Economics

Craig Emerson is a good man to have around in federal politics. He has ideas, which is what politics should be largely about. And ideas, in the barnyard of Canberra politics, are almost as scarce as hen’s teeth. Emerson has a PhD in Economics from ANU. In earlier times, as an adviser to Prime Minister Bob Hawke, he had a reputation for being a bit of an environmentalist. Traditionally, the two disciplines don’t sit happily together. He managed to embrace them both.

When Richard Florida, the peripatetic celebrity academic from George Mason University, was in Australia to promote The Rise of the Creative Class (2002), he described Sydney as one of a dynamic new generation of cities that is attracting global talent. The following year, as a guest of the Melbourne Fashion Festival, he included Melbourne with Helsinki, Stockholm and Minneapolis–St Paul as models of creative and inclusive societies. On a later visit to New Zealand, he observed that the Lord of the Rings movies catalysed a new technology and entertainment industry for Wellington, earning it the reputation as a creative city. Is there a pattern here?

Australians like to believe they live in the best country in the world. Plenty of space, abundant  natural resources and lots of sunshine for this nation whose inhabitants have come from all corners of the earth to a land of opportunity. It’s an appealing national smugness that has comforted generations of Australians as they looked with tolerant amusement at the congested societies of industrialised countries elsewhere in the world. Aren’t we lucky!

Occasionally, there may have been some nagging doubts as we looked at the growing wealth of the Asian economies and the technological sophistication of overseas manufacturing. Are we as smart as they are? Do we work hard enough? Are we falling behind? Is this the land of the long weekend? In recent years, have we become hard-hearted and lazy? Good questions, and easier to answer anecdotally and instinctively rather than empirically. Generally, we thanked our lucky stars.

Michael Pusey coined the term ‘economic rationalism’ in 1991 to refer to the narrow economic focus of many senior public servants in Canberra. These influential advisers were mostly classically trained economists who saw their task as being to assist in creating a more efficient and productive society by privatising publicly owned utilities and services, giving greater rein to market forces, increasing competition, deregulating the labour market, and so on. But like every major political programme, economic rationalism has had, and continues to have, great social costs. John Wright’s book is primarily a moral evaluation of this programme.

Is the great white middle class endangered in Australia? If it is, does it matter greatly? Michael Pusey answers ‘Yes’ on both counts. He argues that we are seeing a ‘hollowing out of the middle’. If he is right, this hollowing out has significant consequences. Both major political parties have spent decades courting the wannabe middle class – from Robert Menzies’ ‘forgotten people’ to Gough Whitlam’s outer suburbanites, and from Mark Latham’s ‘aspirational’ voters to the recipients of John Howard’s tax welfare and handouts for private schools. A significant contraction of this constituency would create political shock waves. In addition, the decline of the middle class would throw an interesting light on our current prime minister who, more than anyone since Menzies, has represented middle-class values and aspirations while championing the radical economic restructuring that Pusey sees as leading to the decline of the middle class.

If you like business bodice-rippers, these are blissful days. After the host of books that emerged from the dot com Götterdämmerung, another wave of cautionary tales has hit the shelves. I reached for Mark Westfield’s HIH after reading my third book about Enron, Mimi Swartz’s Power Failure, and was struck at once by a casual coincidence: that both Enron’s Ken Lay and HIH’s Ray Williams insisted on being referred to as ‘Doctor’. In Lay’s case, this was on account of his PhD in economics. Williams laid rather flimsier claim to his honorific, after Monash University rewarded him for various endowments with an honorary doctorate in laws in 1999.

Big business is a kind of communism. Employees in their vertical villages banter this truth, checking over their shoulders for fear an office spy is eavesdropping. It is a communism that aims for the inequitable distribution of wealth, just as traditional communism aims for the inequitable distribution of poverty. It is the People’s Republic of Capitalism (PRC). Its languages are Bluff and Spin and Acronym. It is always ‘strong and growing’; always ‘resilient and facing up to new challenges’, with the CEO pursuing higher EBIT and better KPIs before the all-important IPO. It is active in funding charities and the arts.

This is a large yet very readable book. There are three strands to this work: a demonstration of the inexorable tendency of a market economy to oligopoly; an explanation of the ease with which money can set ethical consideration aside; and an account of the development of the companies that make and market Coca-Cola. While McQueen has strong opinions, he is careful to separate his critique from his account, and he supports both his opinions and his account with extensive referencing and a substantial bibliography.

I wouldn’t have minded being a fly on the wall when Valerie Wilson did the research for this book. It began life as a PhD project in the University of Melbourne’s Business School. Wilson wanted to find out what underlying attitude people had to money. She should have asked me. I love the stuff. Just don’t see enough of it.