Tuesday, August 30, 2016

Painting the colours of Greek statues

As late as my 2010 visit to the Greek Isles, I thought that while marble Greek statues were just that, white marble. I always thought that they were a bit cold, but they had become a sort of taste thing, an exemplar of Greek taste. Then I found that they were painted.

The Wikipedia article on Ancient Greek Sculpture tells a little of the story. Paint flakes had often been found on the statues but had been ignored, even denied. It wasn't until modern technology and the work of Vinzenz Brinkmann and Ulrike Koch-Brinkmann that the light (and colour) dawned upon the scene.

This 2014 piece tells a little of the story. This 2016 piece on a current exhibition a little more.

I have to say that the colours are a little garish by current tastes. This one makes the lion look a little like a stuffed toy sitting on a child's bed!

Still, it is nice to know that there was colour around. Some of those Greek homes and temples would actually have been very drab without it.

Another reminder too about the difficulty of actually knowing the real texture of the past. As an example, it wasn't until my visit to the Greek Isles that I realised just how important water was to settlement. I did know how important trade was, but it didn't form a real pattern in my mind until the visit.

The same sort of thing applies to Australian history. When I first studied Australian history, the near starvation of the early settlement at Port Jackson was attributed to poor farming techniques. That may have been a factor, but we also now know that there was an El Nino induced drought.

I should leave the last word on Greek statues to a comment from JCW at another place:
Funny, innit; whole literary/dramatic theories have been written about the differences between Apollonian (cool/white/ classical/contained) and Dionysian (unrestrained/colourful/extreme), based on modern(ish) observation of classical statues, wot were never white in the first place. I bet Apollo and Dionysus are laughing their silly heads off after getting pissed on nectar, and agreeing that humans are pretty stupid for getting it SOOOOO wrong.

Monday, August 29, 2016

Monday Forum - Rugby, professionalisation and the return of the Australian Parliament

Saturday night I had the dubious fortune at the nearby pub of watching the Wallabies play New Zealand in the second Bledisloe Cup match, the annual Rugby derby between the two countries. The Kiwis won (again) retaining the Cup (again).  The Australian team's body language at the presentation says it all!

My enjoyment of the match was not helped by the surrounding group of rampant Kiwis. In fact, the tiny group watching was nearly all Kiwis. Meantime, the sports tab area nearby was crowded to overflowing.

 It is no secret that I follow and enjoy Rugby Union. It will therefore be no surprise that I have not enjoyed the recent decline in Rugby. The national team peaked for last year's World Cup, although it was not good enough to win in the end. However, the excitement of the World Cup and Australia's relative success, indeed the recent success of the Australian Women in the Sevens at the Olympics, mask a continuing decline in the Australian game.

In a piece in Rugby News, Bret Papworth argues that part of the solution lies in the re-direction of funding to the grass roots. I have some sympathy for this position, but there is (I think) more to it than that. It seems to me that the Australian Rugby Union in its desire to survive and grow in a competitive sports market over-extended itself and the game itself. In seeking to expand and maximise the TV money, it lost sight of those who follow as well as play.

There is another issue as well. The physical  demands of the modern game, the body sizes required, the sheer increase in skill levels, are actually crowding out the smaller and not so good who just want to play because it is fun.

In a different direction but still staying within the gladiatorial arena, the Australian Parliament is about to resume after a long election related break.  What are the issues that you are watching?

 As always, feel free to go in whatever direction you want!

Same Sex Marriage

Tonight it looks as through the same sex marriage plebiscite is dead, but is it?  It is if Labor votes against it, but will Labor do so? Will be interesting to see how it plays out.

Saturday, August 27, 2016

Saturday Morning Musings - a changing Australia

As I write, ABC News 24 is providing rolling coverage on the results of the Northern Territory elections. In the words of Adam Giles, the Northern Territory's outgoing Chief Minister and the first Aboriginal to head an Australian Government, the Country Liberal Party received a real thumping.

With a population of just 245,000, the Northern Territory has the  smallest population of any Australian state or mainland territory. With 25 members in the NT Parliament, this means that it has the smallest population electorates in the country. Mind you, the Territory is not small in geographic terms - over 1,349,129 square kilometres or 520,902 sq miles.

I have never been to the Northern Territory apart from a brief transit stop at the old Darwin airport many years ago. No doubt I will get there at some point.

The Northern Territory is a reminder of just how large and diverse Australia is. It's not just varied geography, but variations in history and culture.

The NT has the only electorates in the country with majority Aboriginal populations, but also (I think) the only electorate named after a Chinese citizen, Fong Lin, carrying the name of a popular former mayor of Darwin.

One thing I learned a long time ago was the danger of making generalisations based on one's own experience. I feel this particularly strongly at the moment.

