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Dear Mr Rudd (Minister for Propaganda)

By Chris Lewis - posted Monday, 27 July 2009


Dear Mr Rudd,

I remain amused by your ongoing bid to offer rhetoric under the guise of what policies are needed to solve the big issues that confront Western nations (especially Australia), and your ongoing attack on the so-called economic right as if supporters of freer trade and smaller government have no idea.

Your reliance upon rhetoric is shameful, as again indicated by your recent Sydney Morning Herald effort (July 25, 2009). With your attack on the so-called economic right, you somehow remove yourself from your own role in the very trends you are criticising? Did you not help rationalise Queensland’s public service when working for Premier Goss, thus earning you the nickname Dr Death?

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Perhaps I am being too harsh. Can you inform Australians of your longstanding concern about such adverse trends caused by so-called neoliberalism? I ask this because you expressed little awareness about any global economic problems ahead back in 2007.

Anyway, as a tutor who is about to assess 2nd year ANU students on their essays about public leaders, my first impression of your essay is to give you a credit. It does express intellectual aspiration but, unfortunately, the argument mostly offers rhetorical support for Labor policies with too many words citing data to show how clever you are.

However, as a piece of propaganda the essay is brilliant. You would make an excellent Minister for Propaganda in any country. By getting ahead of the game in terms of what policy trends are likely to emerge, you can lead the debate and portray yourself as the great leader with a sound grasp of the issues. With the Coalition struggling to offer any effective policy alternative as they bicker over key issues, most notably in regards to addressing greenhouse gas emissions, it appears that only an economic disaster can threaten a Labor victory at the next election.

Your emphasis on pain ahead is correct. Declining budgetary revenue from slower economic growth in coming years is likely to emerge which makes the task of balancing budgets much tougher. I hope that a Labor government makes the reforms on a fair basis rather than a strategy to win the greatest number of seats.

And you are wise to admit that your government can do little to prevent rising unemployment, interest rates, food and petrol prices that could emerge in coming years. This is a vast improvement from your past rhetoric of promising to do much but doing little about important everyday considerations for ordinary people such as food and petrol prices.

Similarly, you should highlight the mistakes made in the past with the heavy reliance on debt, although your argument incorrectly attributes much blame on the US despite acknowledging that most Western nations (including Australia) were also reliant on such debt to fuel both national and international growth.

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But when you make judgments about the past you should not use the same evidence to support your own efforts. It is not clever to gloat that Australia has the 2nd lowest level of debt of all the major advanced economies without giving due credit to the Howard government’s efforts.

Similarly, with your attack on so-called neoliberal policies of the past 25 years, particularly those of the US leadership, you need to show what policies should have been implemented, which countries could have taken up the void caused by the US abolishing capital controls in order to compete, and just how freer trade could still work to help both rich and poor nations prosper without mobile capital. As the above sentence indicates, these three dimensions to policy need to be answered together.

And are you also criticising the US most when you express an observation that some nations adhered to principles that government “should get out of the road of the market altogether and that the state itself should retreat to its core historical function of security at home and abroad”? After all, it was the US Federal Reserve which encouraged lower interest rates to attract investment and maximise profits, a stance supported by most major Western governments, and an example of government intervention which helped fuel the sub-prime housing disaster and many national housing bubbles.

It is also misleading to brag that Australia will have a lower level of debt after the current economic crisis compared to other Western nations. If you are honest, you would acknowledge that Australia would also be in dire straits without Chinese demand as commodity prices would collapse.

In reality, Australia can do little to influence the international economy. As usual, the policies that drive the international economy will be decided by the US and the EU, although international forums will allow smaller players to raise their voice. What Australia wants from its trading relationship from China may prove irrelevant if a trade war emerges.

Though your essay illustrates the pain ahead, you hardly have any real ideas about how “to enhance long-term productivity growth” and lessen Australia’s reliance on the boom and bust of mining and shares. Yes you cite the US National Economic Council stating we need to be “more export-oriented” and “less consumption-oriented”, but how do you propose to make this transition?

