1. Trump’s trade deal will make us collateral damage
Kevin Rudd’s AFR article Trade deal will not stop US and China drifting apart gives us the lowdown. From the URL his heading was probably Trade war truce a symbol of the US unhinged. Seems Trump banged on for an hour about incoherent nonsense at the announcement while the head Chinese trade negotiator stood patiently by.
Rudd says intellectual property theft will be criminalised in China for the first time. Good in principle, but you will need to make your case in Chinese courts. Continue reading Weekly salon 20/1→
An open thread where, at your leisure, you can discuss anything you like, well, within reason and the Comments Policy. Include here news and views, plus any notable personal experiences from the week and the weekend.
The gentleman in the image is Voltaire, who for a time graced the court of Frederick II of Prussia, known as Frederick the Great. King Fred loved to talk about the universe and everything at the end of a day’s work. He also used the salons of Berlin to get feedback in the development of public policy.
Fred would only talk in French; he regarded German as barbaric. Here we’ll use English.
Cricket icon Richie Benaud, who distinguished himself first as a leg-spinning all-rounder, then as a daring Australian Test captain and later as the ‘voice of cricket’ in the commentary box, has died at the age of 84.
Benaud’s skills, drive and determination took him to the top on and off the cricket field, and made him one of Australia’s most recognised people, instantly identifiable simply as Richie.
He played 63 Tests for Australia, was the first player to score 2,000 Test runs and take 200 Test wickets, and never lost a series as Australian captain.
After hanging up his Baggy Green cap, he spent more than four decades as the king of cricket commentators, a man viewed around the world as one of the best callers, watchers and analysts of the game – and perhaps its best ambassador as well.
While acknowledging his record I’d rate him as a top-flight bowler who was a handy batsman rather than a genuine all-rounder, who would be selected for his batting and his bowling absent the other. Genuine all-rounders are rare. I can think of Garfield Sobers, Keith Miller and Ian Botham, also Adam Gilchrist in a sense.
Benaud, I think, gave some respectability to the Packer circus and was apparently quite influential in giving advice.
2. Opinion polls
In Great Britain Ed Miliband overtakes David Cameron in approval ratings, as Labour pulls ahead in the polls.
Here in Oz Newspoll studied quarterly trends with a larger than usual sample. The headlines and much of the reporting was about Abbott’s poor performance in WA. You had to dig to find the national TPP poll which had Labor ahead 55-45. Also:
Opposition Leader Bill Shorten leads Mr Abbott 44-34 as preferred prime minister.
He is now ranked as better prime minister in all states for the first time.
Australia’s imprisonment rate at 186 per 100,000 is historically high and getting higher. Moreover:
In contrast to most other developed countries, this rate is palpably high. The rate in Canada is 118 per 100,000. The incarceration rate in Australia is nearly three times higher than in Scandinavian countries.
Standing apart from these trends is the world’s greatest incarcerator, the United States, which imprisons more than 700 people per 100,000 – an increase of more than 400% in three decades.
It’s costing us a pile of money – we spend $A80,000 per prisoner per year compared to $A30,000 in the US. This wouldn’t be so bad if it worked, but it doesn’t:
Sentencing is the area of law where there remains the biggest gap between what science tells us can be achieved through a social institution (criminal punishment) and what we actually do.
our prisons [are] where the greatest number of human rights infractions occur.
The start and endpoint to the solution is to confine jails (almost exclusively) to those we have reason to be scared of: sexual and violent offenders.
Thanks to John D for bringing this article to my attention.
4. Keep an eye on Greece – something unusual is happening
James Galbraith has been to Greece to consult on their problems and reported in an amazing speech to the European Trade Union Institute.
So as these manoeuvres, as I call them, mature, there emerges an interesting possibility. And that is the possibility of a politically stable, anti-austerity government in Europe, led, as I think you probably have observed, by forceful personalities, and presiding over an economy which is so far down that it has no place to go but up. And that may well be, within a short period of time, on a track of some recovery, some improvement in jobs performance and stabilisation of its external debt situation.
This would be in the wake of a crisis that was brought on by the neoliberal financial policies of the early part of the 2000s. Which was then aggravated and prolonged by the austerity ideology that succeeded the crisis, by the profoundly counterproductive policies with which Europe has reacted to the crisis. And so the possibility that an anti-austerity government might lead the beginning of a recovery from the austerity regime is, I think, a present reality and it is, of course, a nightmare in certain quarters.
Finance Minister Yanis Varoufakis and Prime Minister Alexis Tsipras have faced a wall of grief and pain from a hostile media and European finance authorities. If they prevail it will be because in the end Angela Merkel is pragmatic rather than doctrinaire. The stakes are high:
It goes beyond that to the future of Europe and beyond that, to the meaning of the word democracy in our time.
Two big lessons of economic research over the past 10 years are that inequality is not the result of inexorable laws of economics but rather of policy; and that countries that adopt policies that lead to high inequality pay a high price – inequality not only leads to a divided society and undermines democracy, but it weakens economic performance.
