Lara Giddings has already urged hard-pressed Tasmanians to spend their savings shopping til they drop. Now Tasmanian retailers have joined in. Next up, no doubt, the TCCI will be encouraging us to do the right thing and prop up the economy by buying stuff.
Giddings’ advice, and that of her free market tail-waggers, is as misguided as it is economically irresponsible.
Consumerism to prop up the Tasmanian economy is short-term, reckless and socially, economically and morally bankrupt.
As the US Congress Financial Crisis Inquiry Commission said in its 2011 report, the GFC was primarily caused by “the widely accepted faith in the self-correcting nature of the markets and the ability of financial institutions to effectively police themselves. More than 30 years of deregulation and reliance on self-regulation by financial institutions… had stripped away key safeguards, which could have helped avoid catastrophe”.
Despite this, Labor, the TCCI and the Liberals continue to tell us that growth, deregulation, the cutting of red and now green tape and the “free market” are what’s best. But they’re dreaming and in a clear state of post-GFC denial.
What these people need for Christmas is a new economic consensus, not business as usual. Shopping local is a very good thing. But there is more to life than consumerism. Growth based on taking stuff from nature, consuming it and throwing it away is no way to run a planet or an economy. But we’re still being told it is and that it’s the only way. It isn’t.
The GFC is the corollary of environmental global collapse: they are symptoms of each other. Growth and attempts to jump-start the economy, globally and in Tassie, will keep hitting nature’s limits until we make our economy truly sustainable. That’s not economic ideology, it’s common sense.
And, here in Tassie, we’ve got leaders telling us to shop til we drop, by way of advertising their total lack of imagination or fear to promote anything other than the discredited economic consensus. They can’t accept that we need to run our economy with people’s wellbeing, sustainability and human interest at its centre.
Yes, we should shop local. But we should also unhitch our economy from the idea that Gross State Product will somehow make us all happy. It won’t. Only an economy run for Tasmanians, putting our real interests first, will.
In September, the Mercury published two supplements called Let’s Make This State Great. Most of the Tasmanians featured were on the right track. If they were running our economy, I reckon we’d be heading in the right direction.
Lara and her free marketeers are stark naked – and it’s not a pretty sight. We need leaders with the courage to tell us some hard truths to put us on a higher path to economic resilience. What better time to start than Christmas?
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Comments (16)
The usual answer in to this is to take in each others washing.
Lara and the free marketeers???? There is no free market. Lara proposes Keynesian economic solutions and they in no way shape or form can be considered pro ‘free market’.
Capitalism everywhere has been trampled by cronyism and socialism. The result of this interference in the free market was the GFC.
Just two examples.
In the US Clinton and then Bush legislated that the two main home loan lenders in the US, Freddie Mac and Fannie Mae, HAD to provide loans to people that wanted to buy a house.
They were required by law to loan money to people who had no income, no job and no assets.
The fallacy that the financial sector was unregulated is just that. There were over 1500 authorities, bodies committees etc. responsible in overseeing some aspect of the financial sector. That is not an unregulated market. In fact, it is the most regulated market in the US.
And as soon as the banks got bailouts, thanks to muppet Obama, it became obvious that this would sow the seeds of the next global financial crisis…sovereign debt.
I am amazed to see people like Milne espouse Keynesian theory whilst at the same time opposed to growth at all costs. I actually agree! Growth at all costs is very harmful to an economy so why would Milne and co embrace the one economic theory that has that as its central principle?
Time to learn about other economic theories. Particularly, Austrian Economic School, which has been around much longer than Keynesian theory and accurately predicted the GFC and its cause and the Sovereign debt crisis.
Their theory on sound money, backed by something real usually gold or silver, would be the perfect antidote to the growth at all costs brigade.
Tom get a grip. Consumerism is what our economy is based upon.
You write, “What these people need for Christmas is a new economic consensus,.......” well I reckon I’m one of “these people”. What is it in particular that the “new economic consensus” will provide. Hopefully not telling me how to spend my money or what I should charge for my services. That’s already been tried by some spectacularly unsuccessful eastern european states.
