Rudd’s questions show neither foresight nor hindsight
Posted by Dave Bath on 2009-02-04
KRudd’s essay on the financial crisis in the current edition of "The Monthly", especially his questions on why it all happened, shows that he doesn’t have a good grasp of the past, the present, and probably is not equipped to develop optimal strategies for the future.
He promised us he was promethean, his questions show he isn’t even a good epimethean.
KRudd: How was this allowed to happen? What ideology, what policy, what abuses made this possible?
My answer: These questions are the same thing. It’s fairly obvious that reliance on the market (which can only offer good collective outcomes if it is rational, which it isn’t) and regulatory failure from governments of all persuasions sucking up to the finance industry, both in national policy and international bodies, was the cause. Did you or your party in Canberra object to the bubble-producing housing bonus or negative gearing, the policies of Liberal federal and ALP state governments? Did you or your party complain about the loss of policy-levers for the real economy as everything was privatized except losses?
Krudd: Were there any warnings?
Yes, lots! Even from Free-Trade advocates such as "The Economist", who have been worried about the housing bubble and the under-the-counter derivatives market for years (see "Rise of the Dark Board" 2007-04-27), even back as far as the 1990s. You can also see this post of mine which has links to a few relevant things. The Economist put it bluntly in 2007-04-01 ahead of the recognition of the "crisis": "But it is in the nature of capitalism to test new ideas to destruction and to use new instruments as the basis of speculative excess."
Krudd: And if so, why were they ignored?
Short answer… because it was convenient for you!
Longer answers… take your choice of one or more of the following, and others I haven’t included:
- You haven’t being listening to impartial voices, those economists who aren’t employed by sectors dependent on rising stocks. Why don’t you read The Economist and the many academics… or do you only listen to the comments of the likes of CommSec dealers on TV? See "And over to Ronald McDonald for nutrition advice…" (2008-11-04)
- You might have suspected the truth, but didn’t pass it on to voters before or after the election, until the elephant in the room got so big there was no air to breathe. Until you stop trusting the words and actions of the folk in the finance industry, things can only get worse.
- Politicians don’t get brownie points for issuing uncomfortable warnings unless the population is literate in the subject concerned. The population is economically illiterate and thinks GDP growth is good (see "Not all GDP growth is good" 2006-11-12), has been unworried by debt, can’t recognize a bubble until it bursts in their face… at least Sarkozy is pushing for basic economics to be a compulsory part of secondary education up to year 10.
- The loss of government-owned banks cut off a major way independent advice could reach the ears of governments, as nationalized banks, staffed by public servants at reasonable wages (not the ridiculously high packages you cite for the Wall Street pirates) would offer information more in line with the national interest rather than to fill their own pockets.
Of course, if you really want answers, rather than merely be seen as asking pertinent questions (that you should have been asking for many years), I suggest you go back and look for the observations and recommendations of those who did have the foresight to see the bubble and know it would burst.
Seriously, the only people who have any confidence in the current world economic architecture are the politicians. The lefty "true believers" were never sucked in. The "mug punters" investing directly, or indirectly through superannuation, in stock markets and housing recognized they were mugs, but were only given Panglossian advice from the finance industry and politicians, and even the finance industry has patently lost confidence in the system that supposedly gave it philosophical credibility.
Perhaps the real questions you should be asking are these:
- When nobody else has confidence in the financialist system, why do politicians the only ones professing confidence, and throwing our money away rather than using the same money to take control? Is it that you want to be able to throw your hands up and say "there is nothing we can do… we don’t have the policy levers"?
- When will you start listening to those voices that have been issuing warnings for years?
- Why did you, and other politicians, choose to either listen to duds or fail to inform the public of the problem?
- Do you listen to the same type of self-interested well-funded business lobby groups and so-called experts when defining climate policy? Should that change, or are you happy to risk a similar meltdown of the environment?
The recognition of the current crisis by politicians, at least to the public, is about as useful as recognizing the danger of a hungry lion from the bite marks on your leg. This might save you electorally, but my guess is that both you and the Liberal Party knew that this was going to happen.
- "Might the Libs want the ALP to win?" (2007-05-08)
- "Chickens coming home, roosting above the fan" (2007-11-19)
I ask myself is the following: why should I have any confidence you’ll start educating the public honestly, start listening to those economic voices that have a good track record, and start acting in a way consistent with the views of both an Economics Nobel Laureate and little ol’ me?
Finally, a quote from KRudd’s lead paragraph of his essay.
The significance of these events is rarely apparent as they unfold: it becomes clear only in retrospect, when observed from the commanding heights of history.
It was forseen, KRudd chose not to see it.
The question we must ourselves is this: is Krudd’s self-admission of inadequate understanding and vision for significant and inevitable events any better for climate change?
- Published later than this post was written, but well worth reading, is "Rudd’s breathtakingly cynical essay" (2009-02-04) at On Line Opinion
- "Rudd on the global financial crisis" (2009-02-03) at Public Opinion