I live and work in melting post Sydney. The area I live in was once heavily Greek. Now the Greek population is aging and the children have moved. At Eastlakes, the older Greek men still gather for their coffees (photo), the Greek Church is just up the road, the traditional Greek barbershop is still there in Kingsford, but now the Greek population has been replaced by later migrants.

At Kingsford, the street scene is dominated by UNSW international students, especially those from China. The pop-up shops that I wrote about in Infant formula, pop-up shops and the future of Australian food are still there with students buying food and other goods to send home to China.

Just two and a half k away in Eastlakes, the Asian influence is there, as is a Middle Eastern flavour. However, the money isn't there, for many of those on the street live in surrounding social housing.

Each working morning, I catch the bus on the start of my journey to Parramatta. The bus takes me past Eastlakes, through the old Greek suburb of Rosebery and then though the sprawling apartment complexes of Victoria Park and Green Square where youngest lives. This is quite heavily younger (and better off) Chinese territory. Visiting youngest on a new street that carries an Aboriginal name, Gadigal, you will see no Aboriginal people. The street terrain is Chinese dominated.

A little further on as the bus passes through Waterloo you will see many more Aboriginal people in part because of the social housing estates nearby. The George Hotel with its barred windows is a route stop on the return trip.

At Central railway station the ethnic scene is more mixed, full of computers of all types. Here you will also find the homeless, as well as the buskers and the lady selling the Australian edition of the Epoch Times. We know each other by sight because I always take a copy of the paper.

She is not pushy. She stands there holding out the paper, ignored by most. As I walk towards her clearly coming, she smiles and holds the paper out.

From Central, the train runs first through the Inner West. This is Green, "progressive" country. Then the train rushes through the mixing suburbs where so many recent immigrants now live.  I have long meant to get off, to wander the streets flaneuring to my hearts content. But work or home beckons.

Parramatta bills itself as Sydney's second city. As indeed it is in historical terms. Yet it is only in the last few years that Parramatta has begun to acquire a metropolitan feel.

This shot of Parramatta is a  a few years old now before the new tall buildings started to go in. The place is in the process of transformation, of fundamental change. In ten years, it will be a genuinely metropolitan centre.

In thinking of divisions in Australia, it is important to remember that they are as much geographic as cultural. Darwin is very different from Sydney, but what is Sydney?

The difference between Parramatta and the Sydney CBD and inner suburbs is quite profound. As one simple measure, almost no-one who works in Parramatta lives in those areas that we tend to think of as Sydney. Indeed, they rarely visit. They all live and play in the outer suburbs linked to Parramatta by rail. There are practical reasons for this. It takes me over three hours each day just to get from home to work and back.

Parramatta is melting pot Sydney.

Each day, I walk past Arthur Phillip High School and the adjoining public primary school. Arthur Phillip is due to go high rise. For the moment, the school operates from a mix of old and temporary building.  

Arthur Phillip is mixing pot Sydney. I watch the kids playing on the concrete basketball and soccer courts. There is barely an Anglo in sight. I watch the Indian parents, mainly mothers, bringing their children to the primary school. Insatiably curious, I watch and listen, trying to work out the the relationships. Listening is important, for it tells you about cadence, structure, attitudes.

Our own small office is very mixed. There is one Chinese Cambodian, one Australian Indian, one Torres Straight Islander, one long standing Polish migrant, two Anglos. I learn about different customs. Yet I am conscious of one difference from my past.

Listening to the kids from Arthur Phillip, I am conscious that I have absolutely no idea about their lives. I can surmise, but I don't know. At the office, while we are all friends my geographic distance makes social mixing outside work very difficult. Each person mixes with their own group in their own area.

That, in turn, made me realise that outside work, I have less exposure now to other cultures and the variety of Australian life than I did in either Armidale or Canberra. In fact, I have less exposure now than I did when I was just nineteen. I think that's a problem. Certainly its a problem when I claim to be a social analyst.

 The difficulty lies, I think, in the absence of social interaction outside of work. But that's very hard to obtain.          


Sunday, August 21, 2016

Sunday Essay - reflections on culture, society and early Australian history

When I first read A C V Melbourne's Early Constitutional Development in Australia (First published 1934. My copy edited by R B Joyce, University of Queensland Press, St Lucia, 1963), I thought that it was as dull as bat shit. Yes, I am sure that there are specialists in bat shit who find the substance quite fascinating, but you know what I mean!

The difference now is that I know just so much more. The names and events are familiar, that certainly helps, but I also have patterns in my mind that are deepened or sometimes challenged by the new material I read. No doubt you will hear more of Melbourne, but tonight I want to use it as an entry point to another discussion, the importance of culture. Not "high" culture, but culture in the sense of patterns and dynamics in society.

I'm not sure when I first became interested in culture. Growing up in Armidale sensitized you very quickly to social structures. Armidale and the surrounding district had at least six quite distinctive social groups that mixed and overlapped in complex ways.

