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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 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.”
The branch of economics that deals with values is Austrian Economics.
The concepts of scarcity and choice lie at the heart of Austrian economics. Man is constantly faced with a wide array of choices. Every action implies forgone alternatives or costs. And every action, by definition, is designed to improve the actor’s lot from his point of view. Moreover, every actor in the economy has a different set of values and preferences, different needs and desires, and different time schedules for the goals he intends to reach.
The needs, tastes, desires, and time schedules of different people cannot be added to or subtracted from other people’s. It is not possible to collapse tastes or time schedules onto one curve and call it consumer preference. Why? Because economic value is subjective to the individual.[1]
But this is not what Chalmers has in mind. He is not concerned with the values of the individual. He believes it is the role of government to select the values of the economy. In the immediate term these are: “introducing cleaner, cheaper, more reliable and increasingly renewable energy, and adopting practices and technologies that reduce our emissions; developing a more resilient and adaptable economy in the face of climate, geopolitical and cyber risks, unreliable supply chains, and pressures on budgets from an ageing population; and growth that puts equality and equal opportunity at the centre.”
Chalmers seeks to create a new, values-based capitalism for Australia by reimagining and redesigning markets – “seeking value and impact, strengthening safeguards and guardrails in areas of unchecked risk and with coordination and co-investment – recognising that government, business, philanthropic and investor interests and objectives are increasingly aligned and intertwined.” But is this idea feasible? Would it work in practice?
In the thirties, Franklin Delano Roosevelt (FDR) introduced the New Deal as a set of policies to ameliorate the Great Depression. It was very popular, but counterproductive.
The New Deal … included quasi-fascist schemes to regiment industry and agriculture; public works and regional pork barrel spending to reward the New Deal coalition; price support and production control schemes to levitate farm prices; work relief and social programs to relieve the immense destitution and suffering among the unemployed; and endless special interest legislation sought by unions, the housing industry, and other organized lobbies.
Some of these programs provided humanitarian relief and a safety net. Most either retarded recovery or were abandoned before they could do much harm. And a few – like the industrial union legislation, universal social insurance, Fannie Mae, bank deposit insurance, and farm price supports – lived on to cast a heavy and debilitating shadow over the distant future.
But FDR’s opening blow was devastating and long lasting. He outright abolished the basis for sound money at home and personally blocked the revival abroad of stable exchange rates and common international money; that is, currencies redeemable in gold.[2]
In 1933, when Roosevelt took over from Hoover, he took charge of all the country’s gold. Everyone was forced to convert their physical gold to fiat currency and the gold redemption clause in private and government contracts was declared invalid. Banks were directed to deliver their gold to the Federal Reserve. Once this was complete, the government devalued the dollar by about forty per cent, making a profit of about $2.8 billion on the gold it had confiscated. The government had defrauded its own people. It had taken their capital and was now in total control of the nation’s money and how it should be spent.
The National Recovery Act (NRA) set out to control prices, rates and wages by industry. Within six months, industrial production fell twenty-five per cent. The minimum wage laws of the NRA priced the marginal worker out of a job; they were particularly harmful to the inexperienced and the elderly and forced half a million African Americans onto relief in 1934.
Late in 1937 the weary economy collapsed once again. In a nine-month period in 1937 and 1938 industrial production dropped 34%. Roosevelt’s advisors demonstrated that they had learned little from the grim experience of the previous years. Unemployment in 1938 stood at ten million, higher than it had been in 1931. They resorted again to the panaceas of pump-priming, deficit spending and inflation.[3]
So a recession that had begun as a result of government intervention into the money supply was sustained by more of the same, plus tariffs, controls over wages and prices, and subsidies to farmers.
