Tasmanian Times

The individual has always had to struggle to keep from being overwhelmed by the tribe. If you try it, you will be lonely often, and sometimes frightened. No price is too high for the privilege of owning yourself. ~ Friedrich Nietzsche

The individual has always had to struggle to keep from being overwhelmed by the tribe. If you try it, you will be lonely often, and sometimes frightened. No price is too high for the privilege of owning yourself. ~ Friedrich Nietzsche

Economy

The (austere) golden age of Peter Gutwein

First published June 19

“I believe,” said Peter Gutwein in his budget speech, “that Tasmania is on the cusp of a golden age.”

Public hospitals are in permanent crisis. School retention rates remain the shame of the nation. There are 16,500 Tasmanians unemployed but looking for work. Another 26,800 people are under-employed, needing more work than they have. The rate of labour under-utilisation – the key measure of labour market slack – stands at 16.7%. Homeless people face a winter sleeping rough at the showgrounds because there’s nowhere else to go.

Despite the crippling funding shortfalls for essential government services, Mr Gutwein has permanently reduced the state’s revenue base by decreasing payroll tax. Decent funding for hospitals, schools, child protection and housing is further away than ever.

Golden age? What on earth could he have meant?

The most plausible answer can be found in the discredited but persistent economic doctrine of “expansionary austerity”. If that sounds like a contradiction in terms, that’s because it is.

Austerity has been defined by the Australian economist John Quiggin as “tight control over public expenditure and measures to put government budgets into balance or surplus”.

Its accompanying rationale is the notion, central to neoliberal economics, that restrictions to the size and scope of the public sector (and therefore to government expenditure) will create room for the private sector to expand. The doctrine further holds that in all circumstances, or almost all, private companies are more efficient than government organisations and that if they are given preference, growth and prosperity will increase. The notion was perhaps best summed up by US President Ronald Reagan when he said that “government is not the solution to our problem; government is the problem”.

But the idea that the economy is a finite, zero-sum affair can be true only in rare circumstances. If all the factors of production – natural resources, capital and labour – are constrained, then contracting the public sector could reasonably be expected to result in an expanded private sector. In practice, only the supply of labour is crucial: the Tasmanian economy is not generally constrained by a lack of resources, and private investors can generally be found for projects likely to make money. But when there is full employment, it is trite to say that the same person cannot work simultaneously in two different areas.

In Tasmania, the labour market is far from being in a state of full employment. Although headline employment has improved from Lara Giddings’ austerity-induced recession of 2012-13, there remains a great deal of slack in the state’s labour market.

Economic growth can occur despite government austerity but not because of it.

The other key assumption of expansionary austerity – that the private sector necessarily does a better job than the public sector – cannot, even if it was true, be practically applied to the activities of Australian state governments. Most of their activities cannot adequately be replaced by the private sector because companies cannot simultaneously make a profit and provide these essential services to an adequate standard at a price most people can afford.

Private hospitals largely confine their activities to maternity and elective surgery. Those with emergency departments lose money on them: their EDs are expensive, inadequate and inefficient. All the rest is left to the public hospital next door. Private schools cost a great deal of money but provide similar academic results to public schools, when allowance is made for the background of students. Private prisons, where tried, have not proved a success. And the public is unprepared to countenance private companies running police and courts.

Most importantly, only a relatively few people can afford to pay for essential services like health and education. Unless the cost is borne by the entire economy, through taxation and government, our society would be one in which few of us would choose to live.

Austerity has a long history of consistent and disastrous failure. Under Herbert Hoover, it created the Great Depression. It was essential in propelling Germany and Japan into the Second World War. It was one of the suite of neoliberal theories that produced the Global Financial Crisis. It was responsible for almost a decade of lost growth in Europe after the GFC. And it is responsible right now for the evisceration of Britain’s National Health Service.

In Tasmania, it has meant the constant crises in public hospitals, the shortage of teachers in schools, the simultaneous under-funding and privatisation of child protection services and the under-staffing of prisons. In short, it provides a text-book example of how austerity fails to provide either adequate public services or a private sector capable of doing the job instead.

*Martyn Goddard is a public policy analyst based in Hobart.

