvement could be made. This has led to the left and right sides of two-party systems in western democracies losing their competitive edge, as they both adhere to this liberal orthodoxy with only minor disagreement as to the details of its execution. The GFC has shot this orthodoxy to pieces by proving that a system based almost exclusively on personal freedom, individual rights and open markets can still fail disastrously and cause the global depression we now know as secular stagnation. The GFC culminated in the bail-outs, which went against everything that liberalism stood for and, to make matters worse... they worked. Nevertheless, the status quo's hold on political elites is so strong that nothing new has been able to get any sunlight to grow past these withered old vines, and the crisis that started in 2008 shows no signs of abating for most of the 99%.

So far, so good. I'm with the post-liberals on this critique, all the way. It's a tough situation to solve with just one ideology. I'm glad someone is stepping up to the crease to swing for the fences.

So, what is this solution we're all waiting for? Post-liberalism sets up some oppositions.

• Instead of liberalism's tendency towards centralised government, post-liberalism seeks to devolve decision making on policy for public institutions away from bureaucracies and towards professional guilds, community groups and other smaller local bodies;
• Instead of liberalism's ambivalence towards capitalism's historical predilection for accreting national oligopolies, post-liberalism foresees the establishment of regional banks and various measures to encourage easier money at a local level; mandated appointment of employees to corporate boards to break up the old boys club; and something called the "mutualisation of markets", which is rather nebulous but indirectly suggests a carbon price;
• Instead of liberalism's reification of the openness of markets as a secular end in itself, post-liberalism seeks to reapply a moral framework over discussion of economic issues, with - undeniably - a strong Christian element, specifically Catholic;
• Instead of liberalism's emphasis on open borders to encourage free movement of labour, post-liberalism would cut immigration but also focus on building "social housing" for those immigrants they do let through;
• Instead of liberalism's attacks on entitlements to social security and unemployment benefits, post-liberalism emphasises the "contributory element of the welfare system", which means a higher pension or dole for those who have paid into the system previously, but denying benefits to recent immigrants or the young;
• Instead of liberalism's attacks on the minimum wage, post-liberalism encourages companies to set their own "living wage" at much higher than the official minimum wage, as KPMG does with its staff in London with apparently net-positive results.

There is much for either side of the political divide to like and plenty to hate, which is no doubt why the ideology remains fodder for meaningless seminars at the fringes of both the Conservative and Labour movements in Britain. Dyrenfurth claims Tony Blair's Third Way as an antecedent, but it also shares a communitarian focus with the Big Society concept which fuelled David Cameron's landslide Tory victory in 2010, and has since been accused of being a cloak for mindlessly slashing the state, especially since Cameron has since cut even Big Society programs deeply as part of his liberal commitment to economic austerity.

Dyrenfurth commits a drive-by criticism of focus group politics, which is no doubt a dig at Zombie Bruce Hawker and Rudd-era obsessions. Post-liberalism as described by disaffected Poms feels a bit like the sort of bubble-and-squeak ideology a British focus group would come up with, though. Take Blair's Third Way and combine it with Cameron's Big Society, add in a few reactionary anti-immigrant elements to please the UKIP-voting recalcitrants, chuck in some sops for the grey power vote about how those lazy young people don't deserve the dole, throw the poor a bone by saying you'll have a non-binding word to multinational corporations about their pay packets... and just a pinch of Catholic brimstone. Lovely jubbly!

It is no wonder that Dyrenfurth references the Accord in his article, since to pull off such a radical transformation of society as is detailed in post-liberalism would necessitate the construction of a consensus as strong as Bob Hawke worked so hard to achieve in 1983, so a campaign like this really is in Labor's DNA as he says. The only problem is that the Accord was actually the mechanism to implement the Thatcher/Reagan liberal hegemony in Australia, so we're a bit once-bitten-twice-shy around here about that sort of thing.

Even with an Accord 2.0 to bring in the full post-liberalism platform driven by as talented a politician as Hawke, could it ever work? Can you imagine the AMA and/or nurses union having final say on policy in a privatised health system? How would the vice-chancellors committee and/or teachers union maintain control over a decentralised education industry? Can we trust the banks to police themselves? (Hint on that last one: no.)

Post-liberalism correctly identifies a disconnect between the populace and political elites, which is why modern politics is a war between populists and elitists. Its solution is to wave hands in magical fashion to imagine an agreement between the populace and the elites, whereby the elites promise to be good and the populace have to accept their word. Post-liberalism requires the removal of the coercive power of the state to fix public institutions. This is a very English construction: expecting the peerage, OBEs and GCMGs to act on behalf of the people, without any direct accountability apart from public shaming. I would have thought this line of thinking was laughable ever since Yes Minister, because political elites have lost pretty much all of the shame they once had. That might not quite be true in Britain even at this late stage as their elites still maintain some vestige of knightly commitment to service, but the trends are not good and one should not base a political philosophy on it.

