Assesses Australian political economy near the end of the resource boom (circa 2013), asserting the need for more non-primary exports, decreased real-exchange rate (the Aussie adjusted for comparative interest rates, inflation, and productivity gains), and reduced living standards (less imports). Dismissive of political leadership, Garnaut, the Hawke-era government economist, barracks for technocracy. Why wouldn’t rivals respond in kind? How do his prescriptions escape the trap of public choice economics and unaccountable progressives?
Japan’s postwar boom had brought the center of the world economy closer to Australia; the impact of China’s post-1978 gains are well documented. White Australia had been inefficient because the country needed people as well as hobbled by encompassing protection, personified by McEwen. The Hawke-Keating era had never known a majority for reform: it was championed by independent experts. The recession of 1990-91 started backlash against reform.
Though Hawke ran a tight budget, the country did not save enough of the fiscal surplus (as a percentage of GDP), instead drawing the lesson that budgetary policy was ineffective.
The Howard administration is upbraided for acting to soften the introduction of GST and higher gas prices. Australia has yet to adopt ready-made foreign productivity practices: in the 1990s, growth trailed the OECD, 1.1 vs 2.5 per annum.
One-third of the economy is exposed to international trade, and the leading constraint on Aussie economy remains balance of payments. Health and education comprise 13 percent of GDP and 20 percent of employment. Accordingly, productivity must be packaged not pursued piecemeal. (Unexplained) monopoly pricing stops the declining cost of imports from reaching consumers, checking the desired depreciation of the Aussie. Immigration has raised skill levels and thus helps attract international capital (although such capital would seem suspect); the assertion that immigration reduces Aussie inequality in comparison with the US is unsupported, and there is no general discussion of social cohesion.
More in the policy realm, states lack effective powers to tax and therefore fiscal freedom while the Commonwealth cannot exercise powers of scale. Garnaut recommends constitutional review by experts. But states with larger equalization receipts have larger public sectors: public choice dynamics look to be at work: why would they not capture the review process?
A chapter on the green economy, now seeming a prelim to more recent work, fails the ex ante test: among many other examples, studies touting the effects the Olympic and the World Cup have been wildly optimistic and rarely address inevitable unintended consequences. Why should ‘climate change’ different? Aren’t advocates another special interest? There’s also a discussion of contemporary alternatives for taxing primary resources, summarized as ‘fair distribution’ of the burden of adjustment.
Most aggressively, Garnaut says no ‘thinker or leader’ has lead decisive historical progress (‘inflections’), crowing a number of questionable assertions about the capacity of political leadership, in support of arguments for technocratic government.
Politics in a democracy is inevitably a contest between groups seeking efficient policy for economic development and equity, and other groups seeking interventions to confer special benefits upon themselves or to kill or constrain interventions that would impose unwanted costs.
Abbot is chided for his determination to keep political promises in changed economic circumstances – why will public experts prove more adaptive? Confusingly, Garnaut suggests the relevant of international benchmarks (p.51) but also the failure of Aussie social sciences to stand independent (74). Private interests skew research.
How is technocracy insulated from moralizing practice (e.g., woke America) – Garnaut’s pandering through the back door?