Malcolm Turnbull as next Labor Prime Minister

With the current state of Australian politics where we have two party leaders at historically low popularity ratings, it is time to think of a new approach to our future political leadership. Tony Abbott’s LNP is well ahead in the polls, but Abbott himself is even less popular than the Prime Minister. Why is that?

Basically, Abbott is outside the mainstream of Australian political thought. Historically, Australian PM’s are generally builders of consensus, not deliberately divisive characters like Abbott. Abbott also has huge weaknesses as a leader: he is an ultra=conservative Catholic with social views well to the right of even mainstream Catholics, especially when it comes to the treatment of “women’s issues”, socially progressive policies, and contentious public policy issues like immigration, the treatment of refugees, and indigenous rights. He has seemingly no ability (or wish) to build a set of policies on which he can be judged by the electorate. He is relentlessly negative, putting into practice his maxim “that he will do ANYTHING to become PM” (espoused to the independents when they were negotiating their position after the hung parliament was elected at the last election). He is breathtakingly unscrupulous as shown by his rigging of the policy costings at the last election, and then seeking to blame treasury when they were shown, by the independent umpire, to be rigged . As the highly respected political editor of the Australian Financial Review, Laura Tingle, said at the time about Abbott’s behaviour and that of his party:

“There are two possible explanations for how an opposition presenting itself as an alternative government could end up with an $11 billion hole in the cost of its election commitments. One is that they are liars, the other is that they are clunkheads. Actually, there is a third explanation: they are liars and clunkheads. But whatever the combination, they are not fit to govern.”  (AFR, 3 September, 2010)

Abbott has done nothing since to suggest he has changed his stripes. In fact, his behaviour has got even more bazaar.

In policy terms (as far as we can make them out) Abbott is probably closest to the previous Liberal PM John Howard, but Howard rarely made the mistake of being deliberately divisive, and when he did (such as his utterances about Asian immigration in the 1980?s), he did have the political insight to realise if he ever were to become PM he had to be seen to be a consensus builder rather than a divider  Although it didn’t stop Howard from occasionally “dog whistling” on race (Tampa, indigenous apology, the history wars) when he was in power, he re-invented himself (Richard Nixon like) before he was re-elected opposition leader in 1995 prior to winning the election in 1996, subsequently describing himself as “Lazarus with a triple by-pass”. Abbott shows no such self-reflection.

Abbott also has serious gaps in his policy knowledge. He says himself he is not an economist (obvious to anyone with a rudimentary knowledge of the “dismal science”) which is a major gap for a would-be PM. He also says he has no understanding of technology, which he then demonstrates when he talks so dogmatically about such policy areas the NBN network, technology induced productivity improvements, climate change science, and even in Health, an area he should know since he was Health Minister for over a year.

He would be a disaster as Prime Minister.

So why is his party so far ahead in the polls? In short: Julia Gillard. Unfortunately, she has been a huge disappointment as PM and has proven herself to not be up to the job. She is accident prone, flip-flops on policy, is unable to argue a case, is dominated by, and beholden to, Union apparatchiks who put her in the job in the first place.  She appears unable to mount the political strategy which could neutralise Abbott. Although more principled than Abbott, Gillard does not have the gravitas needed from a national leader. The electorate has clearly made up their mind about her, and if she were to stay in the job up until the next election, Labor would be left with a football team of MPs.

Those inside the Labor Party seem to think their solution is to bring back Kevin Rudd. The problem with this is that the flaws in Rudd’s personality identified leading up to his demise in mid 2010 are still there. His character flaws, his inability to get on with people, his leadership shortcomings, his excessive secrecy, his treatment of staff, his ridiculously long hours, his arrogance, are still there. His inability to deal with Abbott (nerdy Kevin to Abbott’s school yard bully) was painful to watch last time, and will be again. Like Abbott, he shows no signs of a Howard-like self-reflection that may suggest he might behave differently if given another chance. He might, just might, beat Abbott at the next election, but the limitations of his first term will still be there.

