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Abbott’s budget bluster highlights a deficit of social responsibility

Today’s announcement by the government that it has a $12 billion “black hole” had the status of a confession. It needn’t have. All talk of “black holes”, “revenue shortfalls” and “structural deficits…

Tony Abbott’s attack on Australia’s debt and taxation levels is sorely misguided. AAP/ Alan Porritt

Today’s announcement by the government that it has a $12 billion “black hole” had the status of a confession. It needn’t have. All talk of “black holes”, “revenue shortfalls” and “structural deficits” remains trapped in a rationalist approach to economics, which is being increasingly discredited around the world.

The rationalist, or neoliberal, approach assumes that budgets simply must be balanced – or preferably in surplus – most or all of the time. It’s an inherently conservative approach that denies governments the possibility of going into deficit to fund expensive, long-term infrastructure projects which will have overwhelming benefits for the community. It’s the approach taken by the Tony Abbott-led Opposition, which is telling everyone who will listen that Australia must “urgently” redesign its budget so as to “live within our means”. The two biggest problems, according to Mr Abbott, are Labor’s debt and high taxes.

Not only is this simply rubbish, but the experience of the rest of the world suggests that it is also economic madness. We can see the flaws in Mr Abbott’s arguments by looking at the figures. Public debt in Australia is not a problem. The ratio of public debt to GDP is about 27%, compared with an average of about 90% for developed economies. And Australia is well down the list of effective taxation rates among OECD nations.

Indeed, on standard economic measures, Australia is not only performing better than the rest of the world, but performing better now under Labor than it was when Labor took office from the Liberal-National Coalition in 2007. Since then, GDP per capita has climbed 13%. Real wage levels have increased 27%. Household savings have more than doubled. Labour productivity is now at an all-time high, and is a clear eight index points higher than in 2007.

Pension levels; superannuation; international credit ratings; the value of the Australian dollar; industrial production growth; foreign exchange reserves; the balance of trade; the current account as a percentage of GDP; the government ten-year bond rate: on all these measures, Australia has improved its economic situation since 2007, while the rest of the world has moved in the opposite direction.

Perhaps most strikingly, the national interest rate, which according to Liberal Party propaganda is always lower when it’s in government, is now 3%, compared with an average of 6% under the Howard government. And five years on from the global financial crisis, Australians are living with an unemployment rate of 5.6%, compared with well over 7% in Canada, the USA and Britain.

Anyone listening to Mr Abbott would assume that Australia is on the verge of economic ruin. In essence, Abbott has told us that we’re at real risk of going the way of Europe unless we elect him to “stop the taxes”.

The reason Mr Abbott’s strategy has worked to date is that problems do exist for people, but not in the way that he portrays them. Economic indicators might suggest that we’ve never had it so good, but the hardship felt in the suburbs tells a different story. The folly of three decades of free-market ideology is now obvious: families tethered to unaffordable mortgages; new suburbs underserviced by public transport and infrastructure; a public education system so run-down that it forces parents into the private system. It is the dissatisfaction with these outcomes that Mr Abbott is tapping into, but he’s proposing the wrong solutions.

We’re now seeing two consequences of neoliberal economic rationalism in practice. Firstly, there are huge structural deficits, not in the budget but in social infrastructure. The hollowing out of the public institutions favours the bottom-line profits of existing corporates, but relegates government to the role of mere manager. The privatisation we never talk about is that of risk, as our pension plans have now been opened to the vagaries of the stockmarket. Housing becomes less affordable. Public transport becomes less universal and less, well, public. Governments find it increasingly difficult to draw up meaningful budgets, as revenues are tied to fluctuating international demand for export commodities.

The gap between the richest and poorest in deregulated, privatised societies has grown wider, as it has in Australia since the mid-1990s. And the concept of a public sphere is all but gone, a whole generation growing up in a world in which they’re encouraged to think only about how to succeed for themselves in a game whose rules have been dictated by massive corporate interests.

The second, more immediate, consequence of neoliberal theory in practice can be seen in the effects of Europe’s embrace of the austerity doctrine in the wake of the GFC. First, in 2008, the consequences of too much “deregulation” in the global finance industry became apparent when thousands of low-income earners had to walk away from their homes after their so-called “low-doc” loans were revealed as toxic assets on the imaginary books of financiers. The subsequent collapse of globally significant companies led to a cessation in the flow of liquid capital, which then turned national debt into disastrous impending liabilities for countries across Europe and elsewhere.

Initially, proponents of the neoliberal orthodoxy tried to shoot the blame home to those who hadn’t properly listened to their prescriptive advice. The problem was not too much deregulation; it was that too much regulation remained in the finance and other industries. And if governments hadn’t tried to fund their expenditure with debt, they wouldn’t be in strife. Rather, governments should have pursued budget surpluses at all costs, to ensure that public spending remained less than public revenue. Given that the proponents of neoliberalism had also been arguing for massive decreases in taxation on corporate profits and personal income, the cuts to public spending they required had to be deep and dramatic.

