Friday, March 2, 2012

The 'Certainty' Myth

A sub-narrative amid the media thumbsucking about the future of the Australian Labor Party after the leadership spill has been the ritual calls from business leaders for the removal of "uncertainty" - the idea being that the economy has ground to a standstill as the egos exchange handbags in Canberra.

"Business groups have welcomed (the resolution of the) leadership ballot, saying having Julia Gillard remain prime minister delivers certainty to small business," one article said, quoting the small business council. Echoing that view was big business council boss Graham Bradley, who told The Australian, that business needed, yes, "certainty" and an end to the Labor feud.

And on and on it went, as a cavalcade of CEOs, pinstriped bankers, cigar-chomping miners and sundry thinktankers  lined up to plead that the very wheels of capitalism were at risk of falling off if Kevin and Julia did not bury the hatchet in one or the other's head as of yesterday.


The reflex approach of journalists in reporting the claims of big and small business is to start from the assumption that everything they say is true and noble and civic minded. No-one ever suspects that they have anything else in mind than the good of the general community.  Certainty? Why yes, sir, it is quite unfair that you should ever have to live without your every endeavour being greased by the wheels of the state.

The first assumption here, of course, is that democracy is all fine and dandy, but the big end of town really does prefer that the real red-in-tooth-and-claw nature of politics not get in the way of their making money. And if politicians' heads are to be cracked it is preferable that the business council or minerals council be the ones doing the cracking.

The second assumption is that the desire for 'certainty' is solely the preserve of capitalists. Yet in the past 30 years, wage and salary slaves have had to wear more and more risk themselves - in the form of reduced  employment conditions, the impact of hugely volatile markets on their retirement savings , the gradual move to 'user pays' in health care and the slow destruction of public education while the rich are subsidised by the state into private schools. But that uncertainty is OK, it seems, because it is about imposing the discipline of 'the market' to every part of the wider public's lives.

So we witness the utter hypocrisy of capitalists preaching the need for 'certainty' for themselves while telling everyone else to suck up the market forces. Yet those same "industry leaders" go crawling to the government for taxpayer bailouts when their businesses find market forces too much to bear. They privatise their profits and socialise their losses without a hint of embarrassment.

So confronted with this special pleading from business, journalists could do the public a favour by exercising the scepticism that they pride themselves on when reporting the vainglorious utterances of politicians. They might also like to test business' claims against what is actually going on in the financial markets.

For instance, the Australian dollar - commonly seen as the canary in the coal mine of global risk sentiment - has gained 5 per cent against the US dollar this year and throughout the Gillard-Rudd stoush has traded between $US1.06 and $1.08, near the top of its recent range. It also has approached six month highs against the yen and has continued its ascent even as our terms of trade begin to decline.

Indeed, since Gillard came to office in June, 2010, the Australian dollar has climbed 23 per cent against its US counterpart, the second strongest performance out of 31 currencies tracked by Bloomberg. So if the currency is a measure of the perceived health of the Australian economy, the "uncertainty" of the Labor ructions these past 18 months is clearly not an influence.

Also bear in mind that the reason the Australian dollar is so strong is the unprecedented foreign demand for Australian government bonds, which are among the last 'AAA'-rated issues left in the world. According to Bloomberg, Aussie government bonds have returned 40 per cent for foreign buyers since Gillard took over. At the same time, the cost to insure our government debt - as measured by credit default swaps - has hit six month lows this week.

This is telling you that big money investors - portfolio managers with billions at stake - were  not spooked in the slightest by the catfight in Canberra.  In other words, people running bond portfolios out of London, Tokyo or New York knew that whoever won the ballot, the macro policy settings would not change.

So we have local business leaders and rent-seekers running around screaming the sky is about to fall in - and journalists blandly reporting their whining - while big international capitalists just see a remarkably stable and well managed safe haven offering attractive bond yields of around 4 per cent and an appreciating currency.

The irony is that part of the reason Gillard has been in trouble in the polls has been the damage that the strong currency is doing to just about every industry outside a supercharged resource sector. If you recall, Labor did have a plan to deal with that imbalance. It was called the RSPT. But then business pleaded for certainty.....

26 comments:

  1. Fucking brilliant

    ReplyDelete
  2. "So we witness the utter hypocrisy of capitalists preaching the need for 'certainty' for themselves while telling everyone else to suck up the market forces Yet those same "industry leaders" go crawling to the government for taxpayer bailouts when their businesses find market forces too much to bear."


    OUCH!!

    Paul Espie on Lateline last night was another example: http://www.abc.net.au/lateline/content/2012/s3440888.htm

    I often wonder how some of these industry leaders keep a straight face.

    Great post Mr D.


    johnny come lately

    ReplyDelete
    Replies
    1. Yeah - Espie had quite a hide. And then he looked offended and taken aback when Emma Albo... asked him to confirm his connections with the Liberal Party.

      Delete
  3. This piece should be published in The Age, The Australian, The Drum, The (gasp) Fin Review - it deserves much wider readership

    ReplyDelete
  4. That would be the same Graham Bradley who, as head of Bluescope, was warned repeatedly that China would become a net exporter of steel. Bradley batted away the idea that it would profoundly change Bluescope's market environment. Then, China became a net exporter of steel, which was part of a whole lot of economic developments which saw the $au appreciate against other currencies - all of which were eminently foreseeable.

    Bradley can't handle certainty. Bradley doesn't know about management. Then again, questioning Bradley wouldn't be proper journalism, would it.

    ReplyDelete
    Replies
    1. Bradley is not the only one Andrew, most are too greedy and too stupid to realize that `free-trade` is code for `Australia is the dumping ground`, and `productivity` is code for `no value adding done here`. Politicians, Businesses and embedded media are all dopey on this.

