The Man in the Dream Coat
Parliament has resumed this week amid a deteriorating economic environment and the Government has announced a massive fiscal stimulus that could ultimately result in a national debt of more than $200 billion.
I’ll be commenting on the stimulus later in the week but today I’d like to confine my comments to the Prime Minister’s essay “The Global Financial Crisis” published in The Monthly magazine.
The treatise goes some way to explaining Mr Rudd’s eclectic range of philosophical positions as an ‘economic conservative’, a ‘Christian Socialist’ and now a ‘Social Democrat’.
It’s as if Mr Rudd has a dream coat that changes colour to suit his own political needs at the time. It’s already changed from red to blue to pale pink, reflecting his economic and philosophical journey.
His broad-ranging attack on free markets, capitalism and his new theory of ‘neo-liberalism’ contains any number of contradictions that raise many questions. Not least of which is: “What does this man really believe?”
In channelling discredited economist John Maynard Keynes – whom he described as a successful speculator, despite the fact Keynes twice near lost everything by speculating in the financial markets – Rudd attacks free markets and supports increased levels of government intervention.
But later, Rudd refers to a number of crises that contributed to the current economic environment. He refers to the 1987 stock-market crash, the Gulf War, the 1994 Mexican crisis, the Asian financial crisis and the dot com bubble.
I agree with Mr Rudd when he says that it was the intervention of the US Federal Reserve, riding to the rescue of embattled investors, that added more fuel to the fire. In fact I have written similar things myself.
We differ though in the conclusions we draw. Mr Rudd uses the interventions as an argument against free markets and capitalism. I see it differently. Government intervention to ameliorate investors from losses when they got carried away only delayed financial reckoning day.
But each day of delay in accepting the consequences of irrational exuberance only made the problem worse. We are now facing the results of those poor decisions involving government intervention.
Mr Rudd has certainly put on another economic skin under the guise of being a social democrat but his logic is as flawed as his handling of the Australian economy.