To be honest Mr Rudd I do not see much originality from your ideas. While you provided free ceiling insulation to 2.7 million homes to improve energy use (February 2009), this idea was in line with other think-tanks that noted the need to provide support non-housing parts of the economy, such as providing incentives for insulation of homes to help the construction industry rather than big social housing projects (Finfacts, June 12, 2008).

You also have much to say about a flawed reliance upon debt, yet your government has assisted first home buyers to get loans, a strategy that will prove to be a disaster should the economy worsen much further as some have predicted (Steve Keen and Gerard Minack). Further, is not the ASX now working with the Australian Office of Financial Management to list government bonds on the local exchange?

Yes, you mention the need to improve productivity and improve infrastructure such as schools, roads, rail, ports, clean-energy projects, universities, TAFEs, hospitals, medical research and a national broadband network. But all of the above are a given for any modern economy in a competitive world. Such policies do not indicate how Australia can diminish its reliance upon minerals or withstand greater competition from developing nations.

And what do you mean when you call for greater international co-operation to address the investment imbalances that developed between the surplus countries in the East and deficit countries in the West?

Why would China not aim to be both the largest consumer market and exporter? After all, the US used to be both in 1950 before its promotion of freer trade (more so than previous hegemons) helped undermined its economic dominance which resulted in a greater reliance upon debt.

Where are the signs that China wants to play by the same rules? As noted recently by Stanley Crossick, Director and Founding Chairman of the European Policy Centre, we indeed have much to worry about when a communist government (policy posted June 4) urges government investment projects to purchase domestic products, although Washington’s 2009 “Buy American’ provisions also favoured US contractors.

China remains a mercantile nation which has done little to prevent piracy of Western products, has tariff and non-tariff barriers and subsidies to promote exports, and has long kept its currency cheaper to help its exports.

And with China arresting Rio Tinto officials after Australia’s steel producers managed a 33 per cent price cut rather than China’s preferred 40 plus per cent, it appears China is not going to democratise or do anything else unless pressured to do so by the Western powers via carrot and stick approach.

In a world of freer trade, nations which do have a large number of skilled workers and growing middle class, an abundance of cheap labour, and a communist political system, will prove unbeatable if current trends continue. This will long remain the case even if a communist China chooses to listen to you and expand its social welfare system.

Western countries will never be able to compete with China in the foreseeable future no matter how productive they are? Look at the US which has long ranked at the top or near the top of the World Economic Forum’s Global Competitiveness Report (2008-2009).

That is why protection is on the rise and will increase as respective economies suffer.

Mr Rudd, your broad outline for the future does not make sense. You promise to keep government tax below the level of the economy you inherited and acknowledge that budget revenue will suffer from lower growth, yet your government will address increasing welfare demands (health and an ageing population), fix bottlenecks constraining our growth potential from mining, spend $43 billion to construct and operate a national broadband network in partnership with the private sector, and ensure that Australia meets it water needs.

And how do you propose to meet Australia’s housing needs. Though your government announced in February 2009 that it would spend $6.6 billion (mainly over the next two years) to create 20,000 public houses, the Australian Institute of Health and Welfare estimated that there a 177,000 applicants are on waiting lists for public housing (The Age, February 4, 2009).

With Australia’s housing problems likely to get worse under tougher rules for financial institutions in regard to lending practices, what do you propose to meet the housing needs for ordinary people? Will you just let rents rise and rise?

After all, the signs are not good for ordinary workers when the Fair Pay Commission offered no rise in the minimum wage for the lowest paid workers.

Mr Rudd, your recent essay is mostly rhetoric intended to promote Labor’s election prospects rather than a serious summary of the policy difficulties ahead. While an undergraduate can be excused for a lack of knowledge about international politics, you are the Prime Minister of Australia who should have a much greater grasp of economic complexity. For this reason I have chosen to downgrade your essay and given it a bare pass despite your considerable effort as Australia’s Minister for Propaganda.

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About the Author

Chris Lewis, who completed a First Class Honours degree and PhD (Commonwealth scholarship) at Monash University, has an interest in all economic, social and environmental issues, but believes that the struggle for the ‘right’ policy mix remains an elusive goal in such a complex and competitive world.

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