The Davos trip has been a gift that has kept on giving, although in a depressing way. Here is my contribution in the Weekend Australian.
You will all be pleased to know that I am about 90 per cent recovered from my recent trip to Davos. The residual 10 per cent is the result of a persistent infection caught from putting up with all that ‘pious baloney’ uttered in the break-out rooms of the congress centre. (The term ‘pious baloney’ was invented by Newt Gingrich – arguably his only value-add to the world.)
There seemed to be multiple sessions on the crisis, future and point of capitalism. I went to one session where one of the Global Youth Leaders (think: former captain of school debating team) lept to his feet, screaming that he was going to insist that all the world’s stock exchanges demand that listed companies no longer maximize profits. Stakeholders, the environment, the community – companies must be forced to take these factors into account.
Great, I thought. That will really help the downtrodden masses of the globe.
One of the strange things about these sessions was that everyone, apart from me, had come along with an iPad or similar device. Armed with my journalist’s pad and pen, I thought I could make a lasting impression as a deep thinker and intrepid interlocutor.
As we debated the evil side of capitalism – I decided against pointing out the positives – quite a few of the participants played Angry Birds on their iPads. To be sure, many were checking their emails or watching the unfolding news from their own countries. But one chap sitting next to me watched a Beyoncé clip – it looked very alluring, I thought, but perhaps not quite on message.
No one seemed to see any irony to the coincidence of the loud public denunciations of capitalism and the enthusiastic use of a device that could only have been invented, developed and sold at an affordable price within a capitalistic system.
Davos is, not surprisingly, very European-centric. And I suppose if you are European, you might cast around for a few scapegoats to explain the dire economic conditions in which many eurozone countries find themselves – the banks, the ratings agency, the 1 per cent, venture capitalists, speculators, capitalism itself. A Swiss woman sitting next to me at another session was convinced that, were it not for the incorrect assessments made by the ratings agencies of eurozone countries, there would be no crisis.
I tried to make the point that the ratings agencies had made serious mistakes in their assessments of exotic financial products, such as collateralised debt obligations, but it was less clear that their ratings of countries’ financial positions are awry. Were this the case, the financial markets would not take any notice of the ratings agencies. Sadly, this Swiss woman was not for turning.
In fact, as long as no blame was sheeted home to the governments themselves, the Europeans seemed happy to discuss the crisis affecting the eurozone until the cows came home. (I think the cows – all three of them – might have been in barns; it was very cold.) The austerity measures being imposed on the citizens of Greece, Italy, Ireland, Spain and Portugal were regarded as completely misguided, prompted by the rapacious and baseless demands of capitalism and financial markets.
Of course, our previous Prime Minister once sang from the same hymn sheet when he declared “the time has come, off the back of the current crisis [the GFC], to proclaim that the great neo-liberal experiment of the past 30 years has failed… And, ironically, it now falls to social democracy to prevent liberal capitalism from cannibalising itself.”
Kevin, you spoke to soon. What is now clear is that governments have failed – not the system of capitalism. Rather than governments having “a central role in the regulation of markets and the provision of public goods” (Kevin’s words again), it is now apparent that governments have to get out of the way to allow private enterprise to invest and flourish. Governments must encourage individual responsibility, rather than induce (seduce?) individuals and families to rely on government provision of services and hand-outs.
The strange thing is that our current Prime Minister is on to this point. (Perhaps she doesn’t like singing hymns – I don’t think she goes to church very often.) As she rightly states, “If anything of value can be retrieved from the wreck of failed economic approaches in Europe pre-2008, it is the lesson to the world: fiscal discipline matters”. Quite.
Instead of putting up with all the existential ruminating about the future of capitalism, we really should have been talking about the failure of governments. How can we ensure that governments perform their appropriate roles effectively and efficiently – and no more? What is the path from excessive government involvement, high deficits and huge government debt to smaller, sustainable government?
Too many eurozone countries spent like there was no tomorrow and made commitments to their citizens that can no longer be kept. Does it really make any sense to have a list of 500 occupations which provide for retirement at the age of 50 on a full government pension? This was the Greek way. And does it make any sense for a government to prevent companies from offering temporary employment contracts or making it impossible to sack workers? This is the Spanish way – unemployment currently over 20 per cent.
While governments fail, they can also improve. There are even some examples to follow. After a near-death experience in which the banking system came close to collapse in the 1990s, Sweden has managed to reduce significantly the size of its public sector.
