John Quiggin has published an open letter from 50 academic economists arguing that the stimulus package prevented Australia from going into recession:
Over Fifty Australian Economists Agree Fiscal Stimulus Prevented A Major Recession
Nobel Laureate Professor Joseph Stiglitz has stated publicly that the Australian Fiscal Stimulus was a well designed package that saved the Australian economy from a major recession that has hit almost all the other OECD economies. He argued that the Australian package was a model for other economies facing similar problems.
The attached letter was signed by over fifty academic economists. Several other academics and economists supported this view about the Fiscal Stimulus Package that prevented the Australian economy from a deep recession and prevented a massive increase in unemployment.
The Australian economy has come out of the Global Financial Crisis in surprisingly good shape thanks to this Stimulus Package.
The Australian unemployment rate is amongst the lowest of any of the OECD economies.
Unlike the US and Europe, we are not facing the possibility of a double dip recession.
The current level of government debt (the lowest in the OECD economies) is due to tax revenues falling during a slow-down in the economy, whilst social security payments increase. Most of the increase in the debt would have happened independently of the increased government expenditures associated with the Stimulus Package.
The Stimulus Package has led to an increase in infrastructure investment that would help the long-term development of the Australian Economy.
The names and affiliations of the economists are here.
John Quiggin fighting the good fight again! Good stuff.
All the nonsense about waste in the stimulus is mostly a case of the ideologues at The Australian clutching at any straw they can to discredit Keynesian spending.
More economists should do their bit to educate the public about business cycles, automatic stabilizers, Keynesian economics.
Neo-Keynesians support neo-keynesian theory – big surprise.
No comments on the size of the stimulus spending, where it was targeted, the controls in place to manage the spend, Federal governments ability to manage large programs of expenditure or of continuing with the as yet unspent dollars.
No comment on the appropriateness of the whole package – only that infrastructure spending is good.
Must have been the bare minimum on which they could get agreement. Of limited value except to get some headlines in support of the Labor Party. Partisanship that will be seen as such.
Hmmm.
Lets see now.
On the one hand we have the Murdoch media and Abbott, Hockey and Barnaby mumbling inanities and contradicting themselves.
On the other hand we have the record.
That the Australian economy did not suufer the pain of recession anywhere near that of the rest of the developed world and that is due, according to numerous world organizations and international experts and now, in addition, 50 Australian experts, thanks to the competence and wisdom of the ALP government and its timely and appropriate policies.
Who to believe?
Hmmm?
There are some really funny parts in Lenore Taylor’s and David Uren’s Shitstorm, which was what Rudd called the GFC.
On one occasion Rudd was being briefed by Bernanke in Washington. Apparently he is a gentle, understated bloke. At the end when they looked at Rudd for his reaction, he was fast asleep!
But don’t you worry, the American’s appreciated Rudd, and he worked the international phones to see something sensible happen.
When Swan and Henry went over for the IMF meeting the Americans tried to scare the bejeesus out of everyone, because there was a tendency to think it was an American problem. They succeeded, but the Australians were ahead of the curve. Bernanke mentioned fiscal stimulus as well as monetary policy, which Swan took as confirmation for what they were planning.
Bernanke said later, yes it was in the speech, but he thought of fiscal stimulus only after public confidence took a dive. Swan and Rudd saw it as preventing a dive in confidence, with even the announcement of what was intended being important.
Therein lies a fair bit of the difference, I think.
I would like to know what was the feeling between Wayne Swan and Kevin Rudd, because I believe that Kevin was trying to take away the effects of the previous governments, going backwards into sanity, but hit a lot of opposition from Wayne and his lawyer mate and like, It is my belief that if Kevin had intelligent help from his Collogues, he might well have hit on the policy to take Austraslia out of the recession properly. We are just coasting on the edge, with the promise of toppling right in, considering the policies and history of the contesting morans.
Let’s face it Ginja — spending money looking after people’s needs is utterly wasteful. Is there really a business case for it? It’s hard to say. Are most people worth investing in? Probably not.
As Tony Abbott points out, the future is much too expensive. We just can’t afford it. Instead, Tony Abbott advocates embracing the past in all its forms. Sure it was ugly, inhumane, bigoted and so forth — but it was cheap not only in the price of everything but in its ideas. The further back you go, the smarter and more like a man of his times Tony Abbott looks.
