Public ideas, including holiday reading

The state as a source of value

Economic conservatives tend to think of the government as an unproductive economic overhead: the smaller the better. More compassionate people see the state primarily in terms of redistribution through social security transfers, and means-tested services for the poor. Mainstream economists see the state in terms of working where the private sector doesn’t work, or doesn’t work so well, compensating for market failure through providing services or regulating the private sector.

Mariana Mazzucato sees an even more central role for the state, in terms of the economic services provided by a public sector that is “sexy, edgy and crazy”.

She uses health care as an example of her ideas. Economists argue that if the government provides good health care for all, the economy will benefit – a relationship confirmed by various nations’ performance in dealing with Covid-19. But Mazzucato turns the idea around, asking how we can set up an economic structure that ensures health care is delivered for all.

She explains her idea of government in a 27-minute interview on the ABC’s Sunday Extra: Rethinking the state. Her ideas are hardly radical. They simply involve our letting go of any idea that somehow government services do no more than to fill in for the private sector, and our embracing the idea that government services make a positive contribution to our wellbeing. (Miriam Lyons and I, drawing on Mazzucato’s ideas, expressed that same idea strongly in our 2015 work Governomics: can we afford small government?)

Mazzucato’s latest book is Mission economy: a moonshot guide to changing capitalism. To quote from her website:

Mission Economy looks at the grand challenges facing us in a radically new way, arguing that we must rethink the capacities and role of government within the economy and society, and above all recover a sense of public purpose.

The fiscal bargain – why we have come to love taxes

Our attitude to taxes is akin to our attitude to dentistry: it’s worth enduring the pain in order to enjoy the benefits.

Miranda Stewart of the University of Melbourne describes this “fiscal bargain” and other aspects of public revenue in the ABC’s The Money program. (Link to the December 1 program, from 14 minutes to the end at 33 minutes.) She gives a history of public revenue, explaining that the convention of governments relying on taxes that are collected with the consent of the governed, held in a consolidated revenue fund, and used to fund public goods, is a relatively new development, that political philosopher Joseph Schumpeter called the “tax state”.

Governments have generally relied on taxing income to collect revenue, and because most income in a modern economy is in the form of wages, an economic structure that sustains high wages will make for easy fiscal management. (That’s a simple bit of financial mathematics that conservatives don’t always understand).

That system works reasonably well as a means to deal with economic inequality resulting from income disparities. But the growing economic inequality of our time relates to disparities in wealth, and we need to re-design our tax systems to cope with this development, as well as with the emerging technical issues associated with a digitalized economy.

Miranda Stewart is author of Tax and government in the 21st century. In the interview she mentions Peter Carey’s 2020 book The tax inspector, which could also be good holiday reading.

Where is capitalism headed?

Karl Marx got one or two things wrong. There has never been a transition from capitalism to communism, for example. But he also got quite a few things right about capitalism’s likely path through history and its weaknesses.

David Elias Aviles Espinoza of the University of Sydney, writing in The Conversation, describes our times as an era of “late capitalism”, a concept developed by Belgian Marxist Ernest Mandel: We live in a time of ‘late capitalism’. But what does that mean? And what’s so late about it?

“One of the main features of late capitalism is the increasing amounts of capital investments into non-traditional productive areas, such as the expansion of credit”, he writes. He goes on to review the 1991 work of Marxist literary critic Fredric Jameson who took up the idea of late capitalism. Jameson describes an economic system in which everything, including arts and lifestyle activities, becomes commodified. “In this capitalist stage, we see innovation for the sake of innovation, a superficial projected image of self via celebrities or ‘influencers’ channelled through social media, and so on”.

Maybe “late capitalism” is a stable system, or maybe it will give way to a post-materialist economic system. Espinoza leaves that question open. He provides plenty of hyperlinks to the works of economic philosophers, some recent, some historical, some Marxist, some in the economic mainstream. There’s plenty for those who want to impress their friends with serious and heavy holiday reading.

Democracy is under attack, but it’s not going under

Don’t believe the naysayers: democracy is alive and well, and on the rise in places.

Martyn Goddard, in his usual thorough style, has an article on his Policy Post So there’s a crisis in global democracy? Actually, no. “It’s the autocrats, not the democrats, who are in trouble” he writes.

