Sunday, February 01, 2009

Rudd banalities & handout disease

Rudd’s critique of neo-liberalism of course goes too far. His plan is probably to convert the global crisis into a historic failure of Liberal Party philosophy and its allegedly pro-market ideas. That’s a useful output for Rudd from a few hastily drawn-together conclusions that are vague enough to be reversed tomorrow and, even if this seems a bit dishonest, Rudd is a banal politician at heart, who confuses verbiage for honesty. But more importantly his half-baked theories on the failures of capitalism do not in themselves imply what should be done in terms of current policy in relation to the financial crisis. My fear is that that the theory he believes underlies his views will be used as a jargon-driven excuse for a big, mindless ‘Labor Party spend’.

LOL: The Labor Party will fix the economy! Car dealers, the car industry, child care, commercial property, banks have all received bailouts and now the dairy industry wants one. The Labor Party is heavily infected with the bailout disease as well as its inevitably confused social romanticism.

Rudd’s view of ‘government to the rescue’ is already producing dreadful outcomes. Rudd’s $30 billion package - $2 billion from government, $26 billion in government loans and $2 billion from the banks - supporting the property sector seems to have been rushed through following tearful representations from National Australia Bank*. Two days before Rudd made his January 24 statement Lindsay Tanner told the 7-30 Report that the government was only considering options. Two days later Rudd had decided on his course of action without apparently involving the RBA. Recall that Rudd disregarded the RBA in providing the unlimited guarantee for bank deposits - a case study in unintended consequences.

Rudd reminds me of one of my former bosses who arrived in his new job reading a book on how to make decisions in two minutes. I thought he was joking at the time in endorsing this treatise but this excuse for an educated human being made everyone's life a nightmare because he believed his own two minute judgements and invariably got it wrong.

Rudd claims the property move will save the jobs of 50,000 tradespeople. But with this ‘plucked-out-of-the-air’ figure that’s a hefty $600,000 per job as Brian Toohey points out in the Weekend AFR (firewall protected). Moreover, it is not clear that it will save any jobs – as Malcolm Turnbull has pointed out these jobs hardly depend on who has borrowed to buy the real estate that the loans finance. It is the use of that real estate not who owns it that will determine the complementary employment. The move by Rudd is about protecting the assets of banks and transferring valuation risk onto Joe Citizen. Government – particularly Labor - constantly needs to be reminded that it produces no wealth and only transfers privately created wealth to its coffers through taxes and charges.

Falling property prices are to be expected in the current situation and the last thing anyone should want is a government-induced expansion of this sector. The property sector should contract and the shareholders of the big banks deserve a kick in the guts not non-shareholders for backing boards who got it wrong.

Recall too that Rudd crumpled completely in the face of whining from Woodside concerning the exclusion of natural gas from compensation under the emissions trading scheme. Woodside won 100% and nothing was left to fund low emission technologies.

Toohey crisply sums up the Rudd problem:

“There’s a legitimate role for argy-bargy in public policy formation. But when a prime minister is a complete pushover, cabinet should supply constant adult supervision’.
I’d go further than this but I have decided to conceal my bitterness that we have elected poultry for a PM. His existence is like the capital bailout – we all pay the costs.

*It of course helps that property developers are major Labor Party funders.


Anonymous said...

It didn’t take long for this man of the people and their times to emerge from among them. In their baby boomer prime they were all Thatcherites and Reaganites in favour of markets and the new tools of financial intermediation to take over old capital and run with it faster, harder and smarter, as well as assume the reins of power. In their prime when the sun never set on rising asset prices and tax receipts they were all market men full of testosterone. Approaching dotage there's nothing like a crash in their super funds to call forth their men of action and new champions. We are all Keynesians now! Sheesh!!

Anonymous said...

Harry, Rudd's cririque of cowboy capitalism is the same one you've made in post and post. Because he's said it, all of a sudden you retract, purely for tribal reasons.

"I have decided to conceal my bitterness"

LOL. Harry, you have flaunted your bitterness since the day after the election!

Anonymous said...

No Spiros he basically said 'Rudd’s critique of neo-liberalism of course goes too far.'
and he's right in the sense it's partisan and neglects the equal culpability of central bankers and regulators, not to mention those who enjoyed bloated tax receipts for so long. If Rudd wants to go down that path, he'll expect a similar slapdown when his slipshod bailouts and handouts fail to produce the goods and/or sends the next generation into onerous debt. Socialists fall on their sword when they run out of other people's money.

Anonymous said...

Actually Tim Blair exposed the forked tongue and bob each way of the Govt. There was Gillard bragging at DOHA that our banks and financial regs were an exemplar for the ROW to follow. Oh yeah Julia? Then presumably our regulators were asleep at the wheel with those exemplary regs at their disposal while Kev's Gordon Geckos were all running amok then? Which is it Julia or Kev? A bloody good question for the MSM hacks to follow up wouldn't you reckon Spiros?

Anonymous said...

Obs, you appear to have caught a touch of the JCs, obsessively responding to your own inane posts when no one else can be bothered. Unfortunately this condition appears to have no cure.

Anonymous said...


take a hike you shallow idiot.

John said...

Good post Harry. I have a number of friends who supported the change of govt and 12 months later all of them are very disappointed with Rudd.

My personal view is that Rudd is trying to set himself up as a Seer, a prophet laying out the future for us. He can never be a visionary leader, his conceptual style, personal history, and character make that impossible. That is, the man is being hubristic. He is just a mundane opportunistic thinker who reads too much and lacks depth of analysis.