By about 2009-10, governments had a stark choice: either accept the prescriptions for rationalisation and cut spending deeply, or try to tackle their looming fiscal crises with pro-growth strategies which would hopefully work to simply inflate the debt away. The choice was framed as the ultimate battle of the century between two dead economists: Milton Friedman and John Maynard Keynes.

Governments responded in one of three different ways. The first, which was the response of the European governments, was to continue to adopt the so-called “free market” mantra and impose severe austerity on their populations with the aim of bringing national debt under control. The second, which was the response of the Australian government, was to pour public dollars into key growth industries (such as construction), which would hopefully tide the economy over until consumer and business confidence recovered. The third, which was the American response, was to be caught hopelessly betwixt and between these approaches — a consequence of a Congress which wanted the former and a President who wanted the latter.

Five years on from the global financial crisis, we have the provisional results of these strategies. Europe has not recovered. Its public debt has crystallised into a real problem because, in an environment of structurally low economic growth and hence inflation, governments cannot rely on price increases over time to in part inflate that debt away. Europe is now facing another desperate choice: does it continue to attempt to repay the debt (which means more cuts and no more spending – and no more growth), or does it default on the debt, which would presumably cause havoc on the international money markets?

The United States is seeing a very slow recovery. Unemployment remains persistently high, and there’s not much more that can be done from a monetary perspective because the interest rate is about as low as it can go. That country also faces a choice: does it go the way of Europe and cut public spending, or does it risk the inflationary bogeyman and stimulate the economy with debt-funded public spending?

On any sensible analysis, then, the unorthodox approach by the Australian government has been well and truly vindicated. It’s worth pausing to ask why we’re about to turf the Labor Party out of government, in favour of the Liberal Party led by a man who continues to insist that the problems are debt and high taxes. Of course, Labor hasn’t helped itself: for years Wayne Swan was running around the country promising a surplus come hell or high water. Only recently has he begun to explain that cutting spending will only invite unemployment and a recession.

Politicians and other non-economists have for too long deferred to economists who insist that policy must be dictated by neoliberal “truths”. But the thirty-year neoliberal experiment is drawing to a close. The time is now well and truly nigh for a reinvigoration of strong institutions of state, to encourage common civic-mindedness in the population, to begin work on the massive backlog of neglected infrastructure projects, and to ensure that the most valuable of all 20th-century inventions – the welfare state – is not further corroded by more implementation of ossified economic theory.

In Australia, as the election approaches, we need to be asking all candidates just how they will respond to these new economic realities. Unfortunately, much of the discourse remains trapped in an empirically unsound regurgitation of neoliberal dogma about “structural budgetary deficits”. To the contrary, Australia should be using its AAA credit rating, the low price of money and its very sound public debt levels to borrow in order to fund much-needed social programs and public infrastructure.

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76 Comments sorted by

  1. Chris Reynolds

    Education Consultant

    I see Tony Abbott on this matter as on a number of others to be a hollow man with hollow promises. When Australia (during the first mining boom) had the chance consolidate its fiscal situation the then treasurer, Peter Costello splurge the rivers of gold on tax cuts and middle class welfare.

    By bribing the electorate (a strategy which did not work electorally) he thought to squeeze back into government after eleven long year and tiring Ministry. As it happened Australia was cushioned against…

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  2. Hardy Gosch
    Hardy Gosch is a Friend of The Conversation.

    Mr.

    Interesting article. Thanks!
    The reason why these facts are not widely known by the general public is obvious.
    Murdoch, his mates and minions provide wall to wall opposition to the Feds. for purely selfish reasons. Circulating misinformation and distortions are their tools. These attacks on our democracy have been clearly identified in many previous TC articles and by posters on this site.
    Why are there no “viable” alternatives to the majority of the current federal government’s policies?
    Wouldn't that indicate that the basic government strategy is working?
    What can be done to enlighten the electorate I ask myself!

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  3. George Michaelson

    Person

    I think we have to at least give the Liberal/National side a small allowance for the difference between what they SAY they will, do, and what they CAN actually do.

    I don't believe Tony Abbot, or his government-to-be, has any intention of actually doing half the things they allude to. They just need to ensure enough people believe they MIGHT, to achieve their outcome.

    He'll tow the boats to the border of Australian influence once. He won't repeat it in front of the international press, if the…

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    1. Hardy Gosch
      Hardy Gosch is a Friend of The Conversation.

      Mr.

      In reply to George Michaelson

      Good points. However my main concern remains the undue IPA influence and the LNP mentors Rupert M, Gina R and George P.
      Murdoch's Fraudband Network is a prime example.
      It is imperative not to allow dangerous power and profit driven entities to undermine our already seriously impacted democracy any further.

