A revised version of my recent post on the polls, public opinion and economic management has been published over at On Line Opinion today. While we’ve already discussed the substance on this thread, this might provide an apt discussion starter for us to talk about the likely interest rate rise tomorrow, and other recent developments in the (highly political) economy.
Note: There are also some interesting comments on the OLO forum for the article.
Mark is right - there’s a disjunction between the media hoopla about the strength of the macro-economic indicators and people’s real-life experience of the economy.
Part of this reflects the shallow nature of media reporting of the indicators that the government trumpets as evidence of its superior management abilities.
Case in point is the quarterly CPI numbers. You don’t have to dig too far below the surface to find that headline inflation has been held down by China’s influence on traded goods prices.
Inflation in the non-traded sector (things that are not readily exported or imported) has been going up much faster. This is a problem, as it includes lots of important stuff for the average person like health, housing, education, insurance and haircuts. (You don’t buy a Plasma TV everyday).
Likewise, the media trumpets the lack of growth in average weekly earnings as a positive. But it just as easily be seen as a negative if you’re the person putting in lots of unpaid overtime.
The profit share of the economy is at a record high. And while the CIS Austrian school mob will be saying that’s good news in a shareholder economy, the fact is most people derive the lion’s share of their income from their human capital, not financial assets.
If he were to win another election and maintain his Senate majority, it is clear that Howard’s next big ideological frontline would be Medicare and the dismantling of what’s left of free health care (unless it is in a marginal seat).
Rudd would do well to urge people to go and see Michael Moore’s explosive new movie ‘Sicko’ on the rank injustices of the dog-eat-dog American healthcare system. That’s what would lie ahead under a fifth term Howard government.
I think two things are needed to better inform economic debate.
One is a greater willingness focus on “work breakdown structure”, a term borrowed from project management discipline, a fundamental technique for defining and organizing the “total scope of a project”, as defined by Wikipedia. I like the term “abstract economy” because it makes a distinction between having a surface understanding and a deep understanding of economic matters.
So it’s great that we have some authors out there that aim to simplify understanding of economics to spare government/media communication about this complex subject from being totally reduced to the simplistic.
Books such as Ozonomics and Gittinomics are books I’m likely to rely on, perhaps in combination with a basic principles and practices book, to deepen my understanding of economics on a “need to know basis”.
The other thing is a need to help define the “total scope of economic challenge” is to compare economic cultural literacy with marketing cultural literacy, for reasons I will make clearer in my future posts here at LP and on my personal blog.
…From Justin
Mark,
I think this is a very good piece, so cheers. Howard’s line about us never having it so good will turn out to be one of his greatest election-year blunders. What was he thinking? The frustration for Howard, of course, is that Rudd can do nothing to ease these pressures in the short term (unless he goes for ‘inflationary’ personal income tax cuts), and so Rudd’s appeal to voters on a hip-pocket basis is a big lie (not to mention a threat to our democracy, according to Gummo). A lie that is on the scale of the great interest rate lie of 2004? Perhaps not, but a lie nonetheless.
Mr Denmore,
I think you have the Austrians a little wrong (although I am no political economist and I’m happy to be corrected). I would have thought the CIS Austrian mob would say high corporate profitability is good, not just because of a financial benefit to shareholders, but also because it improves the conditions for business investment (which increases the marginal productivity of workers and pushes up their real wages/purchasing power). Isn’t this why they get stuck into capital gains and corporate income taxes?
Finally, the cracks about a healthcare system under Howard are hysterical (but not in funny way, more of a Green Left Weekly kind of way). While a degree of market reform is certainly desirable (think elements of the Singaporean system), anything other than a universal health care system is dead in the Australian political water. Your claims have about as much credibility as me claiming that the nationalisation of manufacturing lies ahead if a Rudd government is elected. Citing ‘Sicko’ was icing on the cake, though. Didn’t that guy go to Cuba?! Talk about naive…
Cheers
BBB
There are some similarities, BBB, but I think, as I said in the piece, he’s onto the power of symbolism over substance - feel the voters’ pain rather than make any promises to alleviate it which are meaningful.
Agree, Mark. But now we are getting into further similarities with the interest rate lie and Howard’s latest buck-passing to the states. Will it be good enough for Rudd to build an successful election platform on “I feel your pain, I’m going to have inquiries about supermarket and petrol prices, and I’m going to monitor them, blah blah blah” and then when nothing comes of it all, turn around and say “Hey, I didn’t actually say any of that would make a difference. We all know that the Government can’t really do much about it, kthx bye”? I would think not. Just as the punters (justifiably) feel betrayed by Howard, they may well end up feeling betrayed by Rudd.