A lot of what post-liberalism has to say is about the failings of economic liberalism, and fair enough, but it skates over the implications of rolling back social liberalism. There are mentions of re-capturing nationalism, presumably from the likes of UKIP. While they don't come out and say it in the open, post-liberals would put a price on carbon as a part of applying a moral aspect to markets. What does post-liberalism have to say about abortion, or free speech, or affirmative action, or multiculturalism? These issues are finessed, when they are mentioned at all.

There are too many spinning plates in post-liberalism for me, and not enough responsiveness to democratic will. A resurgence in Catholic control over government is precisely not what is needed, or wanted given societal trends. The proponents of this Aristotelian utopia seem to me to want to be the chosen few in the old Greek's characterisation of authority residing in "the one, the few or the many", making their credo just another anti-democratic repudiation of the Magna Carta which conveniently forgets to include democracy as a key component. This article makes that explicit, by also invoking Edmund Burke to raise the prospect of "virtuous elites" acting as mediaries between institutions and the populace. A crusading coalition of Catholic Cromwells! Saints preserve us.

Axis & Allies II: Electric Boogaloo

One of the great things about Twitter is that sometimes you have random conversations you never thought possible. One such this evening happened in between wrangling my seven-week-old boy, discussing Russia and China with Noah Smith of the Noahpinion economics blog, who had a thought that those two resembled the Axis powers of Germany and Japan in World War II. I enjoyed the back-and-forth immensely, and thank Noah for his engagement with the hoi polloi.

The abject failure of the Institute of Public Affairs

Following on from Alan Moran's sacking from the Institute of Public Affairs for anti-Islam tweets, John Quiggin sticks the knife in by comparing the IPA to their American counterparts, the Heartland Institute.

Finally, there’s the question of how long the IPA can avoid the fate of Heartland, which has lost most of its corporate sponsors (except for a few diehards from the fossil fuel sector) and is a shell of its former self. the IPA has already gone a fair way down the same track, and is now, in large measure, a private plaything of Gina Rinehart. In return for her bounty, she has demanded the most humiliating obeisances, most notably support for Northern dam projects like the Ord River scheme. Until recently the IPA was a reliable critic of such boondoggles.

Similarly, Andrew Elder details the flimsiness of Dick Warburton's review into the Renewable Energy Target, and how the agenda from the right is to abandon economic rationalism in favour of killing off entrepreneurialism and disruptive innovation of companies like Silex and ARENA, and handing money over to established monopolists.

The government's anti-RET position means that current electricity provider(s) will be able to buy the intellectual and other property rights for the proposed solar facility at a fraction of the cost that it would have been worth as a going concern. This means that the incumbency of existing providers will be maintained without them having to do the hard work and take the risk that Silex/ARENA took, while reaping the rewards properly due to Silex/ARENA. 

Are we starting to see a pattern yet? How about the cost-benefit analysis of the National Broadband Network, yet another rubbish report prepared by expensive external consultants to produce exactly what the government wants to hear: specifically, that the Internet doesn't have exponentially expanding bandwidth demand and Australians aren't going to want any more bandwidth in ten years than they already do now. This is patently stupid, but nothing more than can be expected from the Minister for Ill Communication, Malcolm Turnbull.

David Walker at Club Troppo runs interference for Turnbull, which is understandable because Turnbull pushes all the buttons of a high-level wonk. The Minister sounds like he's well briefed and in command of all the facts; a cursory glance at the Delimiter story stream on Turnbull - culminating in an apology by Renai Lemay for ever thinking Turnbull was on the level - shows that his position is a Potemkin village that only impresses those who don't know the hollowness of the Liberal policy platform. Just as Henry Ergas believes his economics credentials qualify him to blog about politics without justification, David Walker thinks that as a journalist, consultant and policy wonk that he can grok broadband technology just like that, and wave through Turnbull's cunningly constructed consultancy conclusions.

Now, allow me to set out my credentials in this one: I was originally a technology journalist, starting in 1997 on weekly newspapers and then moving to bi-monthlies including Internet World Australia where I covered a lot of ISP and Internet industry stories during the dot com boom. Additionally, I spent a year or two in the mid 2000s doing sales for Neighborhood Cable, so I have some direct knowledge of what regular customers want out of their broadband connections.

Walker's justification for agreeing with Turnbull is that we don't need broadband for anything other than pirating video content.

Trouble is, most of the innovations we have come up with recently don’t use all that much bandwidth. Facebook and LinkedIn and Instagram are only medium-bandwidth even at their most intensive. Twitter and smart electricity grids are low-bandwidth. Networked games like Halo 3 use surprisingly little bandwidth too, with local hardware doing most of the work. And beyond a certain point, the speed with which you see Web pages has little to do with bandwidth; it’s mostly about server responsiveness and network latency.
Most projected e-health applications, including your latest x-rays, won’t use that much bandwidth either. Even fairly decent video-conferencing for education and medical consultations and business meetings uses perhaps 2 megabits per second, according to the demand document. To the extent that something is limiting growth in the use of such technologies, that something is generally not bandwidth.
The real policy problem with the NBN is that high-speed broadband just isn’t that much of a revolution. And to justify the cost of universal provision, it needs to be.

