Public ideas

“The economy exists within society, not vice-versa”

That’s the headline from Martyn Goddard’s Policy Post in which he interviews Saul Eslake on the GFC, debt and deficit, and why we need to pay more tax.

It’s Eslake’s account of the path of economic ideas through the 1980s triumph of neoliberalism, the crisis of 2008, up to the present time when there is still an unhealthy obsession with government debt, and when even a Labor government seems to be reluctant to question the neoliberal economic orthodoxies about government debt and taxes.

Eslake’s ideas are hardly radical. It’s OK to borrow to fend off a catastrophe, as we have done with the pandemic; it’s quite normal to borrow to invest in productive assets; we should not confuse government debt with the national debt; and redistributive taxes are a means of partially compensating for the maldistribution effects of neoliberalism.

To return to Goddard’s title, it’s essentially a quote from Karl Polanyi’s 1944 work The great transformation, in which he warned that up to that time markets had been contained within society, subject to society’s norms, but the postwar order would see the emergence of a reversal of thot order, in which markets would take over society.

We have been through the commodification of everything, and it has failed.

The seven habits of highly effective nations

What makes for enduring national competitive success? Drawing on historical studies, a group of researchers working for the RAND Corporation, who were in turn working for the US Department of Defense, set out to identify the relevant factors.

Michael Mazarr of the RAND Corporation led the study, summarizing its results in Foreign Affairs: What makes a power great: the real drivers of rise and fall.

The researchers identified seven leading characteristics of nations that for some period have occupied strong positions in the global hierarchy:

  1. A driving national ambition
  2. Shared opportunity for citizens
  3. A common and coherent national identity
  4. An active state
  5. Effective social institutions
  6. An emphasis on learning and adaptation
  7. Significant diversity and pluralism

In Australia we may baulk at the notion of there being a “global hierarchy”, but in view of the parties involved in the research we shouldn’t be surprised at finding that they have such an American perspective.

Unsurprisingly, having a bombastic emperor or president promising to make the country great again is not one of those factors. Perhaps more surprising is the fact that having great armies or navies does not feature in the list. That’s because so many of those factors, such as an active state, a common national identity and an emphasis on learning and adaptation, are necessary for countries to establish a strong defence force.

Although the study falls partly into the MAGA category (even the idea of “manifest destiny” can make it into the mind of liberal scholars), it could be relevant for a mid-size nation seeking to ensure its place in the world.

Running a checklist for Australia we seem to be falling down on several of these conditions. We lack any sense of a driving national ambition – although a zero-carbon industrial transformation and a strong place in the Southeast Asia-Pacific regioncould qualify if we sustain these policies. Because of inequities in education and inherited wealth, we are drifting away from shared opportunity. On a common and coherent national identity we may be doing better than many countries with tribal, language and regional differences, but we still lack the confidence to have our own head of state. We are suffering the economic consequences of a “small government” philosophy, which has devalued and run down our common wealth, including our social institutions. And particularly over the last eight years, our national governments have treated learning and science with contempt. But at least we seem to do well on diversity and pluralism.