You had the basic divisions of town, gown and country. But they were subdivided in turn. In country, you had the division between farmer and grazier. Gown was the academics, but you also had the large number of non-academic staff who were not gown, formed part of town, but were also distinct. In town, you had social and economic divides linked to what people did, to their education and social status. Some of the wealthier merchants or professionals, for example, interlinked with the grazing community or with gown.

Religion and politics sat as a layer over all this. Where you went to church or to school reflected, affected, the groups that you belonged to. There were considerable sectarian divides, not just Roman Catholic versus protestant, but within the protestant churches themselves. Then there was another layer linked to community activism. There is almost a universal truth in smaller communities where cooperation is central to the maintenance of the fabric of life that involvement brings acceptance and recognition that crosses divides. The CWA (Country Women's Association) is a good example.

I straddled divisions, but was obviously very aware of them since I had to navigate my way through. It gave me a good understanding of social analysis.

The first academic sociology work that I can remember reading, I was still at school, was a book I plucked from my father's shelves. It was, I think by an American sociologist called Harrison White. I think that it was White. It certainly sounds like him. According to the Wikipedia piece linked above, White emphasised the importance of networks and social interaction in the formation and working of culture.

The book in question included the story of two new American suburbs founded about the same time drawing from similar demographics. The residents in one formed bonds, welcoming new comers, creating a positive culture. The residents in the second, partly because of urban design failures, became fragmented, isolated, creating a very different culture. Decades later, the first suburb had grown in cohesion, prestige and wealth, the second suffered from problems of crime and social disunity and was in economic and social decline, slipping into social decay.

New South Wales began as a penal colony. It was partly, in fact, a large scale penal reform experiment and one that proved to be a considerable success. The institutions and cultures that we know today formed during the earlier colonial period. Some were not so good, certain aspects of the Rum Corp come to mind, but others were. The sheer exigencies of running an open penal colony created a higher degree of local freedom, greater possibilities of  advancement, than was the case in the United Kingdom. The strong executive power exercised by the earlier governors may have been necessary just because it was a penal colony, but it also acted to check the power of emerging wealth and status based on the civil and military officialdom.

Add caption
Early politics in the colony centred on two emerging groups, the emancipists or ex-convicts and the exclusives, the civil and military officials who had built their own private wealth largely from their official positions.

Initially the exclusives lead by people like John (image) and James Macarthur had power and especially the access to London provided by their wealth. They were active in promoting their interests including their access to land. But the emancipists were also becoming wealthy and, with time, proved reasonably capable lobbyists with both sides using employed agents within the House of Commons.

In the beginning, there were few free settlers in the new colony. As early as 1792 Governor Phillip, anxious about the food supply, had asked for some free settlers. The first group arrived on the Bellona on 6 January 1793 attracted by inducements that included a free passage, grants of land, tools and implements from the public stores and the services of assigned convicts, fed by the Government for two years and clothed for one.

The number of free settlers increased slowly from that point, but by the time Governor Macquarie arrived in 1810 there were perhaps still only 1,000 as compared to 1,700 officials in the civil and military departments and perhaps 5,000 convicts. There were also some 2,500 children.

Macquarie did not favour free settlement. He saw NSW as a place of redemption where offenders might re-establish their place in society. He did not mind men with capital who might establish themselves in agriculture, but was vehemently opposed to those with connections who expected to acquire wealth from the exploitation of Government privilege. This made him a natural target for the exclusives who campaigned against him in London.

The exclusives gained their name from the way they excluded people, even most free settlers, from their society. They had position and wished to protect it. In so doing, they created a bond between the ex-convicts who were achieving success and free settlers, between merchants and artisans who might otherwise have been drawn to the order and social hierarchy the exclusives represented. This gave the emancipists added numbers and, in time, influence.

The political divide between exclusive and emancipist was inherently unstable because it was based on social class, on concepts of order and status, in a rapidly evolving colony. The accumulation of wealth by the emancipists, ex-convict and free, could not be ignored. The tipping point came with the pastoral expansion.

On their estates on the outskirts of Sydney and in the Hunter, exclusives were attempting to recreate the social order of a home country that was itself undergoing fundamental change. They had a vision of broad estates farmed by tenant farmers, of country houses and an ordered country side. Their wealth was based on land acquired by grant and purchase, on farming and the sale of farm produce.

The explosion of settlement outside the boundaries of settlement – the nineteen counties - imposed by Governors concerned about the management of a penal colony changed everything. Initially the squatting rush was opposed by many exclusives. It threatened the value of their estates within the settled areas, it threatened their life style and position, but they soon joined in. There was money to be made.

One product, wool, was central to the rush. It was a high value product that could bear the very high shipping costs associated with slow land transport. But once the pastoral expansion began, other factors came into play. The pastoral rush created a demand for horses, for sheep, for cattle, to stock the new properties.

