Why the InterGenerational Report is So Deeply Flawed

Imagine that twenty five years ago, back in 1990, you were handed the task of predicting a group of central African nations’ economic future for the next forty years.

Scary thought, right?

Well anyway, one of the things you would have been certain about would have been that these countries must develop a communications infrastructure in order to achieve their economic potential.

So, you would have built into your predictions investment in a vast copper network  throughout these countries. Why? Because hitherto, every developed country in the world had done just that. And if countries want to develop economically, then a sound communications infrastructure is fundamental, right?

Except you would have been wrong!

From the viewpoint of 2015, we know that most of these countries will completely bypass the copper technology and go straight to wireless and mobile, saving billions of bucks along the way.

Pretty serious mistake, no? Going to totally mess up your result, yes?

As my bushy mate would say, “Blood oath!”

So, back in our Tardis to 1990.

Hands up if you predicted 9/11. You didn’t? Dear, oh dear, not much of a crystal ball you’ve got there.

How about the Global Financial Crisis in 2008? Oh, back in 1990, you didn’t see that either. Only the most serious economic event since the Second World War, and you didn’t even notice.

So how’s, our plan looking now? Like a cyclone proof garden shed, totally screwed?

It’s generally accepted that 3D printing will change the nature of manufacturing over the next decade, and I just bet there’s no mention of it either.

I think I’ve made my point. Making a prediction about the world and our place in it even ten years out is flat out impossible.

So, why did Hockey push this report so hard, when even he has to get it, that the IGR is a compete crock?

The answer is that, while it’s a complete crock, it’s a crock carefully designed with one goal in mind: to justify a bunch of ideologically driven policy objectives that make zero economic sense, but which are much loved by the Institute of Public Affairs and their fellow travelers.

The IGR is simply a scene setter for policies aimed at continuing the greatest transfer of wealth in Australian history; from the middle class to a small, immensely wealthy elite.

And that dear friends, is why the IGR is such a profoundly flawed document.

Unless of course, you are one of the beneficiaries of far Right voodoo economics, in which case, it’s a masterpiece.

What ISIL Can Teach our Political Leaders

What can ISIL teach our political leaders?

At first blush, one might say, not a whole helluva lot. No matter how bad our leaders are, which, BTW, is pretty bad, ISIL has to be worse, right?

Well, maybe not quite.

A question driving enough hand wringing in Canberra to generate an epidemic of Carpel Tunnel Syndrome, is this: why are young people giving up the Great Australian Dream to join a bunch of murderous thugs and face a high probability of becoming inhumed. (That’s a Terry Pratchett word – it means the opposite of exhumed. Think about it…)

Picture this: You’re a middle class Aussie kid of Middle Eastern background. You live in a country which, when it’s all said and done is still pretty damned fantastic. You really can achieve whatever you set yourself to achieve. Yeah you might cop some sledging, but no worse than “Pommy Bastards” copped a half century ago.

But no, you throw it all up to go kill some people and most likely get killed yourself?

Why would you do that?

Now there are some who’ll say, it’s the whole paradise and virgins thing.

But I don’t buy that. Think about it. You’ve got options here.

You can listen to some stranger with a Quran in one hand and an AK47 in the other, and no education religious or otherwise, who says, come and kill folk and if you die you get the whole paradise package.

Or you can listen to your local Imam who says, do that and you go to hell. But if you live a virtuous life you get fifty plus more great years on earth and then you still get the paradise package.

What are you gonna choose? Yeah, me too.

So, no. As an explanation, that doesn’t come even close to cutting it.

The answer to the question of why these kids are making the choice they are is simple.

The guy with the AK47 is offering two things:

  • a vision, a goal, right here on earth, that young people can be deeply passionate about, and which gives them a sense of identity; and
  • A structure of which they can become an integral part.

Let’s take them one at a time.

First, Napoleon, no slouch in the Leadership department, once said, “No man can lead who does not create a vision for the future. A leader is a merchant of hope.”

Every successful leader in history, whether good or evil, has understood this, and in simple language, articulated a clear vision of where he or she was taking the team. And it was always portrayed as some place wonderful, or at least heaps better than wherever they were at the moment.

Whether it was glorious conquest or a fair and just society, or the really nice valley on the other side of the mountain, the dream was well understood and more or less enthusiastically supported by everybody.