Tom the study of the economy may not be a precise science, but it is not a fairy story. Whishful thinking about us all caring for each other and the environment is. Accept the sad fact we are all inherently selfish in our needs and allow the best system to evolve which balances those demands. If it looks like something we’ve got now it is probably no accident.
In the meantime go out and earn and spend your butt off. It will be doing us all a favour as those little bits of paper we call money, and think have some value, go around.
#3 James, selfishness is but one aspect of human nature. It is unbridled selfishness, midwived during the Thatcher/Reagan era which has got us into this mess.
What makes us truly human is our selflessness. We need to shift our currently narrow focus, in the new millenium, from “It’s all about me” to more selfless aims. The time will come when the critical mass will see that their survival depends on working for more than filling one’s own bottomless pit of wants. Ironically, the shift to selflessness will then become a logical choice for the selfish.
‘Tom De Kadt’ when will you do the right thing and publicly disclose your links to the Greens political party? Your article is indiluted pap, by the way.
Davies #2 is on the right track.
The study of the economy makes astrology look respectable.
Economists create models on expectations of humans making ‘rational’ choices that fulfill individual ‘selfishness’, yet humans repeatedly don’t conform to the ideals of rational, selfishly driven actor.
The idea of an infinitely expanding i.e. growing economy, within finite resource limits is a fantasy. The recent World Economic Forum reporting emphasizes the unsustainability of this model, as do so many individuals, Tim Jackson in ‘Prosperity without growth’ or fellow Tasmania Paul Gilding in ‘The Great Disruption’. What you don’t find in almost all of the present economic modelling is any reference to energy, it is assumed that there will never be a time when we don’t have access to abundant, cheap energy. Notwithstanding the shortcomings noted above, the economic models simply don’t work without cheap energy, and we’re rapidly moving to a time when energy is no longer a cheap resource.
Despite many decades of a growth model economy there’s little evidence that the added material wealth has actually improved health or wellbeing for our affluent societes. Obviously I’m making an assumption as to the role of an economic system.
To me the mantra of ‘buy more stuff’ is nothing more than a desperate call from those unwilling or unable to let go of dying and unsustainable economic model. Rather than being viewed as villains I think the likes of Tom, Paul and Tim are acting with great courage in urging us to look for economic systems that genuinely support human wellbeing and the ecosystems upon which our lives depend. I don’t know what the alternative economic model will look like, though it is something that myself and many Tasmanians are willing to explore.
John #4. Please don’t think we don’t share the same desired outcome, as expressed in your, “The time will come when the critical mass will see that their survival depends on working for more than filling one’s own bottomless pit of wants. Ironically, the shift to selflessness will then become a logical choice for the selfish.”. Would that be the case.
But the problem is this view of the economy, like climate change, is yet another example of the zero sum game. If everyone co-operates all win, if one co-operates and the other doesn’t, the person who doesn’t is rewarded. To have mutual success requires a degree of advancement and perfection of thought and behaviour far from what we have or can conceivably accomplish now.
What we have achieved by empowering people to make their own decisions about how they spend their money (and I am the first to admit that this is a fiction because of taxation superannuation GBE monopolies and all sorts of market distortions) is to create markets for goods and services. Markets create value. Money is a worthless bit of paper unless we can exchange it for something that we want. When governments start telling us what we want, or what we can have; when governments start telling us to be selfless, what we understand as an economy starts going wrong. Black markets invariably appear. Eg drugs or services provided by cash in hand tradesmen. Isn’t it better to try to manipulate a market economy we have some understanding of rather than try to invent some other.
Space here doesn’t permit proper explanantion.
To summarise my view; inspiration goals are great but don’t allow what you wish for in the economy to get in the way of what can be delivered. What happens in life is that people spend money on what they need and want. Discretionary spending, which is what makes our economy spin around rather than grind, is by and large on inherently useless overpriced or unsustainable objects or services; think fashion, entertainments, fancy cars, or the elephant in the environmental room; tourism.