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  4. Dale Bloom

    Analyst

    It should be understood that if there is any increase in spending on infrastructure, that infrastructure has to generate enough profit to pay for cost of building the infrastructure, and also pay for the cost of maintaining the infrastructure.

    I don’t know of many infrastructure programs that can do that, and if infrastructure programs did, Europe and the US would be doing it by now.

    Australia also has a trade deficit and not a surplus, and the federal government budget is in deficit at the same time federal government revenue is falling.

    These are (or were) the good times due mainly to the mining boom, but that may have peaked.

    With a burgeoning population, it makes our situation rather dire.

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    1. Chris Reynolds

      Education Consultant

      In reply to Dale Bloom

      Rather dire by comparison with? And you don't trust the ratings agencies? If you don't who do you believe/ Surely not Tony and Joe! They have an axe to grind.

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    2. matthew piggwick

      logged in via Twitter

      In reply to Dale Bloom

      Infrastructure programs DON'T have to generate enough profit to pay for themselves and their maintenance. They provide conditions that allow income* to be generated or saved by their existence.

      For example, a public hospital doesn't pay for its self, it provides healthy citizens who can work or be educated with minimal disruption from illness.

      On your rationale sewers in major cities would never have been built, we would still have dunny men coming to empty cess pits.

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    3. Dale Bloom

      Analyst

      In reply to Chris Reynolds

      Our economic gains in recent years seem to have been swallowed up by an unnecessary economic stimulus program after the GFC, failed infrastructure and ponzi demography schemes that have not been profitable, and a welfare budget that now consumes 35% of tax revenue.

      Our mining boom is like the UK and North Sea oil. After the oil ran out, they were worse off than before.

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    4. Mike Swinbourne

      logged in via Facebook

      In reply to Dale Bloom

      "......It should be understood that if there is any increase in spending on infrastructure, that infrastructure has to generate enough profit to pay for cost of building the infrastructure, and also pay for the cost of maintaining the infrastructure...."

      Why?

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    5. Dale Bloom

      Analyst

      In reply to Mike Swinbourne

      The Abbot government plans to spend $500 million on roads in SA.

      http://news.ninemsn.com.au/national/2013/04/27/14/25/abbott-pledges-500m-to-sa-road-project

      What is not mentioned is that they will have to find $500 million to spend in about 15 years time, because roads are commonly designed to only last 15 years.

      If the road doesn’t repay itself, and pay for the cost of maintenance and eventual replacement in 15 years time, it is not economic to build it.

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    6. Russell Marks

      Honorary Research Associate, School of Social Sciences at La Trobe University

      In reply to Dale Bloom

      This is pure neo-liberal blabber. The economic stimulus program was not unnecessary; global experience since 2008 has surely proved that. Infrastructure should *not* be required to "generate its own revenue": as Matthew argues, infrastructure is about sharing the cost-burden across the community and avoiding even more costly outcomes down the track. And the welfare budget *should* "consume" a fair whack of tax revenue. After all, taxation is inherently redistributive. It's about ensuring that…

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    7. Dale Bloom

      Analyst

      In reply to Russell Marks

      I will use an analogy.

      Today I had a look at some land that is causing local controversy. On that land is going to built a number of large shops and a residential housing subdivision.

      Infrastructure will be needed for the development, but all is good for GDP, and the development creates some short term local employment.

      Unfortunately the land was once a part of a swamp, and up to 4 foot of water can flow through the area in a heavy wet season.

      The area is a disaster waiting to happen…

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    8. Russell Marks

      Honorary Research Associate, School of Social Sciences at La Trobe University

      In reply to Dale Bloom

      Those housing developments are precisely the kind which *should* be outlawed by state (or federal) planning laws, but which aren't, because of neoliberal ideologues in government who have deregulated to such an extent that planning decisions are largely deferred to the developers themselves. While the rise in developer influence on state governments is also the result of decades of High Court cases which have centralised taxation powers in the Commonwealth thus leaving states with few revenue streams…

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    9. Jerry Cornelius

      logged in via email @hotmail.com

      In reply to Dale Bloom

      That stimulus is the only thing that kept our economy out of recession in 2008-09. The two big mining states went backwards faster than the rest of the Australian economy during this period. Mining did not save us, the fiscal stimulus did.

      The school halls built all around the country have been a long overdue improvement to our basic infrastructure. I would call them a resounding success, and so would the independent auditors of that program.

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    10. David Collett

      logged in via Twitter

      In reply to Russell Marks

      Russell, "The folly of three decades of free-market ideology is now obvious: families tethered to unaffordable mortgages;"

      Care to explain how Labor is proposing to do anything towards housing affordability?

      What are the factors that contribute to unaffordable housing in Australia?

      If your doing social sciences then you would probably agree that housing affordability is important.

      If you look at the factors that contribute to increasing demand and reducing supply in housing and hence house prices, would you agree that what is needed is a more "free" market?

      Or do you have an alternative socialist solution?