Policy measures like Fannie Mae, deposit insurance, social insurance, The Wagner Act, the farm programs, and monetary activism share a common disability. They fail to recognise that the state bears an inherent flaw that dwarfs the imperfections purported to afflict the free market; namely, that policies undertaken in the name of the public good inexorably become captured by special interests and crony capitalists who appropriate resources from society’s commons for their own private ends.[4]
We would need to be careful that the friendly, well-meaning collaboration that Chalmers proposes between industry, unions, venture capitalists, superannuation firms and government does not lead to crony capitalism. There is a real and ever-present risk that the chosen groups may act in their own interest rather than that of the general public. Moreover, firms may find it desirable to support government policy in other areas in order to win government favours. Chalmers hints that he wants to alter the role of the Reserve Bank, but he is not specific about his plans. Let us hope his assault on our money is not as devastating as FDR’s.
It is worth noting that the areas of our economy that are least efficient are the ones that are either highly regulated or are run by government. For example, education and health care are among the few things that cost more in terms of hours worked now than they did sixty years ago. They suffer from a lack of innovation, from a lack of entrepreneurial input.
In fact, the glaring omission in Chalmers’ paper is that there is no mention of the role of the entrepreneur.
The more we diversify as consumers and specialise as producers, the more prosperous we become as individuals and nations. It is the entrepreneurs who drive this economic process. They back their judgement and risk their time and their capital to create the goods and services that they perceive consumers want.
Entrepreneurship is not a role that can be played by government and bureaucrats. Nor can it work if it is stifled by regulations, controls and special favours.
What Chalmers is proposing is to move economic decisions from the business sphere to the political sphere. He and his party will select what they deem as valuable for us and they will then work with a few experts – bureaucrats, CEOs of our larger companies, union leaders, heads of superannuation funds, etc. – to guide our economy in the direction of their choosing.
The trouble is that these experts do not have the knowledge, in fact cannot ever have the knowledge, to undertake this task optimally. This was explained brilliantly by F.A. Hayek in his essay, The Use of Knowledge in Society, which addresses the generic problem of how to make rational economic decisions. Hayek based his analysis on three profound concepts. First, that not all knowledge is scientific; there is also the knowledge of time and place. Second, that knowledge of time and place is held by millions of individuals. Third, data that is aggregated loses nuance.
Hayek explained that sound economic decisions cannot be made centrally by experts or bureaucrats because they can never have all the knowledge needed. Moreover, they lack transient information about people, local conditions and special circumstances – that is, the knowledge of time and place. That knowledge is held by millions of people and the price mechanism enables them to use that knowledge effectively in economic decisions.
Free markets optimise the economy for the benefit of free people.
The philosophers of the Enlightenment told us that liberty works and that prosperity flows from it. Two hundred years of history has shown us that this is true – that it works in practice. Moreover, it applies, not just in the Anglosphere or in the developed world. The concepts are valid universally.
Societies which have embraced liberal democratic principles – individual rights, private property, the rule of law, and representative government – have thrived. Now everyone can live happy, prosperous and meaningful lives if they and their leaders choose to build their societies on these principles.
Let us hope that Jim Chalmers allows us to set our own values, resists the temptation to impose his own, and allows the free market to continue to deliver prosperity.
Peter Fenwick is the author of The Fortunate: Ten great writers highlight how we created free and affluent societies(Connor Court, 2020). This was reviewed by Gary Furnell in the January -February 2023 edition of Quadrant.
[1] Lewellyn H. Rockwell, Jr., Why Austrian Economics Matters.
[2] David A. Stockman, The Great Deformation
[3] Brown et al, The Incredible Bread Machine
[4] David A Stockman, The Great Deformation
I am not an economist but my brother told me about the Chalmers paper in The Monthly so I read it. I found it hard going.
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I noted early on that he spoke against government “picking winners”. Then he spoke of value economics. That’s picking winners, isn’t it?
Dishonesty, lies and creative accounting ooze from this wolf in sheep’s clothing. Nebulous phrases such as “Our mission is to redefine and reform our economy and institutions ” are code for anti free market policies and the road to socialism.
The destruction of Australia with net zero madness, large scale welfare immigration,
tow the line authoritarianism in education and corporations, to name a few, is well under way.
Go away Comrade Jim.
