Australia is a great sporting nation, but also being a nation that’s world-class in weight-gain, it’s a great sports-watching nation as well.
From the races at Flemington to the medals at the Olympics to the mythological two flies crawling their way up the dunny wall, we love to score points as much as we love to bet on them. We’re a proud nation of totalisers and score-boarders and it’s unsurprising then that this extends to economics and finance as well.
Where else would you have people cheering the ascent of the local currency? Where else would it be point of national pride that we live in expensive homes? Where else would you have polling numbers won and lost on what a discredited ratings agency in New York says about a state government surplus?
The strangeness of this was made stark this past week when France, stripped of its AAA-rating by Moody’s could barely muster a Gallic shrug, but Queensland, having had its rating put on negative watch by the same agency, scrambled to promise more swingeing budget cuts.
France, the proud heir to a once mighty empire may naturally view these Wall Street parvenus with more disdain than the government of Queensland, but it nevertheless says something about us as a nation. Whether stemming from questions about our place in the world, or a product of our superlative-inducing natural landscape, there appears something unusual about our collective obsession with getting the best financial score and climbing up the economic league table. And while many of us may be reluctant to admit it, perhaps there is something even the toughest maroon-clad Queenslander can learn (our Treasurer included) from those so-called cheese-eating French.
Economics serves people, not the other way around, and in France this is a view so accepted they even have a phrase for it: laissez-faire. The meaning of the term has become so associated in the English-speaking world with neo-liberalism, but its fundamental intent has been obscured.
Coined by the physiocrats, a group of economists in pre-revolutionary France particularly concerned with the peasantry’s relationship with the land, laissez-faire was originally used in the context of letting farmers and merchants plough and trade in accordance with society’s imagined natural order. While the term certainly did reference free trade – it was supposedly first uttered when Jean-Baptiste Colbert asked a group of businessmen what the state could do for them – it more importantly referred to economics free ofunnatural interferences.
Certainly, the free trade message of the term has been carried forth into modern capitalism, but the other elements of laissez-faire are so far removed from the ideology of its apparent latter-day adherents that the original French physiocrats must be rolling in their graves. These days a warped financial economics governs the system, where in the name of laissez-fairethe whims of the market, not to mention ratings agency analysts, dictate government policy. And like a CEO who destroys the company to please the shareholders, politicians from Michigan to Madrid, Athens to Alabama, have bowed to the dictates of bond investors, implementing often self-defeating austerity measures, which in many cases have only delivered balance budgets at the expense of making the economy smaller.
Deficits must of course be paid, and fiscal sustainability is an essential plank of responsible government, but a pro-cyclical fixation with cutting spending when times are tough is counterproductive to say the least. And now that this ideology – all in the name of the same laissez-faire of course – is hitting not just Queensland but the entire country, we’re likely to discover just what the rest of the world is complaining about too.
With both major parties committed to a federal fiscal surplus at a time when the mining boom is slowing without the stabilising effects of a lower dollar, it’s incumbent upon monetary policy makers to ease the pain, but there’s only so much that lower interest rates can do. Further, while the rest of the world is stuck – partly of its own austerity-gript making – in a pattern of little growth, it’s unlikely that alternative exports or foreign investment will come to pick up the slack.
Whether viewed at a state or national level, austerity measures at a time of reduced global economic activity is grossly problematic, let alone for the reason of placating the ratings agencies. Sound budgets are essential in the long-term, but like an athlete who starts training for the finals the day before – an analogy any sports-mad Aussie will understand – a turnaround cannot be expected overnight. Indeed, such a program would likely only result in an injury.
With such glowing statistics as the fastest-growing rich-world economy and two of the world’s greatest treasurers already to our credit, it’s time to step out of the tally room and think about how to really address our economic needs, rather than merely follow a checklist to further financial point accumulation.
In testimony to the French – who, perhaps admirably, are also aloof to other flimsy measures like GDP – we should adopt an attitude of studied indifference, of unruffledsang-froid, when confronted by the next change of credit rating. While it’d be foolish to ignore all such messages entirely, most market signals, after all, are just noise.