Kevin Rudd on the economy

Kevin Rudd has written a long essay on the Australian economy again. This time it is in the Sydney Morning Herald. Shaun Carney at The Age predicts that:

The article will, predictably, be dismissed and ridiculed by his opponents and other media outlets, not only for what it is but what it argues. Rudd has, as a small part of his argument, quite intentionally climbed right up the noses of free marketeers and neo-liberals over what he sees as their culpability for the global financial crisis. This is a reprise of another one of his long-form essays, which appeared in The Monthly magazine a few months ago.

Anyway, here is part of the article. The rest can be found here.

When Australia last experienced a global recession worse than this one, Jim Scullin and Joe Lyons were prime ministers of Australia, Don Bradman had just begun his Test cricketing career and Charles Kingsford Smith had just made his first flight across the Pacific. Of Australia's current population of nearly 22 million, only 1 million of our number were alive to experience the traumatic impact of the Great Depression.

In its response to the global recession, Australia has sought to learn some lessons of recessions past. To cushion the impact, the Government took strong, early and decisive action through the Nation Building for Recovery plan to support jobs, small business and apprenticeships today by investing in infrastructure for tomorrow.

The alternatives were to do nothing or, worse, effectively replicate the Premiers' Plan of 1931 when governments cut expenditure, thereby compounding the problems created by a private sector already in retreat. The result, of course, was an economic rout, appalling unemployment and a decade of negligible growth through the 1930s.

By contrast, the economic data today suggests the Government's plan is working so far. Australia is performing better than most other economies, with the fastest growth, the second-lowest unemployment and the lowest debt and deficit of all the major advanced economies. And we remain the only advanced economy not to have gone into recession.

Long Waves and Creative Capitalism

Technological theorist and historian Carlota Perez has provided an analysis of the current global economic crisis that locates it within 50 year "long wave" theory and provides an analysis of the condition for a sustainable global boom for the 21st century. This is available here and well worth a read.

Long wave theories were first developed by the Russian economist Nikolai Kondratiev, who was executed by Stalin for his troubles. They were subsequently developed by the Austrian economist Joseph Schumpeter as well as the Marxist Ernest Mandel. Carlota Perez and Chrstopher Freeman have been pioneers in linking this work to technological developments, around the concept of techno-economic paradigms.

Recession hits hard: No food at Chinese Banquets

This from Wednesday 4 March 2009 Courier-Mail online. I suspect the sub-editor meant "No booze, less food at Chinese banquet". Perhaps he/she had just been for a "No food, more booze" dinner.

No food, less booze at China banquets

Article from: Agence France-Presse

From correspondents in Beijing

March 04, 2009 06:25pm

CHINA will no longer wine and dine visiting heads of state at sumptuous banquets, cutting back the fare to just one soup, three dishes and no liquor, a senior official says.

The scaled-down menu comes as China implements government savings and encourages thriftiness in the face of the global financial crisis, said Li Zhaoxing, spokesman for China's
parliament, which convenes this week.

"When our president ... and prime minister invite foreign heads of state, during the state banquet the menu will not exceed one soup and three dishes," Li said.

"No Chinese liquor will be served."

More on California fiscal crisis

From the Financial Times:

SAN FRANCISCO, Dec 19 - California Governor Arnold Schwarzenegger declared a fiscal emergency on Friday to call lawmakers into another special session to tackle the state’s weakening finances, and separately ordered state officials to prepare to furlough and lay off employees to cut costs.

His two actions mark a dramatic escalation in the budget battle waged in recent weeks in Sacramento, the capital of the most populous US state and world’s eighth-largest economy, as its revenues fall harder and faster than expected.

California’s state government now faces a $40 billion budget shortfall over its current and next fiscal years and is on track to run out of cash in February.

California’s Democrat-led legislature concluded its prior special session on Thursday by approving an $18 billion budget package, but Schwarzenegger, a Republican, said he would veto it because he wants lawmakers to both address the state’s budget gap and ease regulations to speed construction projects to help stimulate the state’s economy.

Assembly Speaker Karen Bass said the Democrats’ package would have provided for $3 billion in revenues for transportation projects, accelerated $3 billion in bonds for transportation projects and made it easier for hospital construction and expansion projects to move forward.

The dispute over which approach would better boost California’s ailing economy, underscored by its 8.4 per cent unemployment rate last month, comes on the heels of a decision on Wednesday by the state’s Pooled Money Investment Board to halt $3.8 billion in loans for public works.

The state government needs funds from the Pooled Money Investment Board to pay for vital services. The board’s action affects almost 2,000 projects, including highways, schools, levees, housing and parks.

The legislature now has 45 days to pass and send a bill or bills addressing the state budget to Schwarzenegger.

In the meantime, the state’s Department of Personnel Administration will under Schwarzenegger’s executive order adopt a plan that would go into effect in February to furlough state employees and supervisors for two days per month.

The order also calls for state agencies and departments to initiate layoffs and other ”program efficiency measures” to post savings of up to 10 per cent in the state’s general fund.

”Every California family and business has been forced to cut back during these difficult economic times and state government cannot be exempt from similar belt tightening,” a statement from Schwarzenegger office said.

