Tuesday, March 31, 2009

Colless on the Governor-General

Malcolm Colless wrote an article on Australia's recently appointed Governor-General and her current controversial role promoting Australia's foreign policy agenda in Africa.  Unfortunately, his article contained an historical inaccuracy.  I corrected this and provided my own brief opinion on the issue on the article's online comments page.  

Wednesday, March 11, 2009

Populism lurks in the wings waiting to take centre stage as a villainous protagonist

It is likely that 2009 will be dominated by the global economic crisis. In the absence of some even greater disaster befalling the world, the most pressing item on the agenda of most national governments will be to soften the impacts of the crisis on their respective economies.

To this end, many governments are implementing fiscal stimulus packages. These packages usually include a tax cut/cash handout coupled with public investment in infrastructure. Such packages are aimed at immediately boosting demand and employment while improving the productivity of an economy.

Most countries have also responded to the crisis with deep cuts in interest rates, which are intended to stimulate demand and the supply of credit.

The contents of fiscal stimulus policies are contestable. The balance between cash and investment is hotly debated. As a general rule, parties on the right have generally favoured tax cuts while parties from the left lean towards infrastructure investment.

Despite frequent political disagreements on the composition of stimulus packages, there is an increasing consensus that such government expenditure is an appropriate response to the crisis.

Unfortunately, government and political responses to the financial crisis have not been limited to crafting prudent stimulus packages. If they had, we would have less to worry about. We could have braced ourselves for the rough economic ride in the hope that some relatively sensible responses to the crisis would help minimise the impacts of the bumps along the way.

Governments and political parties the world over are pursuing agendas other than simple fiscal stimulus in light of the crisis. It is these agendas that are great cause for concern because of their potentially disastrous long-term consequences.

In particular, it has recently become fashionable to push an anti-market populist agenda. There is an increasing propensity of mainstream politicians of a particular ideological inclination to use the financial crisis as an opportunity to push long their long held anti-market views.

Criticism of the market was an inevitable by-product of the financial and economic crisis.  There are many that blame the market system for wiping out trillions of dollars in wealth, ruining livelihoods and destroying hope for any economic growth in the coming year. A number of world leaders, from Russia to Venezuela, have been gloating over the apparent failure of the capitalist system.

Some of this sentiment has been infecting more mainstream political leaders as well. Kevin Rudd, the Australian Prime Minister, in an attempt to position himself as a global opinion leader, suggested that Hayekian policies and neo-liberalism had failed. He argued that the financial crisis was an epoch changing event that marked the end of “the great neo-liberal experiment”.

Mr Rudd’s position is flawed because there has in fact been no “great neo-liberal experiment”. Certainly, Reagan and Thatcher were zealous in their application of free market ideas but their worst excesses were tempered when they were replaced in government. The reality is that market fundamentalist policies have been softened by the strength  of social democratic parties, social realities and democratic political systems.  On the whole this has improved government policy.  

Admittedly, Mr Rudd does acknowledge the importance of markets and market principles. However, by painting a picture of vanquished Hayekians and the end of neo-liberalism, Rudd polarises debate when consensus should be sought. This serves to add fuel to the fire of anti-market sentiment when it is least required. Many of the more extreme European social democrats, who have long been wedded to regulations that stifle economic growth and social innovation, will no doubt be pleased by Mr Rudd’s intervention.

The trouble is that there are insufficient voices talking up the benefits of markets and market mechanisms as an approach to achieving beneficial policy outcomes. Even the leadership of economically liberal political parties are becoming reticent about vigorously advocating pro-market agendas even if they make sound policy sense.

Let us not forget the importance of market-orientated ideas in the regulation of greenhouse gas emissions and other negative externalities. The great efficiency gains that are a result of introducing market principles into standard government practice should not be overlooked. Let us also not forget the great benefits to consumers and overall wealth that have resulted from opening economies to global competition.

The potential consequence of the anti-market ideas that are currently getting easy traction is a return to inefficient and unnecessary command and control style government policies. These often serve to limit individual choice, reduce competition, increase costs/prices, disadvantage consumers and, ultimately, slow the rate of economic growth. Simply put, the drive to regulation that is now in vogue raises the spectre of suffocating over-regulation.