Beyond the frontier, land had no direct value because there was no ownership. The value lay in the value of the increasing stock of animals, of the returns that might be gained from those animals. The wool clip provided an external source of income that underpinned the whole process, but it was the animals that were important. You didn’t have to sell your stock to the final point of sale such as the abattoir, you could sell them to the squatters moving to the next point of occupation who needed stock to do so.

The end result was a long boom that finally culminated in the crash of the early 1840s. Both exclusives and emancipists participated in this rush. In so doing, the old divisions disappeared, new ones emerged.  

Saturday, August 20, 2016

Saturday Morning Musings - taking pride in the Olympics

The Olympics really haven't grabbed me this year, primarily because I haven't watched it on TV and consequently haven't had that intense exposure.

It's been a messy Olympics, messy in the lead-up, messy in performance. 

There have been the usual positive stories that come from human endeavour. The story of Nikki Hamblin of New Zealand and Abbey D’Agostino of the United States is one such. Real tear jerker stuff. Makes one realise that life is not just about winning.

I do wish the Australian Government had a similar attitude with its KPI (key performance indicator) approach to sport. To focus sports funding on the achievement of Olympic gold is, to my mind at least, not very sensible. There is a real old Soviet block flavour to it, sport as promotion of national prestige. When the approach fails, it detracts from the achievements of the athletes themselves. 

Of course I expect Australia to perform relatively well. Of course I get sucked in by the medal count, although I think the way that is done is distorted. Gold is not all. At the end, its all about participation of kids (and adults) in the whole variety of sports that most interest them.  When, as Australian Olympic chief John Coates has pointed out, sports funding becomes focused just on those things in which Australia might perform best, distortions result.

It seems to me that the target should be not to be the best in an absolute sense measured by medals, but the best we can be at the time. If someone else wins and we have done our best, then that should be enough. 

At the end measured by medals or premierships, competitive sport is a zero sum game. There can only be one winner.  

Around Australia there are millions of Australians who get up to take kids to sports. There are millions of Australian who follow a sporting team even if it is losing. The parents who watch their kids play, the fans who stay with the team even though it it coming last, the people who hope that next week will be better but we have had fun in the meantime, are not dumb. They are participating in a human endeavour where participation is, finally, the end in itself.

If you adopt the KPI approach, what's the point of those fund raising BBQs? What's the point of driving for hours so that you or your children or your friends can play? 

The KPI world gives us, reinforces the world of, those obnoxious parents who abuse a volunteer official because they may have made a mistake. It sucks the life out off the community element, the individual playing because it is a good thing, that is central to so much sport. And for what? Another time consuming official inquiry into why money was wasted, another official inquiry into why we did not perform in that targeted way?

As a nation, we fund sport because we perceive it to be a good thing, something that benefits the nation at multiple levels. Sport is good because it makes us healthier. Sport is good because it gives us an outlet for other aggression. Sport is good because it builds a community. Sport is good because we have fun.

KPIs suck the fun out of sport. KPIs degrade the pleasure we take from an individual doing well. KPIs make individuals feel failures because they have not delivered on a medal even though just getting there is an achievement in its own right. KPIs are a total distortion They really F the system up. 

So to all Olympians from all countries I say thanks. You have got up in the early morning. You have done the hard yards that most of us could never manage. Whether you have won or lost, you can take pride. I hope you enjoyed the experience despite the performance pressures. You can be proud.   

Friday, August 19, 2016

Mr Abbott and the Malaysia solution revisited

Sometimes in public policy there are no good solutions, only least bad ones. If you reject the least bad one on the grounds that it's not right, you end with a worst result.

Back in May 2011, I wrote this:
"My first quick reaction to the PM's Malaysian proposal, Gillard's refugee deal, was positive as one step in a possible broader solution. That reaction is not shared by many of my blogging colleagues. 
Given this, I thought that I would set out the principles/issues that underlay my reaction simply and without supporting argument:
  1. The Howard Government's refugee policies were part of a pattern of behaviour that, at the end, swung me against that Government. The refugee policy may have stopped the boats, but it came at a high human cost and was (as I saw it) part of a progressive dehumanisation of Government.
  2. The initial policies of the new Labor Government may or may not have been sensible, but they were a reaction to Howard Government policies. However, Labor then became trapped in the political get tough rhetoric. Just as Mr Howard's policies ignored key regional dynamics, so East Timor regional processing got thrown in without thought.
  3. The Howard policy was simple. Make things tough at this end and we stop the boats. Mr Abbott's single minded rhetoric on the issue has been effective only because of apparent failures in Labor policy, as well as Labor's failure to articulate a clear alternative approach.
  4. Both the Howard and, to a degree, the Rudd-Gillard approach were crafted for domestic consumption and really didn't take into account broader issues.
  5. The refugee problem is complex. Further, the problems that countries like Thailand, Indonesia and Malaysia face are large compared to ours in terms of numbers and resources.
Turning now to the specifics that guided my instinctive reaction:
  1. There is no such thing as perfection.
  2. For a number of reasons including politics and humanity, we have to stop the boats. We have two choices: we can go the Abbott/Howard route or an alternative. None of those attacking the Gillard proposal have really put forward an alternative. If the current opinion polls continue, Mr Abbott may well win the next election.
  3. The Government is, I think, reaching towards a regional framework that will provide a more sensible approach. That can only be underpinned in the end if we take more refugees.
I am well aware of issues associated with Malaysia's treatment of refugees. I am old enough, among other things, to remember the treatment of Vietnamese boat people. That (the issues), it seems to me, is a matter to be dealt with in negotiation."
Mr  Abbott's highly qualified  admission that the Opposition should perhaps have supported the proposal is interesting, including the admission that a more bipartisan approach might have reduced some of the poison now infecting Australian politics. Mr Morrison's response that he did as he was told on the matter by Mr Abbott ("I acted in accordance with my leader's instructions," ) is also interesting.