      Delete
  5. A question as to procedure Mr D, if you would.
    You write "the ritual calls from business leaders for the removal blah blah blah".
    Who would have initiated those ritual calls?
    Did the journos call the business leaders or did the business leader[s] contact the journos [via instructions from an editor perhaps?].
    Who made the running here, in your experience?
    Whose idea was this?

    fred

    ReplyDelete
    Replies
    1. It`s really simple actually, trollumnists at blogs.very.limited.news/fact-free-propaganda troll their masters favorite topics. Then finding the latest Liberal or corporate media release start the bleating. Before you know it, the rest follow, Sunrise, ACA, LatelineLand, the LOT.

      Delete
  6. OOps, the reference to editors is misplaced, it should refer to the journos.

    fred

    ReplyDelete
  7. Fred, you're asking did journos initiate the calls. Check out this news release from the BCA:

    http://www.bca.com.au/Content/101945.aspx

    ReplyDelete
    Replies
    1. Thanks Mr D.
      Nice article BTW.

      fred

      Delete
  8. Speaking the truth to power is no longer to be found in our pathetic msn. It is only found in the best of the internet sites like Mr Denmore's. Good on you you are worth bottling!

    ReplyDelete
  9. Another ace Mr Denmore.

    However, the likelihood of a similarly clear-headed and clearly-written analysis appearing in mainstream media outlets is ... uncertain

    Fractious

    ReplyDelete
  10. I saw red when The Age was blaming Julia Gillard for Alcoa threatening to close its Point Henry smelter.

    The smelter was built 50 years ago to process low-grade bauxite, the plant is powered by cheap electricity provided by the State Electricity Commission. The plant hasn't had a substantial upgrade, alternate sources of higher grade bauxite are now available, cheaper power is available in Iceland. The then Liberal Premier of Victoria, Jeff Kennett broke up the State Electricity Commission in 1992 and the electricity generation is owned by British for profit interests. The directors of the Alcoa Australia holding company AWC have won the accolades of financial analysts. NOT

    The Age prints so many lies it's disturbing.

    Billie

    ReplyDelete
  11. A superb article, Mr. Denmore - thank you very much.

    ReplyDelete
  12. I suspect that the major reason that Gillard has been so hounded is that she is the most adept minority negotiator (probably because she isn't a big, swinging, authoritarian dick like Rudd, Abbot (a dick AND an ex-journalist) and the rest of the schoolboys). This makes it a lot harder for the rest of the bullying clique (said CEOs, bankers, miners and their tame think tank propagandists) to quietly capture the agenda without letting the peons know it was cooked (vide Rudd's RSPT and the neutered dog's breakfast of his attempt to do something about carbon emissions). Thank Dog that sufficient numbers in the caucus aren't still dedicated members of the Fight Club.

    There really is something vitally reaffirming about having a female PM who negotiates the filthy compromises required as openly as she can - the least important, but most satisfying, being that the reduces the petulant schoolchildren (especially the bullying prefect, his poodle and his masters) to inchoate rage.

    ReplyDelete
    Replies
    1. '...a big, swinging, authoritarian dick...' First thing I thought of was Rudd's, Abbott's... never mind.

      Thanks rhwombat, I'm going to have to slaughter a pig to get that image out of my brain :)

      Delete
  13. There is so much right in this article it's amazing.

    You are an inspiration.

    ReplyDelete
  14. Excellent post Mr-D. I`m glad somebody else is noticing that the mega-rich bleating is amplified, while the working class are being screwed over & ignored by the embedded media. They haven`t woken up to the retail bleating either and how it`s all linked.

    ReplyDelete
  15. This article should feature as part of economics/politics 101.

    Why don't we have more journos - even at the ABC - who cut through the bullshio & put 2 + 2 together like this piece does?

    ReplyDelete
  16. Hear fucking hear, Mr Denmore.

    I'm conscious of the bias with every piece of drivel I read, and yet (as happens so often when I read this blog) I am always surprised at the level of emotion that floods out of me when I read pieces that reflect reality. Thanks for keeping me somewhat sane.

    ReplyDelete
  17. Wonderful article Mr D.
    Pity it isn't in one of the main papers to show them up

    ReplyDelete
  18. What amazes me in all this is that while it's blindingly obvious to all of us who are interested in public policy, the actual members of the Government have been so ham fisted in taking on these groups. One of the many successes of the Hawke Government was the adroitness in dealing with interest groups and ensuring that they were both heard, but that the government's own messages were heard. Rudd, Gillard and Swan have fumbled so many dealings with the interest groups that they've lost more than they've won. The thing with interest groups is that you must be adroit and pragmatic: build your case publicly and privately, step back when you need to and move when you can. All the best politicians do this, and are able, over time, to shift the agenda. The RSPT was so ineptly handled that it played straight into the miners hands. Yes, one media group certainly helped, but as this article correctly shows, if you let the interest groups do the talking, the blatent self-interest becomes obvious.

    ReplyDelete
  19. Good points, Anonymous. It's worth listening to George Megalogenis' discussion on ABC with Richard Fidler. You can get it on podcast. George makes the point that the difference now to the '80s reforms was that the government had the opposition on its side. Pragmatic, economically rational reform like the RSPT would have been easier to get through then because the Opposition was not being partisan for the sake of it. Unfortunately, as Swan rightly points out in his essay in The Monthly, Abbott and the ugly crew he leads have taken on the tactics of the Tea Party - and we're gradually sliding in the US mould of gridlock through perpetual partisanship.

    ReplyDelete