Sadly, the brave new world Charmers is promoting (values based capitalism through a partnership of business, unions and government) is just another rehash of the Hawk/Keating economics. The question, and the red flag for all freedom loving Australians, should be ‘who’s values?’ We already know that Labor has an abysmal record for funding its supporters, and starving its opponents, with most Australians being in the later camp.
In reply to Rabel 111
You may not have liked the policies of Paul Keating and the late Bob Hawke but their approach was nothing like this waffle.
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Their realistic changes aimed at modernizing the economy were well regarded by many on both sides of politics. They were generously given bipartisan support in their endeavours by another realist, John Howard, who was a fair man and who recognised the value in for example Treasurer Paul Keating floating the Australian dollar – something John Howard was thwarted from doing by a less able leader, Malcolm Fraser.
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Jim Chalmers is nothing like Keating, Hawke or Howard. They were prepared to take responsibility and be held accountable for what they did.
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They made their mistakes but generally they all did pretty well. Unlike with Jim Chalmers you got realism from them – not this unmitigated waffle.
“His vision of government, its institutions and corporate allies directing the economy from above can only be taken as further evidence of just how deep his ignorance runs…”
Sure sounds like Fascism to me. That’s gonna turn out well.
“It’s going to be alright. The nasty people have gone”.
Yes and the cheap people are now in charge.
A paper like this by Peter Fenwick is like a breath of fresh air. I would bet that it would not find a place in any of our woke, socialist university commerce faculties.
Could you post a link to Dim Jim’s ‘thesis’, Peter?
https://www.themonthly.com.au/issue/2023/february/jim-chalmers/capitalism-after-crises#mtr
Now don’t blame me later for sending you this waffle.
Unfortunately I’ve had the pleasure of reading the full Jim Chalmers’ paper.
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If self indulgent, relentlessly obtuse waffle (like four paragraph references to Greek philosopher Heraclitus and reference to Dionne Warrick lip syncing on a Paris roof) and an extraordinary level of political spin are going to make our economy more prosperous, fairer and less “vulnerable” then Jim Chalmers will be a great treasurer.
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However waffle and political spin may sometimes win elections and improve polls but they do absolutely nothing positive for any economy.
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Jim Chalmers’ paper is the greatest collection of obtuse waffle and political spin I’ve ever read in one place. And I’ve read a lot of economic stuff and unfortunately a lot of political waffle.
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In a massive 5713 words it’s difficult to get any clear idea of even one single policy change he might undertake as Treasurer. He predominantly talks in euphemisms and generalities like he’ll “renovate” the Reserve Bank and “revitalize” the Productivity Commission. What in the hell does that mean? It could mean whatever people want it to mean.
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To be fair this paper is quite an achievement. It’s got to be said he’s a consummate spin doctor who in 5713 words side steps any semblance of anything he can be held accountable for.
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Now if waffle were all we were going to get from Jim Chalmers it wouldn’t be so bad. But Jim Chalmers seems to have little faith in our current free enterprise economy. He isn’t simply talking about adjustments at the margins which correct market inefficiencies and inequities. He’s talking about restructuring our economic system which has served us so well and made us one of the world’s leading economies.
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His paper amounts to a vote of no confidence in the private enterprise system we have.
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He’s actually talking about “reimagining and redesigning markets”. He says “carefully constructed markets are a positive and powerful tool.” This is not simply market intervention to correct market inefficiencies and inequities, it’s about redesigning markets and institutions.
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And who will decide how that is done? And how the RBA is “renovated” and the Productivity Commission “revitalized”?
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Chalmers talks about unions and business doing this with him. But big business and big unions have huge vested interests in the process and in skewing outcomes to suit their own constituencies. Monopolist businesses won’t want more competition and greater efficiency overall. Big unions will want restrictive agreements and practices in place which benefit their members but lead overall to lower economic efficiency.
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The extent of all this was dishonestly not mentioned before the last election. Labor went to the polls with a deliberately small target approach. Even their strongest supporters conceded that. They didn’t talk about redesigning our free enterprise economy.
