Paul Keating famously educated the media and himself about the art of “pulling the levers” of the national economy. For a few years, the J-Curve was the subject of water-cooler discussion, the “twin deficits” theory was widely bandied about, and everyone had an opinion on micro-economic policy. Debate for and against “economic rationalism” raged. Paul Kelly and other journalists applied the acid test of economic orthodoxy to politicians, and a Federal Treasurer fell because he couldn’t remember what an economic acronym stood for.
Yet the Howard Years have seen the disappearance of informed economic debate, and indeed arguably of a coherent macro-economic policy. Puzzlingly, because issues like the trade deficit and the current account have certainly not gone away. With a few honourable and excellent exceptions, like blogdom’s own John Quiggin, academic economists seem largely to have departed the public domain.
Chris Sheil is probably right that neo-liberalism has been effaced by neo-conservatism and “rational economics” has made way for a pervasive populism:
What neoliberals (and all their business, media and academic associates) need to face up to, I submit, is that they have been dancing with the devil. It was their tacit agreement to allow their liberal interests to play a bit part (while holding noses) to the neocons which has placed them in irreleventville. What this may foreshadow is the final demise of the neoliberal moment. Having triumphed in the ’80s, having allied with the centre-left in the ’90s, having stayed silent in the ’00s – assuming their interests were in hand, if no longer to the fore, under the conservative side of politics – they now find themselves without a relevent voice in a left versus right populist contest.
The neo-cons of course have a faith-based attitude to reality exemplified by Cheney’s alleged comment that deficits don’t matter. But as Nicholas Gruen argues at Online Opinion, the absence of a serious economic debate from either side of politics is a huge worry as we enter 2005
With the greatest respect to Quiggan, many academic economists opposed economic reform in the 1980s and derided the ‘neo-classical agenda.’ Pusey was their hero.
Now our new Freidmanites and Demsetz auctioneers bang on about deficits and the Howardian night Chicago died. I don’t buy it. They just want any old piece of hickory to clobber a man they’ve always loathed.
In the long run, prosperity is built on culture: a libertarian culture where democracy, catallaxy, the rule of law, limited welfarism, first class infrastructure and education and maximum individual freedom reign. America has it. Australia has increasingly embraced it.
Within prudent reason, I’d welcome the deficit-financing of Murray River restoration, for example, or even an enlarged aid package to South-East Asia. If Cheney said that, personally I think he was right. Who knows or cares what the US deficit was following Appomattox, the Korean War or even the Carter Administration? Nobody.
C.L., I thought Pusey wrote his book on economic rationalism in 1990. maybe I’m unaware of the stuff he produced in the 80s which made him John Quiggin’s hero…
As to Carter, I think Reagan made an issue of the US deficit in the 1980 campaign. ironic really…
I’d be more interested to see you take on Nicholas Gruen’s nuanced critique of both sides of politics in ignoring economic problems. it seems to me you often skirt around the edges of issues to make a polemical point. yr a good writer though :)
I rather like the Leo Dunbar piece that is reproduced on my website. In 1985 he identified the four groups who screwed the debate on econonomic rationalism. Preview shows the link is not coming up live so this is the full address
http://www.the-rathouse.com/hayaustriankey.html
Or go to the Rathouse and find ‘The Austrian Key’ on the Hayek page.
The leftwing critics of economic rationalism need to come to grips with the larger program of non-socialist liberalism that CL identified above, free trade under the rule of law with maximum freedom and tolerance and a welfare safety net.
CL
which serious academic economists are you referring to who think of Pusey as a hero? While there are some who have been critical of the more hard-edged economic rationalisms when applied to industrial relations or welfare, these are distinct from the Old Keynesians and Political Economy types (like Ted Wheelwright) in that they did not reject the package (e.g. lower tariffs, Hilmer reforms). And are you implying that this group suddenly converted to ‘Friedmanites’ and ‘Demsetz auctioneers’ just to spite Howard?
As yellowvinyl implies, you are just spouting hot air.
I must say this polemic on Economic Rationalism fails to acknowledge the underlying process that is occurring (though Rafe’s post, did allude).
To articulate the ‘underlying process’ I refer to Hegel’s ‘dialectic’ thesis; from a ‘thesis’, there develops a contradictory ‘anti-thesis’, and in the ensuing struggle a ‘synthesis’ emerges.
The ideological ‘thesis’ of the Dickensian late 18th century era was Mercantile Liberalism. This was challenged by the ‘anti-thesis’ of Socialism. The ‘synthesis’ became Social Democracy.
As we know, Hayek was not convinced of the benefits of Social Democracy, pointing to the emergence of the ‘welfare state’ as undermining the Protestant Work Ethic and hence the eventual demise of society (or at least that part that he valued).
The current ideological preference for Market Liberalism inculcates the Hayekian agenda.
While the previous ‘dialectic’ was premised on social value, the dialogue on Market Liberalism is expressed in economic – not social – terms.
