Nobel Prize winning economist Joseph Stiglitz is in Australia to tell us how to run a successful economy.
According to Stiglitz our government should be spending more, not trying to get its budget back into surplus.
It says a lot about Australians’ inferiority complex that we give people like this the time of day. Because if we weren’t so certain that all wisdom resides overseas we’d recognise that our economic performance since the 1980s has been one of the best in the world.
And that stellar economic performance was not driven by following any of the policy prescriptions that Stiglitz preaches.
Stiglitz, influential in the US and as a former World Bank economist, doesn’t exactly have a successful track record to run on. If you were looking for examples of what to do, neither of those institutions would be the place you would look.
The US has been overspending for years, aided and abetted by the Greenback being the world’s reserve currency. But it hasn’t brought them extraordinary wealth, and their performance after the GFC compared to ours has been anaemic.
Rather than telling us what to do Stiglitz should be asking our advice on how to structure an economy and a banking sector so that they don’t go into shock and meltdown so easily.
He’ll find that the reason Australia has fared so well is that we have built ourselves a flexible economy which reacts quickly to stimuli, preserving financial and social capital. We allow entrepreneurs to get on with the business of business, and we have a tightly targeted welfare system that ensures those who need support get it, and those who don’t can look after themselves.
We don’t have quantitative easing, and we do have banks whose key business is lending, not merchant banking and speculation.
There are some blemishes – we have a housing sector which has become overpriced as a result of town planning policies, and unwinding this bubble will be difficult and take time – but they are minor compared to the boils that need to be lanced in the US economy.
And we had a government for the last few years who decided to spend without looking at the return. By doing this they raised expenses and expectations unrealistically in advance of income.
Stiglitz is here as a guest of The Australia Institute, one of the cheer squad for the debilitating economic policies of the last 6 years.
As such he is not here as an economist, but as a prop in the agitprop of domestic politics.
Much like Al Gore lent his Nobel Laureate to the reprobate Clive Palmer.
It’s unlikely to end any better for Stiglitz than it did for Gore, although at least the TAI is on his side.
This article reads like something that a factional warrior might write – strong on opinion and light on fact.
One internal inconsistency illustrates its shallowness. The author states that Australian “economic performance since 1980 has been one of the best in the world”, but then says that policies of the past 6 years have been “debilitating”. Make up your mind!
I agree that there is room for criticism of the past 6 years, but suggest that the previous few were truly terrible examples of poor economic management by a government which was wasting opportunity and shoveling dollars into middle-class welfare in a futile attempt to win the 2007 election. The results of both eras are a mixture of good and bad.
All government is worthy of criticism. All visitors with the experience of Stiglitz deserve to be listened to politely. Let’s avoid needless argument about what he might or might not say until he has actually said something, then address the subject, not the man.
Comment by John B — July 2, 2014 @ 10:04 am
Click on the link John B and you’ll see Stiglitz has already had plenty to say. We survived the last 6 years because the changes that were made then haven’t had time to impact too badly, and will mostly be reversed, if Abbott can get his politics right.
Nothing “factional” about this “warrior” – I’ve built a good reputation over 15 years for telling it like it is. You don’t even trade under your name, so if you have a reputation, it obviously doesn’t count.
Comment by Graham — July 2, 2014 @ 10:32 am
Absolutely agree with John B.
And add, if the land of the dollar bill, is not a shining example, then it has more to do with deregulation, extreme capitalism, the desire to privatize everything, including the very economic pillars every western style economy rests on; and Ideologues, who routinely ignore or bag sound economic advice!
We’re the only nation that has negative gearing?
Along with a completely unnecessary middle tier of money grabbing middleman govt, costing the tax payer some 70 billions, just to pay for its existence.
We’re the most over governed nation on earth bar one!
And then the so-called liberals bag on endlessly about, um ah, small government!
And their middle class welfare, or money hissed up the wall, is currently costing around another 70 billions and rising!
The current government’s answer?
Keep all the middle class welfare, and even add to it with a PL scheme designed by the over privileged for the over privileged, and pay for virtually all of it, with a old McDonald’s farm of cuts!
Like here a cut there a cut, everywhere a cut cut; here a click click, there a snip snip here, everywhere a click click or snip snip, and so it goes.
If everybody is to sacrifice, then those at the top need to match the 15% permanent cuts imposed on the least well off, not the very temporary 3%, which many seem to think is a perfectly reasonable.