Without the burden of the euro as a currency but with open product markets, the Swedish economy has performed well in recent years, particularly off the back of strong export growth. In 2011, the Swedish government handed down a budget surplus equivalent to 0.6 per cent of GDP. Government debt stands around 37 per cent of GDP.
Now no one is suggesting that the new Swedish model is flawless, but the example does establish what can be done to change the economic structure of a country – to be much less reliant on the public sector.
The first step is to recognise that governments can and do fail, to develop a framework outlining the appropriate roles of government and to establish a means of scaling back and rationalising government activity. And stop trying to blame capitalism – it is so much better than all the alternatives.
“Why should the Greeks retire at 50 when we Germans retire at 67?”
A reason for Germans being reluctant to subsidize Greeks.
Thomas Esmond Knox
20 Feb 12 at 5:18 pm
I wonder how Al Gore is going with that Sub $500 laptop he was developing for the 3rd world.
RodClarke
20 Feb 12 at 5:23 pm
http://www.telegraph.co.uk/news/worldnews/europe/germany/1482371/If-you-dont-take-a-job-as-a-prostitute-we-can-stop-your-benefits.html
RodClarke
20 Feb 12 at 5:26 pm
The Greeks should be able to retire whenever the freak they like, but the govt shouldn’t have to fork out for their retirement.
I saw one of those ‘the world according to Greece’ maps recently, and the EU was renamed ‘Union of Stingy Workaholics’
What would greece be called on a map of the world according to Germany. ‘Our Bitches’?
Speaking of iPads etc, I love how Apple, despite being as capitalist and mercenary as they come, get a complete free pass from the Occupy Whatever crowd ‘cos their products are cool.
papachango
20 Feb 12 at 5:26 pm
Matthew Parris warns that kicking the Greeks when they are down is not a good idea as well as being an act of bastardry. He notes that Greek immigrants are hardworking so the problem lies in institutions more than an inherent characteristic. (Paywall)
http://www.theaustralian.com.au/news/world/beating-up-an-entire-people-a-huge-injustice/story-e6frg6ux-1226275139334
Viva
20 Feb 12 at 6:00 pm
The plain fact is that the Tea Party took to the streets to get government spending, handouts and debt down.
The cleaned up after themselves and organised politically to effect change within the system as constituted.
The Greeks haven’t.
They’ve behaved like spoilt vicious teenagers.
They don’t get any sympathy from me.
JamesK
20 Feb 12 at 6:31 pm
I’ve tried Angry Birds but I just don’t find it absorbing. Tearing off sheets of loo paper is more so.
Elizabeth (Lizzie) B.
20 Feb 12 at 11:25 pm
Reminds me of the quote about to oil wells.
‘You never know how deep a well is until it’s empty’
sean
21 Feb 12 at 11:22 am
Judith, The appropriate role for the Australian governments are clearly laid out in the state and federal constitutions. The fact that all governments tend to either ignore the constitutions or set up mutually agreed “conventions” to circumvent them and never get called to account is the issue.
I would urge everybody to read the Australian Constitution and particularly the section which deals with the areas where the Federal Government is allowed to legislate. A good example is education. There is no provision in the constitution for the Federal Government to be involved in education which is purely a State issue. This being the case why do we have an education department and a minister at thee federal level. If an incomming government decide to go back to the constitution and government accordingly over half of the government laws and bureaucracies and all associated costs would disappear over night.
Cyril of Gladstone
21 Feb 12 at 12:09 pm
Cyril,
Several acts of constitutional bastardy have you made you try to lock the gate after the beast has bolted.
The High Court found that UN treaty rules, enacted by legislation, can take precedence over the constitution.
This simply allows the constitution to be legislated away.
What sheer bastardry. They ought to be tried for asebia and founding new religions.
.
21 Feb 12 at 12:12 pm
Lol, but without a federal minister how can we end the blame game….
sean
21 Feb 12 at 12:15 pm
the time has come… to proclaim that the great neo-liberal experiment of the past 30 years has failed…
Always interesting how politicians leap in with such authoritarian declarations viz history, before the dust has settled, as if everyone will simply accept their views.
And, ironically, it now falls to social democracy to prevent liberal capitalism from cannibalising itself.
Interesting also how such would-be historians live in ignorance of said history when its inconvenient. After all the 30 year ‘experiment’ succeeded another ‘experiment’ that was then judged a total schmozzle.