I digress just to point out the irony of a Green concerned about climate change promoting tourism for Tasmania as an economic saviour. There is a valid argument that tourism is bad for the environment because of the costs in carbon associated with travel, by air, boat and roads, the construction of those conveyances, the housing for short term accommodation, buses and taxis that run you around, making the plastic knicknacks you take home for the kids, or building the boats that take you to see the sights with 1000hp on the back, etc. We don’t advertise for people to come and see Tasmania and travel on buses and stay in a tent. Tourism is energy intensive and purposeless. It doesn’t create anything except a transfer of wealth at the cost of the expending of energy. And the extraction, use and consequence of energy use is the real cost, not money.
Sorry to leave you on such a gloomy note. But make the best of what you can while you have it might be a more sensible mantra.
Davies at #2. Your statement, “Their theory on sound money, backed by something real usually gold or silver, would be the perfect antidote to the growth at all costs brigade.”
Can you please tell me how gold or silver, differs from tulips or the viewed potential for an income yield from bundled securities. Gold has no intrinsic or inherent value in the absence of a market.
Get with the plot, value is a construct of the markets.
Like #1 says “The usual answer in to this is to take in each others washing.”
Nick, can you email me direct, Linz will give you the address. I have an interesting take on the energy issue and its relationship to economic collapse that might interest you.
#2 - davies - you’re clearly a confident person - confident enough to contract the central findings of the US financial committee which reported on the causes of the GFC and was populated with a bunch of searingly intelligent economists. It found the (misplaced) faith in the ‘free market’ and deregulation were fundamental to the cause of the GFC. I suggest, as a primer, you take a look at some of the repeal of the Glass-Steagall Act, which allowed banks free rein - and led to governments around the world bailing out private sector banks. http://en.wikipedia.org/wiki/Glass–Steagall_Act
#3 - Mr Crotty - the GFC is the corollary of environmental collapse. You seem to think there is a choice. But there isn’t. Business as usual has been rudely interrupted by the blatant fact that the planet’s natural parameters and limited resources can continue to underpin a consumer based economy. I’m not concerned with fairytales - which is precisely what the west’s mainstream politicians continue to tell us is the best economic solution - growth and buying stuff. I understand that humans are murderous, selfish and fatally flawed - which is precisely why we have laws. I agree with you we need the best system possible - the problem is, that is exactly what we don’t have. Sustainable economics means protecting the very resources the economy depends on. Problem is, most politicians don’t have the courage to take this fundamental need to their voters and then make it legally binding…
#5 - Yo Merk - If what I’ve written is “pap”, I encourage you to say why… Your comment is pap because there’s nothing to back up why you think my article is lacking…! As for the Greens, yes, I’m a member and a proud one…
#8 I presume you are trying to link gold and silver, the preferred form of money for most of our history, with tulips, a one off bubble extravaganza, to make gold and silver seem risky and ephemeral?!
Your inference doesn’t work.
Gold and silver has been viewed as the preferred ‘money’ for thousands of years. It has only been since 1971, when Nixon took the US off a diluted form of the gold standard, that no country in the world has had ‘real’ money.
Money is the medium for an exchange. For someone to exchange their service or good for money they need to have confidence in that money. They need to know that they in turn, with that money, can exchange it for some other good or service.
Money should be stable (supply), have a nonmonetary demand, have a high value per unit weight, be durable, divisible, recognisable, and not be easily counterfeited. Gold and silver have been the preferred choice as money because their qualities closely match the qualities of money. Tulips do not met the above criteria. Nor, may I add, does fiat currencies that have nothing ‘real’ backing them.
The usual answer is not ‘doing each other’s washing’ but is in fact the ‘broken window’ scenario. Interestingly, the ‘broken window’ scenario is very much at the core of Keynesian economic theory. Sadly for it, the broken window scenario has been refuted by numerous parties. One of the first and most readable was Frederic Bastiet back in 1849 or so. It makes for good reading.
Yes #10 I am confident. I know enough in the area of economics, finance and investments to state what I state.
Now to your specific points:
‘contract the central findings of the US financial committee’ (I presume you mean contradict?!)
‘populated with searingly intelligent economists’
‘found misplaced faith in ‘free market’ and deregulation were fundamental to the cause of GFC’.
