Friday, March 2, 2012
The 'Certainty' Myth
"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.....
Posted by Mr D at 10:46 PM