Jim Chalmers’ rambling treatise won’t fix the economy
Treasurer Jim Chalmers’ rambling treatise is not only incoherent … it lacks any real policy value.
In one of his first acts as Governor of Pennsylvania last month, newly elected Democrat Josh Shapiro scrapped university degree requirements for all government jobs in his state of some 13 million people.
“Every Pennsylvanian … should get to decide what’s best for them – whether they want to go to college or straight into the workforce – not have that decided for them,” he said.
It was a pragmatic, sensible, indeed “free market”, policy that sought to push back against the endless push for more and more young people to pursue costly degrees of increasingly dubious value to themselves and the rest of society.
The announcement offered a stark contrast to what’s been offered so far by our new Labor government, whose focus in the early months has been “responsibility and resilience”, according to the Treasurer Jim Chalmers in his latest essay in The Monthly.
The government has “an appetite for straight talk about our national challenges … a willingness to talk up not down to each other … to put values at the forefront of how our economies work” on the path to the sunlit uplands of “sustainable, resilient, inclusive growth”. You get the idea.
Indeed, Chalmers’ choice to frame his essay around the musings of Heraclitus, a pre-Socratic philosopher, makes more sense once you absorb the World History Encyclopedia entry on the circa 500BC thinker, who was “known to his contemporaries as the ‘dark’ philosopher because his writings were so difficult to understand”.
The Treasurer’s rambling missive, where it is coherent, is excessively gloomy and wrongly blames economic problems on the non-existent bogeyman of “neoliberalism”, when government regulations are typically to blame.
Even before we embark on Chalmers’ Capitalism 2.0, unemployment has fallen to the lowest rate in a generation.
Far from being “desperately overdue”, gender equality, in terms of women’s workforce participation and societal freedom, have never been so great. The “systemic inequities” continue to crumble as years of prosperity fuel choice and opportunity.
The obvious problems in the economy right now stem from too much regulation. Energy is a case in point, no longer resembling anything remotely akin to a free market after years of government subsidies and meddling have destroyed any hope of cheap power for the foreseeable future.
Indeed, government spending as a share of the economy in practically every Western nation, around 40 per cent of GDP in Australia, has reached levels far beyond what economist John Maynard Keynes, whom Chalmers quotes approvingly, ever thought sustainable (25 per cent). And it’s likely to rise even further. The government is about to preside over the biggest tax increase since World War II, as wages and prices surge, with no corresponding increase in the income tax thresholds.
Remarkably, it may even rescind the piddling reversal of some bracket creep the previous timid Coalition government managed to pass into law.
The Treasurer is right that the Global Financial Crisis, which former prime minister Kevin Rudd in an earlier pompous Monthly essay simplistically – and conveniently – attributed to “greed”, “was never truly resolved”. But that’s because governments never had the courage to fix the underlying problem: implicit government guarantees that encouraged banks to balloon in size, speculate wildly with depositors’ money, all topped off with a complex array of prudential regulations that encouraged banks to make home loans and lend to governments.
Similarly, healthcare and education remain mired in myriad anti-competitive regulations and opaque subsidies, called out over many years by the Productivity Commission, that makes these two bloated sectors ever more self-serving and unproductive.
Finally, the inflationary burst that has kneecapped real wage growth over the past two years isn’t the fault of the war in Ukraine, as Chalmers suggests, but rather the hundreds of billions of dollars of new money pumped into our economies, and the crippling lockdowns that history will no doubt judge harshly once the current generation of leaders moves on.
Government policies Labor supported during the pandemic, such as shutting schools, businesses and universities for months, obviously made the inequality Chalmers decries much worse, given their far bigger and lingering impact on lower-socio-economic families.
And if inequality was “too high” before the pandemic, it’s as much the fault of Labor’s own beloved compulsory superannuation, perhaps the biggest intervention of them all, which slashes ordinary workers’ take home pay to enrich a vast overpaid army of ticket clippers.
The word competition doesn’t appear once in Chalmers’ essay, which perhaps isn’t surprising, given Labor appears to show little interest in breaking up large powerful private monopolies that dominate the most profitable sectors of the economy. Indeed, it didn’t contain one mention of the most powerful group of natural monopolies in the world: Google, Meta, Amazon etc, whose market power is matched only by their political clout, including outside their native US, where politicians on both sides of the aisle are grappling with how to prune their terrifying potential to undermine free speech.
After nine months in government, only two concrete policy proposals emerge in the Treasurer’s 6000-word vision: making the Treasury’s Intergenerational Report and Tax Expenditure Statements – introduced by the Howard government in the late 1990s and 2000s, respectively – “more regular” and “more transparent”. Neither is a bad idea but hardly the stuff of revolution.
Vaguer, and more concerning, aspirations include “creating a new sustainable finance architecture, including a new taxonomy to label the climate impact of different investments”.
I could save the government a lot of time: it’s zero for all of them, given the tiny share of Australia’s carbon dioxide emissions globally. But my advice is unlikely to stop the creation of a new morass of regulations that will create new layers of bureaucracy, economic distortion, and, of course, another small army of highly paid, inequality-increasing experts to get around them.
Indeed, if Australia’s future prosperity is vulnerable, it’s not from the “passive de-prioritisation” Chalmers laments, or a lack of “values” or “wellbeing”, but from the relentless push to phase out use of the fossil fuels Australia relies on to sustain its extraordinarily high standard of living.
Having a thoughtful, intellectually curious treasurer is far from a bad thing. But Australia doesn’t need its leaders to be “rethinking capitalism” when the solutions to problems are tweaks on a path that’s proved highly successful already, much of it thanks to the pioneering reforms of Hawke-Keating in the 1980s.
Pennsylvania isn’t the only US state with a Democrat leader that’s recognised the limits of government, resisting the policy by platitude that appears to have captured much of the Democratic Party and parties of the left more generally around the world.
In Colorado, Democrat governor Jared Polis spent his first four years in office from 2019 pruning regulations to help boost housing supply and cutting property taxes. In 2021, he shocked Democrat colleagues by suggesting the state’s ideal income tax rate should be zero.
The lesson is pockets of sanity remain in centre left parties, however much vague rhetoric dominates the public statements.
We can only hope Chalmers’ summer writing was more about shoring up political support in the youth wing of the Labor movement than penning a policy road map for the next few years.
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