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Greens: Liberals Committed to Trading Heritage Treasure for Trinkets

Peter Gutwein: Labor-Green hypocrisy over Treasury Building

Labor: Gutwein refuses to answer the simple budget questions

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16 Comments

16 Comments

  1. Christopher J Ward

    June 24, 2018 at 5:36 pm

    Gutwein – good wine – never: more like vinegar. I would like someone with knowledge to explain why government property has to be sold. There won’t be much left very soon. The post-Cold War neocons have sent us down a crevasse of despair. If you are poor, unhoused, sick and so forth, it’s your own fault. As for the Sydney broadcaster, once known as the ABC, it could never be sold as a going concern. I’m tired of smarmy faces and what my English relatives call gobshites. Q&A, Media Watch, and that damned bloke with the Quaker coat before the news (sic) – my TV watching has been declining seriously for a couple of years. To the generation expecting great things with more technology, I wish you luck and soon androids will put the puffy-faced plonkers out of business. With reluctance, I think I have to evaluate anything on TV as “fake.”

  2. George Smiley

    June 19, 2018 at 2:56 pm

    #9 … At least Uncle Eric is upfront about his hatred for the ABC, or it seems to underlie his tortured syntax.

    As for the private jets, budget repair could be better served by pollies sharing; organising those most intense public moments accordingly. Eric can gawp with Friedenberg at unlikely pumped hydro sites, while Bill Shorten arrives to attend the exhumation of Mike Parr.

  3. William Boeder

    June 19, 2018 at 3:06 am

    Nothing new with Tasmanian Premiers of this State as the whole passel of ’em including those in times the past and unto our present, there has been a goodly number of our State parliamentarians that have played the part as fiddlers of the truth. I note your #9 comment Mr Hawkins, you’ve got your descriptives down pat.

    How a certain Senator hasn’t been shuffled off to Risdon, by way of his discovered former covert contretemps, this had left me stunned for quite a long while with a long-term bothering dose of perplexity.

    If ever there is doubt, we must remember the edifying words given to we the Tasmanian citizenry, straight from the lips of our former now late State Governor.

    Corruption? Nooo, not in Tasmania.

    Though there was that rather strange occasion in our Tasmania that had involved our late State Governor, His Excellency Peter Underwood at that earlier time he was said to be “poised and at the ready to strike with his favourite Black ink fountain pen”………… to sign his Royal assent to enable the highly contentious, anti-the-people, Pulp Mill favouring section 11.

    Corruption? Nooo, not in Tasmania.

    https://www.libdemvoice.org/opinion-do-parliaments-laws-really-need-royal-assent-in-2013-33999.html

  4. mike seabrook

    June 19, 2018 at 2:52 am

    want jobs

    1. recommence construction of the gordon-below-franklin hydro scheme and send a message to the world that tassie is reopen for business

    2. dupe the feds into paying for a bass strait electricity cable which will save 5c per kwh transformation/tramsmission costs

    3.dupe the feds into paying $150 million to relocate the macquarie point sewerage treatment plant

    4. it worked with the magnificent $50 million tassie fox and none of the ministers for foxes have been brought to account – why not the above.

    5. find more dams to be paid to not build

    6. ask for more money to plant trees and more money to not chop down trees

    7. any chance of funding for more MIS scams for tassie agriculture.

  5. john hayward

    June 19, 2018 at 1:19 am

    Verdun #2 … The question you might ask is this: “could Tassie’s essential services be improved if all the millions handed out to loggers, gambling operators, crony developers, land swap fraudsters, and other parasites was given to those activities that provide some social benefit?”.

    John Hayward

  6. John Hawkins

    June 19, 2018 at 12:40 am

    #10 … Real chaps drink Krug.

  7. TGC

    June 19, 2018 at 12:14 am

    Good as done #9. Cool the Dom Perignon

  8. John Hawkins

    June 18, 2018 at 11:27 pm

    TGC

    Your pin up boy The Premier of our State told a barefaced lie to our Parliament.

    He stated that he was not present when the vote to privatise the ABC was taken; if he was he also would have voted to do just that.

    Problem he was filmed as being present.