A reasonable sacrifice, would likely cause as much or more pain, than that inflicted on the least well off.
And then they wonder why power usage is way down?
Even in the middle of winter the majority can no longer afford it!
Those that still can, have little other choice but to wind back economy supporting, discretionary spending!
Nobel prize winning Stiglitz might recommend root and branch tax reform/quite massive simplification, as the best way out?
But when have either side of politics listened to sage advice?
When we last had people, the majority, of candidates with real world, practical experience maybe?
But not much since.
The advice that Graham seems to be predicting, is probably sound Keynesian economics, you know, the principles that brought the world back from the Great Depression, with is tent cities, soup kitchens and millionaires, down to their last million, taking swan dives off the Empire state, or the Brooklyn bridge!
And into a period of unprecedented prosperity!
All wound back since the late sixties/early seventies, by Reaganomics, Thacherism and tea party histrionics!?
Meaning, the richest pay the least tax as a percentage of their income, while the average working class slob, pays through the neck?
And if that wasn’t bad enough, asked to believe, it’s all down to welfare, and socialism!
Like our universal health scheme, that looks after everyone, and for around half that of the US, which still leaves 30% totally dependent on Charity!
I wouldn’t hold the US up as any sort of shining example, not on economics, or best practice at anything, except perhaps endless spin, how to screw the neighbors, or turn war into a privatized profit making enterprise?
And simply because, with history repeating itself, it seems the ruling Ideologues, learn nothing from History, but particularly, if the facts get in the way, of their highly flawed belief systems.
How much welfare for the rich is in the farm bill, and how much economic activity/discretionary spending would it generate, as improved benefits/basic wages, for the poorest?
Alan B. Goulding
Comment by Alan B. Goulding — July 2, 2014 @ 11:13 am
Having read the linked article, I don’t see what the problem is. They are primarily only motherhood statements. Maybe Stigltz has nothing better to offer, in which case his visit is a waste of his audience’s time, a non-event. Until then, he simply isn’t worth the ammunition; a has-been.
Regarding reputations, I don’t have one to defend. And I don’t rely on a self-assessment of my abilities from 15 years back, although I am sure that I was far better once than I am now, at many things.
John Bennetts.
Comment by John B — July 2, 2014 @ 11:16 am
More slogans, caricatures, circular reasoning and invincible ignorance from the left, ho hum. This belief that government is some kind of magical economising machine is what led to their love affair with Stalin, Mao and Pol Pot.
Modern Australian leftists of course disclaim this but they show by what they’re saying that they have learnt nothing in the last 100 years.
All you have to do is ask, if government has the superior ability to “manage the economy” that you allege, then wouldn’t full socialism be a wonderful success? Although they do inwardly believe this or they wouldn’t keep arguing for more government control, faced with this question, they have no option than to backtrack, and hence disown their own principles, because they know that the left wing has always advocated policies that resulted in mass starvation and political totalitarianism.
But when you then ask, by what rational criterion do you distinguish government intervention that you acknowledge is incompetent, wasteful, corrupt and anti-social, from that which you allege is the selfless fountain of all moral and economic good, they are at a complete loss to make any rational reply.
So we get more of their endless slogans, caricature, misrepresentation such as “extreme capitalism” and their nutty idea that socialisation of the means of production makes society more physically productive and fairer, an idea that has no basis in reason or reality, and on a level with their Keynesian idea that burning down houses makes society wealthier.
Stiglitz is an anti-economist, a shameful throwback to the economic ignorance of the dark ages.
Comment by Lancaster — July 2, 2014 @ 11:37 am
– Property is either private (personal or collective – do what we want within/out the law)or public (“common wealth” – we all share and maintain)
– Public property, including the right to make rules covering use of both private and public, is vested in the 3 levels of government by all natural adult citizens.
– when things do not go well in private, public always gets the blame and when private stuffs itself at the expense of the rest of us as it did in GSC – public is there to pick up the pieces as it did in Aus.
– whether public could/ should have done things differently/ better or not is a separate discussion
– as is a discussion about either corporate lobbying to “steal” from public because that is easiest and not their money anyway, or current government’s mantra “open for business” (read democracy, the little we have, for sale)
– current stock of public trustees’ (elected representatives) underlying motivation is to do the least for the shallowest of thinking by selling/ flicking/ buck passing/ excusing at any price so as to secure a life after politics (gorilla politics) and the whispered admiration of those who have ($$$) access to their shell like ears
– Stiglitz is one of 13 recognised economists who saw the GFC
– All commentators should be asked “where were you just before the GFC hit?” and then I am happy to take all the time to listen.
