Niall Ferguson, MA, D.Phil., is the Laurence A. Tisch Professor of History at Harvard University and William Ziegler Professor at Harvard Business School.
Niall F’s website doesn’t just tell uswhat a dashing fellow he is. It shows us. There he is – hair pinned back by the onrush of the future he is building as he expounds our past.
And then it shows us that he collects job titles pretty much with every breath.
He is a resident faculty member of the Minda de Gunzburg Center for European Studies. He is also a Senior Research Fellow of Jesus College, Oxford University, and a Senior Fellow of the Hoover Institution, Stanford University.
Anyway, I was amazed to read this spray which dates back to September last year. (It’s mysteriously almost impossible to read on his website with the background nearly as dark as the text – perhaps it’s my browser – but if I were him I would have made the background darker still – and somehow prevented highlighting which turns the text an easy to read white on blue background – but I digress).
It argues that Australia’s fiscal stimulus didn’t save jobs and save Australia from a (technical) recession. (I’ve occasionally seen Ferguson wade into economics proper and it’s seemed to me that he’d kept his claims calculatedly vague to try to stay out of the way of those who might deconstruct his claims in the blogosphere. In any event he has run into flak from Krugman and others who pulled his arguments apart.
Here what’s telling is Ferguson’s reciting partisan talking points. Viz.
Spare us the fable that it was better designed. After the home insulation fiasco and the now-proven waste on new school halls, that can’t withstand serious scrutiny.
Well if you read the reports the school halls exercise seems reasonably well managed – only it attracted lots of headlines – not hard with 20,000 odd projects and a rushed timetable. Indeed it’s not even clear that the insulation was such a fiasco, but we’ll leave that to one side. But the thing wrong with Ferguson’s claim is that from a macro-economic perspective which is all that’s relevant to the argument the stimulus was well designed. In other words even if the projects were a micro-economic fiasco, they had the same short run macro-economic characteristics as brilliantly executed projects. And their macro-economic impact was as you’d expect and as measured – strongly supportive of the economy.
Then there’s the net exports story.
Net exports surged from 2.4 per cent of GDP in the firstquarter of 2009 — the nadir of the GFC — to 5.4 per cent in the first quarter of this year.
Problem is that that’s nowhere near enough to hold up GDP growth against expected plunges elsewhere. And surging mining exports won’t save many jobs – as seemed to be saved. If you look at the national accounts you find that consumers spent their cash splash in late 2008 and early 2009 so that retailing jobs were retained and that construction boomed. That’s what saved the jobs. Funny that.
Ferguson’s article seems almost certainly done on the fly. He argues that the RBA raising rates shows that the stimulus was overdone. But the RBA gradually put rates up to around a neutral level as it became clear that the economy was doing OK – looks like evidence of getting the economy back to normal ASAP to me. Wasn’t that what we wanted? Perhaps there’s an argument here, but Ferguson leaves us none the wiser as to what it is. Then he says this “As economist Christopher Joye has shown, small business, residential mortgage, personal and credit-card interest rates have all been materially higher under the Rudd-Gillard government than under Howard.” And, through the very different economic times and periods of the cycle – and the increased margins after the GFC – and this is supposed to show what exactly?
The thing that took the cake for me was Ferguson falling for the right’s talking point that the mining tax showed a kind of Hugo Chavez kind of instinctive punishment of success. It was a fine piece of micro-economics which would have lowered more distorting taxes (on companies – including low profit mining companies – and savings) which was the baby of Ken Henry, one of our finest econocrats, who’s a believer in free markets and lower taxes.
Finally, let’s raise our hats to Aussies who did the most to meet China’s booming demand: the diggers. Yes, theAustralian mining industry, which accounts for nearly 10 per cent of GDP and circa 40 per cent of total exports,moved heaven and earth — well, certainly earth — to satisfy China’s needs. We see the fruits of this effort everyday, most recently in the record $3.6 billion trade surplus in June, the biggest in history.Unfortunately, the government is doing the very reverse of tipping its hat. On the contrary: it’s dipping its handinto the mining companies’ pockets.
For shame . . .
Postscript: From last years Budget Paper No. 1, here is the Treasury’s breakdown of GDP growth in 2009-10 – the dark blue lines. It’s easy to see the fiscal stimulus in consumption, dwelling investment and public expenditure. It’s not so easy to see some of the factors that Ferguson mentions, like net exports for instance, though obviously they played some role.