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    11. Michael Shand
      Michael Shand is a Friend of The Conversation.

      Software Tester

      In reply to David Collett

      The "Free Market" doesnt insure that the lowest possible prices are garrunteed at all, thats not what free markets do. unregulated free markets are more like social darwinism where the strong succeed and the weak go bankrupt.

      If a company is able to gain a monopoly it will, if a company is in a position to form price agreements with its competiters it will.

      Free Markets allow company's to do what company's do best, make profit, but that doesnt at all equate to cheaper prices - thats one way to make more profit but certainly not the most economic way, its far easier to shut down your competition

      This isnt socialism, this is economics.

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    12. Dale Bloom

      Analyst

      In reply to Russell Marks

      As the mining boom peaks, we are left with a trade deficit, a federal government deficit, falling revenue, state governments in sever debt due to unfunded liabilities, and many local councils under economic risk (eg. Qld now has about 1 in 5 councils officially placed at high risk financially).

      We do have many more people in the country, which gives Australia a major problem in finding them long term employment, and household debt due to mortgage repayments is likely to soar.

      The reason why housing is being built in unsuitable places is that the ponzi pemography industry is now Australia’s biggest industry.

      The government cannot put a stop to ponzi demography, because so many jobs will be lost from the building and construction area of the economy, which currently employs many people.

      So the behemoth of ponzi demography continues.

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    13. David Collett

      logged in via Twitter

      In reply to Michael Shand

      more affordable housing would come from reducing regulations such as negative gearing and the restrictions on the supply of land/apartments as well as increasing regulation such as requiring more of a deposit for each new mortgage. The solution requires more free market thinking and better regulation in banking.

      My ideology: purely free markets are just as stupid as planned economies. But elements of both are needed. The market has its place and so do tax-funded areas that would not be profitable otherwise.

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    14. Mike Swinbourne

      logged in via Facebook

      In reply to Dale Bloom

      My local council just paved (with asphalt) the footpath on my street. I'm going to suggest that is not going to generate a single cent in profit, nor is it going to save money in maintenance - in fact, it is likely to increase the maintenance costs.

      So I guess, by your argument, the council did the wrong thing.

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    15. Russell Marks

      Honorary Research Associate, School of Social Sciences at La Trobe University

      In reply to David Collett

      I don't think Labor does have a plan to deal with housing affordability. Unfortunately Labor remains largely trapped by the Keating legacy. It assumes that the Hawke/Keating period of government was a resounding success and hence is unwilling to distance itself from it. Kevin Rudd tried for a while, but didn't have the backing of his Party, and wasn't able to use the force of his personality (a la Hawke or Keating) to drag the rest of the Party along with him. Labor is currently hopelessly divided…

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    16. David Collett

      logged in via Twitter

      In reply to Russell Marks

      Hmmmmmm.

      well firstly I agree that housing affordability is a very important social goal and with quite a bit of what you have said except for the parts about tighter regulation on the housing market & dictums ( I believe you can achieve both dictums, it doesn't have to be one or the other).

      I like socially progressive policy ideas but not when there is a belief that we have to borrow to fund them when there is already a lot of room for improvement simply by reducing the amount of waste in…

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    17. Robert Tony Brklje
      Robert Tony Brklje is a Friend of The Conversation.

      retired

      In reply to Dale Bloom

      What a crazy idea, any investment in infrastructure by government has to generate a profit, truly and utterly greed driven insane. By far the majority of Australian roads and footpaths do not generate any profit at all. Should they all be sold to for profit private corporations who will charge a toll on each and every metre of public thoroughfare, with maximum profits at selected choke points, like major intersections, can't pay the toll, can't cross the intersection.
      Take for example a typical…

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    18. Dale Bloom

      Analyst

      In reply to Mike Swinbourne

      I know a town that has 3 coal mines and a power station, but most streets have no cement footpaths, and there are still streets without cement curbing and channelling.

      http://en.wikipedia.org/wiki/Collinsville,_Queensland

      Large amounts of money were extracted out of that area, and it seems most went to some offshore company, or the money went to Brisbane.

      Brisbane has now grown so much Ipswich and the Gold Coast are almost suburbs.

      But one does wonder how economic is Brisbane, or if it acts as a economic blackhole, that sucks in all wealth and spits out waste.

      The mining boom may have peaked, and so much money was wasted to eventually produce deficits, or spent on housing for an artificially increased population.

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    19. Russell Marks

      Honorary Research Associate, School of Social Sciences at La Trobe University

      In reply to David Collett

      Sounds like an interesting video David --- what's it for? I think you're probably right that public spending on housing has in part been misallocated. The first home buyers' grant seems a pretty good example of that.