Now I am presuming you are talking about the Financial Crisis Inquiry Commission and their report into the GFC. Their main conclusion was “While the vulnerabilities that created the potential for crisis were years in the making, it was the collapse of the housing bubble - fueled by low interest rates, easy and available credit, scant regulation, and toxic mortgages = that was the spark that ignited a string of events…”
‘Years in the making’ refers to the US going off the gold standard in 1971. From 1971 we have seen 40 years of unending credit expansion because fiat currencies can be printed at will by governments. So that backs my interpretation.
‘Collapse of housing bubble - low interest rates and easy credit’. Again this supports my stance. Governments ‘forced’ the major mortgage lending bodies to loan money to people who had no chance of making the payments. Low interest rates and easy credit was government policy.
‘Scant regulation’. Well here we differ. I say 1500 authorities/bodies etc overseeing the financial market is not scant regulation. And the only regulation I can see being blamed is the repeal of the Glass-Steagall Act and I will get to it later why I think that opinion is wrong.
‘Toxic mortgages’. Agree but this sort of bundling by banks has been done for many many years. The Glass-Steagall Act did not cover this aspect of banking. Remember, these ‘toxic mortgages’ were bundled up as AAA rated by ratings agencies. Banks were not taking risks, as they could see it, by buying and trading the top-rated product. It does call into question though their investment acumen.
‘populated with economists’. Really? The Commission had 10 members (6 picked by Democrats and 4 by Republicans), the chair and vice were politicians. The others were lawyers, political aides, backgrounds in business and finance. Only one economist was on that Commission.
Now for deregulation causing the GFC. Apart from Glass-Steagall, which deregulations are you talking about? Which Acts etc. got repealed to give the impression the banking sector was being deregulated?
As for the Glass-Steagall Act, only one provision of the Act, the one preventing the same holding company from controlling both a commercial bank and an investment bank, was repealed. The rest of the Act still stands does it not?
Banks lost money because they held AAA mortgage securities that turned out to be bad loans…in fact very bad loans! The Glass-Steagall Act did not and does not prohibit the buying and trading of mortgage-backed securities. These deals would have been made with or without the Glas-Steagall Act.
The Act or lack of it did not force governments to bail out the banks. They did so from their own choice. And not all governments did bail out their banks. Iceland is an interesting example of that.
It seems to me my interpretation of the cause of the GFC is not too dissimilar than the Commission. Where we differ is the amount and effect of regulation and deregulation. Governments, having largely caused the GFC, would obviously look for a scapegoat that wasnt them. To blame it on the ‘free market’ and capitalism, when they know full well we do not live in such an environment was sheer genius. Particularly, as the ‘cure’ to offset the scapegoat meant more government interference in the market. The major cause of the GFC in the first place!!!
Davies has all the bits but has them out of order slightly.
The ratings agencies acted incompetently or neglegently, depending on whether you where a buyer or an observer, and they did so because they were paid by the banks packaging the toxic sludge to rate it. That conflict of interest should never have been allowed by the regulating authorities. At that point the rot was terminal.
The bankers were the ones strong arming government to bail them out, an act which caused governments no end of grief as they encumbered taxpayers with obligations while bankers continued to reap massive salries and in many cases, bonus cheques. ASk the greeks if you don’t believe me.
As for the Austrian School of economic thought, wasn’t Freidman a student, and didn’t he and his accolytes conduct the rape of South America. If I recall correctly Rumsfeld and Cheney were his students. His method is well sumarised in the following mantra: “the floggings will continue until morale improves”. Ask any South American.
Go read “Confessions of an Economic Hit Man ” by John Perkins, and Shock Doctrine by Naomi Klien.
Economies are like eco systems, you cannot take out more than is coming in without it turning to custard.
#15 True I have glossed over the culpability of the ratings agencies. I also have some doubts about their timing when downgrading a country’s rating.
But Milton Friedman was NOT ever an Austrian economist. He was the leading light in the Chicago School and thier thoughts on monetary policy is very very different to Austrian theory on sound money.