Club Troppo

Lets imagine someone facing the end of a working career. They’ve built up a large jam jar of money. With these savings they can buy the goods and services they need/desire despite no longer producing anything to exchange in the market for them.

Now imagine a society with a bulge of people in a certain age demographic. Each of these has a large jar of savings. When they retire they will proceed to spend spend that money.

Except there’s a problem. They’re using that money to buy the goods and services of the remaining working population. Money is only as good as what is able to be there to buy. More money would just bid up the prices of the output already possible. Digging up the money is no different to printing it.

In another society however, savings don’t go into jam jars, but into the financial system where they are used to purchase other assets, financial and otherwise. This allows the money (and resources not consumed) to be used by other people while it is not being used by the saver. Hopefully the financial system will allow these savings to be invested in the economic sense, spending that increases the amount that can be produced in the future, by education and purchases of machinery and infrastructure etc.. This way the greater output of those future workers can support both themselves and the non-productive retirees with no drop material quality of life on average and without the need for government expenditure.

In the financial pages the aging population is often given as a matter of fact explanation of the need for superannuation and the expansion of superannuation. This is helped by the fact there’s a large industry to hire people to argue that its own promotion is good policy. Whilst other reasons have been varied (such as reducing the Current Account Deficit, remember that?). But if the “saving so we can afford an aging population” explanation has currency, then there are fairly large issues about how we’re handling these savings. (Continued)

What do you do if you’re a ‘third wayer’ and things don’t seem to be turning out all that flatteringly for your vision?  You just keep talking in pretty much the same way, slap a coat of Web 2.0 paint on the vision and press on.

Oh well, none of us that I know of are that clever about what we should be doing to make the world a better place.  But it can be irritating both reading and listening to Tony Blair clones. The general shtick is that the era of mass this and mass that is over, thus we have to ‘move beyond’ mass welfare.  This will be done when we empower people.

Couldn’t agree more, but somehow I don’t think we can make much progress without acknowledging how difficult this is. While there are things we can do to make welfare more active, more empowering etc etc, the third wayers seem never to write about this in the tragic terms that I think are warranted.  When there was no welfare people looked at the misery and the indignity of it and thought that surely welfare was a no-brainer.

(I agree – in any reasonable utilitarian analysis the ‘utility’ supplied to the poor from welfare vastly exceeds the disutility of us rich people giving up ten, twenty or even thirty percent of our income. The idea that redistribution from rich to poor was socially beneficial was an integral and natural part of the views of early 20^th Century mainstream economists like Marshall and Pigou. If the consumption of virtually all commodities is characterised by diminishing marginal utility (as you consume more you get less ‘utility’ from each unit consumed) then it stands to reason that taking a dollar from someone with lots of money can be done at relatively little cost to utility whilst redistributing it to the poor enables the use of the same dollar to secure things of much higher utility. On a simpler level, swapping one person’s luxuries for another’s necessities makes obvious sense. This commonsense disappeared from economics as it tried to give itself value free foundations and so lost contact with its origins in moral philosophy.)

Anyway, as we now discover, we’re also subsidising the behaviours that generate poverty – like single parenthood, drugs, domestic violence and the breeding and neglect of kids. Why do third wayers never really focus on the tragedy of this – on the difficulty of subsidising something while trying to reduce it?  We’ve got ourselves a very very hard problem and we’re probably condemned to tinkering at the edges to alleviate the worst of it – unless that is one simply declares war on the welfare state as some on the right would like to do.

The third way has broadened its base in the UK, illustrating just how important leadership is.  In Australia we had eleven years of John Howard and the parameters of our politics – perhaps that should be perimeters of our politics – are still shaped by that time as we continue to obsess about the most recent boatload of asylum seekers. In the UK they’ve had a similar amount of time with New Labour and now they have cooked up a new brand – “progressive conservatism” a subject which no fewer than two think tanks have dedicated themselves to exploring (not to mention Demos who established a ‘progressive conservatism’ project from which much of this seems to have started.)

David Cameron the putative Conservative PM spends a great deal of his time sounding more like Tony Blair than anyone else. When this struck me from watching a few of his YouTube videos I discovered on further inspection that this is indeed a criticism which has some currency in the UK.  However given the party he heads one presumes that there are plenty within progressive conservatism who hope to use the third way and the Web 2.0 ideas which have come in the wake of the third way to scale back the state, as alternative approaches are cranked up.  Then it may not seem so nice.

It’s in the nature of politics that bold claims get made when one is campaigning in poetry and that those claims end up looking a bit shoddy after a period of governing in prose. What’s more galling is all the consultants and spruikers for the new approaches sound just the same – when it seems to me that those who set themselves up as ‘thought leaders’ ought to both campaign and govern in prose. (Continued)