Month: February 2013

The IPA: Less scruples than Billy Hughes

John Quiggin95 Comments

A prominent figure in Australian politics in the first half of last century, Billy Hughes, ‘the Little Digger’, was famous for his flexibility, having successively led the Labor Party, National Labor, the Nationalists and then the United Australia Party, before serving in Labor’s Advisory War Council and then joining the Liberal Party. According to legend, he was once asked why he had never joined the Country Party (now the National Party) and replied ‘You have to draw the line somewhere’.

Starting about the time Hughes retired, the Institute of Public Affairs has been similarly flexible, serving first as a Liberal Party slush fund, and then combining a high-minded line in free-market ideology with hackish advocacy on the part of all kinds of vested interests. But, unlike Hughes, the IPA has decided not to draw a line anywhere.

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PPPs take a long time to die

John Quiggin27 Comments

In the immediate aftermath of the GFC, I argued that the Public Private Partnerships model then in vogue was broken beyond repair, and that, even after the crisis we would be unlikely to see many more, though we might see deals wrapped up to look like PPPs, but with the public bearing most of the risk.

The recent failure of BrisConnections, the owners of the Airport Link Tunnel in Brisbane was no surprise. The AirportLink deal was one of the last pre-crisis PPPs, when investors were still optimistic enough to buy shares based on absurdly overstated traffic flows. In fact, they bought “partly paid” shares, a startling piece of financial engineering under which shares, trading at virtually zero, carried with them the obligation to come up with a payment of $2/share later on.

Because of the eagerness of private investors, the Queensland government bore little risk in the project. Former Treasurer Andrew Fraser’s description of the project as “a zinger of a deal for the public” displayed his customary tact, but was accurate enough considering the deal in isolation. The problem is that, after this and similar failures, it is highly unlikely that the pre-2008 PPP model can be revived in Australia.

For roads at least, there’s a simple alternative – road pricing based on congestion. I and other economists have been banging this drum for years, but politicians are terrified of even mentioning the idea. At one level, I can understand this – it’s tricky and likely to be controversial – but Queensland governments of both parties have adopted politically suicidal policies, largely motivated by the perception that they will free funds for capital investment.

First, Anna Bligh, along with Andrew Fraser reduced Labor to a seven-member rump with her pursuit of economically disastrous asset sales, exactly the opposite of what she had promised. Now, Campbell Newman has dissipated a huge volume of goodwill with savage cuts to public services, again a wholesale breach of promise, and is now pursuing privatisation. Compared to these electorally suicidal policies, road pricing ought to be a doddle.

Explaining democracy (crosspost)

John Quiggin77 Comments

Crooked Timber recently ran a book event on The Priority of Dem>ocracy by Knight and Johnson, which produced a lot of interesting discussion about various kinds of arguments in favor of democracy. I’d like to look at a couple of related questions: why does (representative) democracy exist, and why has it become the dominant form of government in the modern world? Here’s a two-part explanation, which doesn’t invoke any ideal theory or even much of a pragmatic case that democracy will produce good policies.

(A) Representative government, with elections and a party system is attractive to those competing for political power because it provides a peaceful way of displacing one set of rulers with another, and gives the losers the knowledge they will always have another chance. It’s stable because it provides a set of rules for succession that (nearly) always work

(ii) Representative systems tend naturally to universal suffrage, since both those who gain the suffrage and one faction of the existing electorate will always benefit from extension

An obvious question on (i) is why representative government took so long to emerge. I have some ideas but I’ll leave it to commenters to discuss if you want.

If the explanation I’ve given works to explain the existence and survival of representative democracy, it doesn’t say much about the character of that democracy. It’s obviously consistent with a duopoly made up of two more-or-less similar factions in an oligarchic ruling class, but it doesn’t preclude versions closer to the ideal where representatives actually represent their constituents.

I’m an econ-blogger, not a political theorist, so I won’t be surprised to learn that these thoughts are wholly unoriginal. But they seem to have some bearing on our recent discussion, and not to have been raised there, so I’m opening up to others.

Uranium exports: bonanza or bust?

John Quiggin173 Comments

Note: The usual sitewide ban on discussions of nuclear power is lifted, for this post only

Queensland’s ban on uranium mining was lifted last year, and a committee is due to report soon on the conditions under which mining might be restarted. As recently as a year ago, the prospects for uranium exports looked bright, despite the Fukushima disaster. In March last year, the Bureau of Resource and Energy Economics predicted “prices close to $100 a pound between now and 2015, rising to $124 in 2016 and $141.6 in 2017, in constant 2011-12 Australian dollars.”

In reality, however, the price has fallen to $US43/pound in early 2013 and looks set to decline further. Looking ahead, the future of nuclear power looks bleaker than at any time since the industry began. That’s bad news for the global climate – cheap and safe nuclear power would be the ideal replacement for coal if it could be delivered – but there is no benefit in denying reality

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Is the tide turning?

John Quiggin61 Comments

It’s easy to overestimate the significance of a single electoral cycle (look at the Repubs after 2010), but there really does seem to have been a big shift in US political debate. Of course, that’s from a position where centrists like (first-term) Obama were occupying the positions held by moderate Republicans 25 years ago. It’s reasonable to feel a bit ambivalent about ‘victories’ like repealing the most regressive bits of the wholly regressive Bush tax cuts. A couple of links of interest (a few weeks old, but I’m running behind on most things)

* The Hoover Institution’s Policy Review is ceasing publication, and its final issue includes a piece by longtime editor Tod Lingren who concedes defeat, at least for the moment, to what he calls Left 3.0. This is his name for the self-described “Democratic wing of the Democratic party” which has, in his view, absorbed and tamed the radical left, defeated the Clintonite New Democrats, and dominated the Republicans. Lingren is surprisingly sympathetic, essentially implying that the only thing wrong with Left 3.0 is that too much egalitarianism is bad for economic growth

* Michael Lind gives chapter and verse supporting a view that I advanced a while ago, that US politics is best understood by treating “Southern White” as an ethnicity. There’s an interesting comparison to the now-disappeared nativist movements among Northeastern Yankees in response to Irish and other European immigrants

If US politics does shift to the left, what effects will that have elsewhere? Even the most liberal Democrats would be centrist at best in most countries, and their most radical goals (single-payer health care, a progressive income tax, parental leave and so on) would be uncontroversial in most places, so there won’t be much direct effect. On the other hand, in Australia and other English speaking countries, a large slab of the right wing gets its talking points from the US Republican bubble, via the Murdoch press, and look to an idealised version of the US as a free-market model. If the Repubs are discredited at home, that will create some problems for their followers abroad.