So what is the solution to this “plague on both their houses”. In two words: Malcolm Turnbull. Turnbull will never be re-elected Liberal Party leader. He is too honest, too aware of good policy development, and too principled. In short, too liberal. The Liberal Party has had a taste of bully-boy Abbott and they seem to like what they see. The intellectual wing has been sidelined, the liberals have mostly not been pre-selected, and the relentless negative campaigning, road tested by the US Republicans, is here to stay.

In these circumstances, what is in it for Turnbull to stay around? To serve under Abbott and be expected to argue populist policies in which he clearly does not believe?  I don’t think so. He is too smart, too much of a policy wonk and much too liberal to have much in common with Abbott, Hockey, the Bishops (Bronwyn and Julie), Mirabella, and Morrison, just to name a few. He is also too knowledgeable about economics and business to have to argue for Abbott’s populist economic policies.

The best solution for Australia is to install Malcolm Turnbull leader of the Labor Party. It will have a number of effects: ensure Federal Labor easily wins the next election; keeps Tony Abbott from ever becoming Prime Minister; pushes the Liberal Party more to the political centre; partially disenfranchises the backroom factional heavyweights controlled by the powerful unions in Federal Labor; and provides a much better, more sophisticated, and progressive government than we have had any time since the Hawke/Keating years.

Many in the Liberal Party will hate the idea because of course they know under these circumstances they would have no hope of obtaining government for at least another two terms (and of course they would lose Turnbull’s marginal inner city Sydney seat); many in Labor would hate it too because it will upset the planned progression of many of the machine men such as Shorten and Combet, but at the end of the day, power does tend to change people’s perspective, and this move would just about guarantee power federally for Labor for several more terms. It will also bring to the end Tony Abbott’s destructive form of confrontational politics, hopefully forever in Australia.

And that, everyone should cheer about.

Marginal Revolutionaries

Comment on the Economist article (31 December, 2011) “Marginal Revolutionaries”

I think it is very significant that “the Economist” has bothered to give these new emerging theories on economics serious consideration, particularly Scott Sumner’s work around NGDP. In fact, I think Sumner’s work is so significant that he will be viewed in future as a visionary, for which he could even win the Nobel Prize. Now that would really be revolutionary – a Nobel Prize winner coming not from pure academia, but from the “Blogsphere”.

It is also heartening to see original thinking emerging to tackle the extraordinary economic circumstances the world finds itself in at the moment. The Keynesians, Monetarists, or even the Austrian school do not seem to have the answers to the world’s current predicaments. Maybe Sumner has?

Bad Trade Deficits Typically Indicate Insufficient Saving

Comment on Economist article by Scott Sumner (January 2, 2012) “Bad Trade Deficits Typically Indicate Insufficient Saving”

It is important to realize the impact of policies relating to savings in Australia. Since the late 1980s Australia has had a national superannuation scheme in which every employee is required to put 9% (soon to go to 12%) into a tax protected savings pool. These are then invested (under specific guidelines) into a variety of income generating investments, about one-third of which are offshore. The size of this fund far exceeds the Singaporean model, and its investments are market driven, rather than government directed as in Singapore. In Australia also because there is so little government debt, financing of external deficits are largely done through private banks and are generally “income related” as opposed to financing recurrent expenditures.

The effect of this is that through enforced lifetime savings Australian retirement incomes are substantially funded, and the Australian economy has access to a multi trillion investment pool which it would not otherwise have. It is interesting to note that Australia is one of the few places in the world where retirement benefits for federal public servants past and present are fully funded via a future fund.

The superannuation pool also turns “the man in the street” into shareholders as much of this savings pool is invested in the stock market. It is not an accident that all mainstream media in Australia is obsessed with the performance of shares, in my view more than anywhere in the world.

There are many reasons for the Australian economic success story, but amongst the raft of economic reforms carried out in the last 30 years, the Australian superannuation model is one of the most important.