There are all sorts of things wrong with this mode of thinking. Correlation does not imply causation; perhaps the applications recently developed are low-bandwidth because they have to deal with crappy networks that don't enable innovation of more bandwidth-heavy content?

The assumptions in the demand document are slanted towards broadcast media. For instance, the 2Mbps quoted for videoconferencing is just for one-on-one calls, yet videoconferencing is made for more than two callers at a time, for collaboration in business and family or party calls in private usage. The one-on-one model is a relic of the broadcast media era, and that's the revolution that the NBN promises: the disruption of the one-to-one or one-to-many modes of communication, and the enabling of many-to-many modes.

With these things, it's always instructive to follow the money. Who stands to lose the most from the rise of the Internet and its disruption of existing businesses? If you look at the bandwidth usage, it's video content that eats up a lot of it. Foxtel is the major provider of paid video content in Australia. News Corp is the entity most at risk if the Internet is used to bypass its paywall to access content-that-wants-to-be-free. (In previous years I would have included Telstra in this part of the rant, though they don't really care as much as they used to about this stuff, since they have started to give up on owning content and focus on getting paid to operate the networks no matter what runs over it.)

I got questioned recently on why I don't join much of the rest of the left in bemoaning the supposed dominance of the IPA, its ubiquity on ABC platforms, its frequent appearances at The Conversation, its infection of Liberal Party processes, etc etc. My contention is that the original aims of the IPA - to be the intellectual arm of the Liberal Party and guide its policy development along ideological lines - have comprehensively failed. These days, as Quiggin rightly notes, the IPA is a cheerleading outfit for Gina Rinehart, Rupert Murdoch and the tobacco lobby, at the expense of any policy credibility they might once have enjoyed. As Elder goes through, the IPA is no longer a defender of entrepreneurialism, but a paid shill of crony capitalists. They actively lobby against Schumpeterian creative destruction, because they are paid by the people whose businesses' destruction would be caused by healthy capitalist competition. They have almost completely abandoned Menzies' founding principles, as evidenced by their recent dabbling with anti-Islam bigotry.

The reason I am ambivalent about this situation - the IPA's continued success of getting their message out to the public, combined with the poisonous nature of that message - is summed up by Harry Clarke in a comment on the Quiggin piece:

The IPA has been spectacularly successful at getting its extremist message across. I congratulate them. The difficulty is that people don’t like their message. I think the great Australian descriptor “ratbag” describes them well. Fundamentalist economics that perverts what economic theory instructs. I agree with you – the CIS relies more on reason.

In the words of John Williamson, Australians revel in our ability to "tell our leaders to go jump in the lake (but we'll never knock Australia, you make no mistake)". Yeah, we're fair dinkum in this country about recognising galahs when we see them. I believe in democracy, and the capability of the Australian public to work out who is on their side. The more the IPA's message is disseminated, the more Australians jeer and laugh at it. I know enough about the IPA to conclude that it is a failure, a folly, a flailing flinger of falderol, a figure of fun... the rest of the nation is just catching up on the news.

By the by, it should be pointed out that Moran's "sacking" from the IPA hasn't stopped him from posting on Catallaxy Files. This suggests a schism developing between John Roskam, still lurking about in the race for preselection for the Victorian seat of Hawthorn being vacated by Ted Baillieu, and Sinclair Davidson, who runs Catallaxy Files and has done nothing to stop its strong shift to becoming a secular freak show of anti-Islamic hatred, to the extent where Davidson ran a guest post this week tying a possible Australian conspiracy by public servants around a Rotherham-style Muslim child sex ring to the abandonment of the repeal push for s18C of the Racial Discrimination Act. The cognitive dissonance of holding the belief that the appalling Rotherham case presages a global epidemic of Muslim-on-white-teen rape after having defended the Catholic Church against allegations of a global epidemic of organised Catholic-priest-on-white-teen rape does not seem to bother anyone there. It is at the point right now where many Cat commenters would be welcome to speak at a Catch The Fire Ministries event, since their ideologies are functionally identical. With the abandonment of ideological principle, the IPA and its blog Catallaxy Files don't have much left to talk about, so they are in danger of descent into contagious conservative fear.

Short Kicks: The People's Hamstring

- ASADA have convinced Cronulla Sharks players to take a plea deal to admit guilt over the Stephen Dank drug saga, which means they only miss the remaining few weeks of the current NRL season. The amount of games they will miss is equivalent to that if they all injured a hamstring. On one hand, ASADA gets to claim a victory and focus on the club giving them most resistance, in Essendon. On the other hand, the "win" is about as hollow as the head of an average Sharks player. Unfortunately for Essendon fans, the EFC hierarchy are unlikely to be offered such a deal because of their intransigence. Even if such a deal was put forward, they most likely wouldn't accept it because it would mean the sainted James Hird would have to be rubbed out for life, and captain Jobe Watson would have to lose his Brownlow Medal. The sideshow of the current Essendon court battle is only a distraction before we get to the third act in that tragedy.