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From this paper we know this is likely to lead to significant fundamental change involving the restructuring of what have been free enterprise markets … but even after 5713 words we have no concrete idea about what those changes will mean.
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But the changes will be significant because Chalmers talks about the “illegitimacy” of our current free enterprise markets which he claims were exposed during the Global Financial Crisis 15 years ago. He’s going to change that in Australia by redesigning our existing free enterprise markets. Yet in almost the same breath he talks about our economic future dependent on foreign markets.
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You’d have to give his paper 100% for political waffle and zero as an accountable economic document which had a cogent explanation of a way forward for our economy.
The bad news is that Jim Chalmers is actually treasurer – so these are the ramblings of someone who’s actually in a very powerful economic position in this country.
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The good news could be that Jim Chalmers might be the consummate political spin doctor but is so confused in his economic thinking he won’t actually be able to extract himself from the soup he puts forward in this paper to actually implement anything.
The “Values” that Treasurer Chalmers talks about are not the “Values” on which Australia rose from a convict settlement to one of the leading democracies of the world.
Chalmers “values” were decided by Marx and Engels, enforced by Lenin, infiltrated by Gramsci, practiced by Putin and proposed to be inwoked by WEF, IMF and UN.
No free person was ever happy when a Government had its foot in his door and its hand in his pocket.
Admittedly it’s early days but what has Jim Chalmers’ new fairer, value approach given us so far? We may not be able to evaluate in any precise policy way what in the hell Chalmers is talking about in his waffling paper but we can look at what he’s done so far in office.
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With Labor being out of office for so long Jim Chalmers seems to think it gives him a completely free hand to blame the Coalition and conservative approaches to policy for what he sees as our current “illegitimate” market systems that he claims the Global Financial Crisis uncovered.
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And it’s hard to hold him to account for the sorts of waffling objectives he claims will fix what he calls our “illegitimate” economic markets – mainly because they’re so broad and obtuse it’s difficult to know what policies might actually flow from those objectives. I’d be surprised if he knows. If he does he’s not telling us.
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However let’s be fair though – the great scholar says he now has the answers and it will take time but he’s made a start.
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Let’s look at that start.
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The major economic problem immediately confronting Australia is inflation. What has Jim Chalmers done to reduce inflation? Virtually nothing – he’s mainly talked about it. He’s left all the heavy lifting to the Reserve Bank to impose increases in interest rates to get inflation under control.
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Chalmers has talked a lot though. He’s commented sympathetically at length on how hard those interest rate rises might be on people and that the full effect of their negative impact hasn’t been felt yet. All this sympathy and description is aimed at distancing the government from any accountability for the negative effects of those interest rate rises – and putting the RBA in the frame for them.
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But the government is accountable. It’s virtual lack of fiscal action has meant that interest rate rises will have to be steeper and faster than they would otherwise have been to get inflation under control.
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The limp fiscal action Chalmers did take had no effect on reducing inflation. It was to give some cost of living assistance which most commentators felt was token only and would have little impact.
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Meanwhile the middle class welfare promised during the election to those on joint incomes up to $500,000 for housing and childcare was to stay in place.
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Another serious problem immediately confronting our economy is the cost and availability of healthcare. For example many people who currently need healthcare can’t afford to have it because bulk billing is increasingly less available. However the government only talks about longer term answers and virtually nothing to address the immediate problems.
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Is this an example of the new value approach? Virtually no action on the immediate economic problems confronting us and a dogged determination to hold onto middle class welfare.
There are people sleeping on the streets and not getting the medical care they need but Labor can afford to hand out middle class welfare. It makes an absolute mockery of the supposedly more fairer approach Chalmers waffles about
The point about the middle class welfare is that Labor is now touchy, feely and is more aligned with that class than those it was created to represent. BO, you have hit the target.
It is interesting to consider the other ads in the Monthly February 2023 edition:
– An ad for the Monthly itself, with the tag line “get out of the shallow end”, a reference to Scar’s line in the Lion King about the shallow end of the gene pool. It characterises non-subscribers as genetically inferior; subscribers as superior.