It is, of course, very difficult to know what might have happened if another course had been followed. I doubt that it would have been worse. The poisoned chalice that is "Stop the Boats" keeps dripping, with the Greens doing their best to hold it to the Government's lips saying just another sip.

In some previous posts I have tried to explore ways of humanising current policy within the frame set by the Government's policy parameters. I don't think I was very successful.

What I can be sure of is that the current approach will lead to continuing problems. Sort Manus and Nauru remains. In the end, I am left with the depressing feeling that Nauru might become the Australian equivalent of Guantanamo Bay. Not a nice prospect. We will probably sort it out. The only question is the final cost.


These numbers seem reasonably accurate - a Manus cost of $2 billion. Later we will get all the numbers - Nauru, Manus, navy etc - and be able to make an objective judgement as to value.

Monday, August 15, 2016

Monday Forum - as you will

This is another as you will Monday Forum. But first, a few observations on current events.

To say that the Australian census muck-up was annoying is an understatement. It wiped out an evening when I was meant to be writing a post. I got through and started entering, broken by a few interruptions. Then when I came to post I got a message saying unsuccessful, try again later. I did, a number of times. Finally, I thought I will just save and then come back later. I tried to save and lost the lot.

By then, although I didn't know it, the servers had been turned off. It wasn't until I went onto twitter that the scope of the problem became clear.

In process terms, this was an interesting census for a number of reasons. It was the first where people were expected to  lodge on line. It was the first in which issues of privacy became so very dominant. And it was the first total census delivery stuff-up.

In an interesting piece in the Sydney Morning Herald, Code Red: How the Bureau of Statistics bungled the 2016 census, Peter Martin examines some of the reasons for the census debacle. I wondered what you thought of failure and the surrounding arguments?

The data dump to the Guardian of several thousand incident files from Nauru continues as a major story. I commented previously on the way the Government's border protection policy was unravelling in at least political and public terms, a trend that I thought likely to continue given the approach adopted. The Nauru matter will continue for some time. Meantime, the future of the Manus Island camp continues as a  looming problem. 

Given how much we have discussed border protection here, I suspect there is not much more to be said for the moment. 

Only two topics out of many possibilities. I leave it to you to nominate what you like.     

Sunday, August 14, 2016

Reflections on Richard Neville's Play Power 1

In my train reading, I have finally finished Richard Neville's Play Power (Jonathon Cape, London 1970).  In the end, it left me curiously dissatisfied.
What's it all about, Alfie
Is it just for the moment we live
As an historical period piece, I think that it's very good. It describes the various threads in the counter-culture movement as they existed in the last years of the 1960s, including the conflict between those who were politically inspired and those following a different hippy drum. It provides a snapshot of the underground press at the time, a press at the height of its influence and popularity. It captures the life of those who tuned in and dropped out, who joined the hippy trails, some never to return.

At the time of writing, Neville believed that a revolution was underway:
For while the Establishment, with its flair for survival, can ultimately absorb policies, no matter how radical or anarchistic ………, how long can it withstand the impact of an alien culture? – a culture that is destined to create a new type of man (pp 66-67). 
Note the use of the word man. The counter culture is sometimes credited with contributing to the rise of feminism. Reading the book, I can't see that. At least as Neville describes what he calls the Movement, it is totally male-centric. All the main figures are male. The trends that led to feminism, are much older. Freidan's the Feminine Mystique, a seminal work in the modern feminist movement, was published in 1963, predating the rise of the Movement. That rise was coming, but not there yet.

In Neville's world, I accept that this may be unfair, women were there to be screwed, especially while stoned. Neville writes (p 67):

Meanwhile, into the world, children are being born like they never have before. ‘We want our son the be free, unprogrammed and completely unidentified with the state’, says one child’s young father who delivered the baby himself…That means no birth certificate, no schooling unless the child wants it, no taxation, no official record of his existence. These children will be tranquilised by hash, lullabied by rock and roll, educated by the community. And if one of them is ever discovered by the bureaucracy? ‘He will tell them he’s from another planet,’ advises one father.