- Bill Shorten has addressed all the rumours about being the Senior Labour Figure at the centre of rape allegations, which have now been confirmed as never going to go anywhere. While the media are asking questions of every Labor politician who bobs his or her head up today, the only real remaining question is whether the media is going to pursue the story well beyond its nominal shelf life, in particular by airing the allegations directly from the woman herself. Who am I kidding? After the Gillard era, nothing is too grubby for the "mainstream" media to run with.

- Liberal Party failure John Hewson is now advocating for a Tax Commission, to remove powers to set fiscal policy just as the RBA was created to stop the National Party dictating monetary policy from Cabinet. This would be a complete abrogation of responsibility by the Australian political class, an admission of incompetence on a grand scale. Just because Hewson can't explain GST on a birthday cake doesn't mean we should abandon the ongoing search for a politician who can build consensus for reform. It is all too easy to look at the gradual degradation of the skill level of our politicians at a federal level and conclude that economics should be left to the wonks. Even if the Tax Commission was a paragon of Keynesian orthodoxy, that ideology must be leavened with healthy doses of democracy lest it become just another tool of unaccountable elites.

Atlas Stevens while Abbott shrugs?

Stephen Koukoulas is on his hobby horse again about Glenn Stevens and the RBA not being loose enough with monetary policy. In his unofficial role as Australia's (partial) answer to Paul Krugman, he's bashing Stevens about refusing to lower interest rates in the face of a complete lack of interest from the fiscal side in doing the heavy lifting to rescue certain parts of the economy from the depredations of a globalised market.

In these circumstances with below trend growth, a high and rising unemployment rate, a currency that is hurting the traded goods sector and risk still a dirty word, why not cut interest rates?

The obvious answer is that there's not all that many basis points to go before we hit the zero lower bound of 0% interest rates, and as can be seen from the current US and European live experiments, that's not a position that you want to be in. The Kouk wants 50 points to take the official cash rate from its already historic low of 2.5% down to 2%, but it's rare for that to be the extent of a shift in policy. Once the RBA starts moving in one direction, it's difficult to reverse momentum.

No, just because other Western countries have made the mistake of locking in procyclical fiscal austerity and relying on the steaming new theory of market monetarism, doesn't mean we should follow suit. This is about as low as we want interest rates. As Greg Jericho says:

Perhaps we are asking too much of monetary policy.

Jericho goes through the arguments for and against macroprudential tools, as a way to lower interest rates without encouraging a bubbly investment in housing instead of support for solid, growth-producing business. He ends up cautiously endorsing the use of those tools, presumably in conjunction with further easing.

My thoughts go back to one of the key reasons for the housing boom in America that led to the GFC: government intervening in the housing market to incentivise financial institutions to provide "sub-prime" home loans to people who often couldn't afford to pay them off. Now, I know the situation here is a lot different. The thread I see running though is the law of unintended consequences. We just don't know how those macroprudential tools would work in practice.

Perhaps more importantly, we DO know how well fiscal stimulus works, as we have decades of empirical data of successes to show for it, most recently in 2008/09. Expecting Glenn Stevens to be Atlas while Tony Abbott shrugs is too much to ask. The pressure should be on the government, not the wonks. We know what to do, the elites have to be told.

Hayek as the bizarro Lenin?

Brad DeLong has a regular series of Honest Broker posts, where he tries to frame an argument not necessarily in both-sides-do-it centrism, but applying the same logic to both sides of the debate. Thus in this piece at the WCEG blog, after depicting Adam Smith as being in dialectical opposition to Karl Polanyi on the subject of social democracy versus laissez-faire free markets, he tries to classify Friedrich von Hayek - much beloved of the classical liberal economists like those over at Catallaxy Files - as one of the lesser "channels" in a river "delta" of economics of the 19th and 20th centuries, along with Leninism and Keynesianism.

1. Lenin says the social democracy or democratic socialism is unstable. The bourgeoisie is hegemonic. It will turn the mechanisms of the democratic state to its own purposes. What is needed is aggressive communism to exterminate the bourgeoisie as a class. Only after the aristos and the bourgeoisie and the hep-men and the kulaks and the careerist bureaucrats have been eliminated can a properly-good society be built. 

2. Keynes says that we really need much less social democracy (or democratic socialism) than the main Polanyi current believes. Simply stabilize aggregate demand at a high level via clever central bank financial engineering, and people will not mind that the market treats the “fictitious commodities” like commodities. Moreover, the taste-making and the thrift-promoting virtues of the bourgeoisie sitting at the top of a fairly-steep socioeconomic pyramid are a feature, not a bug, for a good society. 

3. Hayek says that the problem with classical liberalism was that it was not pure enough. The government needed to restrict itself to establishing the rule of law and to using antitrust to break up monopolies. It was the overreach of the government beyond those limits, via central banking and social democracy, that caused all the trouble. A democratic government needs to limit itself to rule of law and antitrust–and perhaps soup kitchens and shelters. And what if democracy turns out not to produce a government that limits itself to those activities? Then, Hayek says, so much the worse for democracy. A Pinochet is then called for to, in a Lykourgan moment, minimalize the state. After social democracy has been leveled and the rubble cleared away, then–perhaps–a limited range of issues can be discussed and debated by a–limited–restored democracy, with some kind of group of right-wing army officers descended from latifundistas Council of Guardians in the background to ensure that property remains sacred and protected, and the government small enough to fit in a bathtub.