Cheers
BBB
Howard’s line that you’ve never had it so good is a huge mistake and he is paying dearly for it.
That he is correct, is not the point. There is real pain out there, mainly caused by the rise in the cost of housing vastly outstripping the rise in earnings (though this has to correct eventually, but may take many years given the inefficiencies of the housing market). But what will Rudd do about this? Nothing. He can’t go on a vast house building exercise because the value of people’s property will collapse.
Additionally, rates are rising (correctly) as inflation is creeping higher. Yes, shirts and shoes are declining but all measures of domestic inflation (school fees, childcare fees, skilled labour etc) suggest inflation is nearer the 6-8% mark than the official 2-3%. This is hurting. Again nothing Rudd can do about rates.
Petrol has also increased enormously. Not Howard’s fault and nothing Rudd can or should do about.
Terrible marketing by Howard because with unemployment at record lows, the stock market at record highs (well, last week anyway), and the economy growing at a nice 3% clip, he should have walked this election.
Mr Denmore
Huh? There has been significant growth in AWE over the past ten years.
Huh?
You would do well to stop obssessing over the U.S. and gain some insight into the Australian political economy before you start deifying Mr. Moore. You would also do well to take an Adult Education class in “Deconstructing Michael Moore 101.”
You would do well, John, to stop employing such a condescending tone particularly when it’s not warranted because of your failure to read what your interlocutors are saying. What Mr Denmore is clearly referring to is not the growth in AWOTE over a decade, but the recent quarterly figures post WorkChoices which have been hailed on numerous occasions in places like the Fin Review as showing a remarkably restrained rate of growth given the tight labour market and capacity constraints in the economy. If you want to comment on IR and labour market matters, it might assist you to follow contemporary trends and commentary.
BBB, that of course is the danger of symbolic politics - it’s good for winning elections, but not so good for delivering. Howard is finding that out now, and on one interpretation, he’s also demonstrated that it takes a long time for the deficit between rhetoric and reality to become apparent. But I’m not sure that’s the right lesson to draw, as each Howard election victory has rested in large part on fear of the alternative rather than an endorsement of what he’s done per se.
It was Harold Macmillan, I think, who is credited with having coined the phrase of never having had it so good.
Has there ever been a time when a long-term incumbent government, witnessing voters losing interest in it, were jerked back to the party line with the cry “you’ve never had it so good”?
Howard claimed ownership of the good times during his victory over Latham back in 2004. He said that he was protecting living standards from the ravages of ALP misrule.
It is thus utterly consistent for him to claim credit for what he promised to do way back in 2004.
The term “marketing” implies that Howard is in control of the message that he wants to broadcast to the electorate. It implies that Howard might, with equal facility, spin a different, even opposite message for the sake of maximisation of electoral return.
This is how we have come to understand Howard — the disciplined, maximising political machine. This is the essence of Howard’s image as a “clever politician”.
Howard’s recent behaviour, on the contrary, has come as quite a shock to persons commited to the view of Howard as a “clever politician”.
No, we are witnessing a very different Howard. He has either tired of spinning, or has lost the capacity to spin.
As Howard views the prospect of the end of his political career, finally, he wants to say something that he genuinely believes. And he genuinely believes that he has bequeathed Australia his legacy of sound management, stability and prosperity. Finally, he wants some credit for a genuine achievement.
And what an irony has greeted his latterday candour.
He finally speaks from the heart and he is derided as a mentally schlerotic, tone-deaf, accident-prone old git.
The truth has damned John Winston Howard.
John Greenfield,
Ken Phillips of the Institute of Public Affairs, hardly a nest of lefties, wrote an opinion piece in The Age just last month proclaiming the absence of wage-induced inflation at a time of record low unemployment.
And he attributed this to the impact of the government’s workplace relations changes. Recent changes to the laws had “neutered” old-fashioned notions of wages justice, Phillips wrote.
As to the profit share, the RBA’s own numbers show this is at its highest level in 30 years.
According to the national accounts, business profits grew by 6.3 per cent in the year to the December quarter. Annual growth in wages, meanwhile, has remained steady at around 4 per cent per annum.
Mr Greenfield, you would do well to stick to the facts rather than descending to infantile abuse.
