Monday, August 09, 2010

This election isn't boring, it is depressing

That was our conclusion at the weekend. Stripped of all the guff about whether there are any policies to debate, or whether the media is or is not doing a good job, or whether the campaigns are all too much spin, there is a truism of politics that you get the politicians you deserve. Just how bizarre this has become was revealed by the presence of Mark Latham.

If the best we can offer our country is a choice between the ALP that is in one of its "whatever it takes to win" modes and the Liberal Party (there is no effective coalition - the Nationals have no impact on policy except the climate change decision that created the opportunity for the Liberal right to roll the moderates) that is trying to make a campaign based on how badly it would have handled the GFC into a positive...then we really do need to (to borrow the Democrat line) "change politics".

The bad news is that no amount of voting for the Greens for balance of power, or pining for the Democrats or finding some new single issue (or narrow base) party - think Sex Party, Family First etc - will change the fundamentals. In fact the small party vote is part of the problem - campaigning for preferences rather than votes.

I briefly thought that Tim Blair was giving me suopport today on my plea for a bit of policy distinction. But no, he was doing the usual right-wing thing of imagining a homogeneous "left" that he claimed wanted policy to be the issue this election but was happy to talk about leadership at the last election. Apart from the fact that there is no such uniform "left" view, the last election actually did revolve around policies on reconciliation, climate change and - above all - Work Choices.

I don't know how he can construct the line "Forget policy. An entire government is in vicious collapse, which overrides any interest in minute policy discussion." This I simply don't get. Yes Labor hasits raving looney on the fringe - Mark Latham - but Malcolm Fraser could almost match that.

There really is an issue here and it is starkly represented by how the Liberal Party would have responded to the GFC. Tony Abbott is promising four things, cut the waste, pay off the deficit, stop the new taxes and turn back the boats. The last of these is just populous nonsense as there is very little effective difference in how many refugees will be settled under either policy and the Liberals have already been caught on their immigration lie.

The first three are all GFC related. They are really saying we didn't need the stimulus and we didn't need the waste.

Meanwhile Nobel laureate Joseph Stiglitz has written today that the Labor Government put in place "one of the best-designed Keynesian stimulus packages of any country". He goes on to note that our deficit is small compared to any other country and that it would be wrong to reduce it if thatmeant not investing in future capability. On waste he points out that economic theory and notes "it is wasteful to spend too much money preventing waste".

Ross Gittins separately reports on the review of the BER, which reached the same conclusion. Basically they said "waste" of 5% was a reasonable trade-off to deliver the speed of the expenditure.

But it is erroneous to claim Abbott did nothing on policy (despite this sarcastic take on a campaign memo) - one report notes that he "is considering taxing all but a fraction of Australians at one simple flat rate, exempting from tax the first $25,000 each Australian earns." (The campaign launch seems to only be available as a video not text). The actual policy commitment was merely " that within 12 months of taking office the Coalition would outline plans for tax reform" - and this despite the other Henry Tax Review.

But in choosing the flat tax (and it is not really a flat tax just a change in the progressive steps) Tony is reported to also reject the tax concession on interest income and the simplification of work expenses claims. He of course also rejects the mining super-profits tax - something Stiglitz points out sits oddly with an obsession about the deficit.

So we do have a choice between two parties that are very clear on what their approach to the GFC was/would have been.

All this then makes anoyther piece in the press today - Lucy Turnbull's speech for a debate on capitalism. After good work in indentifying the benefits of the market as a conduit of information and the failure of central planning to make production decisions, she goes on to write;

The roots of the global financial crisis largely lie in government meddling to privilege particular groups. The crisis confirmed capitalism works better when individuals are treated equally and vocal or powerful interests don't get special treatment.

This I cannot understand. To the extent there was Government interference it occurred because the US Govt was promoting greater home ownership, which did result in more loans to the so-called NINJAs (no income, no job, no assets). But the Government policy was predicated on the assumption that the financial markets adequately managed risk. They did not. They did not for three main reasons; that risk was measured by rating agencies rather than the old Basel 1 rules, that the banks had been allowed to merge/expand to be involved in non-bank activity and there was no open market for derivatives.

These were all "institutional design" failures. Markets all rely upon "institutions" - the most notable of which is the institution of private property itself, but also that the enforcement of private property rights is a "public good" and why Government funds and operates police forces and courts. A second is the institution of "contract law" (and I guess torts).

Turnbull is right to note;

Meeting the challenge of climate change will demand courage, commitment and technological ingenuity. Just as price signals, fair markets and free trade are the cornerstones of the capitalist system for creating goods and services, they should be the foundation of our response to climate change.

Only by harnessing them will we be able to unleash human ingenuity to reduce our emissions cost-effectively. The alternative is heavy-handed regulation and governments trying to pick technological winners. Much of today's awesome technology was unpredicted even a decade ago. The best mechanism for realising the infinite ingenuity of humankind is the market itself.

There are two parties contesting the 2010 election. One of them actually stands for market capitalism - that is the Labor Party. The Liberal Party stands for money and privilege - it is not the Liberal Party created by Menzies but the re-incarnation of the UAP.

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