If Smith and Polanyi are to wear the clashing guernseys of Team Freedom versus Control FC, how do we assess these three other channels, if we are to do so? Perhaps DeLong would argue against such fastidiousness, but it seems to me that he has framed these three in order of... something. It's not in order of adherence to democratic principles, because all three credos are in some ways repudiation of the supposed depredations of democracy, from Lenin's mistrust of bourgeois institutions through Keynes' belief in minimalist efficiency to Hayek's railing against what is called these days the voters voting themselves "free stuff". In fact, the lack of faith in democracy is what unites all three, as DeLong tells it - but that's not what they differ on.

Apart from setting them all on an equally low rating for democracy, I would argue that the axis on which you would plot these three to correctly identify them is class: specifically, which class should be given the reins of government to ride roughshod over the other classes as glorified Guardians of the Galaxy. Lenin believes the exploited workers should rule, Hayek believes the rich and privileged should rule, and Keynes sits somewhere in the middle with the bourgeoisie.

Are any of these better than the others? It certainly puts Hayek in a bad spot, if he's just the other side of an anti-democratic Leninist coin - not so much an anti-Lenin as Lenin with richer mates. DeLong makes this criticism more explicit by later accusing Hayek of being an imperial apologist for the Habsbergs of his native Austria. Lenin's Two Stage Theory - where a temporary period of capitalism will somehow result in socialism - is thus the mirror image of Lykourgan Pinochet-style Hayekism, where a period of fascism will somehow produce a stronger, leaner, more Spartan society.

In the middle, Keynes is no less guilty of wanting to bypass this pesky notion of democratic accountability (according to DeLong's framing), which leads to what these days is called wonkism, or technocracy - and we can all see how that has worked for Europe. Put the eggheads in charge with no pitchfork-wielding constituency to keep them honest, and they will tend to protect their own mates elsewhere in the ruling classes. It is true that of the three, Keynesianism tends to be more democratically popular than the other two extremes, but that is mainly because 21st century society has a much larger middle class - it is a happy coincidence, not a feature.

But why does economics have to abrogate democracy? The framing by DeLong here bypasses the possibility of the coexistence of strong economic theory with a healthy democracy. I am not an expert on Trotskyism or other examples of the more democratic-imbued criticisms of the three channels of economic thought as presented by DeLong. There must be some synthesis, however, which doesn't require abandonment of the Magna Carta.

China is too big to fail

I was retweeted by Brad Delong today for linking to Stephen Koukoulas' latest missive on the results of the current Liberal federal government's campaign of talking down the domestic economy: it looks like it has worked as retail sales have tanked and we're about to enjoy the same sort of quarterly handbrake effect that the US has just endured. This lead to a short (of course) Twitter conversation with Patrick Chovanec about China, which lead to this observation which interested me.

@m0nty for much of the rest of the world, end of China's investment boom is net positive story (relieves deflation, opens up net demand)
— Patrick Chovanec (@prchovanec) July 3, 2014

Chovanec is a Chinese expert of some renown, a former employee under Bill Kristol and a former colleague of Paul Ryan. His blog is interesting reading, in that it is an ongoing attempt by a conservative theorist to understand why this is the Asian Century, and how this is going to lead to China belting the bejeesus out of America in both economic and political power games (if not actual war). He is a bear (despite his protestations), as a conservative academic looking at China must almost inevitably be to jive his beliefs with the ongoing economic and social experiment happening before his eyes based on what he must see as an unworkable melding of private and public control from above. China is still a command economy for the most part, only using those elements of capitalism which are useful for its centrally-determined agendas. As Chovanec notes on his blog, control is actually getting more concentrated among power elites not less. Despite all this, China continues to grow like topsy and it's winning a lot of the contests it enters - like currency wars and its increasingly dominant position in Africa.

Chovanec has issued dire predictions of calamitous domestic Chinese bubbles, as have many watchers over the years, but if the Chinese miracle is merely a mirage then it hasn't dissipated yet. For instance, after he spent a lot of energy talking about how the local real estate "bubble" was ready to pop, it surged again early in 2012, leading to a series of posts floating up reasons as to why stentorian bears like him were so wrong. From the Australian perspective, where it seems apparent that China's restrictions on multiple home purchases are probably why Chinese investors have invaded the Australian real estate market in such numbers to treat empty dwellings like gold deposits, there doesn't appear to be much of an end in sight to the Sino-Australian real estate boom.

Chovanec has also been quoted on recent movements in the heavily subsidised Chinese solar cell industry, as in this NPR interview, and here I think is where his own insights illustrate what is going on.

INSKEEP: So what do the Chinese do now?
(LAUGHTER)
CHOVANEC: Well, what they probably do is they dig deep dig into their pockets – the pockets of the central government – and bail out these companies. Because what they’re really afraid of is, you know, we've seen this over the past couple of months, that even relatively small companies, when they fail in China they're so intertwined in terms of their credit relationships and the local economy that essentially everything's too big to fail.

