Peter Smith

Ersatz conservatives

Bill Shorten was reported as ruling out an increase in the dole. Apparently a number of “conservatives” think that dole should be increased. Judith Sloan and Heather Ridout were mentioned in the report that I read. I don’t know whether Judith Sloan and Heather Ridout consider themselves conservatives. I lose the sense sometimes of what being conservative means to some people.

I recall ANU economist and former Reserve Bank board member Warwick McGibbon putting the case that the stimulus spending package was too big. Something smaller would have been okay apparently. I recall Harvard economic historian Niall Ferguson noting that Keynes “had a great idea [of using] public borrowing to finance public works to galvanise economic activity”. His only query was whether it would work when governments were heavily indebted.

In my book, none of these positions of conservatives are conservative. Except for Austrian economists and a few others, economic conservatives these days seem to be apologists for government interference in markets of one kind or another. They exhibit characteristics of socialists or progressives. As George Bernard Shaw might have said it is only a matter of haggling over the extent.

Take the dole. Its purpose should be to provide a bridge for people temporally out of work to find work. Whether it should be more or less might be an issue for the welfare lobby and trade unions; it should not in my view be among the main issues for conservative economists. The dole should be geared to helping those unemployed to find new employment and be time bounded to avoid the European disease of entrenched and growing long-term unemployment. But this is contingent on the absence of restrictive labour laws such as minimum wages. That is the principal issue which should occupy conservatives; not the size of the dole.

Of course if society sets employment conditions which keep people out of work, then it is obligated to provide them with ongoing adequate and generous sustenance. That is the unvirtuous socialist circle. The role of conservative economists is to argue for the removal of restrictive labour laws and any unwarranted restrictions put in place by trade unions and professional associations to ensure that people can find jobs and do not have to rely on hand outs.

The labour market should be allowed to work within sensible laws which are geared to preventing the exploitation of children and which protect the safety of workers but which do not unduly restrict the ability of employers and employees to negotiate appropriate compensation arrangements, including wage rates and hours of work. Welfare should not be administered through imposing restrictive compensation arrangements. It puts people out of work. There is usually a trade-off between employment conditions and jobs. It was interesting to read reported comments of an AMWU organiser when the Heinz factory at Girarre in Victoria recently closed. Apparently the union had won the workers good conditions. So good they all lost their jobs.

Take stimulus spending. Any of it and all of it is useless and damaging. Resources move productively in response to price signals. Government spending imposed willy-nilly on the economy will harm rather than assist economic recovery. Conservative economists understand that sustainable demand arises from well-directed production not the other way around.

An economy is driven by businesses that collectively make many thousands of different of products. In the course of doing that they create equivalent incomes to buy those very same products in the very same quantities as they are produced (overseas trade aside). When it works tolerably in sync, times are good; when it doesn’t, downturns follow and businesses old and new begin looking ahead and scrambling to rebalance production and demand.

Why in the world would any conservative economist think that dumping large dollops of government expenditure, of any size, at any time, on this adjusting economy would be helpful? What some so-called conservative economists are effectively saying, it seems to me, is that not so much arsenic should be administered or that it should be administered only in specific circumstances. Arsenic is bad for you whatever the size dose and whenever it is ingested.

True conservative economic positions are not extreme. If they seem that way it is only because we have drifted so far away from them over the years under the influence of insidiously creeping socialism. So now, those who are mildly right of centre are called conservatives.

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