Thursday, May 08, 2014

Abbott and Shorten and a problem of trust

I made a vow to myself to stay away from politics until after the budget when I could reasonably analyse what had been said. It seems not. Think of this as a not especially profound  observation, rather than a political comment.

One of the things that puzzled international observers during recent years was the degree of economic pessimism in Australia as compared to, say, Europe. Australia was doing well in economic terms, Europe not. Why, then, were Australians economic pessimists? It seemed irrational.

The real answer was, I think, that Europeans expected their economic position to improve, if sometimes from a dire base.  By contrast, Australians had the nagging feeling that their economic individual position was likely to get worse. I think that’s still the case.

This creates the first problem for Mr Abbott. He is plainly telling people that they must bear pain, accentuating existing pessimism.

This feeds into a second problem. Globally, the decline of the middle class in western countries has become accepted dogma. It’s been coming for a while, but it’s strongly there in popular thinking. This Essential Research story indicates some dimensions of public reaction at this point.  Now Mr Abbott’s difficulty here is that when he says that his proposals will create future wealth, people say so what. It’s not going to come to me. It’s going to go to firms and the wealthy. You tell me that I must bear pain for the good of the country, but I don’t believe you when you say that I and my kids will benefit.

Mr Abbott’s third problem is that there is a remarkably high degree of economic literacy in Australia. His budget analysis and rhetoric is strongly countered by alternative views made more dangerous because, often, they are starting from similar premises. Australians don’t actually care about a one or two percentage point shift in the Government’s share of GDP. They do care about their welfare and that of their kids. They are quite capable of making judgements based on alternative reporting.

When I first did microeconomics all those years ago, we distinguished between value (what was earned) and distribution (how it was distributed). We were told that these two must be kept separate. In his focus on value (maximising national wealth), Mr Abbott has ignored distribution (how will people benefit?).

Now I happen to believe that we do have a longer term budget problem, if not quite as articulated by Treasurer Hockey. I also believe that we have to increase national productivity, given the changes around us in a globalising economy. However, I have also argued that we must look at fair sharing of returns and of compensation for those adversely affected. We have to present a case to what is, in fact, an intelligent electorate.

The idea that the electorate is actually intelligent is, I think, anathema to the commentariat of left and right. How can punters think?  Well, consider this. How did independent Peter Andren hold Calare when his views on some issues were so far removed from those of his electorate? 

I never met Peter Andren. However, as I understand it he was a straight shooter; he listened, explained, but would not shift on things he believed in just to retain his seat. People might disagree and even vote against him, but they had a base on which to make a judgement. He was a solid figure in a shifting world of political advantage. People knew what they were getting, not on specifics, but in terms of stance and values. They also knew that he would work hard for them regardless of their views.

Both Mr Abbott and Mt Shorten suffer from the simple question of trust. We trust neither them nor their parties. Until they engage us in sensible debate, lack of trust will remain.   


Legal Eagle said...

Hear hear, Jim. I trust neither Abbott nor Shorten. I am worried that the Libs are engaging in the same knee jerk policies which I think were characteristic of the Rudd/Gillard years. I am worried that the changes wrought by the budget may have unforeseen negative consequences. I think this debt levy is a bad idea. There must be a better way to do it (a more efficient tax system, for example). And as for parental leave - again, they could reform the tax system to allow income splitting instead. I just feel very nervous and not at all trusting.

Evan said...

Very true.