Just as the TARP bank bailout and the auto bailouts worked perfectly in America, so it appears that China has avoided a series of pitfalls from inefficiencies in its system by temporarily socialising the losses and keeping long-term-viable businesses out of bankruptcy. This is the positive side of too-big-to-fail. Keynesianism is all about smoothing out the peaks and troughs of economic happenstance to prevent long-term damage to the livelihoods of the relatively powerless workers who would otherwise have their careers thrown on the scrapheap of history, for the benefit of the economy as a whole.

No doubt there is an argument that China's socialisation of losses from Suntech et al is a different situation to TARP and the auto bailouts, since the latter actually made a profit in the end and there might not be such an easy denouement to the Chinese solar cell industry's woes. Similarly to the National Broadband Network in Australia - I'm talking about the original Labor vision, not the emaciated joke it has become under the Liberals - governments are in an unique position to invest in such projects and secure a solid rate of return, because they can accumulate many more benefits from positive externalities than do private corporations. Even if the NBN or Suntech were to represent paper losses on their own balance sheets, the indirect public goods from universal broadband in Australia or the popularisation of solar cells on roofs across China could very well translate into higher taxes from increased general production, or a decrease in spending on policing or environmental cleanups.

Under certain circumstances, where it is done for solid Keynesian reasons, TBTF works. Chovanec and those of his ilk like to say that Chinese leaders don't really know what they're doing and lack a coherent direction for the future, but so far in the 21st century they have been kicking ass and taking names in both economic and political realms. Australia may be inside a rapidly shrinking bubble as the bears say... or the lucky country may have just been lucky one more time.

Zombie Reaganomics at the Cat

Regular Catallaxy Files commenter Fisky - a combative chap who is nonetheless prone to sudden brain farts like his panicked Malcolm Turnbull spruik - posts today in praise of Reagan and in criticism of Thatcher, re their economic legacies.

The politics of austerity, where conservative governments risk short-to-medium term recessions in order to clean up the fiscal mess of their Left-wing predecessors, should be abandoned. Labor never take responsibility for their irresponsible spending and it is maddening that the Liberals always get suckered into bearing the political costs of being the “mean party”, the tax-hikers and the penny-pinchers. What is needed instead is an unapologetically belt-loosening pro-growth agenda of the kind that carried Reagan to the biggest electoral landslide since WWII, the supply-side economic policies to match, and a simple slogan to knit the whole thing together – such as “Legalise Growth!” or, better still, a resounding “No to Austerity!”

Translated, Fisky is calling for deficits to blow out like they did under Reagan, fuelled in an engineered bubble of Keynesian pump priming to magic up jobs in the public sector regardless of cost benefit analyses, and "worry about fiscal retrenchment later". US government debt as a share of GDP increased from 26.2% in 1980 to 40.9% in 1988, with deficits of a proportional size not seen since WW2.  In Reagan's case, the deficit paid for military build up that did very little for the regular domestic economy. In the case of Australia, where public-debt-to-GDP is still below 15%... well, there are plans for a true NBN lying around, but maybe Fisky wants to cover the Arafura Sea with brand new additions to the OPSOB fleet to enforce Rudd's wildly successful PNG solution?

Joe Hockey is already doing what Fisky wants (and what Reagan did) on the spending side as part of the Australian bipartisan commitment to Keynesianism. Many, many billions of dollars are being poured into roads and medical research, not to mention many hundreds of millions for fighter planes. Hockey maintains some level of decorum on the revenue side, though, and he's not likely to make the same mistakes that Reagan did in kickstarting a generational change in inequality by cutting taxes on those who can most afford it. Hockey will wait it out for bracket creep to inexorably shore up the structural revenue shortfall that happened under Labor, as a responsible Treasurer should.

Fisky is the sort of cheerfully dumb character whom it would be fun to have a beer with and talk a load of old toot, but you'd be seriously worried if he came home with your daughter. Hilarious that he is what passes for an intellectual over at the Cat, because the usual suspects in the comments over there don't even twig that he's calling for a Keynesian spending blowout and have been cheering loudly for leftist policies that even Krugman would think fiscally irresponsible.

If there's any inheritor of the Reagan legacy in Australian federal politics at the moment, it seems to be Clive Palmer with his populist, responsibility-free calls for lower taxes and higher spending. Perhaps Fisky has jumped ship yet again?

Unicorn rainbows and the LDP budget

The Liberal Democratic Party released its alternative budget today in the Fin, amid about as much fanfare as the alternative Tea Party version of the annual State of the Union address and with as little impact. Among the highlights:

• A ridiculous application of the discredited Laffer curve theory with the assumption that cutting the top marginal tax rate to 33% would mean only a $3B hit to government revenues but would add over 1% to GDP growth;
• An unsupportable application of a flawed study by Andrew Leigh (since comprehensively debunked on scientific grounds) to claim that freezing the minimum wage would lead to the creation of 100,000 or more low-paid jobs;
• A laughably bare assertion that the government can arbitrarily cut public sector wages by 10% without incident;
• No modelling of the effects on domestic demand of such massive changes as adding the family home to the pension asset test, or reducing multi-billion dollar subsidies for education and R&D overnight, among other changes amounting to cutting public sector spending by 10%.