How Will Japan Pay For Reconstruction

Comment on blogs about the Economist article (March 16, 2011) “How Will Japan Pay for Reconstruction?”

To szegneg…. The Marshall Plan in Europe post WW2 was one of the most visionary policies of the twentieth century. Not only did it buy permanent peace in Europe but provided the platform for unprecedented prosperity which along with the US economy has been driving growth now for 60 years.

Who has been the beneficiary of this? Undoubtably the US. The US has been paid back many many times by the Marshall Plan through this prosperity – there is no justification at all for them to demand payment from Europe (or Japan for that matter).

It is true Japan is probably in the best position to finance its own reconstruction due to its very high level of foreign reserves and individual household savings rates. If they are able to unlock household savings, it will produce over the next ten years, a third engine room for world growth along with China and India. Whilst this will put further pressure on scarce resources, and no doubt drive up world commodity prices further, overall it will push the world into another decade of substantial growth and prosperity.

How Will Japan Pay For Reconstruction

Comment on Economist article (March 16, 2011) “How Will Japan Pay for Reconstruction?”
This is the sort of quirk of economics that makes it be known as “the dismal science”. Nevertheless, it is certainly true that Japan is in the much better position than the US or Europe to finance a rebuild. If they can unlock domestic savings, and provide market based mechanisms for the allocation of resources above the obvious need to renew destroyed infrastructure, they will benefit the economy enormously.
In the meantime,quantitative easing (ie printing money) via the Bank of Japan to kick-start spending on reconstruction seems like a sensible thing to do without the inflationary pressure apparent in other first world countries. Since Japan appears to be in a deflationary environment, a boost to NGDP growth could only be a beneficial thing. These policy changes may indeed kick-start the Japanese economy back to life to the considerable benefit of the rest of the world.
If they do this, I predict they will return to more “normal” growth of 3-4% quite quickly and reduce their deficits very rapidly. No other countries have these opportunities in this way. Notwithstanding the tragic loss of life, in the long run for Japan it may open up a new chapter in their proud history, not all of it bad.

A Deadly Raid

Comment on the Economist article (31 May 2010) “A Deadly Raid”

Until both sides realise that incidents like this will continue until there is a peace deal, this situation is unavoidable. Israel continues to believe that a country with a population of 5 million can use military force to suppress 100m plus around its borders.

The only solution is to stop the settlements, withdraw to the pre 1967 borders, and make peace with the whole of the Arab world. Then have this supported by a million plus troops from UN peace keepers paid for largely by petro dollars, and allow Palestine (Gaza and the West Bank) to develop peacefully into a low cost economic haven right in the middle of the middle eastern powers.

Heaven forbid, Israel may well get on with their neighbours very well, share a common prosperity, even eventually participate in a middel eastern common market. The region could then become a force for good in the world rather than be the reason for most of the world’s conflicts between islam and the West.

No Waving, Just Drowning

Comment on Economist article (31 May 2010) “No Waving, Just Drowning”

@AJ Johnstone

Yes a trade-off with between Taiwanese unification and Korean unification with the South in control maybe is something which could be put on the table. However, this would not get rid of China’s fear of having American troops at their borders. Maybe they could agree to leave the GIs in the South or even have then withdraw completely and replace by a UN international force. In any case, if South Korea controls the entire peninsula the need for US troops is not as great and South Korea itself has considerable military capability in its own right. With American military aid, surely this could be worked out.

There remains though the financial challenges of unification. There were many major mistakes in the German unification where it cost West Germany far more than it need have, principally moving to full unification immediately. Some sort of interim phase should be looked at where the market can adjust and investment can flow to the lower cost North Korea and with South Korean economic stability, management and institutions, as well as democratic base, there is no reason why North Korea could not morph into a low-cost economic tiger right on the doorstep of South Korea, Japan and China. Rather than costing the South, this could enhance the prosperity of the whole north asian region, including North China. In this though, unlike the two Germanies, it would be essential that for a time the North and South have two currencies, and their relative value can converge  as the north approaches the South’s prosperity. This could take 50 years, but it would give the South (and China) a low-cost manufacturing tiger at their doorstep and provide a huge incentive for both the South and China to invest in a successful economic future for the North.