      Supply of land is a vexing issue for me. On the one hand a restriction of supply seems to be one factor which drives prices up. On the other hand, I do wonder how much the provision of new house & land packages in the far-outer suburbs really does affect the prices of existing housing. Then you've got to consider increased commuter costs, costs associated with building (or not building) infrastructure, and environmental degradation. So on balance I'm not sure that it's a more economic option than simply encouraging higher-density living in the capitals -- which is one thing Melbourne does seem to be doing (though I really wish the new apartments were built of more than cardboard, and were subject to some kind of meaningful energy efficiency minimums!).

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    20. Michael Shand
      Michael Shand is a Friend of The Conversation.

      Software Tester

      In reply to David Collett

      "The market has its place and so do tax-funded areas that would not be profitable otherwise" - I think you are completely right here.

      "reducing regulations such as negative gearing and the restrictions on the supply of land/apartments" - I think you are also right about negative gearing, it is another privilage for the already rich and privilaged in our society - Land Im not so sure about, for the sole reason that expanding the city limits has had its day, thats no longer a sustainable option…

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    21. David Collett

      logged in via Twitter

      In reply to Russell Marks

      The video is just another attempt at saying something about the issue. I believe if we are aware of a constructive way to contribute then we should. However, this attempt will be more about encouraging people to ask questions. Am coming to the view that education and independent thinking is the only path forward, so trying to encourage that.

      Agree that the land supply issue is more complicated than just releasing lots of it freely. I believe there is enough smart thinking among Australians to solve all of these problems but they don't get any air time or encouragement by the political decision makers.

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    22. John Homan

      Engineer

      In reply to Dale Bloom

      Infrastructure is not just roads, bridges and harbours. This type of infrastructure requires mainteneance - at a cost - to slow its depreciation.

      On the other hand the benefits of infrastructure like education, health, the NDIS, and social enterprise, although somewhat abstract and hence harder to evaluate, will appreciate over time, and increasingly benefit our country and society.

      John Homan

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  5. John Campbell

    farmer

    What you say makes perfect sense to me Russell.

    A pity the neo-cons are so averse politically and philosophically on stimulating the demand side of the economy.

    Their mantra of more tax cuts for the rich and more deregulation is simply a formula for more pain and the likely return of catastrophes like the GFC.

    I suppose next we will be fed with the discredited 'trickle down effect' garbage as a solution to financing the underprivileged.

    I feel certain that the recession and poor economy that Tony Abbot has long claimed we are suffering from, with the help of a mostly compliant media, we will really see should he win government.

    I notice the Victorian government (Lib) has tried to increase demand by reducing stamp duty and increasing payments for first home buyers, something for which I feel they should be congratulated.

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  6. Pat Moore

    gardener

    You're right Russell Marks. Neoliberal economic 'rationalism' is way past its useby date. It is a viscious, corrupt experiment upon humanity it treats as farm animals and economic units of labour and consumption and as no more than a market place.

    In its genesis via Milton Friedman's Chicago School first taken out of the lab and applied to post Allende-assassinated Chile, through its global application via ideological structures of US economic empire, through its bloody wars and free trade…

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    1. David Thompson

      Marketing Research

      In reply to Pat Moore

      Except for one problem. Tony Abbott is not, and never has been, anything like a "neoliberal", whatever the author thinks that means. One definition the author hammers home is that he defines "neoliberal" as meaning "rational". If the author prefers 'irrational' folk to fill the Houses of Parliament, I don't think he'll get much support.

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    2. Suzy Gneist

      Multiple: self-employed, employed, student, mother, volunteer, Free-flyer

      In reply to David Thompson

      One man' rational is another one's irrational. Both are sides of the same coin ;)

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    3. Michael Shand
      Michael Shand is a Friend of The Conversation.

      Software Tester

      In reply to David Thompson

      The Author doesnt describe neoliberalism as rational, the author talks about the rational behind neoliberalism

      like you can talk about the rational behind my comment or the rational behind Elmo's skin colour....it doesnt mean that my comment is rational nor that Elmo's skin colour is rational

      hope that helps

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    4. David Thompson

      Marketing Research

      In reply to Michael Shand

      Michael, the author does not "talk about the rational behind neoliberalism". 'Rational' is an adjective, and only a noun when you are talking about "rational" numbers, which - similarly to rationalist economists - are numbers that are not "irrational". The nominal for 'rational' is rationalness, a ghastly word. OTOH, given the way you use 'rational' as both noun and verb in your next paragraph, I'm guessing you might have just made a typo, and meant to use the noun 'rationale' - "the rationalE behind…

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    5. Dennis Alexander

      logged in via LinkedIn

      In reply to David Thompson

      David, a minor quibble: the nominal form of rational is rationality. "Economic Rationalism" (from which the particular "rationalist" used in the article derives) assumes that individuals make economic (consumption) choices "rationally" calculated to be in their own best interest - essentially a computation of costs and benefits in quantified (e.g. dollar) form assuming full information or including computable margins of risk for incomplete information, i.e. the consumer as computer. In this approach…

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    6. Rob Newcombe

      logged in via Facebook

      In reply to David Thompson

      No, neo-liberalism defines *itself* as being rational. The author isn't using 'rational' as a positive value judgment, he's just using the accepted terminology.

