Whining about Stiglitz, Sloan undermines herself beautifully

For all of Judith Sloan’s righteous ranting against Nobel Prize-winning economist Joseph Stiglitz, her piece essentially boils down to this: Joseph Stiglitz is American, Australia is doing better economically than America, and so therefore Stiglitz should shut up and go home.

A pretty babyish position to have.

Still though, taking Sloan at her best, what she’s suggesting has a pretty fundamental problem. It’s been true for the past two decades that Australia is doing better economically than America. But it’s also true that Australia is an economy with more government intervention than America’s.

It’s a pretty fundamental truth that Sloan is pretty eager to ignore. These kinds of comparisons are superficial and don’t tell us much, but since Sloan thinks it’s good argument to use them, I could just as easily suggest that that reason we’re doing better is because we have a much better mix of government intervention, and that going backwards on that is likely to worsen our problems.

People who regard themselves as commentators should be above this kind of crap. Unfortunately, I don’t have much confidence that Sloan will improve on this front anytime soon.

On Parkinson’s “vague notions of fairness”

It was good to see Opposition Leader Bill Shorten not allow Treasury secretary Martin Parkinson’s “swipe” to go unanswered. Disappointingly, though, he responded in the empty way that he has been employing far too often lately.

Mr Parkinson had complained that Labor’s use of “vague notions of fairness” as a reason to block key measures of the Budget risked consigning Australia to poorer living standards as structural economic reforms would not be put in place. Mr Shorten’s response: “It is not vague if you are under 30 and have no income for six months, that’s real. It is not vague if you are working class parents weighing up whether to send your kid to university and all of a sudden the cost of a science degree triples.”

Untrue? Well, no. Those most disadvantaged in society have much to lose from this Budget. But Mr Shorten’s response does nothing to actually undermine Mr Parkinson’s complaint. It responds to an accusation of using “vague notions of fairness” by using more examples of notions of fairness.

The actual problem with what Mr Parkinson said is that he assumes, as do many in the economic establishment, that better economic living standards always means a better overall quality of life. According to them, the measure of whether a government is successful or not boils down to whether they increase the nation’s overall wealth.

But the role of government is much broader than that. There’s not much point in a nation being wealthy if most people can’t ever hope in their lives to share in it, or if the environmental conditions around them are so awful that they can’t appreciate the world around them. What we really should expect from the government is to provide satisfactory lives to the greatest number of people that it possibly can.

So for any such reform that might improve the efficiency of our economy, it isn’t worth it if the increased efficiency is outweighed by an accompanying decrease in equity. To use an extreme example: Abolishing income tax and replacing it with consumption taxes is probably more efficient at getting revenue for the government. But the loss of our biggest method of progressive taxation would increase inequity so much that we should be happy to wear the consequences of revenue collection being slightly less efficient.

Of course, Mr Shorten could never give such a complicated response. But it shouldn’t have been too hard to go down the right track by reinforcing that we do actually care whether our governments are collecting and spending our money with “notions of fairness” in mind.

The good thing is that Mr Shorten still has time to learn to speak with real conviction rather than clever lines.