‘Well, what’s your name?’ you ask him. ‘Odradek,’ he says. ‘And where do you live?’ ‘No fixed abode,’ he says and laughs; but it is only the kind of laughter that has no lungs behind it. It sounds rather like the rustling of fallen leaves. And that is usually the end of the conversation

November 26, 2012 § Leave a comment

So where does this obsession with returning the budget to surplus coming from? It appears to be a consequence of the puppet show that passes for political leadership not just in Canberra but globally, where mainstream parties of both progressive and conservative persuasion vie with each other over who would be best at balancing the country’s fiscal books.

The question of whether and when the books should be balanced doesn’t get a look in when this contest is afoot. Both mainstream contenders — Liberal or Labor in Australia, Democrat or Republican in the US — concur that the best budget is a balanced one (and the best of all is one in surplus). This shows that there is no real contest of ideas in modern politics: parties instead compete over who would do a better job of managing the economy according to the neoliberal rulebook.

That rulebook has two overriding principles: that government should be as small as possible, and that asset price bubbles are a good thing — though heaven forbid actually calling them that. The first principle is why a surplus is seen as being better than a balanced budget, since then government can be downsized. The second, which is described as increasing private sector wealth, makes it easier to justify downsized governments since a wealthier private sector has less need of public largesse.

That rulebook appeared to work right from the early 1980s until the crisis of 2007, and when something appears to work, few politicians question why. Instead they strive to take the credit for it. This made governments of notionally Left and Right persuasion complicit in the debt bubbles that actually finance asset bubbles.

This is why there is no Left/Right pattern to political economics in the last three decades: a notional progressive in Bill Clinton signed in the abolition of Glass Steagall; a notional progressive in Tony Blair extended the City-favouring policies of his notionally conservative predecessors Thatcher and Major; and a card-carrying conservative in John Howard simply built on the finance-friendly policies of his notionally progressive predecessor Paul Keating.

In fact, the neoliberal rulebook worked because both rules encouraged the growth of the FIRE economy (FInance and REalestate), where the engine of growth was exploding private sector debt. When that engine burst past maximum revs and seized up in 2007, the crisis we are now in erupted.

An optimist might hope that politicians would learn from their mistakes, and abandon the rulebook that caused the crisis. But that would involve admitting that mistakes were made in the past, and it seems that politicians — and the public too — would rather return to the past than to examine it more closely.  read more

ART: Jeroen Allart

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