I believe that there is a lot on the internet that could be learnt – if the intelligence is in your head. If you have any intelligence, and can understand, go to “The tax history of the US” remembering that they had a recession or depression in the 1930′s also, and are suffering the same fate now. Also go to “Tax history of Australia”, “Tax history of the UK” the tax of 146.1% on 8,000 pounds in 1946, might surprise you, but it worked, the super tax was soon taken off, but the 80% tax remained for a number of years. Unfortunately, in all countries, idiots have seemed to come into power, and you will see in “The Tax around the world” why we have a global economy problem, it’s all the fault of the idiots in each country who have gone down this path, and is not reliant on only one party. When you get that promise you have to sign to join a politicial party,”I promise to agree with the decisions of the majority” means that the people who do join, have no pride in their own integrity, and probibly as much intelligence, they certainly have no thought of democracy or loyalty, allegiance to Australia, and the Australian people. I make no apology – like everybody else, I am sure I am correct.
@6 great post Fran
Yes, you have nailed it Fran.
Well, as Stuiglitz pointed out in an interview with Kerry O’Brien, if not everything works out, what’s the problem? You’re going to have a waste of resources and a drain on social security and tax loss by doing nothing and waiting anyway. Hell, the object was to get moving quickly before panic and loss of consumer confidence really sank in. And action was taken on a variety of fronts: tax bonus refunds, infrastructure investment (including climate change with the much-maligned home insulation program), tax incentives for small businesses.
I drive cabs. The various owners in our fleet ALL upgraded their fleet with new cab purchases to take advantage of the tax incentives. Think of the flow-on effect nation-wide. Cars purchased, local spending and consumption and nice new equipment into the bargain. It’s win-win-win the way I read it. Maybe there is something in the multiplier effect after all.
Unemployment low. Inflation low. Borrowings against GDP just about the lowest of OECD countries. Growth up. Talking about whether we could have done better (and we probably can if we get hit by another GFC wave) is hardly relevant when we survived well and just about everyone else floundered because they didn’t go in boldly enough.
Mervyn Jacobi @ 5, according to Shitstorm Rudd and Swan were very much a team and on the same page during the GFC. When the crisis was top priority, there were daily meetings with Rudd, Swan, Henry, plus a few other officials. Tanner and Gillard were then involved when decisions had to be made.
At that time they were ahead of the Reserve Bank in anticipating the worst. You have to give credit to Rudd, because he saw his responsibility as making contingency plans for the worst.
I gather that post GFC, going into 2010, after the CPRS and Copenhagen failures, the insulation problems etc, Rudd withdrew and became isolated from the rest of the Gang of Four, relying on the young Turks in his office. Had he kept a closer relationship with Gillard and Swan he would probably still be PM.
Anyway that’s the way I read it from the information available.
Whatever the truth about the stimulus spending, the economy today is strong. Interest rates are lower than when Mr. Howard left office. Employment levels are among the best in the world. Balance of trade is at record levels. Inflation is low. We are increasing our housing stock. Schools are being bought into the 21 century. Infrastructure is being built. There is extensive roadwork occurring. The country is getting high-speed internet to help productivity in the future. Homes are being built for indigenous people. Community and preventive health are being provided. There is much more to be done but no government in 2 to 3 years rebuild the neglect of 12 years. The government according to some might be wrong, but the facts show they have not hurt the economy.
Good comments people and I agree with comments #8 and #9.
For a more reality based view of Stiglitz’ track record (& credentials) on matters economic, have a read of the final paragraph of page 2 of this paper he co-authored.
http://www.pierrelemieux.org/stiglitzrisk.pdf
The 50 economists haven’t done their reputations, such as those may be, any favours by adhering themselves to anything Stiglitz says.
Who is Pierre Lemieux [the author cited by SATP]?
The author of this:
http://www.cato.org/pubs/regulation/regv24n3/lemieux.pdf
If we are going to look at one paragraph in isolation, and with the benefit of hindsight [Stiglitz's essay is 8 years old] why not look at the last paragraph of the essay above accessed from the Cato Institute whose funding in 2007 came partly from Phillip Morris, R.J.Reynolds Tobacco Institute, American Petroleum Institute?
Hannah’s Dad: I’ve no idea who is Pierre Lemieux, nor have I any idea why you suggest I cite him as an author. Whoever he (or she) may be is irrelvant.
The link I provided is to a paper that lists Three co-authors, the first named is Joseph Stiglitz, Pierre Lemieux on the other hand is not one of the other Two. Perhaps you are overdue for a consultation with an optician?
Nup my eyes are good.
Look at the name in your link.
Hannah’s Dad: Are you unable to, or choosing not to, read the linked paper? (“Look, over there, a Unicorn”)
If you are unable to conceptualise a linked paper having an author other than the url, then I can have the linked .pdf document hosted on url http://www.roverthedog.com and you may then continue to ignore the writings of Stiglitz and may comment extensively on the writings of rover.
However, nothing will have changed, the linked paper will still be authored by Stiglitz.
SATP
You lie down with dogs you get fleas.