Michael P
Comment by Michael P — July 2, 2014 @ 1:15 pm
I have no problem with any world renowned expert giving lectures in this country. I think it can only be a good thing.
You may disagree with him on some economic matters, but then you’ve never won a Nobel Prize or been chief economist for the world bank. Which is probably why you broadcast your opinions to anyone who will listen on the internet and not in front of an audience of scholars and policy makers.
Comment by James — July 2, 2014 @ 4:57 pm
Stiglitz views are the same as those shared by Orwell’s two legged pigs down on Animal farm. Much more relevant to the oink oink of Mac’s aged place.
James in case you haven’t noticed giving speechs, being reported in mainstream media and hardcopy publishing is now the preserve of the elites and reach a far smaller audience than net publishing. Again Nobel Prizes are only valued by the elites. Most of us don’t see much value in them since often they are given for purely elitist political motives.
How more elitist could you become than by worshipping at the altar of the religion of economics in the temple of the World Bank.
Graham doesn’t need my vocalising his triumphs. We need his site more than he needs us. It is a vehicle for every voice and it respects all voices which is something the elitists mediums don’t do.
Net publishing requires guts and truth to survive for any length of time. To survive in the elite’s medium requires only spin or influence of like minded.
That medium’s days are numbered because of it’s polarization.
Comment by Keith Kennelly — July 3, 2014 @ 11:30 am
Well if I had to chose between a Noble prize winning economist, economic advice and Tony Abbot’s, then I’d likely lean to the Nobel prize winner, particularly, if that Nobel prize winner saw the GFC coming!
And if I had to choose between the voodoo economics that concentrated to much of our finite wealth in too few hands; and caused the Great Depression and the more recent GFC; or the Keynesian Rationale, that not only got us out of the Great Depression, but engineered a period of unprecedented prosperity!
I’d chose the latter.
And that’s not circular thinking, just a summation of irrefutable historical facts.
An economy functions at its best, when our limited money supply, travels through as many hands as is possible, doing good sound economy building work as it does so, but never when more and more of it is collected and then hoarded in fewer and fewer, greed is good hands.
Which were patently depicted as the power hungry pigs on George Orwell’s Animal farm, not the poor old duped and worked into the ground horses, [The workers,] who were hoodwinked by the greedy power hungry pigs!
Whose modern representation, must surely be, obscenely over-rewarded and eternally obfuscating CEO’s/board members, and their conservative, (covert) political servants?
Let the facts and their recorded historical outcomes speak for themselves!
As opposed to extremely simplistic deniers, living in a thoroughly sanitized bubble of false belief; and or, endless historical revision!
Alan B, Goulding.
Comment by Alan B. Goulding — July 4, 2014 @ 11:38 am
Stiglitz didn’t predict the GFC, and your reasoning and examples go downhill from there Alan. The countries that you want to look at at the moment are countries like Chile and New Zealand which all took the commonsense medicine and are now prospering post-GFC as a result.
Comment by Graham — July 4, 2014 @ 12:41 pm
Alan
Four points.
The great depression only ended with WWII.
You have a uniqure take on Animal Farm.
I prefer the views of someone close to our community and elected by our community than some unelected, dubiously honoured, leftie elitist.
Alan watch gor the voming Chona property implosion.
I saw the GFC coming as did the whole of Fox Finance and anyone with a brain who realised forcing banks to lend money to people who could never repay, then allowing those banks to trade in those mortgages was never going to be susyainable and would enivitably lead to a crisis.
Alan
Comment by Keith Kennelly — July 4, 2014 @ 12:46 pm
I’m sorry Graham, I don’t see either of your examples as shining examples of enduring prosperity, just deferred contraction!
Yes, they may be recovering from the GFC, but at what cost and for who?
Discretionary spending, medicine, legal remedies and or social justice for the poor?
And what happens to our Kiwi cousins, when we, a much larger producer, finally overwhelm their Asian meat and milk markets, with fair competition?
I can remember a period of unprecedented prosperity, and a time where we were the third wealthiest nation, and a creditor one at that, and where even so much as 2% unemployment was considered shameful!
Bag the economic principles that created those conditions if your dare!?
