Tuesday, December 18, 2007

What Gerard has said lately

I tried sending a letter to the SMH in relation to Gerard Henderson's 13 November column but I clearly no longer have the knack of being published in that journal. Only Crikey and the AFR and a few telco industry rags seem to like my stuff. Of course, the beauty of the blog is that I am my own editor - albeit for a far smaller readership.

His 13 November item was headed Truck of truth hits a few potholes. This was a column written during the election and in it he started with a criticism of then candidate Maxine McKew contrasting some comments she made with future outcomes during the last election.

His purpose was to "out" behaviour where participants in public debate label their opponents liars when “they really mean they recall events in different ways, disagree on current matters or have contrasting views about the future”.

This is fascinating because Mr Henderson has a reputation for writing detailed letters to correct what he claims are untruths said about him. He also has a reputation for pursuing the “Sydney Line” (as incoming Quadrant editor Keith Windshuttle calls it) of absolute truth.

So his column made interesting reading. Hopefully this new found belief in relativism means we can call a truce in the “history wars”.

More troubling is his claim that “inaccurate predictions” do not constitute a lie. I can accept that an inaccurate prediction based on a full analysis of such observations and explanatory theories as available is not a lie. But I think it becomes a lie when the person making the prediction consciously chooses to ignore factors in making that statement. For example, to make a three year prediction about interest rates which no market economist would dare contemplate.

The same applies to a wilful failure to obtain additional information that was readily available, such as occurred with the children overboard scandal, or to consciously avoid “intelligence” that runs contrary to one’s pre-determined course of action, as happened with Iraq.

We needed more than just a truck of truth this election; we needed an injection of integrity. And in the end it seems like we got it - with the formidable Senator John Faulkner appointed as Special Minister for State with just such a brief.

But dear Gerard Henderson has again today inspired me to write. His contribution Failed policy strong on sentiment was an attempt to claim that the idea of minimum "living" wages is a fanciful affair that works against the interests of the economy at large and hence people in it.

There are two specific matters that I want to challenge. The first is that he manages to cover the early history of the Harvester Judgement without mentionuing why it was that Justice Higgins was required to rule on what constituted a "fair and reasonable wage". The reason was simply that in the era of protectionism the idea of protection was to protect employees as much as investors, and so the law stated that a firm would benefit from the protection (by exemptions from excises) so long as employees were paid a fair and reasonable wage.

The policy was itself entirely coherent if the assumption of protectionism was accepted, and it was not Higgins fault if the parliament's drafting was so woolly and vague. The fact that the first case required the development of a definition and a whole series of other parliamentary and judicial actions perpetuated the concept should not be laid at the feet of poor Justice Higgins.

The second point in the article to challenge is Henderson's derision of the proposition that if an employer can't pay a "fair and reasonable wage" then it would be better that they not be in business. Actually, a neo-classical view would be that it is indeed better not to have the firm in business if it cannot pay the genuine cost (a decent living) of the hire of labour. There are an array of reasons why labour might endure such conditions, but it is economically wasteful to consume something for less than the cost to produce it. Continuing to make the employment available "below cost" (subsistence) results in other ventures that might identify an available labor force from establishing or it results in labor not relocating when it should. This is an argument from simple economics, not from some social justice doctrine.

And what if the consequence is enduring unemployment? Well, the Keynsian response is still the right one. Generate growth in the economy by Government expenditure, either simply by the payment of unemployment relief, or far better by taking the opportunity to use the excess labour to undertake "nation building" projects. And in the process pay them a "living wage" because then we really could be accused of living in a fascist state as the workers on government projects dropped dead from malnutrition.

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