You have accessed this 8 year old Stiglitz article from a website [I presume cos I couldn't get to the home of the link] of Lemieux and asked us to look at one paragraph, one, in an attempt to discredit the credentials of one of the 51 authors referred to in the economists’ letter we are discussing..
Date, relevance and contex are important.
So I wondered who Lemieux was and found the info above and thought I would play your little red herring trick back on you and show where you are getting your info from namely a free market mob who write predictable stuff.
You may wish to read Bernard Keane’s article quoted in the thread above.
Context and relevance.
Careful he doesnt derail it, HD..
Thanks Paul, you’re right, but this should bring it back on track.
Its the bernard Keane article that I refer to above.
It should be lead headlines on the MSM.
http://www.crikey.com.au/2010/08/17/the-campaign-against-stimulus-contradictory-confused-and-callous/
If we totally disregard the opinion of everyone who in 2002 failed to predict the GFC of 2008/09 then we will be left with a very short reading list.
HD, great minds think alike!
(Dr)Fiona Reynolds also discovered the same article and whacked a big slab of it up, I think at the Welfare thread.
One of the best things Bernard Keane has written.
It’s not a derail, Paul, SATP is claiming that Stiglitz’s article is proof his economic credentials are shit. Fair enough, but if you read the conclusion it’s a little different. The conclusion is:
- because probability of a shock is low, the expected cost to the government of an explicit guarantee of mortgages in Freddie and Fannie is low
- any such shock is likely to be part of a general economic downturn
- in such a case the govt will probably back mortgages from non-Fannie/Freddie lenders (i.e. banks) at significant cost
- so given this, even a high-cost guarantee would probably be inevitable anyway.
The flaw in the paper is the estimate of the probability of a shock, but given that the banks were hiding a lot of information about their practices, it’s hardly surprising.
The big problem here is that SATP can’t read, and doesn’t know what an expected cost is.
Thanks SG. Am glad to know “moral hazard” only applies to the likes of us.
I have got ABC radio on the whole day and so far no mention of the open letter in any newscast. Last week one of the Reserve Bank board member made headlines on ABC with his negative assessment of the stimulus. The Australian gave him a big front page headline also. Any bet tommorrow’s front page will ignore this letter?
But, but but …..the ABC is ‘balanced’.
Isn’t it?
But, but but …..the ABC is ‘balanced’.
Isn’t it?
Yup, pretty much
The stimulus package was the worst of capitalism on display. The vulture economy fails and taxpayers money which could be used on services like schools and health are instead spent on encouraging people to go out and binge spend on things they don’t need via payments of thousands of dollars ( I got a few thousand myself). Can anyone defending this spending binge really say they care about the environment? Encouraging people to buy a lot of made in China junk they don’t need to prop up business is appalling policy.
The ALP should hang its head in shame for being a party that encourages uncontrolled binge spending to prop up business. This is what the stimulus package really meant – rampant capitalism and consumerism. Let the capitalist economy collapse.
But, um, spana, the stimulus money was spent on schools and climate change.
@sg, spana’s talking about the individual stimulus payment cheques that some people got way back when.
So: nobody used their Ruddbucks to pay off existing debt? Everybody just used it on consumerist junk? Are you really sure about that, spana?
sg.
A significant part of the stimulus was a series of payments to people on low incomes, some for them, some for each child. Quite a lot of people got thousands of dollars.
Tigtog,
I agree, some money would have gone on mortagages but Harvey Norman seemed to think it was very good for their profits. There was a boom in plasmas at the time if I remember. I also recall the government makin appeals to spenmd it and not save it.
For me, for a Labor government to use taxpayers’ money to prop up business profit is wrong. In a free market business takes the downturns as well. They should not be bailed out by taxpayers.
Spana no disrespect but even by your standards this is incoherent rubbish. Giving thousands of dollars to people on low incomes is using taxpayers’ dollars to prop up business profits? Ridiculous. Just how do you propose a government should stimulate the economy if not by spending money that gets spent on goods and services?
Oh wait, I see your logic now at the end of @ 29. ‘Let the capitalist economy collapse’. Too right, and the low income earners can make their own arrangements. After all, a bit of collateral damage is inevitable in these ideological revolutions isn’t it? At least they will starve in a good cause, even if they have no roof over their heads. Or are you one of these deluded romantics who expects Glorious Socialism to blossom like flowers in the desert after rain, once the Evil Capitalists have been put to flight?
oh god the ALP gave money to people on low incomes?
Fuckin’ conservative bastards. I bet they shafted the teachers too, the fuckers.
Incidentally, as far as I can tell the payment to “low and middle income families” is 9 billion; the schools program 16 billion; the farmers handout 20 billion.
Looks awful to me. Imagine investing in infrastructure AND helping farmers AND giving money to poor people?
So un-ALP.