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    7. David Thompson

      Marketing Research

      In reply to Rob Newcombe

      Rob, that just re-begs the question of how does the author rates 'rationality' at all? You've said, what I certainly read in his article - he's not that impressed by 'rationality/rationalism'. That could be a perfectly defensible position. But in a rather long article, he avoids defending irrational economics.
      As for defining "neoliberalism", you're not trying to have it both ways. You're trying to have it three ways. You say Russell actually defines 'neoliberalism'. Secondly, you're saying there…

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    8. Russell Marks

      Honorary Research Associate, School of Social Sciences at La Trobe University

      In reply to David Thompson

      To clear up any confusion:

      "Neoliberalism", "free market economics", "Thatcherism", "Reaganomics", "economic rationalism" ... they're all pretty much synonyms. So "rationalism" in this sense is simply a label.

      If neoliberal economics is at all "rational", it is so only in the sense that it's mostly internally consistent. But as John Ralston Saul demonstrated so effectively in Voltaire's Bastards and On Equilibrium, rationality on its own is no guarantee against either idiocy or terror. For Saul, decision-making should always aim to encompass common sense, imagination, ethics, memory, intuition *and* reason.

      On this schema, neoliberalism fails in the end because it fails to incorporate any value *other* than rationality.

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    9. Rob Newcombe

      logged in via Facebook

      In reply to David Thompson

      All this coming from a guy who seems to legitimately believe that the opposite of economic rationalism is economic irrationalism, and that in criticising the former concept, the author is arguing for the latter (non-existent) concept. It strikes me that you have a fascinating worldview, sir, but I have neither the time nor inclination to try and unpack it. Thanks for your condescension though, it was very helpful in talking me around to whatever your viewpoint is.

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  7. David Collett

    logged in via Twitter

    I find the 'effective tax rate' a bit lacking.

    If you want to have a go at arguing against Abbot's line about our high taxes you would need to compare our total tax rates for both individuals and business against at least the OECD.

    Like Labor, you seem to advocate that government debt is irrelevant.

    When in fact this week highlighted that there is value in keeping our government debt to gdp ratio below 30% because it will help to maintain a higher GDP growth rate.

    https://theconversation.com/economists-an-excel-error-and-the-misguided-push-for-austerity-13584

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    1. Chris Reynolds

      Education Consultant

      In reply to David Collett

      Yes. It's called Keynesian economics. Gillard made this point this morning.

      Unfortunately Abbott and co are still lost in some Friedmanite jungle and want to take the rest of us there just to protect their mates and those who vote for them. Sadly the MSM and shock jock are trying to herd the populace there too without them revealing that it will be their doom.

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    2. David Collett

      logged in via Twitter

      In reply to Chris Reynolds

      The talk may sound good, but I can't stomach reading/watching anything either side say anymore.

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    3. Chris Reynolds

      Education Consultant

      In reply to David Collett

      I am sure we all have our thresholds of tolerance. Everyone is allowed to tune pout from time to tome. I am just glad to live in a country where such conversations and "openness" are possible.

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    4. Michael Shand
      Michael Shand is a Friend of The Conversation.

      Software Tester

      In reply to David Collett

      When you say that you are glad we didnt do Austerity....surely you understand that this is exactly what Abbott and Co are proposing, fair enough to question Labour - I'm not a fan, but if you think Austerity would of been bad then you think that LNP would be bad

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    5. David Collett

      logged in via Twitter

      In reply to Michael Shand

      To be honest I am not clear what Abbott is proposing, my top of mind thoughts for the Liberals is "stop the boats, stop the tax", but they are just slogans. A week or two before the election I will have a look at what each side is proposing to do for the next term and then make a decision on which way to vote.

      I am not confident to apply hindsight and presume that the Liberals would have done or not done 'austerity' when the GFC hit.

      If I had more trust in what either side were saying then I would pay more attention to what they are proposing/talking about right now and then try and develop more of an opinion on the issue.

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    6. Ted Stead

      Consultant

      In reply to David Collett

      "...there is value in keeping our government debt to gdp ratio below 30% because it will help to maintain a higher GDP growth rate."

      Hold on there! It's highly probable that the causation is the other way. That is, countries with low GDP growth causes higher rates of debt, and vice versa.

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    7. David Collett

      logged in via Twitter

      In reply to Ted Stead

      Ted, can you point to a reference?

      From memory R squared helps to show how strongly the two variables linked, but couldn't find it in the paper, although they were mentioning RR but that maybe referring to a software package.

      Probably possible to ask them for the data set and to find out for oneself but it's not the top of my to-do list right now.

      http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_301-350/WP322.pdf

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    8. David Collett

      logged in via Twitter

      In reply to Ted Stead

      Cheers Ted, read the link. Their opinion that causality runs both ways without any clear analysis of what that causality is in each direction, which I also couldn't find in the paper that highlighted their error means it's best for me to disregard both papers for now.