This reflects the observation made by Max Weber more than a century ago – forms of ‘value’ other than economic ‘value’ require specific knowledges, and popular democracy is not premised on these specific knowledges.
But if anyone wants to comprehend the impact of Market Liberalism, they need to go beyond the ‘economic’ agenda and explore impacts according to other ‘values’.
An interesting side issue is whether Market Liberalism is an ‘anti-thesis’ or a ‘synthesis’. Given the degree of inculcation, it seems a ‘synthesis’. This then suggests that Socialism / Social Democracy are the ‘anti-thesis’. If so, then our debate over the relative merits of Market Liberalism are merely a look back with ‘rose coloured’ glasses.
Jason: If you’re not aware of the anti-economic rationalist worldview of most left-of-centre economists in the 1980s – or that they rallied to Pusey’s banner – you don’t know as much about economics or the history of its policy as you pretend to and I’m not being paid to educate you.
Yellowvinyl makes the point that Pusey’s book was actually published at the end of the 1980s. Er yeah, but it was ABOUT the 1980s – specifically, the rise of ER in the senior ranks of the Canberra public service.
The campaign of Quiggan and other economists against Howard’s drift to Keynesianism coincided with the calling of the election. Its utility was/is the deleterious effect it’s meant to have on his political credibility. Their hearts aren’t really in it because in fact they favour deficit financing on the projects and policies they favour.
The guiding philosophy and culture of an economy are more important to its long-range stability than whether or not it sometimes employs deficit financing. The only people who disagree with that are anal-retentives with a beancounter’s view of life. Most non and anti-ER economists used to agree with that – until late last year.
I know you think your the sphere’s resident economics club-bouncer Jason but there’s rarely any substance to anything you claim or argue.
well, go on, CL, name some names. it looks like you’re the one hiding behind the cloak of obscurantism. i’ve already named one anti-economic rationalist economist – Ted Wheelwright, but as I noted, he’s not in the mainstream but in the PE Marxist tradition. Let me name an economist who was critical of some aspects of ER applied to welfare and IR but not the general agenda – Fred Argy. Fred Argy was, let me note, partly responsible for the push for financial deregulation. But also wrote a book criticising the harder edged aspects of ER. So if you mean someone like Argy, then you’re way off. Perhaps John Langmore (who co-wrote a book with Quiggin) is more what you had in mind? But I haven’t heard anything from him lately. Who then are you referring to? Labor party affiliated economists like Michael Keating or Don Russell then? But they’ve never been anti-ER. So who does that leave (perhaps on the far left) who by your estimation have suddenly become ‘Friedmanites’, eh?
As for Quiggin himself, there is a consistency in what he argues. I seem to recall a lot of what Quiggin wrote in that period touched on pork-barreling by the Howard government. Just because one is a Keynesian doesn’t mean one doesn’t apply a cost-benefit analysis to spending projects. And when did Keynesianism prescribe constant deficit spending or when there is no recession anyway, which is precisely the issue here?
As for the US, you’re well out of your depth since the debate there is about how the US deficit spending will eventually have to come from future tax rises. I suggest you look at the Brad DeLong (centre-left), Marginal Revolution (right-libertarian) and Will Wilkinson ((rights-based right-libertarian) blogs for debate on this where they all agree that the Bush ‘tax cuts’ are fake ones since they imply future tax rises.
The issues are more complex than you seem to suggest, CL and I’d suggest you’re the one who’s getting carried away with your own rhetoric and partisanship. Convenient of you, now that your said is engaged in unprincipled pork-barreling to wheel out the ‘anal retentive’ slur used by the likes of anti-economists like Bob Ellis and of course, ‘magic’ words like culture which can be endlessly subject to exegesis with nary a formal model.
I don’t know any practising economist, left or right, who was at all impressed with Pusey’s work, even where they agreed with his policy biases. Some of this distaste may be professional (Pusey is, of course, a sociologist), but a lot of it is distaste for that incredibly shoddy book. They feel, like I do, that the term “economic rationalist” is simply a term of abuse used by Pusey and others to avoid engaging with policy arguments on their merits – rather as dear old Jo B-P used to use the term “socialist”.
I’m still amused at Pusey’s dismay at discovering Treasury is run by economists. Does he know that Finance is run by accountants, the CSIRO by natural scientists and Attorney General’s by lawyers?
Pusey has been criticised by other sociologists for his methodology, the misidentification of causality outside a broader context (ie it wasn’t just senior bureaucrats having an economics background that led to the rise of ER) and for the rather turgid attempt to apply a Habermasian critical theory gloss to his argument.
It isn’t a good book.
Economics has slipped down the public agenda since the mid-1990s, but like its original rise this was more the product of circumstance than ideology – most of the obvious reforms had been at least partially done, and the mood of crisis that made them politically possible went with prosperity.
We’ve had a mix of reasonable management and good luck over the last decade, but at least the latter won’t hold forever, and when it runs out the debate will be back.