Hank Jongen, the general manager who isn’t

John Quiggin11 Comments

When a PR man presents himself as the boss of the organization he spruiks for, you are well advised to disbelieve anything he says. Hank Jongen “general manager” of Services Australia and its predecessors (such as Centrelink) has been doing this for years, most recently here . In reality, Jongen is the agency spokesperson.

The trick is that “General Manager, Function X” is a title given to lots of middle-ranking public servants. By contrast, Jongen’s statements never qualify the term, sugggesting that he is general manager of the entire organization. In fact, it’s unclear what his actual job title is. According to this org chart, Jongen works for the General Manager, Communications, a position currently held by Susie Smith.

But Jongen and Services Australia are happy to give the impression that he is the boss of the organisation, and never attempt to correct puff pieces that describe him this way, like this one, headlined Dear Hank: Centrelink boss offers personal email as complaints over ‘fraud accusations’ soar

The trick is that Services Australia hands out the title of General Manager to lots of mid-rank executive, seemingly with the sole purpose of enhancing Hank’s apparent status. It’s as if you got a call from the CEO of a major company, personally offering you a special deal, only to discover that sales staff were accorded the title of CEO.

As was said by in the famous feud between Mary McCarthy and Lilian Hellman[1], every word Jongen says is a lie, including “a” and “the”. He is lying from the moment he announces himself.

The same is true of Services Australia. Any statement issued by this organization is tainted by the dishonesty of Jongen’s byline.

fn1. On which I don’t have enough evidence to form an opinion, or interest to pursue such evidence. Just pinching a good line. Here’s the details from when Jongen was the face of robodebt.

UBI: For individuals or households?

John Quiggin19 Comments

This post is about a point which has come up here and there in the discussion about Universal Basic Income, but which I’ve never worked through properly.  


A preliminary observation is that it’s necessary to consider tax and welfare together as an integrated system. What matters most is the effective marginal tax rates (the sum of marginal income tax and benefit reduction rates). 


Then, starting with the current Australian tax-welfare system, and considering possible paths towards UBI, the key problem is that the tax system is organised (mostly) on an individual basis while the welfare system is organised (almost entirely) on a household or family basis. 

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Transmission too

John Quiggin23 Comments

In my article arguing that electricity from solar PV (and wind) could soon be too cheap to meter, I didn’t mention transmission networks. That was for space reasons.

The case for public investment is actually stronger for transmission than for generation. Electricity transmission lines have the same cost structure as renewables (low operational cost and long lives), if anything more so, meaning that the cost of transmission depends primarily on the need to secure a return to the capital invested.

More than this, the electricity grid as a whole is a complex network in which valuing the services of any individual component is just about impossible. That in turn means that relying on markets to make optimal investment decisions is untenable.

For these reasons, the electricity transmission network should never have been privatised. I’ve been arguing for renationalisation for years.

Amazingly, in the new low interest environment, this idea seems to be gaining traction, at least as regards new investment. Labor has proposed a $20 billion public investment. The government hasn’t gone that far, but is seeking to use its own borrowing capacity to provide low cost finance for transmission investment ( a half-baked compromise, but better than nothing).

Too cheap to meter

John Quiggin20 Comments

That’s the headline for my latest piece in Inside Story, looking at the implications of zero interest rates for renewable energy sources like solar and wind. Key para

Once a solar module has been installed, a zero rate of interest means that the electricity it generates is virtually free. Spread over the lifetime of the module, the cost is around 2c/kWh (assuming $1/watt cost, 2000 operating hours per year and a twenty-five-year lifetime). That cost would be indexed to the rate of inflation, but would probably never exceed 3c/kWh.

The prospect of electricity this cheap might seem counterintuitive to anyone whose model of investment analysis is based on concepts like “present value” and payback periods. But in the world of zero real interest rates that now appears to be upon us, such concepts are no longer relevant. Governments can, and should, invest in projects whenever the total benefits exceed the costs, regardless of how those benefits are spread over time.

The arithmetic of retirement income: the case of zero interest rates

John Quiggin34 Comments

Back in 2009, I looked at the implications of the GFC for retirement income, working on the assumption that retirees could safely aim for a 2 per cent real rate of return. The bottom line was that current workers need

double contributions, to 20 per cent of income and shift the work-retirement balance, so that you work from 25 to 65 to finance an expected 20 years of retirement income.

Since then, the real rate of return on safe investments like government bonds has fallen to zero (maybe below). That means that you can treat your net worth at retirement as being equal to the amount you have to live on for the rest of your life. In particular, if you work from 25 to 65 and want finance 20 years of retirement income holding your consumption constant, you need to save one-third of your income.

When I wrote in 2009, the general view was that we were saving too little, so the increase in required savings seemed like a good thing for the economy in general. Now, the reverse is probably true.

Sandpit

John Quiggin16 Comments

A new sandpit for long side discussions, conspiracy theories, idees fixes and so on.

To be clear, the sandpit is for regular commenters to pursue points that distract from regular discussion, including conspiracy-theoretic takes on the issues at hand. It’s not meant as a forum for visiting conspiracy theorists, or trolls posing as such.

Some facts, and claims, about the 21st Century Economy

John Quiggin35 Comments

In the process of working on my book-in-progress, The Economic Consequences of the Pandemic, I’ve been trying to integrate a number of facts about the economy of which I’ve been more or less aware for a while, along with claims I want to make, and put them together into a coherent account of the economic system prevailing (in advanced/developed economies( in the 21st century and how it differs from the industrial goods economy of the 20th century.

As a step towards this, I’ve put together a list of factual claims which I think can be established reasonably firmly, along with claims I want to make that will be more contentious. My plan is to put this together into a coherent analysis, including supporting evidence. So, I’m keen to get good supporting links for any of these points (I have quite a bit, but more would be helfpul). I also want to be sure I’m not missing contrary evidence, and to adjust the claims if necessary, so please point this out also.

Facts (I think)

  • Most economic activity in the 20th century, including services such as wholesale and retail trade, was fairly directly related to the production and distribution of goods
  • This is no longer true: most economic activity is now related to human services, information services and finance, and these are at most indirectly related to goods production
  • Real interest rates for government debt and high-grade corporate debt have been below zero since the GFC and seem likely to remain there permanently under current conditions
  • Massive issues of government debt during the pandemic crisis haven’t changed this
  • Net private business investment (non-residential) has been declining relative to GDP/national income since at least 2000
  • Service industries less capital intensive than goods industries
  • Information economy firms (Facebook, Google etc) invest very little even counting R&R
  • Government investment in traditional infrastructure has been falling since 1970s, at most partially offset by private infrastructure
  • Corporate profits high, mostly derived either from financial sector or from “intangible” assets in IT.

My claims

  • Finance sector profits even higher if payments to managerial level in finance sector are treated as part of profit
  • Intangibles = monopoly
  • Revenue and profits in finance and Internet do not arise from sales to final consumers, and bear no obvious relationship to consumer welfare
  • Implies similar regarding wages for market work
  • Incentives don’t work in in this kind of economy (if they ever did)
  • Unmet needs for public investment in human services: health, education, aged care, early childhood, social work
  • Capacity to meet these through short term increase in public debt, long term increase in taxation

Budget reax

John Quiggin6 Comments

I have a couple of articles responding to the most momentous budget in Australian history. For those who’ve forgotten, it was introduced on Tuesday.

Here’s one in The Conversation on environment and energy policy (heavily edited and done in a hurry, so there are a few points I would have written differently).

And here’s one in Independent Australia, headlined Budget like its 2019, on the government’s failure to learn from the catastrophes of the last year.