Second, we humans are driven by our pack and then tribal evolutionary ancestry to need to know how we fit into the scheme of things; how, even if we’re a small cog in a bloody big wheel, we help to bring the dream into reality. We see examples of this everywhere, from bikie gangs and cults to the military; of people voluntarily submitting themselves to sometimes strict discipline in order to gain the comfort of clearly understanding their role.

Now let’s look at the great dream Abbott offers to young Australians:

  • Cliches, piled upon distortions, stacked upon deceits that a twelve year old can see through;
  • If we don’t suffer now we’ll REALLY suffer in a while;
  • If we can make the wealthy just the teeniest bit wealthier it’ll all be okay;
  • If we can only keep those wicked refugees away, we’ll be okay;
  • It’s all Labor’s fault;
  • Except for the bit that’s all the Baby Boomers’ fault, (But that’s really still Labor’s fault anyway);
  • If it isn’t Labor or the Boomers’ fault then it’s all down to someone who’s in some way a bit different to how we see ourselves.

It’s almost enough to make a fellow want to get on a plane to Syria.

I’m kidding, but just imagine for a moment, what our nation could achieve if somebody, any-bloody-body, would just get out front and give us a vision for our nation that we could really care about; care enough about in fact to believe in, to work for and to maybe even make some small sacrifices for it if that’s what it takes.

And that, boys and girls, is what ISIL can teach Tony Abbott and his cronies.

 

 

 

Fortunately It’s Not Just Jobs that Robots and Computers Will Take

The Australian, in the true spirit of Right Wing ideology, ie be afraid, be very afraid, has written another end-of-the-world-as-we-know-it piece on the coming of the robots.

Basically, we’re all going to lose our jobs to computerization and robots and there’s nothing we can do about it.

To be fair, the author, Andrew Keen, does quote lots of very robotsimportant people whose collective opinion can best be summed up in the quote from Google’s executive chairman, Eric Schmidt, who told the 2014 World Economic Forum in Davos that the “race between computers and people” will be the “defining one” for the next quarter-century.

Well… maybe.

But here’s the thing that Keen, and most others commenting on the issue, nearly always overlook.

Robots won’t just replace workers, they’ll replace consumers.

And here’s another thing: Robots and computers don’t consume.

All those billionaires busily getting rid of people in their businesses, rubbing their hands with glee as their labour costs plummet, apparently forget that they need these pesky things called customers if their factories are to continue to be profitable.

Here’s a simple formula: JOBS = WORKERS WITH MONEY = CUSTOMERS = DEMAND = PRODUCTION = JOBS.

It doesn’t matter where we break the loop, if it gets broken the whole shebang collapses.

What I’m saying is that if most jobs are to be replaced by robots and computers, then our entire economic model will have to be reinvented.

Because somehow, money has to find its way into the hands of consumers if the Capitalist Economy is to survive.

Which is another way of saying that we’re going to have to come up with a model to distribute wealth other than working for a wage.

I can think of several ways, of varying degrees of practicality, that this could be done.

For example, we could lend redundant workers money to buy a robot. The ex-worker could then earn an income by leasing Robby Robot out to a factory or a govt department. (Okay, maybe that’s one of the less plausible options…)

But here’s the thing; it’s extremely difficult to come up with a workable scenario that doesn’t smack of socialism. (I know, the word “Socialism” flashed in your mind in bright red lights back up the page when I mentioned wealth redistribution, right?)

Can you imagine a greater irony than if capitalism, in it’s never ending pursuit of lower costs and higher profits, became the driving force behind the emergence of some lasting, efficient form of socialism?

What is it the Chinese say about Yin and Yang – everything in the universe contains within it the seeds of its opposite.

Bingo!

So, I’m not lying awake at night worrying about robots taking all the jobs.

Because we workers will be needed as much as ever we were. Only difference might be, many of us won’t be forced to spend our days doing something we hate.

Tax Cuts for Small Business – Or, Where Right Wing Economic Gobbledygook Get’s Us

Seems the Greens are supporting Abbott and his cronies’ notion of a tax cut of 1.5% for small business.

I like a cash back as much as the next person, so why just small business? Why give only that part of the economy a leg up?

“Ah,” I hear you say, “Small Business is the backbone of the economy. A tax cut will create jobs.”

“Oh really?” I reply, trying not to laugh.

Let’s take my mate Jack. I’ll call him Jack ‘cos that’s his name and he’s definitely not innocent enough to need protecting.

Jack’s got a small business.