I found this deeply troubling at several levels. One was the absence of any reference to the mother, it's all he. A second is the deep naivety of the concept.

At the time that Neville was writing, it was still possible to follow the hippy route overland from India to England. Of course, it wasn't just hippies. Aunt Helen, always adventurous, went on that trip. It was still possible to dream of Marakesh or dropping out on the beaches of Goa. It was still possible to dream of acquiring a cheap block and doing what you want.

Richard Neville can not be blamed for failing to recognise that the future lay not with his Movement but with George Orwell, an emerging gray society in which every person has a number, in which freedom reigns but only within narrowing defined bounds, in which turn on, tune in, drop out would become a social ill that needs to be addressed with all the social instruments available to computer empowered governments driven by key performance indicators.

Richard Neville could not have realise, although perhaps he should have, that his revolution would end in a war on drugs that would place an increasing proportion of the population of at least some western countries in jail, that would lead to the execution of others in counties that were once on the hippy trail.

I said perhaps he should have. His book is full of stories on increasing government restrictions from destination countries, of local reactions to what came to be seen as interlopers breaching local customs.

Neville has no time for this. The Movement will sweep forward. For my part, I am left with the impression of a group of self-indulgent young from certain wealthy countries who believed that their needs, perceptions and values should over-ride everything else

I will complete this story in a later post..

Monday, August 08, 2016

Confusions over the economic outlook 2- the liquidity trap

At the end of Confusions over the economic outlook 1 interest rates, I said that I would next look at the liquidity trap. I will do so, but first a brief response to the discussion that followed that first post because it is linked.

The Comments

2 tanners suggested that the theory looked even more shaky if the banks simply increased profitability by not passing on interest rate cuts (as they appear not to be doing). This then freed them to make higher profits or support riskier speculation (e.g. in houses or stocks), neither of which generate real income.

 Winton wrote: "It seems that lowering the interest rate no longer has much effect on the exchange rate in Australia. I wonder what will happen if the whole world adopts exchange rate targeting as in Singapore." 

kvd initially focused on policy instability: "Sometimes I think that a government which simply announced that there'd be absolutely no major policy changes enacted for 10 years - i.e. what you've got is your predictable business and personal environment for the next decade - would be doing us all a favour. Instead", he suggested, "we're stuck in the vowels: avoidance of risk, exacerbated by
erratic political environment, leading to insufficient confidence, and then there's overregulation, all of which leads to unwillingness to invest."

Winton agreed:
kvd: That is a good point. Policy uncertainty looks to be a big factor behind the decline in investment in many high income countries over the last 15 years or so. It looks like we have low investment leading to low growth, increased job insecurity, the rise of xenophobia and hence greater policy instability.

However, I doubt whether we could have no policy change for ten years without a fiscal crisis. If no policy change Involved no increase in government spending in real terms it would actually be a major reform. 
In terms of monetary policy, no policy change would involve sticking to the inflation targeting rules we currently have. However, the Reserve bank seems to have a problem in convincing people that it has the means and the determination to meet those targets
Winton and kvd continued in general agreement. "Winton, I agree with your comments, except that instead of the publicised 'inflation target range' supposedly at the core of the RBA's activities, I'd make it a 'desired upper bound over the economic cycle' with no downside responsibility/action." 

Continuing a theme from an earlier comment thread, kvd also suggested that "inflation really is a stealth tax (it advantages both government and borrowers; both being users, not providors, of capital), so why give any sort of encouragement for government action which would seek to promote it in the event it falls below 'target'?" He was cautious about an exchange rate target: "would that not lead to artificiality, and hence vulnerability, in an economy as small as ours?"

Winton and kvd continued in agreement: "kvd, I agree that the idea that any amount of inflation can be optimal seems peculiar. The way I rationalise it is that because of quality change issues, price indexes tend to overstate the rate of inflation. So, our target band might not be too far away from zero inflation. We also need to consider expectations. If people have come to accept 2% p.a. CPI increase is the norm, it will take many years to persuade them that they should expect the rate of CPI increase to be 0% p.a. in future." 

Winton then expressed a concern about the Singapore approach. "It will be interesting to see how Singapore goes ... If we went down that path my concern is that the import-competing and exporting industries would always be lobbying the government to lower the exchange rate target to improve their "competitiveness". If the whole world does it, we will be in a world of competitive devaluations."

Finally, Jasper Gnomes wondered what the Reserve Bank actually did. 


I have outlined the brief discussion on that first post at length because it raises a number of points germane to my argument.

The issue about that dreaded policy instability is something we have talked about here a fair bit. It affects macro-economic policy, but it is still more common in other policy areas. It creates confusion. I am reasonably bright and indeed have been a policy adviser on macro-economics, tax, finance and industry policy as well as aspects of social policy, but I get totally lost now. It makes planning difficult and, to the degree that policy success depends upon the expectations, it ensures policy failure.