Mr Denmore
Doesn’t the RBA report say that the profit share: “remained close to its 30-year high”, strongly suggesting that it is, in fact, below the 30-year high? How did you come up with “the RBA’s own numbers show this is at its highest level in 30 years”? In any case, it appears to flatly contradict your original assertion, made just hours ago, that the profit share was “at a record high”. How did you get it so wrong?
Anyway, the RBA material you’ve linked to has a great comparison of the current resources boom and similar circumstances between 1974-1986. If the mining sector goes through the same experience this time around, it seems that Rudd, and not Howard, will get the greater benefit of persistently high commodity prices and, perhaps more importantly, significantly higher production and export volumes, with obvious implications for our external trade position. Throw in a breaking of the drought, and it may be that Rudd’s timing turns out to be even better than Howard’s! Is Cossie as patient as he will probably need to be? Almost certainly not.
Cheers
BBB
Mr Greedfield, the profit share in the economy is at record highs because every utility that used to be in public ownership has been corporatised and the top execs cream the top.
Multi- million $$ salaries are not rarities anymore. Payouts similarly, when some suit jumps ship to join another organisation, are at obscene levels. Those people are paid handsomely to screw everyone lower down and are rewarded handsomely when they do so.
Do the sums, how do CEO salaries at say, $6-7 million a year plus a payout of $20 million skew statistics when compared with a $9.75 per hour check-out chick, working an average of 20 hours a week (no penalties).
The whole formula for calculating “never had it so good” optimism is a mathematical farce.
Ditto record employment when the definition of work has been screwed down so far that an hour paid work a week counts as employment.
Mark (not b),
Sigh.
(1) The RBA say that the profit share is not at record highs. Are they not a credible source for this kind of stuff anymore?;
(2) Payments to CEOs and other executive employees detract from the profit share. Wages are not profits (to be fair, on a charitable reading you may not have made this particular mistake);
(3) Real wages growth has been observed on both a mean and median basis. There is no mathematical trick to this and the outlying high salaries do not skew the median. According to the latest Census data, median individual and household income (ie. not just wages) growth has occured for the entire term of the Howard government; and
(4) RBA figures show that the hours underutilisation rate (ie. hours of work that unemployed and underemployed workers are searching for as a per cent of total hours searched for or worked) is only marginally above the headline unemployment rate (around 5%).
To summarise, you have absolutely no idea what you’re talking about.
Cheers
BBB
Ross Gittins has a topical op-ed for this thread in today’s SMH: It’s not only the economy, stupid
Macmillan was pretty new to the job when he uttered this line, but the Conservatives had been in power since 1951. He won big in the following election (’59).
I think you’ll find he said it after the 59 election - and went on to lose to Wilson in 64.
Mark - I have to disagree with you.
Bismarck, I can be wrong, but then so can writers for the UK Tele! I might check my Bartlett’s when I get home from work - I suspect it’s a better reference for quotes than the internets.
Fine by me. I love a good quibble. Is this better?
Assuming you’re right Bismarck, are you making the case that Macmillan was set to lose before uttering this cry, whereupon a sullen population turned around and voted Conservative instead?
No, Andrew E, I’m not drawing any conclusions from it and certainly not ascribing any election-redemptive powers to the statement. In terms of your original question, though, the Conservatives were pretty battered by the time Macmillan took the helm (Suez, etc) and he did deliver a thumping win. By the same token, the Democrats used a similar line in the US in 1952 and it didn’t seem to do them much good.
Bartlett’s doesn’t dignify Macmillan with an entry, Bismarck, but I’ll concede on the basis of the Beeb as a reliable source. You’re right, I’m wrong!
http://news.bbc.co.uk/onthisday/hi/dates/stories/july/20/newsid_3728000/3728225.stm
20 July 1957, apparently.
Was just having a Captain Cook at Blogocracy and he had this gem with a lovely quote from Howard:
The difference is that when Macmillan said those famous words the people of Britain were inclined to believe him.
Mr Macmillan was a believable sort of chap.
When Mr Howard plagiariased Mr Macmillan, on the other hand, Mr Howard had long ceased to be a believable sort of chap.
Perhaps Mr Howard has not yet accepted the fact that many people think of him as a liar.
If Mr Howard had accepted the fact that many people think of him as a liar, perhaps he would not have expressed the rather unoriginal sentiment that “You’ve never had it so good.”
Political careers are killed by this kind of miscalculation.
Perhaps Mr Howard isn’t a clever politician any more, either.
I think that nice Mr Rudd is a very clever politician, Katz.