So, Julia: a debate on the economy

The “new Julia” (or “real Julia”) catches the bus and challenges Tony Abbott to debate the economy. Will it happen? Tony didn’t seem all that enthusiastic, did he?

I am no expert, so I note those who fairly could be. Just now we have had Nobel Prize economist Joseph Stiglitz, a professor at New York’s Columbia University, in the country.

THE US and European economies are heading into a long period of weak growth and corrosive unemployment – and imposing a high price on carbon is the best way to resolve the funk, a visiting Nobel prize-winning economist says.

Joseph Stiglitz, a professor at New York’s Columbia University, said the spending cuts and budget restraints increasingly being imposed by western governments were likely to prolong the economic stagnation triggered by the financial crisis.

In a speech titled Road to Ruin, Professor Stiglitz used an address at the Australian National University in Canberra last night to warn that the US government as well as many European governments were pursuing misguided policies in an attempt to rein in their debt…

”The one basis for a global recovery, I think, is a high carbon price,” he said. If governments imposed a tough price on carbon, businesses would have greater certainty to invest in new technology, which would drive growth.

Professor Stiglitz said that Australians had not felt the impact of the economic crisis.

”Here in Australia the only major contribution to the financial crisis was the anagram GFC,” he said.

One person who attended that talk was David Stern,an energy and environmental economist with an interdisciplinary background, whose blog, new to me, looks really good.

I went to see the "Crawford School Oratory" today given by Joseph Stiglitz – just one of the stops on his Australian tour. As you probably know he is a Nobel Prize winning economist who was chief economist at the World Bank and since then has been critical of both the Bank and the IMF and increasingly of other financial institutions and free market oriented capitalism in general. The talk was titled "The Road to Ruin" and was about the Global Financial Crisis/North Atlantic Recession. I took quite a few notes with this blog in mind though I don’t really feel like transcribing them right now. Maybe tomorrow. He was a good speaker and pretty funny at many points. The audience was often laughing…

On the 7.30 Report (27/07/2010) Stiglitz had this to say:

KERRY O’BRIEN, PRESENTER: The election campaign is being conducted in a budget framework based on the Australian economy returning to strong growth. That in turn is premised on the Chinese economy continuing to boom, but the US and Europe can still impact significantly, both on China and Australia, and their immediate future is still deeply uncertain. Joseph Stiglitz is a Nobel laureate, a former chief economist of the World Bank and he chaired Bill Clinton’s presidential council of economic advisors. His latest book, ‘Freefall’, is a worrying critique of the root causes of the Global Financial Crisis, and despite President Obama’s recent banking reforms, he says it could happen again. He’s also predicting another US economic slowdown…

KERRY O’BRIEN: I’m not sure how much you know about Australia’s stimulus packages in response to the crisis, but to the extent that you do, how did the quality of Australia’s stimulus compare with that in the US and elsewhere, in terms of its effectiveness?
JOSEPH STIGLITZ: I did actually study quite a bit the Australian package, and my impression was that it was the best – one of the best-designed of all the advanced industrial countries. When the crisis struck, you have to understand no-one was sure how deep, how long it would be. There was that moment of panic. Rightfully so, because the whole financial system was on the verge of collapse. In that context, what you need to act is decisively. If you don’t act decisively, you could get the collapse. It’s a one-sided risk.
KERRY O’BRIEN: There’s been a lot of criticism of waste in the way some of Australia’s stimulus money was spent. Is it inevitable if you’re going to spend a great deal of government money quickly that there will be some waste and can you ever justify wasting taxpayers’ money?
JOSEPH STIGLITZ: If you hadn’t spent the money, there would have been waste. The waste would have been the fact that the economy would have been weak, there would have been a gap between what the economy could have produced and what it actually produced – that’s waste. You would have had high unemployment, you would have had capital assets not fully utilised – that’s waste. So your choice was one form of waste verses another form of waste. And so it’s a judgment of what is the way to minimise the waste. No perfection here. And what your government did was exactly right. So, Australia had the shortest and shallowest of the downturns of the advanced industrial countries.
And, ah, your recovery actually preceded the – in some sense, China. So there was a sense in which you can’t just say Australia recovered because of China. Your preventive action, you might say pre-emptive action, prevented the downturn while things got turned around in Asia, and they still have not gotten turned around in Europe and America.

Australian economist Nicholas Gruen chimes in:

As Nobel Prize winner Joseph Stiglitz put it last week, the choice was between waste from hasty stimulus spending (it was either that or nothing) and the waste of people sitting on the dole when they could be doing something useful, like let’s see . . . building school halls. Since the stimulus was the Government’s pre-eminent achievement, something that put it in Stiglitz’s book at the very top of the class when it came to fighting the GFC, not having taken on the Opposition’s criticism on waste left the government in a very bad place coming into an election.

Now, the spinmeisters are at least half right. It would be better not to start from here. You’d rather not have your strongest points like the stimulus so muddied by the one liners of the Opposition at this late stage.  But this is where the Government is.  And it’s a better place to be starting from than any desire to unfurl the ‘real Julia’.

Blogger Grog’s Gambit proposed some ads to focus on Labor’s economic achievement during the GFC. For instance screens rolling up lists like this:

During the Global Financial Crisis these countries went  into recession:

United Kingdom
Japan
New Zealand
Germany
Russia
Italy
Hong Kong
Singapore
Ireland
Greece
Spain
Sweden
Ukraine
Iceland
Estonia
The United States of America

The countries that didn’t:

Australia

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4 thoughts on “So, Julia: a debate on the economy

  1. Stiglitz also co-authored a study of the real ultimate cost of the military actions in Iraq and Afghanistan. From memory it was around $3 trillion. The figure includes the cost of treating veterans.

    In the context of his remarks on the response of the Rudd government, Abbott’s bleating about reining in the spending would seem vacuous but then Tony is not renowned for his understanding of economics.

  2. ‘Waste’ in the school funding program : a comment from experience.

    State education bureaucracies are reluctant to decentralise decision making, whatever they may say in public. Schools in the private sector in Victoria are rejoicing in having been given funds for school-specific projects, decided on and managed by the schools themselves. I drive by one such project often. The school community is delighted.

    The Victorian Education Department could not bring itself to allow individual schools to define and manage their own building projects. It set up an elaborate sub-bureaucracy that came up with a limited range of options. Some schools were given things they didn’t want or need but felt they had to accept because the money was on offer.

    Every school has a building project in mind. The Department should have asked for submissions (a Principal and School Council could knock up a submission in a few days) and should have allocated the money to allow for local management. Everyone would have been happy, everyone a winner. But no, Head Office knows best.

    During my own Principalship I was pleased to secure a so-called ‘Keating Grant’, an amount of $500,000 to allow old schools to tart themselves up. The staff identified 32 minor improvements which included extension of two staffrooms, that kind of thing. We got 30 of the jobs done. We could have achieved 32 except for Public Works taking $37,000 as a ‘project management fee’. How frigging stupid was that! I thought that Public Works existed to render ‘public works’ but some smart person got the idea that PWD should be able to show ‘cost recovery’. So public money got shifted around and we had to forgo the final 2 projects for the sake of a book entry.

    I don’t blame Labor for the shortcomings of the education grant money. The blame lies squarely with the state Education Departments. Look no further. The ‘Daddy knows best’ syndrome remains strong. The reluctance to trust local schools and their communities is still the norm.

  3. Pingback: The schools building waste « Neil's second decade

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