Wednesday 3rd of September 2014

back at the workshop ....

back at the workshop .....

You have one chance to speak to the world’s most powerful people. What do you say?

Picture the scene: A classroom in some little town, a bunch of kids in their middle years of schooling. A special visitor is coming today, the assistant manager of the local bank, to explain how the world economy works.

He speaks in short sentences and anodyne generalities.

An open-market economy is a good thing, he says, because “markets are the proven answer to the problem of scarcity”.

Markets mean trade, and trade requires profit, he says.

“And profit is not a dirty word – because success in business is something to be proud of,” says the assistant manager.

“A certain level of government spending is necessary and good,” he says.

But not too much, or you stifle economic growth.

“No country has ever taxed or subsidised its way to prosperity,” intones the assistant manager, parroting a line he heard sometime during an election campaign.

He goes on, stating the bleeding obvious: “You can’t spend what you haven’t got.”

Furthermore: “You don’t address debt and deficit with yet more debt and deficit.”

The assistant manager just keeps on rolling out the platitudes, albeit in an increasingly ideological vein.

“You can’t have strong communities without strong economies to sustain them, and you can’t have strong economies without profitable private businesses.

“Stronger economic growth is the key to addressing almost every global problem.

“Stronger growth requires lower, simpler and fairer taxes that don’t stifle business creativity.

“And stronger growth requires getting government spending under control so that taxes can come down; and reducing regulation so that productivity can rise.”

The class is now getting restive. Up the back a couple of the smarter kids, used to having more sophisticated conversation about politics and economics at the family dinner table, are whispering.

“Does this bloke think we’re simple or something?” says one.

“Either that, or he is,” snickers the other.

Now, let’s leave our imaginary scene, and go to the reality of this glib recitation. It was was not made to a group of Year Nine economics students by an assistant bank manager.

It was made to some of the world’s most important decision makers, gathered for the World Economic Forum in Davos, Switzerland, by the Prime Minister of Australia, Tony Abbott.

One can only guess at what the other attendees made of it.

Do you think Bill Gates, the world’s most successful entrepreneur, needed to hear the news that “profits are good”?

One doubts it. He might, however, have wondered at Abbott when he spoke about a “moral order” based on people learning “to honour their agreements and live in justice and charity with their neighbours”.

Charity? When Gates, the world’s biggest charitable giver, was in Australia in 2013, he lobbied for this rich country to increase its aid program to meet international benchmarks. Instead he has seen the Abbott government slash $650 million from this year’s aid budget.

 As for honouring agreements, Antonio Guterres, the United Nations High Commissioner for Refugees, another Davos attendee, might well have wondered at how that sits with the Australian government’s apparent contempt for the refugee convention.

One suspects that Roberto Azevêdo, the Director-General of the World Trade Organization (WTO), was not bowled over by Abbott’s news that “trade between countries increases wealth.”

He might, however, be keener to hear from British PM David Cameron, who comes to the meeting intent on discussing remedies for one of the unwelcome consequences of free trade, the offshoring of jobs.

He might also have thought Abbott a more substantive person had he even mentioned the need, acknowledged by the WTO, OECD and others, to address the shortcomings of the dispute-resolution processes within free-trade agreements, and their increasing abuse by corporations and, in particular, tobacco companies. Australia is, after all, currently defending one such abusive claim, made by Philip Morris against our cigarette plain-packaging laws.

And the many and varied economists present, such as, say, Dani Rodrik, a professor of social sciences at Princeton University, might have liked to hear at least some acknowledgement of the downside of globalisation – such as increased income inequality.

Christiana Figueres, executive secretary for the United Nations Framework Convention on Climate Change, would no doubt have been alive to the subtext of Abbott’s boast that his government is “streamlining environmental approvals and have already ticked off new projects worth over $400 billion”.

That is to say, his government is facilitating the mining of vast new coal deposits, which will inevitably result in greater climate change, not to mention threaten the Great Barrier Reef.

Other guests who have concerns for the environment, for example, the head of the US Environmental Protection Agency and the United Nations Environment Program, might also have had qualms over Abbott’s categorical pronouncement that “stronger economic growth is the key to addressing almost every global problem”.

The many and varied econocrats present, who had observed Australia’s successful, Keynesian response to the Global Financial Crisis – and who overwhelmingly congratulated us on it – must have been bemused by Abbott’s sudden descent into party-political criticism of it.

And were probably puzzled by his spruiking of other purely domestic policy matters including his personal favourite: the exceedingly generous paid-parental-leave scheme.

The point of the annual Economic Forum is to gather big people to consider big ideas. More than 30 heads of state are there, among the more than 2,600 global movers and shakers. And this Davos audience heard not one thought-provoking utterance from Australia’s Prime Minister in his 20-minute speech (simultaneously interpreted “in all languages”, according to the program), which purported to set out Australia’s agenda for the upcoming G20 meeting, which we are hosting.

Then again, one should consider the likelihood that Abbott did not consider the Davos crowd to be his real audience, and that instead his address was directed at those parts of the domestic audience who, like this government, think in slogans.

I am trying hard not to envision Bill Gates listening to Abbott’s speech and nudging the guy next to him – the Davos seating plan shows that to be Joe Cerrell, managing director, global policy and advocacy for the Bill and Melinda Gates Foundation – and whispering:

“Does this bloke think we’re simple or something?”

And Cerrell’s reply: “Either that, or he is.”

Abbott’s Davos Moment