He makes a taxable income of about a million dollars a year. Probably middle of the road for a small business.

So this tax cut bequeathed by our incredibly generous government will put an extra $15,000 in his pocket.

Hands up anyone who seriously thinks Jack’s first thought on seeing this prize will be – Oh, I must rush out and hire somebody.

Before you answer that, I’d point out that, with on costs, hiring another person will cost Jack at least $40,000/annum.

So, hiring an extra bod’ will now put him out of pocket $25,000 a year.

Still reckon Jack is going to call a recruiting agency?

Me neither.

See Jack has this golden rule. Turns out most small – and large – businesses have it:

They only hire somebody when having that new somebody will contribute to profit.

Why the hell else would anybody hire somebody?

Jack will only hire when he can profitably put that person to work. And if that situation exists after the tax cut, then it existed before the tax cuts and Jack would’ve hired anyway.

So, what will Jack do with his tax cut?

He’ll do what you or I would likely do, spend it on a drunken week in Bali, or on some other exercise in self indulgence.

The only thing that makes any business hire extra staff is when it’ll add to profit.

And the best way to create that situation is to have more economic activity.

We could give everyone a tax cut, so everyone would spend more and that would create jobs. But we’d have nothing in the long term to show for it, except a bigger debt.

If government wants to stimulate the economy while creating a financially sustainable future, it has to spend money on smart investments like infrastructure, education and research. That way, jobs will be created immediately while simultaneously preparing the nation to be more competitive in the future and thus able to service down its debt.

If necessary, the federal government should borrow more and postpone surpluses to do this.

After all, the increased economic activity will increase future government revenues, thus making it easier to reduce the debt as we become more competitive.

And if we don’t make these investments, then we’ll be unable to compete in the future and so will finish up being… oh, what’s the technical term I’m looking for? Screwed, that’s it. We’ll be screwed anyway.

But tax cuts are not the answer, other than giving a short term, temporary boost….

Unless of course, as the Howard/Costello government did, it wants to buy an election.

Tax increases would in fact have a much better impact on debt reduction, provided the increased government revenue is used as described.

 

 

 

 

 

Why LNP Governments Never Manage to Rescue the Economy

Suppose your uncle’s sick. Would you starve him? Or would you feed him up?

I’m guessing you’d go with feeding him up. The time for starving him is when he’s in fine health and his booty is maybe starting to get a wobble up.

Well, it’s the same with an economy.

If an economy gets a bit sick, that’s exactly the wrong time to starve it.

The time to put an economy on a strict diet, otherwise known as Austerity, is when it’s in good health, making good surpluses. We take those surplus kgs, er, dollars, and tuck them away for when the economy gets sick again. Because economies are cyclical creatures.

In other words, the smart thing is to cut the top off the boom and stash it away so we can put it back in to support the economy during a bust.

What does that mean in practical terms?

It means, we should now be borrowing more and pumping it into the economy while it’s not doing so well. Borrowing rates are at all time lows, Australia retains – for now – it’s AAA Credit rating, and has one of the lowest debt/GDP ratios in the developed world.

But here’s the thing. If we give that borrowed money to corporations as tax cuts, (which is the LNP’s answer to every economic problem), then foreign investors will  simply buy another yacht, and we’ll end up with nothing to show for the extra debt.

So, we have to ensure that the borrowed money is spent to achieve two things:

  1. To act as a buffer in the short term to keep the economy humming and unemployment low. Because we are, first and foremost, a society, not an economy. (Listen up, right wingers, the economy is there to serve we the people, not the other way around); and
  2. To position Australia so that in the medium to long term we are able to compete successfully in the global market, thus protecting our quality of life.

But what does it look like, an Australia that will be competitive in the long term?

I have a fair idea, but I really don’t know, though one thing I am certain of; the current federal government has no idea either and isn’t trying to find out.

Yet one could argue that, after national security, anticipating what will keep us competitive in future decades is a key government responsibility.

But instead, what’s keeping Abbott’s mob up at night? The fact that they wont be able to give business more tax cuts this year.

The LNP is more worried about European and American luxury yacht sales than it is about our long term competitiveness.

Of course, in boom times, what does the LNP always do? It gives the extra revenues away as… tax cuts.

One might reasonably ask how they could be so economically idiotic.

The answer is that right wing governments always put ideology ahead of practical experience and data.

And their answer to every problem is… to starve the patient.