Treasurer Jim Chalmers’ essay in this week, on “capitalism after the crises”, sparked fears in certain quarters that he had taken a lurch to the left.
There was certainly a bit of that. His citing of the heterodox economist Mariana Mazzucato as a key inspiration was a bit of a worry. Who the treasurer listens to matters, and I can think of many economists whose advice I’d rather he heeded.
But, overall, I think this criticism is off-base. Far from being too far left, arguably, it wasn’t nearly far left enough. And that’s coming from me, a guy who generally likes markets and is generally sceptical of government.
No, far more concerning than what the essay contained was what it didn’t. I don’t recall ever having read so many words – almost 6000 – that contained so little. No clear proposition, no coherent framework for thinking about the world, no tangible plan of action.
Chalmers’ “capitalism after the crises” looks an awful lot like the one before them.
Free markets have many faults. The neoliberal wave that swept across the world during the decades leading up to the global financial crisis in many ways overcorrected for the government overreach that preceded it.
There’s no doubt government has a critical role to play in a modern market economy. There is a sophisticated and thoughtful essay to be written about what a modern social democratic economy – incorporating lessons from both the past few decades and the past few years – ought to look like. This is not a new idea. Market failures during the GFC spurred endless ruminations on how to build a “new capitalism”.
Prominent columnist Ezra Klein has written about the pro-growth agenda the left ought to champion. As has columnist Derek Thompson, who favours the left adopting an “abundance” agenda. Our very own Richard Holden and Rosalind Dixon have written an entire book, , on this.
These ideas broadly have been arranged under an umbrella of “supply-side progressivism”. The point is to harness the best features of markets in the pursuit of progressive goals. It champions economic growth as an enabler, something to embrace rather than merely to be tolerated (or suppressed as the de-growthers on the left want to do).
I would be delighted to read an Australian treasurer’s embrace of these ideas. Sadly, that’s not what we got in . Rather, we got an incoherent assortment of kumbaya capitalist thought bubbles – the kinds of ideas you might expect from a bunch of virtue-signalling CEOs attending a wellness retreat.
Those on the left should be the most scornful of all. The treasurer’s big new idea of government pursuing partnerships with the private sector is just about the most neoliberal thing imaginable.
Rather than stand up and fight for the government to actually do things, the treasurer wants the banks to fix social disadvantage. Instead of doing the hard yards to reform land use and planning rules and the tax treatment of housing, the treasurer wants super funds to build more houses.
Among the many legacies of the neoliberal era, arguably the most corrosive was the proliferation of mixed markets, which in Australia have become dominant in critical industries. None of the markets for childcare, employment services or private health insurance operate effectively – and all three involve private companies delivering services that otherwise would be delivered by government.
An enlightened liberalism recognises there are some jobs for government and others for the private sector – that the government and private enterprise holding hands frequently results in terrible services at obscene prices. Where is the thought leadership on this key failure of neoliberalism?
I suspect the real reason the treasurer is so keen to champion “impact investing” is the same reason he was so keen to pursue off-budget spending before the election. You get to say all the right things, and have the appearance of solving big problems, while avoiding the budgetary and political costs involved in making a difference.
Off-budget funds for clean energy, housing, industry assistance, you name it, let politicians commit massive dollar figures at negligible fiscal cost. The trouble is, they tend not to add up to much in practice. Worthwhile as it may be, all the impact investing in the world isn’t going to truly solve our great social problems. For that, the government must act.
The government’s power is not in providing loans or partnering with super funds. The government’s power is in actually doing things. In “allocating resources”, as an economist would say. Imposing (or rescinding) regulations, taxing and spending, delivering services. The challenge is to figure when that is needed and when it is not.
The tough spot the treasurer finds himself in is that doing things is hard. And politically fraught. Alas, his essay gives me little faith he grasps what is required of him.
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