Assembly Majority Leader Alberto Torrico and two other top Democratic lawmakers issued a statement that said Schwarzenegger’s order ”adds insult to injury for the state’s economy” and chided him for failing to win over either Democrats or Republican lawmakers to his budget plan.

”The governor has shown he can’t negotiate with Republicans, he doesn’t negotiate with Democrats, and now he’s refusing to negotiate with employees,” their statement said.

”It’s the same lack of leadership that has kept him from coming up with a single vote for any budget solution. And now that lack of leadership has resulted in his making a scapegoat of employees who are not the source of the problem.”

Still watching California

The issue of whether the US state of California will go the way of Iceland is still on the agenda.

THE state of California, one of the top 10 largest economies in the world, will run out of money by February, causing "financial Armageddon", according to dire new budget projections.

As of yesterday, the state's debts were mounting at a rate of $US1.7 million ($2.54 million) per hour.

The de facto insolvency of the US's most populous state - home to such economic engines as Silicon Valley, the Central Valley agricultural region, Hollywood, Napa Valley, the Long Beach ports, and the defence research and production facilities of Los Angeles, San Diego, and the Mojave Desert - would represent a new scale of catastrophe in a year that has seen financial markets and economies across the world implode.

Bill Lockyer, the Treasurer of California, has given warning that $US5 billion of public works projects, including road and school construction, will have to be cancelled because the state's lenders are worried about an impending Iceland-style bankruptcy. California - which has a GDP of $US1.7 trillion - already has the worst credit rating of any of the US's 50 states.

"Without a budget solution, state financing of infrastructure projects will stop. It's as simple, and dire, as that," Mr Lockyer said this week.

For California's Republican Governor Arnold Schwarzenegger, the crisis represents a humiliating final act to his second term. Mr Schwarzenegger, 61, came to power in 2003 because of an almost identical financial calamity, which resulted in his Democratic predecessor, Gray Davis, being "recalled" from office.

At the time Mr Schwarzenegger promised an end to California's tax-and-spend policies and runaway expenses, yet over the past four years of his administration the state's budget has grown by 40 per cent to $US144.5 billion. Thanks to the housing crash, recession and credit crunch, the state can no longer afford this with tax collection.

As the crisis continues and California's credit rating deteriorates, the cost to the state of borrowing keeps rising - a process that could ultimately cause the same kind of deadly spiral that this week tipped the Chicago-based publisher of the Los Angeles Times into bankruptcy.

Mr Schwarzenegger is proposing the same kind of emergency tax rises that in 2003 turned Mr Davis into a pariah. He has suggested a 1.5 per cent increase in sales tax - the equivalent of Britain's VAT - and a tripling of the car tax. When Mr Schwarzenegger first ran for office, he did so on a promise to a revoke a similar car tax increase proposed by his predecessor.

So far, however, Republicans in California's legislature have refused to go along with the proposals and Democrats have refused to cut government programmes, hence the stalemate.

Mr Schwarzenegger has declared a "fiscal emergency" to keep California's legislature in session until a solution can be found.

"When you have a crisis the most important thing is to make a decision," said a clearly frustrated Mr Schwarzenegger at a hastily called press conference on Wednesday. There, he presented an electronic display showing how much the deficit is growing in real time: $US470 per second, $US1.7 million per hour, and $US40 million per day.

He put it outside his office in Sacramento in an attempt to get the state's legislators to reach some kind of agreement. "The worst thing is not to make a decision," he said. "The most costly thing we can do is not to take any action."

California's biggest problem is the precipitous decline in tax revenues over the past year. The state's property taxes - the equivalent of Britain's council taxes - are based on the value of a house when it was first bought, and can then rise by no more than 2 per cent a year. This means that by far the most tax revenues come from new property sales, and these have all but dried up.

Adding to the problem is the fact that many homeowners who bought during the bubble years are now successfully appealing against their property taxes, using evidence that the value of their home is less than it was when they purchased it.

Tax revenues have also been hit by the global recession.

Media jobs crisis

The downturn in media industries is really starting to bite in the U.K.

LONDON, Nov 28 (Reuters) - British media companies could cut tens of thousands more jobs in the coming years as the economic downturn hits an industry already ravaged by the Internet revolution.

British newspaper groups and broadcasters have announced a host of cuts in recent weeks as the downturn in advertising caused by wider economic problems eats into revenues.

But analysts believe this is just the latest wave from the troubled industry, and that worse is to come. They expect stabilisation in the advertising industry by 2010 and not a proper recovery until the London Olympic Games in 2012.

Claire Enders, founder of independent consultancy group Enders Analysis, told Reuters she expected about half of all UK media jobs to go by 2013 under current economic conditions.

"We calculated the total jobs in the media in the UK at about 400,000, that includes newspapers, radio, TV, production companies, advertising and so on, at the end of 2007.

"Between the beginning of 2008 and 2013 we're expecting half of those jobs to go. The big employers are the regional press, magazines, local advertising sales. Real numbers are in print."

For more read here. There is also wholesale belt-tightening in the US entertainment industries.

Interestingly, it is predicted that it is those services rely most upon subscriptions (such as BSkyB) that will fare best, and those most reliant on advertising (free-to-air broadcasters such as ITV) will do worst.