 So we might well be better off freezing policy, accepting imperfections and just getting on with it.

On the question of inflation and inflation targeting and the associated question of what (if anything) to do about deflation is again something that we have talked about. The original idea that a central bank should set an inflation target actually dates back, I think, to the stagflation of the 1970s.

Thinking of Jasper, the Reserve Bank web site describes the Bank's role in these terms.
The Reserve Bank of Australia is Australia's central bank. It conducts monetary policy, works to maintain a strong financial system and issues the nation's currency. As well as being a policy-making body, the Reserve Bank provides selected banking and registry services to a range of Australian government agencies and to a number of overseas central banks and official institutions. It also manages Australia's gold and foreign exchange reserves. 
The role and functions of the Reserve Bank are underpinned by various pieces of legislation. The Bank is a statutory authority, established by an Act of Parliament, the Reserve Bank Act 1959, which gives it specific powers and obligations. In terms of the Act, there are two Boards: the Reserve Bank Board and the Payments System Board. 
The Reserve Bank Board's obligations with respect to monetary policy are laid out in Sections 10(2) and 11(1) of the Act. Section 10(2) of the Act, which is often referred to as the Bank's ‘charter’, says: 
It is the duty of the Reserve Bank Board, within the limits of its powers, to ensure that the monetary and banking policy of the Bank is directed to the greatest advantage of the people of Australia and that the powers of the Bank ... are exercised in such a manner as, in the opinion of the Reserve Bank Board, will best contribute to:
a. the stability of the currency of Australia;
b. the maintenance of full employment in Australia; and
c. the economic prosperity and welfare of the people of Australia. 
Section 11(1) of the Act covers the need to consult with Government; "the Reserve Bank Board is to inform the Government, from time to time, of the Bank's monetary and banking policy." 
The ‘charter’ of the Payments System Board is defined in section 10B(3) of the Act as follows: 
It is the duty of the Payments System Board to ensure, within the limits of its powers, that:
a. the Bank's payments system policy is directed to the greatest advantage of the people of Australia; and
b. the powers of the Bank under the Payment Systems (Regulation) Act 1998 and the Payment Systems and Netting Act 1998 are exercised in a way that, in the Board's opinion, will best contribute to:
     (i)controlling risk in the financial system;
     (ii) promoting the efficiency of payments system; and
     (iii) promoting competition in the market for payment services, consistent with the overall stability of the financial system; and
c. the powers and functions of the Bank under Part 7.3 of the Corporations Act 2001 are exercised in a way that, in the Board's opinion, will best contribute to the overall stability of the financial system.

Sorry for the clunky formatting. 

Up until the 1970s, relatively greater weight was placed upon the maintenance of full employment. Further, fiscal policy - the use of the budget to manage levels of economic activity - was seen as more important than monetary policy. Monetary and fiscal policy were meant to work in tandem.

The stagflation of the 1970s - the combination of high unemployment with high inflation - effectively discredited fiscal policy as a tool. The focus shifted to monetary policy and reduction in inflation. This combined with another trend, the rise of the independent central bank. As part of this, inflation targeting became a key central bank objective. The aim was to get inflation down and then keep it an acceptable level.

During the Global Financial Crisis, fiscal policy came back, if in a fairly ham-fisted way. However, the policy settings and institutional structures that had developed made central banks and monetary policy the dominant instrument for trying to manage the crisis. One side-effect was a world suddenly awash with money. However, that cash could not find its way into,productive investment but instead found its way into assets. So we had a world of low inflation or even deflation, very low interest rates but inflating asset prices as the only game left in town for getting a reasonable rate of return. Now the central banks with their inflation targets were no longer concerned with getting inflation down to target, but actually getting it up.  

Now we come to the liquidity trap. I no longer pretend to understand the theoretical arguments around this, so let me give you the grossly simplistic points that I internalised when I first did macro-economics all those years ago in what now seems a different planet. 

You increase the supply of money. Part of that goes into new spend. With more money, interest rates also fall thus encouraging investment. But what if people want to save the money rather than spend it, what if  nobody wants to invest in new productive activities because the risks are too high, the returns to low.? Then the money supply increases but only goes into chasing assets with existing returns because there is no other game in town? Then you have a liquidity trap. 

I think that is just what has happened. The effect is actually to increase the imbalances in the global economy, making later recovery more difficult. 

In my next post in this series I will look at responses. I will also pick up the exchange rate point.


Winton Bates wrote:" Jim, A good place to start the discussion might be with the article Noric referred to in the discussion on your previous post. I think we are dealing with a secular low investment problem rather than a Keynesian liquidity trap."

This is the article Noric referred to: "We’re in a Low-Growth World. How Did We Get Here?" I think a key point with the liquidity trap as I interpret it is that its an outcome of other things that then has its own effects. One cause is a reduced desire to invest.