If anyone thought that the LDP was ready to govern with a coherent set of economic policies, think again. I have sympathy for the message of attacking rentseekers, but you can't assume away the removal of around 3% of domestic consumption and hope that magical pink unicorns will somehow descend from the nearest cloudbank to fart out enough demand rainbows to make up the inevitable shortfall in government revenue.

I realise this is just an intellectual exercise and it's better than most other minor parties are prepared to do, but if you're going to go to the trouble of preparing an actual Budget then you should show some semblance of connection with economic reality. There are ways to do these things without dropping the country into its first recession for over two decades.

Smokin' Joe swings for Keynesian fences

Laurie Oakes continues to be one of the better connected journos inside the Canberra bubble, and this piece is obviously a straight stenography job from Joe Hockey's mouth to your ears, probably dictated in between puffs at cigars with Mathias Cormann.

Looking his mate in the eye, the Treasurer said: "There is no way on God's earth I am going to ask pensioners to have a lesser increase in their pension while I'm giving your business $600,000 per employee. Forget it. It's over."
Then he walked out of the room. 

Mm hmm, as if anyone else could tell that mayo-lathered story to Laurie than the Treasurer himself. Later in the article, the obvious Hockey line is that the leak of the deficit levy was not done by those who thought up the policy as it came "before the ground had been properly prepared". The prosaic conclusion has to be that it was leaked by those in Cabinet wanting the electorate to fight back against it. Who are these people, what faction do they belong to, and who are they backing to replace the current leadership team? No bubble-embedded journo seems to know, or want to find out. This gambit by the shadowy anti-Hockey forces seems to have backfired in any case, since the latest ReachTel poll shows slugging the rich is strongly popular (53:32).

While the bubbling of the #leadershit pot is a bit of fun, the more weighty revelation in that piece is how strong Hockey is aiming to go with Keynesian stimulus spending, in the form of roadbuilding. Macroeconomists may say any stimulus is good stimulus at the lofty heights from which they see things, but one wonders about the usefulness of this form of stimulus compared to, say, actually building a third Sydney airport, or investing in public transport, or concentrating on saving lives by eliminating level crossings, or just throwing money from helicopters in the general direction of suburbia like Rudd did. Will these roads be to the benefit mostly of mining trucks driven for billionaires who are supposed to escape Labor's carbon and resource taxes?

When a rightwing leader starts talking about wanting to be known for transport infrastructure, my first thought is always about which rentseekers he is seeking to give a free ride on public money.

Sinclair Davidson, professional kurdaitcha man

RMIT economics professor Sinclair Davidson got his head on 7.30 the other night, attacking the government from the right on its debt levy.

SINCLAIR DAVIDSON, ECONOMICS PROF., RMIT: My view is very similar to Milton Friedman's dictum that there's nothing more permanent than a temporary government program. So I think this temporary program, this temporary tax is going to be with us for quite some time.
[...]
SINCLAIR DAVIDSON: Without a doubt in my mind whatsoever, this is a broken promise. Mr Abbott promised before the election, he gave absolute assurances, that the tax burden would be lower under a Coalition Government than it was under the Labor Government.
This is his moment that Ms Gillard had when she stared down the camera and said, "There will be no carbon tax under a government I lead." This is exactly what Mr Abbott is doing.
Ms Gillard never survived from that moment and I think Mr Abbott faces that same problem. Politically it is a disaster for him.
[...]
SINCLAIR DAVIDSON: Politicians, who are the people who got us into this budget problem in the first place, should have the kind of incentives to get us out of this problem.
And, for example, you could have a rule whereby while the budget is in deficit that their salaries get cut by 50 per cent and they remain at that level until the budget is back into surplus.
SABRA LANE: In this season of speculation, that's one idea that can safely be ruled out.
SARAH FERGUSON: Sabra Lane reporting.

The first thing that strikes me in what he says is that there is not much economics content, an affliction that also cruels the works of Henry Ergas in The Australian, a fellow Catallaxian. For a bunch of economists, the Australo-Austrian School, or whatever they call themselves, seem to spend a lot of time talking politics and not enough talking straight economics. Perhaps that is because, as Steve from Brisbane details, when their minds do turn to economics they struggle to mount a solid argument.

Sinclair has been running a series of posts on Catallaxy Files running much the same line, similar to the series he ran after the carbon tax was introduced by Gillard Labor in July 2012 and drawing a direct connection between the two issues. If he wants kudos for messaging independence from the Liberal Party, here you go: let it be known that I have awarded you One Kudos Point.

Of course the game's made up and the points don't matter... the points are like Catallaxy Files itself. They talk a lot over there about useful idiots, a phrase popularised in wingnut circles by Ludwig von Mises to describe liberals who ran interference for Lenin and Stalin - but Sinclair is just as useful to Abbott right now as "proof" of the government's centrism. As long as we can still see the scary silhouettes of Davidson and Ergas through the Overton Window, it's in the right spot for a conservative party. Libertarians are the mystical boogeymen used by conservatives to scare liberals into compliance. Does Sinclair know that this is what he is doing on behalf of the centre right, or does he really believe in the extreme silliness he retails?