He presents a suite of indicators on democracy, acknowledging that over this century so far the number of countries classified as “full democracies” has fallen, and that there has been a particularly sharp decline in democracy in the US. There has been some retreat in the number of countries that can be classified as “liberal democracies” where people’s rights go beyond fair elections and include equality before the law and constraints on executive government. But there has been an expansion in the number of people enjoying at least the right to participate in “meaningful, free and fair, and multi-party elections”, even if they do not have the rights the people of the Nordic countries or Australia enjoy.

And he takes a longer-term time frame, going back to 1800. There has been a big rise in the number of nation states since 1945, with the growth of democracies easily outpacing the growth in non-democracies.

As for the US, whose democratic decline has captured so much of our attention, it may be enjoying a slow recovery from the worst of Trumpism. And he sees problems in the world’s most prominent autocracies, writing about “Putin’s great big-stuff up” and “Xi Jinping’s great stumble forward”.

Goddard’s contribution takes a long-term and broad view. Indonesia, a country counted as the world’s third largest democracy, has just yielded to the far right in passing a set of laws controlling people’s sexual behaviour and criminalizing behaviour that counts as insulting the president and vice-president. Democratization suffers many setbacks.

Finland’s Prime Minister explains the world to Australia

Finland’s Prime Minister, Sanna Marin, has been in Australia, primarily to develop cooperation between our countries on renewable energy development, trade in critical minerals, and trade in technologies.

She outlines her agenda in an address to the Lowy Institute How a strong Europe can contribute to a more secure world. The site includes a full transcript of her address. (The whole session is 54 minutes: the first 17 is her address, the rest is a Q&A session, comprising mainly a discussion with the chair, Michael Fullilove.)

Her speech and much of the discussion is dominated by defence security issues – NATO membership, Ukraine and Russia. The need for western Europe to break its dependence on Russian energy integrates with its need to combat climate change and to pursue a path of economic growth through a major industrial transformation. Finland is committed to net zero by 2035, and to negative emissions from then on.

Refreshingly she sees no trade-off between her country’s commitment to open, liberal, social democratic values, and its need to devote resources to military security. In this context, answering a question from ANUs’ Rory Medcalf about transparency and Finland’s reputation for integrity in government, she stresses that part of Finland’s strength lies in all its citizens having a shared life. That leads at the end of the session to a discussion about Finland’s culture of Susu – a property that might translate to “inner strength”, “guts”, or “solidarity through shared historical experience”.

She has some wise words on globalization: policies to ensure a nation has enough self-sufficiency and resilience to deal with external shocks are quite compatible with trade openness. The idea that there is a binary choice between openness and protectionism is a false dichotomy.

As a reminder to those who see the breakdown of our two-party system as some tragedy, she mentions that there are five parties in her broadly left-of-centre governing coalition.

The Lowy session, with its emphasis on policy, contrasts starkly to a cringeworthy interview on the ABC’s 730, in which Sarah Ferguson seems to be obsessed by her gender, age and a media beat-up about her enjoying the company of her mates at a party. Apparently it’s OK for old men in political office to enjoy the company of their friends (providing they are respectable people from armaments, pharmaceutical and fossil fuel lobbies), but not for young women in public office.

In the 11-minute interview Marin does manage to get in the occasional snippet about policy. When Ferguson asks her about her own life experience through Finland’s well-regarded education system, she replies in terms of the country’s education policy: “we cannot afford to lose someone in society”. That’s about seeing everyone who is not educated to his or her potential as a waste. It’s about seeing education as an investment. That view contrasts strongly with the idea that public spending on education is simply part of distributive welfare.

Fifty reading recommendations and more

The Australia Institute has put together its Essential reading list for 2022 – around 50 titles (including 7 fiction works), many of which have been linked in these roundups.

Josiah Osgood, writing in Time, summarizes his book Uncommon wrath: how Caesar and Cato’s deadly rivalry destroyed the Roman republic. His summary – The Romans destroyed their republic in partisan warfare. We might too – draws attention to the parallels between the Roman republic in its last days and the US today, and is relevant to all democracies.

On last weekend Saturday Extra Geraldine Doogue interviewed Ian Tyrrell of the University of New South Wales, author of American exceptionalism – a new history of an old idea. In the 15-minute interview – The history of American exceptionalism – Tyrrell distinguishes between American exceptionalism and the Trumpian Make America Great Again (MAGA) movement.