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  8. David Collett

    logged in via Twitter

    John Freebairn does not agree with the premise of the above article either:

    "Over the longer run, fiscal deficits, and more importantly increasing fiscal deficits, are unsustainable. They incur higher debt interest payments; higher interest rates for private sector investors; reduced flexibility and effectiveness in responding to economic recessions and crises; and their eventual repayment becomes higher taxes and imposts on future generations."

    https://theconversation.com/federal-budget-2013-why-our-unsustainable-structural-deficit-must-be-tackled-13723

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  9. john tons

    retired redundant

    Excellent analysis, if anything the danger of persisting with the neoliberal experiment is understated. We are now only too well aware that we have cut far too deeply into our natural capital - we are on the verge of doing irreparable damage to our ecosystem, which in turn means that we run the real danger of having nothing to show for the unprecedented advances that we have made. Making the transition to a society that keeps hold of the advances that we have made and at the same time is not dependent on further eroding our natural capital is the challenge the global community faces - with Abbott we are guaranteed not to be able to rise to that challenge - with Gillard there is a faint glimmer that we just might secure our future.

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  10. carolyn fisher

    life traveller

    I am really appreciative, as a seeker of facts, not political bulldust in relation to our economy, for your clear, plain English, easy to understand article. As a lay 'common person' this is really valuable to me. I am going to pass it on.

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  11. Ben Smith

    logged in via Facebook

    When I read the first line of your article I nearly choked on my breakfast. The budget, the economy and the nations growing debt are a cause for concern and require immediate management which the Federal Government has either been unwilling or unable to provide. Your argument is essentially to do nothing, which is indeed illogical. it smacks of the very populist rhetoric we have heard from our Federal Government and irresponsible socialist Governments the world over. Yes, I know that the debt/GDP…

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    1. Russell Marks

      Honorary Research Associate, School of Social Sciences at La Trobe University

      In reply to Ben Smith

      Why do you think the "growing debt" is a cause for concern? Both historically and comparatively, Australia's level of public debt is absolutely manageable. Indeed, some debt is unavoidable at present because of the need to fill the backlog in social programs and infrastructure.

      Government debt is certainly NOT "higher than any level Australia has ever had before". I recommend this paper: http://lowpollutionfuture.treasury.gov.au/documents/1496/PDF/01_Debt.pdf

      I'm also puzzled by your aversion…

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    2. Ben Smith

      logged in via Facebook

      In reply to Russell Marks

      I stand corrected on the level of Government debt. Thank you for bringing the paper to my attention, I look forward to reading it. I still believe that the Government can do a better job at managing the nations finances.

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  12. Anneliese Ford

    Senior Consultant

    Absolutely brilliant article, Russell. Thank you so much for your clear insightful analysis of our political times. Can this truth please be shared with our wider society, which seems so comparatively ill-informed these days, and at such a crucial time.

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  13. Markie Linhart

    Rouleur

    Really good piece Russell Marks. Thank you, and I hope you don't mind but I think the more widely this is read the better, so I've shared it on FB and Twitter.
    Ignorance is bliss for too many people and the readiness of those who take their local tabloid's word for gospel never fails to appall me…

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  14. Dianna Arthur
    Dianna Arthur is a Friend of The Conversation.

    Environmentalist

    I would like to see neo-libertarians actually live up to their ideals:

    Dismantle the following:

    Police force (too much regulation of freedom)
    Military (libertarians can fight their own wars)
    Fire brigade (people can fight their own fires)
    Public Hospitals (because they are public and, therefore, not for the truly independent)
    Education (let them teach themselves)

    Save a fortune that would - in fact there would be no need for government at all by eliminating all of the above (a neolibertarian's wet dream).

    We would be sooooo free - no responsibilities, no consequences.

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    1. Chris Reynolds

      Education Consultant

      In reply to Dianna Arthur

      o, as you rightly imply Dianna just total bloody anarchy where hte gun and the boot would rule just like a Roio Favella! Just tell this to the IPA. They have an answer for everything!

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    2. Rob Newcombe

      logged in via Facebook

      In reply to Dianna Arthur

      Well, the USA actually does have privatised fire brigades. They're a disaster.

      With regard to the rest of your post: most libertarians I know think the government should only have a stake in the military and the police force, since those things are needed to enforce the minimal number of laws necessary to keep a "libertarian" non-state functioning.

      Public hospitals and education they would very much like to get rid of, and if the IPA has its way that's exactly what will happen under an Abbott-led government.

      What's scary about libertarians is not that they're hypocrites, although many are. It's that they're true believers, like the communists they so love to pretend are still a clear and present danger. Given the chance they would actually enact their insane policies and watch civil society collapse, as long as it meant the rich got richer.

