They’ll take their pick and we’ll take their chances. If the politicians of the world felt able to tell us ordinary people the truth they would confess that they really don’t know what is the best thing for their governments to do to get the world out of its current economic mess. For their advice, the politicians rely on those very same finance department economists and central bankers who did not foresee the crisis coming and whose belief in the power of free markets helped create it. With a record like that behind their so-called experts it should be impossible for rulers to be completely confident that this time they are doing the right thing.
Yet act confident the rulers, and the would-be-rulers, do, although that confidence can be about dramatically different policies. At home here in Australia we have a Prime Minister and a Treasurer affirming that without their mini spending stimulus of late last year, and their maxi stimulus that begins this week, the country would be facing economic ruin. Yet just as assertively there is an Opposition Leader proclaiming that tens of billions of dollars are being wasted on unnecessary hand-outs and projects and that any growth in the short term will not be worth the pain to come when the debt must be repaid in years to come.
The story is broadly similar in the United States, where Barack Obama is on a similar stimulus path involving massive spending on infrastructure yet Republicans think that all the country needs is another tax cut, and in Europe where British Prime Minister Gordon Brown is a massive spending man but the French and Germans are still in the wait and see camp as they worry about budget deficits.
How it will all pans out when the leaders of the Group of 20 meet in London early next month is very uncertain. Getting a consensus is clearly going to be difficult And, not being a politician, I am quite able to confess that I have no idea what that consensus should be. But I can see a problem arising if the best solution really is for governments to spend money as quickly as possible to stimulate demand.
Should the Liberal-National opponents of this approach in Australia, and the Republican opponents in the United States, begin to persuade the people that deficits are more dangerous than recessions, governments will perhaps baulk at spending more if it proves that existing spending plans are not enough.
That gives rise to the horrible prospect of the political process managing to create the worst of all worlds — a big deficit and a lengthy recession.
Public service impartiality not dead. A nice reminder yesterday that the notion of an impartial public service is not completely dead. Minister for Infrastructure, Transport, Regional Development and Local Government Anthony Albanese took the unusual step of mentioning in the House of Representatives the retirement of his departmental secretary Mike Taylor.
The Minister described Mr Taylor as embodying “the finest traditions of the public service”. His view that he “has faithfully served the Minister and Government of the day” was endorsed by the current Leader of the National Party Mark Vaile who was Mr Taylor’s minister before the last election.
Populism rampant. The area of economics where there is the biggest gap between what the theoreticians and the people believe it is in policies of protection. Economic theory might make an impeccable case that international free trade benefits everybody but try telling that to the Sydney Daily Telegraph when it decides to play the populist.
“Nathan Rees has been dubbed the Premier for workers in China after revelations that State Government contracts are sending thousands of NSW jobs overseas,” the paper exclaimed across page one this morning.
In the past year government contracts for making police uniforms have gone to China, while ambulance uniforms have been made there since late 2007.
Cutting another half a per cent? Another interest rate cut of half a percent when the Reserve Bank Board meets on the first Tuesday in April is the favourite way on the Crikey Interest Rate Indicator. The Indicator, based on the market at Betfair, puts the probability of a 0.5% cut at 41%
Queensland Election Indicator. There’s been little change this week in the Crikey Queensland Election Indicator with Labor given a 68% chance of winning to 32% for the Libersal National Party.
A rave review. The old fellow has still got it apparently. I have heard nothing but rave reviews of Midnight Oil’s Canberra concert last night. According to my informants Peter Garrett looked much happier performing for 3000 adoring fans at the Royal Theatre’s bushfire fund raiser than he does when facing the Opposition in the House. The Canberra Times this morning said it all really:
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