On the Reserve Bank, two points flowing from discussion:

  • inflation targeting is quite new
  • as are formal agreements between the Reserve Bank of Australia and the Government, beginning in 1996. You will find the agreements here, the first agreement here.

Wednesday, August 03, 2016

Confusions over the economic outlook 1 interest rates

The Australian Reserve Bank has just cut the Australian official cash rate by .25 to 1.5%. I would have kept it on hold at this point, but that's just me. However, it does raise raise an issue. I must admit that I am very confused at the moment about the economic outlook. So in the next few posts I want to explore my confusions. Perhaps you can help me resolve them.

Let's start with interest rates. They are low at the present time, but in Australia at least depositors still receive a real rate of return. I suspect they do in Japan. So far as the banks are concerned, they too receive a real rate of return on loans, in the case of credit cards a very high rate of return. Where, then, is the problem? It can't be the level of interest rates as such.

The argument about low and lowering interest rates is normally put in terms of its affects on investment and consumption at a time when we want demand to increase when investment in particular is low. If we lower interest rates then, or so the argument runs, firms will borrow more for investment, consumers will borrow to spend, and the economy will grow.

I would have thought that there were a few tiny problems with this.

Take consumption first. The amount consumers spend out of income, the consumption function, has been analysed in various ways. To my mind, the consumption function is a combination of income and capital effects. If you income goes up, you will spend a little more. If your assets go up, you will turn some of that increase in value into consumption. In both cases, the effects depend upon your judgement about the long term sustainability of the change in income or asset values.

In the old days of just a decade or so ago, people expected their income to increase on a regular basis. A sensible, rational approach was to peg spend to the old salary and invest the increase in income, thus actually lowering the consumption function while improving family wealth. As your wealth rose, consumption would finally rise, if with a lag.Today, nobody is really sure of employment, while the effects of reducing interest rates on consumption are probably negative in that those who have more cash as a result are more than offset by savers who now have less cash.

Now look at investment. Investment decisions come back to the expected return. When times are poor, shifts at the margin in interest rates have very little influence given the range of other factors involved. Just lowering the official interest rate may but need not increase the profitability of existing investments, but really has little influence on new investment unless rates are very high or the interest rate reduction very significant.

I will continue this series Friday with the concept of the liquidity trap.

Monday, August 01, 2016

Monday Forum - Richard Neville, Power Play and the continuing impact of nostalgia

An exchange of Facebook caught me. Eldest put up a photo of herself in sunglasses. Her cousin said "Very Eighties". Yes, she said. "Very retro".

Now I know that some readers of this blog, at least will have mixed views about the knowledge that some things from the 1980s can be classified as "Very retro". I know that  I do. Well, just too make us feel better or maybe worse, a shot of me from 1983.

I mention this now only because a friend has lent me Richard Neville's 1970 book (its actually the 1979 edition) Play Power. While a little younger than Clive James, Germaine Greer or Robert Hughes, there were all around two years older, Richard Neville was part of that Australian intellectual push that had such an impact in London in the swinging sixties and later.

Around 1963, Neville then editor of the University of NSW student paper Tharunka teamed up with Richard Walsh editor of the Sydney University equivalent Honi Soit and Martin Sharp to launch Oz magazine.

After two Australian obscenity cases, in late 1966 Neville and Sharp moved to the UK and in early 1967, with fellow Australian Jim Anderson, they founded the London Oz. This was notable (among other things) for the then-longest obscenity trial (1971) in UK history regarding the publication of the Schoolkids OZ (May 1970) issue; leading to the conviction of Neville, Anderson and Felix Dennis, later overturned on appeal.

Before going on,  I was fascinated by a little tag at the back of Play Power. I quote:
"This copy does not contain the Under-ground Almanac poster game "HEADOPOLY" as a Prohibition Notice as been imposed on it by the Commonwealth Department of Customs and Excise. ref file no. C & E N70/650 dated March 26 1970."
It seems that the game was banned because it might encourage drug taking. Ten years later it would probably have been okay. Today it could well be banned again!

The first part of Play Power is interesting because it traces the development of the counter culture movement in the late sixties including the rise of the more overtly anarchist and political wing within Europe.

I will do a proper review here later. For the moment, I want to link back to my opening remarks.

I am a fair bit younger than Richard Neville, but there are overlaps to that world, even if I was more of an outsider looking in, influenced, but coming from a different and far more religious stream and going in a different way in personal and career terms.

 Today I am more interested in the historical significance, very conscious of the way that the events of the seventies would close things down. I am also more cynical. And yet there are sufficient overlaps for me to remember that time and indeed to feel a degree of nostalgia for things past and, indeed, sadness for a degree of lost innocence.  But that's another story.

All this brings me finally to the point of today's Forum, the continuing influence of nostalgia and memory. What were the times that you remember that now hold a special nostalgia for you?