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    3. Dianna Arthur
      Dianna Arthur is a Friend of The Conversation.

      Environmentalist

      In reply to Rob Newcombe

      @Rob

      I understand that in the "land of the free" if one didn't have a special fire brigade plaque - signifying payment of fire insurance, the fire brigade would drive by - from memory I think that was in the earlier part of the 20th C. Makes absolutely no sense, as fires spread.

      Same with disease - often contagious, does not differentiate between neo-libs and the rest of us.

      Keeping people uneducated is an excellent way to control people. Which surely is the antithesis of libertarianism - controlling people, AKA "authoritarianism".

      Scratch a neo-con and you will find a control freak.

      Prefer the honesty of anarchy myself.

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  15. George Petrides

    Project Manager, Communications

    Great article, Russell. Thanks for writing it. This is the first time I've seen anyone write confidently and authoritatively that "the thirty-year neoliberal experiment is drawing to a close." I certainly hope you are right, but I am interested to know how you've come to that conclusion.

    From Tony Abbott to the US Congress I can't see all that much turning away from neoliberal policy. Are you able to recommend any further reading or references?

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  16. David Collett

    logged in via Twitter

    the IPA wish list is here: http://ipa.org.au/library/publication/1345447840_document_be_like_gough.pdf

    Dominic Kelly showed that Tony Abbott has no intention of implementing the crazy side of the IPA wish list in his Conversation article here: https://theconversation.com/a-big-fat-yes-or-will-tony-abbott-leave-the-ipa-crying-at-the-altar-13657

    For that reason I am not concerned that Tony is going to follow the IPA, Tony occupies a much more central ideological position than the IPA.

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    1. Russell Marks

      Honorary Research Associate, School of Social Sciences at La Trobe University

      In reply to David Collett

      I wouldn't say that Abbott occupies a "more central ideological" position than the IPA; rather, that Abbott and the IPA occupy very different positions within the broad church that is Australian political conservatism. The IPA is neoliberal and prescriptive; Abbott is socially conservative and rather populist. Moreover, Abbott will always prefer to lose an argument if it means gaining or maintaining political power. Whether Abbott ends up fulfilling the IPA's wishes will depend on (1) the extent to which he's able to maintain authority in his own party, which is broadly in favour of neoliberalism, and (2) the popular mood in the electorate with regards to further neoliberal "reform". I can imagine a scenario where Abbott is effectively forced, through a combination of low personal popularity and strong pressure from his own party ideologues, to implement aspects of the wish-list.

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    2. David Collett

      logged in via Twitter

      In reply to Russell Marks

      Hmmmmm. I can imagine a scenario where Labor is forced to implement some of the policies from the Greens...:)

      My dream is to vote for a party one day which is made up of a team that is committed to making Australia the best in the world in every area. A party where they do not tolerate 'portfolio shuffling' and all the other things that make them second rate.

      Australians demand the best of their football teams. What would it take for them to expect the same focus and team-work from their politicians? The question may even be irrelevant. Maybe it just takes a good team stepping up..But the problem with that is the people that would make the best players would not be attracted to the current game..

      more imagination...

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  17. Michael Gioiello

    High school music teacher/ freelance Opera singer

    I think the real problem here is not Tony Abbott. He will always be a dud. It is the Murdoch lead media who mis-represent the truth by constantly giving biased argument and points of view. The problem is, a lot of people trust main-stream media to deliver the facts. They are not aware that they are being lead down the garden path by Murdoch, who has his own far right-wing political adgendas. Is this type of situation democratic? Not in my opinion.

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    1. Hardy Gosch
      Hardy Gosch is a Friend of The Conversation.

      Mr.

      In reply to Michael Gioiello

      The public should be asked two questions:

      What do you want "Murdochracy" or "Democracy"?
      and
      Have Murdoch, his Mates and Minions made up your mind how to vote?

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    2. Reg Collins

      logged in via email @hotmail.com

      In reply to Michael Gioiello

      Tony Abbott, while a ruthless populist fool, will enter office very heavily indebted to Murdoch's unrelenting assassination of the government, and softly/softly approach to himself. I would say News Ltd's influence will be the primary determining factor in a change of government, as was clearly its intention in the determinedly biased and unbalanced reportage.

      Abbott is a problem as PM because he has a debt to pay to Murdoch. I imagine part of this debt will involve yet another all-out conservative…

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  18. Lee Emmett

    Guest House Manager

    I'm in total agreement with this analysis, and wonder why Labor can't get this message across to the electorate. I'm also glad the the internal bickering in the Labor party is over, and that some bitter and twisted peopole have learnt some comons sense and held their tongues.

    Hopefully the government will be able to sell the 'message' of how Australia is doing better than most of the rest of the world, because the prospect of a federal LNP government is abhorrent: there would be immense job losses if they implement 'plans' like the LNP stes of scrapping or privatising services and/or selling off public assets.

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