Now we have a crisis of youth unemployment, a manufacturing base heading offshore, a malady, well in train long before we had a carbon tax,[not that I agreed with that model,] and record foreign debt, greater than Chinese foreign reserves; coupled to record foreign ownership, and pensioners, who can no longer afford to heat their humble hovels, and where a Sydney bedsit now costs more than a single pension!
This is the reward we confer on the very people who fought for or built this nation; and indeed, bought and paid for, all those assets, now privatized and at the alter of voodoo conservative economics.
Economics, that hissed both our mining booms up against the wall, when they should have been plowed into a sovereign fund, medical research or any other worthwhile example.
It’s never ever good economics to buy votes with once only transient temporary wealth!
So this is progress?
For whom?
Comment by Alan B. Goulding — July 4, 2014 @ 1:18 pm
We created almost impossible debt, just to fight WW11, so if that’s the recipe for unprecedented prosperity, Stiglitz may be on the money!
War bonds all with maximized taxes, put hoarded money to work, building the machines or war, and providing all the men and materials to fight it.
We could follow the war bond example, with self terminating thirty year bonds, to garner all the foreign capital we could possibly need, and then use that income stream, to build all manner of income earning infrastructure.
Rapid rail, energy projects low cost high rise housing etc/etc.
We need to very seriously look at completely restructuring and reforming our tax system.
A simple stand alone unavoidable expenditure tax, would finally put paid to endemic avoidance, particularly by foreign nationals, often with annual budgets bigger than many sovereign nations, many of who pay no company tax to anyone!
That would enable us to then jettison all the other regressive taxes! Fuel excise, the ubiquitous GST, payroll tax, PAYE and PAYG.
In fact the only tax needed, if everyone is paying it, is a single stand alone expenditure tax!
Just this much reform would add around 30% to the bottom line of Australian based business, and 25% to household disposals. Making a 15% non contributory super immediately doable! Microscopic variation of the tax rate, would enable us to lower and permanently set interest rates, at such low levels as to compel the non mining economy, to get up off of its knees and run.
We also need to claw back our purloined economic sovereignty, by returning energy, capital and all cash cow essential service, to public ownership; but never as monopolies, but duopolies, with an expressed mandate, to compete one with the other, for our business.
Employment in these areas, could also be contractual and won via the tendering process, and never for more than three years.
Unions could morph into Labor hire firms, if so incentivated?
Our future is high tech and niche markets!
However, we need cheap energy to encourage its growth here, as opposed to forelock tugging and simply off-shoring our best ideas, and brightest entrepreneurs.
Simply put, the right economic model, that then produces maximized sustainable growth, keeps wages and prices, at reasonable but inherently fair levels, that also allows maximized growth; that then has the high tech manufacturing queuing to relocate here, along with millions of self funded retirees!
The sky would be the limit for an Australia, no longer frightened to stand on its own two feet, and say a final no and goodbye to extreme capitalism, in favor of cooperative capitalism!
You know, the one that took a war-torn and thoroughly bankrupt Japan, and turned it into the second largest economy, only to kill it off, by changing to the individual greed is good, extreme capitalism, which includes nonsense like over-leveraging and over-valuing!
Other equally insane examples, include lending money to people with absolutely no capacity to repay, and no prospect of ever being able to do so, and then compounding that asinine example, with even more of the same, as so called securitized mortgages, or endless, money (debt) plucked from thin air derivatives, further compounded by massive speculation on an unprecedented scale and short selling!
If just the last 2 examples can’t convince our resident ideologues, to abandon their support for these economy killing ideas, then what sort of catastrophe will!
Privatization of any essential service, or energy and capital, has never ever resulted in cheaper fees.
And given business, manufacturing, processing, distribution and retailing, uses these essential services more than any other sector, it is business that is the most hurt by just this sort of nonsense and money for bugger all, unproductive tax practices; plus brokering, of water, carbon, money or value plucked from the ether and myriad other intangibles!
Times and circumstances may well change, but the immutable law of cause and effect never ever does!
Alan B. Goulding.
Comment by Alan B. Goulding — July 5, 2014 @ 11:19 am
Alan you shouldn’t merely comment reactively. You should blogg, like me, or even better still publish a manifesto like all the others who thought the knew what was best for those to stupid to work it out for themselves.
Comment by Keith Kennelly — July 5, 2014 @ 5:18 pm