    Brain Dead springs to mind.

    Then he denied he had voted for privatisation.

    He apologised to Parliament.

    What else could he do but grovel?

    The circus of Government continues!

    As you correctly state in comment #7 “We, the public, know what we want and we pay the ‘clowns’ to perform.”

    As usual you have hit the Liberal Party nail on the head.

    The quicker The ABC hating, jet chartering, MIS promoting, Abortion and Breast Cancer linking chief clown one Erich Abetz gets the boot the better.

    The problem is that he is such a treasure we need him to lose the Liberals the next election.

  9. TGC

    June 18, 2018 at 9:44 pm

    Fantastic news out of Canberra today- once Bill Shorten becomes PM- early in 2019 -Tasmanian workers will get a $1000 a year income tax cut- that’s not a bribe please note -together with all the other benefits to the State already pledged either by Bill personally- a man of great integrity- or by his cadres.
    Peter Gutweins golden years to be eclipsed by Bill’s ‘rolled gold’!- although “all that glitters…”

  10. TGC

    June 18, 2018 at 7:11 pm

    Bec White is on the right track .. form lots of ‘community’ committees, by invitation only of course, so that we can get rid of the highly paid ‘advisors’ currently on the payroll .. as against actually being ’employed’ .. and we can blame the committees when the policies resulting from their ‘advice’ goes awry.

    It’s generally accepted, certainly on TT, that most elected politicians are “clowns” and so intelligent policy making is just a circus. We, the public, know what we want and we pay the ‘clowns’ to perform.

  11. Robin Charles Halton

    June 18, 2018 at 6:47 pm

    Health is always going to be an issue no matter how much money can be thrown its way.

    Health Minister Judy Jackson, for no substantiated reason apart from playing on public emotions, closed the slammer on the Royal Derwent Hospital at New Norfolk, and only the Millbrook Rise annexe survives.

    I can guarantee the public that had the RDH still been open then we would still have a mental hospital, drop-in centre and a recovery centre in a modern context available for those who suffer either requiring permanent or occasional bouts of disability.

    But no, the government is paying hundreds of private providers in the State to do the job instead.

    The problem for the Royal Hobart Hospital is that it lacks the space and services to provide care on a large scale basis.

    So what have we also got today – increasing homelessness and hopelessness, plus increasing crime resulting from failing systems for those with mental health issues.

    Thrown ‘from pillar to post’ is the expression, and what is the government doing instead by concentrating on prison upgrades for the Southern remand centre and Risdon prison $79.3 M and a new Northern Prison starting with $45 M.

    There are those, and I have on occasions met these people, who will commit a nuisance crime and go to Risdon just to get a short term roof over their heads, and food and be with their mates who are in for similar reasons.

    Of course there are homeless people who are not capable of being home trained and no body would rent them properties, no wonder, but the government needs to urgently rethink its mental health system and allow for those who should not be imprisoned for petty crimes.

    Filling up our gaols with social nuisances is not the solution, but somewhere in between a mental health centre where referrals assist with recovery and accommodation when required.

  12. William Boeder

    June 18, 2018 at 6:41 pm

    The great depression circa 1929 was architected by a group of Bankers of the stature of JP Morgan and his contemporaries, mostly due to the poor regulatory authorities in that era. See links below …

    http://www.slate.com/articles/news_and_politics/explainer/2011/01/youre_under_arrest_for_causing_the_great_depression.html

    https://www.youtube.com/watch?v=RN7ftyZigYs&list=PLXAZcgTnDhhrzgeN5V6Z4yrvUSDRBpjH3

  13. davies

    June 18, 2018 at 5:20 pm

    What? You rewriting history? This is seriously wrong. Your blaming austerity for the Great Depression, Germany and Japan going to war, the GFC, and a European decade of lost growth and the BNS – but here are your sources for this?

    In the normal business cycle you will always get downturns. Occasionally you will get a severe downturn. For example, in the USA you got a severe depression in 1920 followed by another severe depression starting in 1929. Both depressions were severe deflationary events with 1920 being the most deflationary on record, yet one lasted 10 years and the other barely over a year.