These same principles incidentally would come into play in a political solution to a Palestinian/Israeli settlement: Palestine (Gaza and the West Bank) becomes the low-cost economic tiger next door to high-cost, high-tech Israel and the emerging economy of newly democratic Egypt with its huge consumer base..

Zapatero’s Cuts

Comment on the Economist article (31 May 2010) “Zapatero’s Cuts”

There is a slow reality beginning to creep into the EuroZone. After years of bagging English speaking markets for their free market practices (which caused the GFC!!), and patronising them for their uncaring welfare free states, they have been forced down that track to survive as individual states, and as a Union.

Hopefully the crisis upon Europe will force long sought after reforms of labour markets, fiscal policies, and trade which will allow the world as a whole to operate much more efficiently and prosperously. Gone will be the days when a relatively few French and Belgium farmers can hold the whole world to ransom via the common agriculture policy ensuring (heaven forbid) that the world may at last get realism into the World Trade Talks.

Or am I living in a dream-world? Is this just another false start in Europe, and when a modicum of prosperity returns so will the same shonky practices? I very much hope not.

No Waving, Just Drowning

Comment on Economist article (31 May 2010) “No Waving, Just Drowning”

Isn’t it about time the North Pacific powers acted to dismantle the North Korean regime. I know they say they fear instability, but that is what they have now, and without coordinated action, this desperate regime just might turn their bluster into action soon. Nukes on Seoul or Tokyo would be far worse than a refugee problem at either end of the country.

Surely it is possible via the secret talks the Economist is suggesting, that the US, China, South Korea, Japan and perhaps Russia plan out coordinated action to move on a dismantling of the regime. China just needs to cut off power and water and the regime will collapse, but that would need to be followed by coordinated action in a way the Bush Regime didn’t act after the fall of Bagdad.

Even China may agree that a unified Korea would be preferrable to a trigger happy divided one. Oh and by the way, there are ways to avoid the cost of the German unification model. The single biggest mistake the Germans made was to initially unify their currency. A unified country, but with borders between North and South, but with a program of moving towards common institutions including political institutions, would not only create a lot bigger market, but would see a shift of investment from the high cost South to the low-cost North , and open up a flowering of economic activity that over the years would see the countries totally coming together. It may take 50 years, but increasing economic prosperity and political stability would be in everyone’s interests, not least China.

This is one instance where coordinated action is justified, just like Pol Pot, Bosnia, East Timor, and Nazi Germany.

No Going Back

Comment on Economist article (19 May, 2010) “No Going Back” 

I just hope this is not an exercise in throwing good money after bad. European Governments, and by extension the EU, have an appalling record in unravelling profligacy in their economic structures: the common agricultural policy; pension allowances way above the rest of the western world; ridiculous early retirement allowances; running up sovereign debt.

This has come to a head with the backlash in Germany when the German populace realised their government was about to prop up a state which allowed, no encouraged, its citizenry to retire at an age well before they themselves were allowed. This is just the tip of the iceberg in terms of profligate spending by western European governments, including Germany.

The reforms recently announced for Greece, and the additional monies, will go to waste unless all Western European Governments seriously tackle their fiscal deficits, as well as doing something about the fundamental structures of their economies.

The waste of the past is catching up to Western Europe, and unless these spending binges are seriously reined in (including the CAP), recovery will not only be a long way off, but will probably mean a permanent recession in Western Europe for the next ten years. If you don’t believe me, examine Japan in the 1990’s. The circumstances in Europe are almost identical.

I seriously doubt the political will is there, either at the national level (including UK), or at the European Union level.