Speaking of magical thinking, the particularly stupid elements of the right have been openly hoping that the debt levy is some sort of ruse, a false flag operation which will be revealed on budget night to have been just a joke guys, had you going there, sucked you all in didn't I eh? Fairfax's Paul Sheehan has been (indirectly) fanning these flames with an unsourced and uncorroborated assertion on Twitter that the debt levy would be boned. He also pinned the lead balloon on Joe Hockey, setting up a potential fall guy if his prediction does come true but somehow figuring that Hockey will come out smelling like roses.

#auspol If Abbott was slashed by his own Gillard Moment "There will be no new taxes", who benefits most? The man who floated it, Joe Hockey
— Paul Sheehan (@Paul_Sheehan_) May 7, 2014

If this was Labor in government, the wolfpack in Canberra would already be barking for for a spill, Sky News and ABCNews24 would be on it round the clock with journo jerks circling each other for the scoop. But it's the Liberals, who get off scot free and leave Scott (Morrison) free to accumulate backroom numbers without significant scrutiny.

UPDATE: I note that Sheehan has deleted the above tweet implicating Hockey, but not the original one predicting that the debt levy would not proceed. Everyone else in the media is assuming it will go ahead.

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.

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.

Short Kicks: Is everybody happy?

- On one hand, we have the right saying that the market will decide so we don't need anti-discrimination laws to prevent gays having weddings in Arizona from being denied service by cake bakers. On the other hand, we have the market deciding that anti-gay discrimination is bad in Boston as the beer industry sides with its customers in gay bars, yet the right is up in arms in horror at the supposed misuse of market power. Which is it, wingnuts?

- The backlash of snark (snarklash? backsnark?) against the New New Media continues, with Wonkette making fun of Vox.com's launch video featuring Matt Yglesias in an admittedly terrible Happy Hammond style tartan blazer, Ezra Klein slammed for hiring a self-hating gay columnist clickbaiter, and Balloon Juice fact checking Nate Silver's allegorical use of a fox as FiveThirtyEight's new logo. The unresolved sexual tension is getting rather steamy in the Web media industry in America at the moment, leading up to the launch of these new titles. Pity we don't have anything like that happening in Australia - chatter about the Saturday Paper since its launch seems to have disappeared.

- Stephen Koukoulas is still swinging the cudgel lustily on behalf of his prediction that the economy is going to turn around and rate cuts will happen this year, maybe as early as May, and he's had plenty of material to work with from recent economic data. His prediction is that in 12 months' time, interest rates will be a full point higher and the Aussie dollar back at parity. That set of numbers would have major implications for the Australian economy as our manufacturing base would continue to be hollowed out, which would blow out budget expenditures. Would revenue bounce back, though? Only if Joe Hockey raises taxes, and/or closes loopholes like the Double Dutch/Irish lurk used by Google, Apple and other multinationals. Given that this government's policy is evidently to do absolutely nothing until they get a mandate after the next election, I would advise not holding one's breath.

Short Kicks: Hockey kicking buttocks for Keynes

Another week where I'm hard at work on my other commitments, so only time for a short roundup. Not that I'm trying to compete with Homer!

- Joe Hockey wants the other G20 nations to engage in Keynesian stimulus so that he can implement austerity in Australia and not have it plunge the domestic economy into recession. We have benefited from China's stimulus during the latest resources boom, and Hockey can see the terrible effect it would have on the nation if it was scaled down at the same time as the high Australian dollar continues to cudgel manufacturing. This is a classic example of talking one's own book; then again, it's rare for a politician not to do so. Judith Sloan feigns ignorance of Hockey's motives, but she knows that Hockey is a Keynesian. The "age of responsibility" palaver from Hockey is a crock, he merely wants someone else to pay for his free lunch.

- Speaking of manufacturing, those blaming the carbon price or union demands for Alcoa's closure should read this, which details how the real reason is most likely cartel price manipulation.

- Mark Kenny points out that the WA Senate byelection would fall just after Hockey's first full budget, which is looking like a stinker. Fat chance of the Libs retaining those three Senators.

- I'm not the first person to say this, but how do you shoot someone in the buttock unless they are running away from you? Perhaps the Libs could take a leaf from the book of Turkey, which seems to know how to build refugee camps. (Yes, I know Manus Island was a Rudd initiative, but it's six months into this government already, at some point the Libs have to be responsible.)

- It was pointed out on Twitter that the last Liberal PM not to hold a royal commission into unions was John Gorton... so that's the last four. The previous one resulted in zero convictions. The witch hunting continues.

- Craig Thomson was found guilty of some of the charges against him, with sentencing due on March 18. I am tipping no jail time and a wet lettuce fine, as the pre-judgement comments by the judge regarding the flaws in the charges make the case ripe for appeal so there's not much that would stand up in a higher court. The question, as is so often the case in law, is whether Thomson will have enough money to pay for lawyers to achieve the correct decision.