    The Great Depression featured inflationary efforts like printing money, price controls, massive government increase in spending, lowering interest rates. Result .. 10 year depression.

    The 1920 depression featured a government cutting spending in 1920 by 20% and a further cut of 35% in 1921. Interest rates were raised. Result .. the depression lasted 15 months.

    Sadly when the GFC hit, and it was a result of increasing levels of bad debts in an irrationally exuberance economy, we followed the failed Great Depression model. Result .. 10 years of very weak or nil recovery. But if you drill down you will see that two of the countries that outperformed the others in Europe were Britain and Sweden. The former was accused of austerity after the GFC, and the latter actually introduced income tax cuts and other libertarian-like measures against the express wishes of the IMF.

    I cannot believe you could look at those events and go .. Yep, austerity is to blame .. unless of course you were unaware of the 1920 Depression…

    As for austerity propelling Germany and Japan into the 2nd world war … Japan had already clearly illustrated its military expansionist plans and its economy and prices were highly regulated and were hardly an example of a free market. And Germany was suffering from hyperinflation and price controls that had ruined their economy and allowed for extremist parties like Hitler’s National Socialists to take charge.

    If you want to learn, then a good start in Murray Rothbard’s book on the Great Depression. On Germany and what happened in the Weimar period then Adam Fergusson’s book ‘When Money Dies’ is excellent.

  14. George Smiley

    June 18, 2018 at 3:50 pm

    Blaming ‘austerity’ for the GFC and Europe’s stagnation over the last decade might be going a little overboard on PC lefty economics. As I recall, the GFC began with a housing bubble centered in America and embraced in the rest of the western world during which anyone with a pulse could get a low interest/interest-only loan to buy or build and make America, Ireland etc. rich and great again. We had been on the edge for a while after tech collapsed and people stopped spending, but thanks to ‘Easy Al’Greenspan and the Federal Reserve there was still a way out.

    I had personally understood it was all over when the resulting bundled mortgages (re-rated by Moodies etc. to triple A) and sold everywhere – even to Tassie local councils – started to go bad. And it wasn’t that which might have bankrupted the world as much as the threat of unwinding a few hundred trillion ‘worth’ of corporate insurance bets on ALL financial possibilities by way of unregulated, unclearing-housed derivatives, thanks to the brilliant numbers men known as ‘quants’ who thought they could play both sides of every trade made risk-free by their equations.

    And the global response was the opposite of austerity; quantitative easing, zero and even negative interest rates that still haunt us a decade after their use-by date with a reflated housing bubble and a bond market bubble big enough to take all our financial institutions down when it bursts. For all this stimulation that propelled new bubbles and reams of excess capacity in all sectors we still end up with low growth, low wages and a now 200 trillion global debt bubble not counting derivatives. The IMF is presently countering spot fires in the gunpowder factory by bailing Argentina for the umpteenth time, pulling all those default swaps contracts out of the fire for the wise guys who bought Argentine debt at pennies on the dollar last time, and recently. Hopefully failing Italy will not be too big.

    But the entitled poor carp and breed, and the entitled rich ubermenschen also. For them ‘austerity’ is a buzzword that refers to cuts in the wages and benefits of the former. For some reason it is only a vaguely desirable concept before elections .. like ‘budget repair’ morphing and co-existing afterwards with unfettered, politically- focused profligacy. A balanced budget by 2050, maybe?

  15. Verdun Schmerl

    June 18, 2018 at 2:42 pm

    There will never be enough money to fulfil every health need in Tasmania, and there will never be enough money to satisfy Martyn Goddard, who continues to dine out on his “permanent crisis” mantra. Happily for Martyn, he doesn’t have to explain what services or people he would cut to afford the massive boost to health spending that he endorses. He has previously proposed deficit spending. How and over what period of time would that debt be paid back? Never explained.

  16. john hayward

    June 18, 2018 at 1:18 pm

    I suspect Gutwein meant to say “gilded age”, meaning an oligarchic plutocracy.

    Greece’s golden age relied on slavery, as it did for the US South. Sadly for Gutwein, that dream is presently a bit beyond reach, but he will continue to strive.

    John. Hayward

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