Chalmers offers Australia a New Deal

Everything is going to be all right. The nasty people have gone. The good people are now in charge. Young, handsome, wise, thoughtful, caring Jim Chalmers is here to reassure you.

It is all in The Monthly - a left-wing magazine with an advertisement for a Rolex watch on the back cover. The Rolex is described as "soothing, moving, empowering." Just like Jim Chalmers.

Chalmers entitles his essay "Capitalism after the Crises."

He begins with some Greek philosophy: "No man ever steps into the same river twice. For it's not the same river, and he's not the same man."

It was the German Historical School, supporters of national socialism, who proposed the now discredited theory that economics varied with time and place and culture. We can assume that is not what Mr Chalmers is proposing.

It is time for action. It is time to address the vulnerabilities that have been neglected so long. We must make up for lost time. The old theories failed. We need new ones for a new age. He calls for "new beginnings", "ending a wasted decade", and a "change of mindset". He promises an end to the systematic inequities that lock out disadvantaged and disenfranchised communities.

Chalmers defines the three crises: the Global Financial Crisis (GFC) of 2008; the COVID pandemic of 2020; and the supply chain pressures caused by the war in Ukraine.

The common thread is vulnerability. "In each case, our communities, economies, budgets, environment, financial and energy markets, international relationships, and our politics – already fragile enough – became more so." He attributes the problems to government policies – and policy vacuums.

He is so right. Yet not for the reasons he lists. The primary cause of the current predicament is that governments throughout the world have spent more, much more, than they have raised in taxes. The difference has been made up by their collaborating central banks who have increased the money supply. Easy credit has encouraged malinvestments. Citizens have been paid when not working; lockdowns have restricted the creation of goods and services; prices have risen as cashed-up consumers vie for fewer products. Inflation is high; money is not worth what it used to be. Private and public debt levels are unsupportable.

Unfortunately, changes that might have been made after the GFC were not. "The entrenched systems and institutions that dictate and drive public and private spending are so complex and vast, and powerful economic interests have so much at stake in keeping them in place."

Chalmers is not attracted to a solution of limiting government spending to what it can afford – to cutting your coat according to your cloth. His solution is carefully constructed markets built in partnership through the efforts of business, unions and government. For him, this is an ideal approach as it enables government to leverage its power to achieve results without adversely affecting its budget.

His plan is to encourage values-based investment. "By failing to put values at the forefront of how our economies work, we also leave behind reams of wasted talent, a degraded environment and social dislocation." He explains that "if we could design markets for investment in social purposes, based on common metrics of performance, many more well-run 'for purpose' organisations could get much more of the growth capital they need."