– An ad for the sister publication The Saturday Paper, with the tag line ‘reject the mainstream racket’, with an illustration of two toads playing tennis, again a derogatory characterisation of non-subscribers and a positioning of subscribers as out of the mainstream, when the paper actually is mainstream woke from cover to cover.
– An ad for the Australian Chamber Orchestra.
– An ad for the Kronos Quartet and Womadelaide.
– An ad for the Adelaide Festival.
– An ad for Academy Travel.
– An ad for Bell Shakespeare’s Macbeth.
– An ad for the State Library of Victoria’s Handmade Universe exhibition.
– An ad for the Art Gallery of NSW.
– An ad for the movie Aftersun.
– An ad for the Melbourne Theatre Company.
– An ad for Schwartz media (owner of the Monthly) podcast.
– An ad for The Politics newsletter.
– An ad for The Saturday Paper’s daily newsletter Post.
– An ad for Schwartz media’s weekly newsletter The Arts.
– An ad for the Malthouse Theatre’s Nosferatu.
– And finally, a back cover ad for Rolex, with the tag line “let there be music”.
The ads are entire for Schwartz media’s own products, for various publicly funded arts organisations and shows, a movie, and then for Rolex. This is a magazine clearly targeted a affluent lefty arts constituency that thinks itself above the hoi polloi.
followed immediately
An ad for Bell Shakespeare’s Macbeth.
Let me guess. It’s set on a Number 47 tram, with Macbeth the driver and his little woman the conductress as they rattle towards Dunsinane Wood, which consists entirely of dot-painted eucalypts endangered by the climate crisis. Macduff is an Aboriginal warrior and, as for the all-seeing witches, they’re named Julia, Hillary and Ita and each is trans, as the obligatory nude scenes make abundantly clear.
It’s worth catching a Bell Shakespeare show, but just one. After that you’ll be in no doubt of the trendy twaddle the Australia Council favours for taxpayer support.
Ah Micheal, are you saying the left are up themselves?
I think he is charming everyone for another ALP con job.
When they start talking about ‘values’ it’s to time to run for it. Of course, they mean their values – not yours.
As regards economics we currently live in a ‘clever’ economy in which there is no need to do productive work. All we need is to train as many baristas, nannies and social workers as possible.
The fact that we no longer have any technical or industrial manufacturing capacity hardly matters. We are, after all, saving the planet (enter ‘values’).
Should we ever become involved in the need to defend our country, this could be inconvenient. However we are peace-loving (cue ‘values’) and so are our neighbours, especially the Muslims, Bhuddists and Communists congregating in eye-watering numbers to our north, all of whom have great ‘values’ like us.
RE: “A certain Italian dictator would heartily endorse Treasurer Jim Chalmaers’ yen to fuse government intentions with those of the captains of industry”
The Australian Labor did this to Western Australia in the 1980s. The Labor party created WA Inc by “fusing” corporate and tycoon interests with those of the WA government. As increasing hundreds of millions of dollars of WA taxpayer money were “lost” by the government, secrecy and shredding increased, and bigger failed deals were made to cover up the mind-boggling corrupt losses. The premiers and ministers then used increasing taxpayer funds to finance writes against critics. The only difference between Australian Labor corporate states and Hitler’s industrialist government complex is that the Nazis were financially more competent.
* Correction: ministers issued WRITS against critics
** shredding: of government records which should have been preserved and archived because they are the property of the people.
The Hawke/Keating government brought in some good changes to the Australian economy, in part thanks to upper house support from the Liberal/Nationals opposition. But what Chalmers is proposing is closer to the Whitlam era of failed socialism, with his lapdog Rex Conner wanting to buy back industry and imposing export price controls which not only failed to achieve their desired purpose but caused serious harm to some Australian businesses.
Chalmers is dangerous because, as others have pointed out, he has no real world experience to rely on, just academic theory.
I notice that some Labor members are now calling for the RBA Governor’s term to not be extended. BO above talks about the RBA being left to do the heavy lifting. Now Labor appears to be scapegoating him.