Other economics

The G7 on global economic resilience

One report that seems to have escaped the attention of the tabloids is the Report of the G7 Resilience Panel who met in Cornwall, UK, earlier this month. Their report – Global economic resilience – calls for reforms in seven areas of public policy:

  1. global health, to achieve universal vaccine coverage;
  2. climate change and the environment more generally, with an emphasis on the need for carbon pricing;
  3. digital governance, in terms of guarding against monopolisation, collecting tax revenue, and combatting cyber-threats;
  4. the global trading system, by strengthening the WTO and using trading rules to facilitate rather than impede global climate ambitions;
  5. investment recovery, to ensure that the post-Covid recovery is driven by adequate investment, particularly in energy transition;
  6. labour standards and participation, to improve the rights of workers, particularly those in minority groups;
  7. supply chains and market fragilities, to ensure that all countries can cope with future crises that disrupt critical supplies.

Writing in Social Europe, Mariana Mazzucato, who served as the Italian representative on the panel, hopes to see the G20 gathering in Rome on October 30 and 31 adopt the principles of the panel’s report, with the “Cornwall consensus” replacing the “Washington consensus”.

She also has an extensive account of the panel’s proposals in Project Syndicate. She outlines the basic economic principles guiding the panel. They would have policymakers “move from reactively fixing market failures to proactively shaping and making the kinds of markets we need to nurture in a green economy. It would have us replace redistribution with pre-distribution. The state would coordinate mission-oriented public-private partnerships aimed at creating a resilient, sustainable, and equitable economy.”

The 21st century so far has been cruel to the unemployed

Between 2002 and 2008 most Australians enjoyed a surge in real incomes, which have been comparatively flat ever since. Age pensioners, whose pensions are linked to economy-wide earnings, shared in this boost. But at the same time unemployment benefits (“Jobseeker”) and parenting payments have stagnated in real terms, apart from a temporary boost during the worst of the pandemic and a small enduring increase once pandemic special assistance was wound back.

These movements are detailed in an ACOSS/UNSW Sydney Poverty and Inequality Partnership report Australian income support since 2000: those left behind.  To quote from its summary:

In short, the performance of the Australian income support system during this period of economic growth has allowed whole groups of people to fall further and further behind the rest of the community. While payments have increased for some groups (people receiving age, disability and carer pensions), other groups, particularly people who are unemployed and sole parents, have been left behind. This has occurred both via payments that have not increased in real terms, but also via policy changes that have shifted many on to lower rates of payment.

ACOSS draws attention to its main findings in a short press release: Sole parents and unemployed face poverty as nation surges ahead.

The New South Wales Council of Social Services has produced a report specifically about the economic conditions of women: Rebuilding for women’s economic security: investing in social housing in New South Wales.  Its emphasis is on women’s access to housing, a problem that is probably worse in New South Wales than in other states. It also has some specific data on the effect of the pandemic on women’s welfare, reporting, for example, that since May this year 61 percent of job losses in New South Wales have been women’s jobs. (Because Victoria has had longer periods in lockdown its situation could be worse.)

Housing deficits

In Australia our commercial buildings generally do reasonably well on energy efficiency, but our housing is of much poorer quality.  On last week’s Saturday Extra Geraldine Doogue interviewed two experts on housing design – sustainable building consultant Andy Lemann, and Davina Rooney of the Green Building Council of Australia: Tackling transitions: sustainable housing.  We can do much better both in the houses we build from scratch, and in renovations. Energy-efficient investments in housing pay good dividends (remember that the money you save from lower utility bills is tax-free income).  Energy-efficient housing is generally more comfortable. And an energy-efficient house, with even a small PV system on its roof, can be a net producer of green energy.

Another housing quality problem is revealed in an article in Open Forum: Cracks in the system.  It describes the incidence of serious defects found in multi-unit residential buildings in the Sydney region.  Buyers generally cannot judge the structural quality of buildings or the reliability of plumbing, electrical and mechanical systems. Therefore in the absence of adequately-enforced regulation there is little reward for the better and more responsible firms in the construction business.

It’s a textbook case of what economists know as the “market for lemons”, a market failure that can be rectified by strong regulation.  You can see a short animated description, Mark Seccombe’s 12 -minute lecture, or you can read George Akerlof’s original 1970 paper.  Business people and their lobbies often complain about regulation, without realising that in situations such as high-rise residential construction a whole industry suffers when there is inadequate regulation, as consumers walk away and spend their money elsewhere.