Michael Stutchbury addresses Rudds assault on neo-liberalism in The Australian, 28/7/09.
Stutchbury has some good points to make but he is, like everyone else in The Australian, obsessed with the debt question and the justification for active (discretionary) government intervention. I wrote a letter to the Australian my first such letter for over 12 months.
In a slightly revised form, my letter is outlined below. It offers a different perspective.
Stutchbury has four particular concerns.
- First, Rudd pokes holes” in the efficient market hypothesis. But can he ensure that governments know or can do better? This is a fair claim. I have argued for more financial regulation but others have different views.
- Secondly, Rudds debate is largely confined to financial markets, not the whole sweep of pro-market economics. True enough – but isnt that fully conceded by Rudd? He nominates five key areas to boost productivity (including innovation, skills, tax etc). With such a program, he demonstrates that Rudd is a long way from being anti-liberal. He is only critical of financial regulation and related issues.
- Thirdly, even at the financial level, the Rudd debate is largely a northern hemisphere argument. This view of Stutchbury is very hard to accept. Recent macroeconomic interventions, in beefing up consumption and the real estate market and offering guarantees to the banks, has acted to recreate confidence and to delay the inevitable rise in bank bad debts and unemployment. Faced with a $210 billion shortfall in revenue, compared with a rise in revenue of $334 billion from 2004/5 to 2006/7, what sort of economy would we have without such intervention? And, in the absence of any discretionary spending, wouldnt Australias public debt levels be as, or almost as, high (simply to to pay for the higher unemployed and lower profits) as they are now – yet with much more individual hardship?
The big challenge for the Government will be to spell out a gradual return to fiscal normalcy by withdrawing the stimulus and retiring debt.
- Finally, Stutchbury deplores Rudds retreat into workplace re-regulation. Yet in most respects, we have a more flexible workplace today than we had back in 1996. And it now has the clear endorsement of the general public.