Rather than governments having “a central role in the regulation of markets and the provision of public goods”
And back again. The arguments about regulation versus non-regulation and their attendant explanations still, in this 21st century, bear an uncanny resemblance to the US electoral slogans of the 1930s. Now they’ve been globalized. Never mind that the situation in Greece and that of the US are almost totally different. Each side says they prove the same thing: we’re right!
Of course you are.
Adrien
21 Feb 12 at 8:02 pm
And what does “social democracy” have to with Australia? Until 1982, the ALP was a ‘democratic socialist’ party.
Peter Patton
21 Feb 12 at 8:17 pm
And where are the declarations that this so-called ‘neoliberalism’ was only ever an experiment?
Peter Patton
21 Feb 12 at 8:18 pm
Adrien
Go to Austlii and look up current Commonwealth and State legislation, and see just how ‘deregulated’ capitalism has become over the past 3 decades. And then for a real belly laugh, check the Law school curriculum at any major Law school in the US, UK, or Australia. De-regulated? Pig’s ass.
Peter Patton
21 Feb 12 at 8:21 pm
Patton,
Check out NSW aquaculture and fisheries rules.
FMD
They don’t even make sense environmentally.
Adrien, Patton is correct. You think we’re becoming laissez faire as we remove tariffs? BAM, non trade barriers pop up everywhere.
.
21 Feb 12 at 8:23 pm
And what does “social democracy” have to with Australia? Until 1982, the ALP was a ‘democratic socialist’ party.
Ay carumba!
And where are the declarations that this so-called ‘neoliberalism’ was only ever an experiment?
Above as quoted by Judith and re-quoted by me.
Go to Austlii and look up current Commonwealth and State legislation, and see just how ‘deregulated’ capitalism has become over the past 3 decades.
The point being?
You think we’re becoming laissez faire as we remove tariffs?
Um no. I don’t think laissez-faire exists or has ever existed. That great advocate of laissez-faire the Republican Party were staunch advocates of tariffs all thru the 19th century? Why? Because it was in the interests of their sponsors. Just as Rudd’s ‘social democracy’ is a front for a rule book in the interests of his sponsors.
Those of us who subscribe to what is hilariously oft-coined a ‘worldview’ appear to believe that these ideologies actually have something to do with the forces that motivates the makers of laws. In reality they are more like the schpiel cooked up to rationalize them.
And because laws, like stains, are hard to get rid of, each succession of policy paradigms (experiments) piles up one on the other and what we get is a mountain of statutes serving multifarious interests most of whom have long since passed.
Still, there are concrete reasons why holders of worldviews prefer Thatcher and Reagan, or, conversely Roosevelt II and Ben Chiefly. Such regimes don’t perfectly satisfy the worldviews (nothing ever will) but still there is more a correspondence between them and certain governments as opposed to others.
Adrien
21 Feb 12 at 8:35 pm
What’s genetically hairless mice got to do with punishment, .?
Winston Smith
21 Feb 12 at 8:36 pm
And the problem with Greece isn’t capitalism or socialism but feudalism.
Adrien
21 Feb 12 at 8:39 pm
Adrien
My apologies, my point about ‘experiment’ was directed at the person who claimed such an experiment had been undertaken in the 30 years before 2008; Kevin Rudd.
And in due season, can I just say this: Good to be with you.
Peter Patton
21 Feb 12 at 8:47 pm
The point being that those sources I noted prove that, in fact, over the past 30 years, Australia, the UK, and US have morphed away from liberal democracies to ‘regulatory states’.
Peter Patton
21 Feb 12 at 8:50 pm
That sounds spot on to me.
Infidel Tiger
21 Feb 12 at 9:08 pm
The point being that those sources I noted prove that, in fact, over the past 30 years, Australia, the UK, and US have morphed away from liberal democracies to ‘regulatory states’.
The morphing started a long time before the ‘neoliberal experiment’. And yes the ‘small government’ rhetoric is just that. Governments don’t voluntarily shrink. At best they simply shift their revenues from one interest group to another. Whatever the ideology spruiked by this or that party the actual mode of economic oversight is corporatism wherein technocrats play with other peoples’ money whether it be that of taxpayers or shareholders.
Adrien
22 Feb 12 at 1:53 pm
And the problem with Greece isn’t capitalism or socialism but feudalism.
No, the problem with Greece is that they invented gayness.
John H.
22 Feb 12 at 1:55 pm