On relative prosperity

Geoff Edwards writes: Re. “We’ve never had it so good — but try telling that to One Nation voters” (yesterday). Two problems with your claim, Bernard Keane, that market economics “have delivered rising prosperity to Australians since the 1980s …”. First problem is that our “prosperity” is built on large and rapidly growing public and (especially) private debt. Any society can flaunt the signs of wealth if measured only by what it spends, ignoring the liabilities it accumulates. A trap here is reliance upon GDP as a measure of economic prosperity, for GDP is a backward-looking flow account and disregards the condition of the capital stocks such as financial and environmental assets. Australia’s private debt has entered unpayable territory and our richest natural resources such as minerals, timber and fish have been mined unsustainably. Mainstream economics is blind to whether the qualitative preconditions for future prosperity are being satisfied.

The second problem is that market economics, at least in the hard one-size-fits-all form visited upon the Australian economy since 1983 through privatisation, outsourcing, deregulation, trade liberalisation et cetera, should not be given credit for such economic comfort as the nation now enjoys. It would be more truthful to credit the public institutions such as CSIRO, universities, TAFE, Medicare, the Australian Renewable Energy Agency, the Australian Research Council, Titles Offices and a host of other civic services for previously laying the ground work for a peaceful, innovative, largely law-abiding and more or less efficient economic production system. These institutions are being systematically underfunded and undermined by pro-market commercialisation. Also, markets by definition distribute goodies to those with purchasing power, meaning that they naturally increase inequality, which for various well-known reasons, is inherently a lead weight upon the economy.

On the cashless economy

Joe Boswell writes: Re. “Economists join the war on cash” (yesterday). Myriam Robin’s interesting article on the implications of a cashless society when combined with negative interest rates omitted any discussion of the consequences for those attempting to save for their retirement. Final salary pension schemes are already gone.

Superannuation or pension savings held in deposit or term accounts with any security will erode quickly due to negative interest; savings held in equities or other volatile investments are a gamble and leave pensioners horribly vulnerable to any downturn in the markets. It follows that funding your own retirement will be very risky or simply out of reach for most people. Some will just carry on working until they drop. The others, as soon as they retire and can access the savings, would be well advised to spend it all quickly, because it’s going to disappear soon enough anyway. Then they will either go back to work or depend entirely on the Centrelink pension. What’s not to like? (And how would anyone justify compulsory superannuation contributions in these circumstances?)