Without a pro-market consensus voice talking up the benefits of effective markets and the use of market tools/principles to achieve policy outcomes, some of the market orientated policy innovations of the last twenty five years may be lost in a wave of anti-market sentiment. I, for one, have been happy with 25 years of economic policy innovation in Australia and have not seen this time as a great neo-liberal experiment despite transgressions by the Howard government (most notably in labour market policy).  

The problem is that anti-market positions can be popular. It is dependent on our political leaders to avoid scoring political points in a time of crisis. They should be working to find economically sound policies to soften the crisis and shield the people from its worst effects without resorting to cheap anti-market populism. The view should be towards long-term sustainability rather than the ballot box.

Policy and regulatory responses to the crisis should pass the good policy test. New policies should be well targeted, evidence based, well designed, the least cost option and with expected benefits outweighing expected costs. In most cases populist and anti-market policies fail this test resoundingly.

Review: Roy Ayers

Java Jazz 2009, Jakarta Convention Centre, Cendrawasih Room, Saturday 7 March 2008, 23:30

Roy Ayers was the last performer of the night. Eight hours of jazz had preceded him on ten different stages. You would think that the audience may have been “jazzed out”. They were not. A slow hand clap preceded his slightly delayed appearance. When Ayers' irrepressibly smiling face appeared, the crowd cheered in approval.

The festival’s earlier performances suggested that Indonesian jazz fans were appreciative but not vocal. Polite clapping, as opposed to cheering, had greeted well-executed solos and performances. Roy Ayers, however, brought out the more base instincts from the well-heeled Jakarta crowd.

The reasons for this were clear. The jazz was hot and the show was great. The audience was engaged right from the start as the bass played the opening groove for an extremely fast paced and chaotic take on Dizzy Gillespie’s classic A night in Tunisia. Ayers’ version featured a screaming saxophone solo that at one point featured two saxophones from the one player. It concluded with a bass solo of such intensity that all the other band members were required to theatrically towel off the soloist as he completed his moment in the spotlight.

Ayers’ and his friends were excellent showmen. The towelling of the bassist set the tempo for the theatrical side of the show that featured many other crowd pleasers such as summarily choreographed dances by Ayers’ along with his back up vocalist. The awe-inspiring drum solo somewhere near the middle of the show combined musical prowess with the theatrical. At one point, the drummer’s hands energetically flailed his drums while his sticks remained perfectly balanced on his head. The crowd cheered.

Ayers' six piece ensemble, supplemented by two guests, was tight. Transitions between the inevitably frenzied solos back to the groove were smoothly executed and pleased the crowd, whose heads bobbed in time with the funk fuelled rhythms. The lack of a sufficiently large horn section was addressed with the judicious use of a synth horns to fill the gaps. Ayers’ was generous with his guests, a trumpeter and percussionist, giving them plenty of stage time to dazzle the crowd with their brilliance.

Ayers’ right hand man, who interchanged between a Rhodes piano and saxophones, was a star. His seamless shifts between rhythmic contributions on the keys to dynamic saxophone solos served provided excitement to each number.

Ayers’ own contributions on the vibes were not as frequent as one would have liked or expected. However, when they came they were smooth. His electrified vibes would sometimes produce strangely altered sounds that caused watchers to momentarily question the source (vibes or synth?) of the melody until they noticed his furious mallet work. The relative scarcity of Ayers’s soloing can be attributed to his role as the unquestioned band leader who was active in controlling the direction of each number. It was in this role that he directed such hits as Everybody loves the sunshine, Love will bring us back together, We live in Brooklyn baby and Hey uh, what you say come on over the course of the evening.

The clearest thing to be taken from the night was Ayers’ infectious love of performance. Smiles, laughs, jokes, dancing and crowd involvement were the order of the evening. More than anything else, it was this that transformed the usually placid Jakarta crowd into a more vocal animal.

Ayers’s thanked the crowd, they cried for more and the lights came up far too quickly. This was the biggest disappointment of the night.