I think he [Piketty] is absolutely right to emphasise the increase in inequality that has occurred. I think he is absolutely right in his key idea that the period from World War II to 1980 was unusual in the history of capitalism, capitalism has typically been associated with high levels of inequality.
What I differ with is I don’t think it is the inexorable result of economic laws, of economic forces. It is a result of policies and politics, it is the result of rent-seeking behaviour, which the laws and regulations help create or don’t do enough to counter. There is almost a tone in his book that this is just the way of capitalism, and my view is that the kind of inequality that we’ve seen is really a result of the fact that we don’t have a well-functioning market economy.
So to Stiglitz markets are a human artefact and need regulation, and the nature of laws and regulations governing markets matters. As do state provisions and interventions.
Joe Hockey defended his budget saying you can’t expect equality of outcomes, only opportunities. Stiglitz has a more nuanced and interactive view:
While there are many dimensions to growing inequality, perhaps the most invidious is inequality of opportunity. Western democracies pride themselves in providing a level playing field, in which all who would work hard can prosper. But it’s a myth, and nowhere more so than in the US, in spite of the rhetoric about the American dream. The life prospects of a young American are more dependent on the income and education of his parents than is the case in other advanced countries. And there is a vicious circle: inequality of outcomes leads to inequality of opportunity which leads to further inequalities of outcome. The prospect for America’s future is thus still more inequality of outcomes and opportunity.
Stiglitz says that only about 8% of those in the bottom half of the income scale get a college education. He says our Australia’s HECS system works and is the envy of the rest of the world.
But Australia is neither the best nor the worst in terms of equality. In his article in The Guardian he compares our Gini coefficient unfavourably with that of Norway, a resource-rich country that has done a particularly good job of managing its wealth for the benefit of all citizens. He links to the OECDiLibrary. I can make more sense of the CIA Factbook which places Norway on 25 and Australia on 30.3, close to the European Union average of 30.6. The USA looks third world at 45.
On the one hand we are the best in the Anglosphere, with Canada on 32.1, the UK on 32.3 and New Zealand on 36.2. On the other, we are worse than half of Europe.
A third area where we do better is in “basic welfare support and systems of social protection.” In America with
almost one out of four children living in poverty, and with deficient public support, the prospects for their future are not rosy – and this will inevitably translate into weaker overall economic performance for the country.
In Stiglitz’s ideal world one’s opportunities are not constrained by the circumstances of birth. Society should help individuals to become whatever they can be, which is in turn better for society and the economy. In Hockey’s world society gets you to a mythical starting line from which reward is dependent on individual effort. Social support is not universal. The social safety net has holes in it through which fall the unworthy.
I sense that for Stiglitz freedom and equality are integrated through a sense of justice, as for John Rawls. Full individuality is attained in a cooperative and mutually supportive social context. This contrasts with the individualistic competitiveness which seems a leading feature of Hockey’s world.
One day listening to Radio National I did hear about research which purported to show that societies with a Gini coefficient of 33 or more tended to become socially dysfunctional and corrosive. Unfortunately I did not get a name or a link. It seems to me, however, that the sense of outrage felt towards Hockey’s budget stems from the sense that it is taking us as a society into territory where we feel that the social contract between the people and the state has been breached.
Asked by Fairfax Media to nominate the two biggest mistakes the government could make that would take it down the American path of widening inequality and economic stagnation, Professor Stiglitz chose the budget changes to university fees and Medicare. Each would make Australia more like the US.
“Countries that imitate the American model are kidding themselves,” he said. “It seems that some people here would like to emulate the American model. I don’t fully understand the logic.”
In the lead-up to the budget Education Minister Christopher Pyne said Australia had much to learn about universities from overseas, “not least … from our friends in the United States”.
Professor Stiglitz said Australia had “a system that is really a model for the rest of the world”, and deregulating fees would move the entire system in the wrong direction.
“Trying to pretend that universities are like private markets is absurd. The worst-functioning part of the US educational market at the tertiary level is the private for-profit system,” he said. ”It is a disaster. It excels in one area, exploiting poor children.
“If you’re rich your parents can pay the fees, but if you are poor you are going to worry about how much debt you’re undertaking.
“It is a way of closing off opportunity and that’s why the US doesn’t have educational opportunity.
“While we in the US are trying to re-regulate universities, you are talking about deregulating them. It really is a crime.”
Similarly with the health system. We have one of the best systems in the world for access and outcomes. Yet we are trying to take it in the direction of the USA which sits at the bottom of the pile.
He said the typical inflation-adjusted income of a US household was lower than it was 25 years ago. The typical inflation-adjusted income of a male full-time worker was its lowest in 40 years.
“You have to say that the American market model has failed. It’s a very strong statement for someone who believes in a market economy. But at the bottom it’s even worse. The minimum wage is about where it was almost a half century ago.”
Asked what Australia had done right that the US had not, he said: “unions”.
“You have been able to maintain stronger trade unions than the United States. The absence of any protection for workers, any bargaining power, has had adverse effects in the United States.
“You have a minimum wage of around $15 an hour. We have a minimum wage of $8 an hour. That pulls down our entire wage structure.”