There’s spending, yes, but this is a thoroughly capitalist budget from start to finish | The Canberra Times

news, federal-politics, jack waterford, federal budget, budget 2020, 2020 budget, capitalism, invisible hand, trickle-down

The coronavirus recession budget involves many opportunities to use the word unprecedented, but here’s one not being mentioned. This is the biggest budget, proportionately, ever devoted by a Western economy to the fundamental theory of modern capitalism: the theory of the hidden hand. Never has such a budget made it easier for a private sector entrepreneur to invest or spend money; indeed, if the investment is into someone else’s goods and services, and the spending produces a job for another, the government will handsomely subsidise it. One might think that any business, or any person, with a viable idea for developing a business able to make profits has never had it as easy as they will have it once the budget is adopted. Just to make things easier, a vast number of Australian consumers will be given large sums of money, primarily by tax cuts, but also because of at least temporarily higher welfare benefits, or job subsidies. Collectively, with the subsidies going to business, the extra government budget deficit – or extra cash being poured into the economy – amounts to about $10,000 for every Australia citizen. Enough surely to indicate massively increased demand for every useful product, desirable good, or valuable service that Australian consumers would want. So what should the woman wanting to start a new business do? Or the businessman who had a viable business until it was brought to an abrupt halt by the shutdowns imposed by the pandemic, now probably beyond resuscitation? The answer from the government is: use your imagination. There’s not much guidance available. This is not a government promoting much in the way of particular outcomes it wants, so much as it is promising the sort of business environment in which anyone willing to “have a go” will get more assistance than most businesses have had over the past 100 years. If there are some areas one might be a mug to invest in – international tourism over the next year or two, perhaps, or the future of copper telephone lines- these ought to be fairly obvious. Likewise, the government has given some signals as to areas where, it asserts, Australia has comparative advantages that the government is going to promote – cheap conventional energy, for example – but the eager entrepreneur might not readily have access to the money for a new power station. Government, in short, is putting its faith in the notion that the sum total of the collective decisions made by every Australian will form the marketplace most calculated to produce the most vibrant and growing economy. The sum of perceptions of individual or corporate self-interest – and the efforts government has made, not least through handouts and reduced taxation – will, by this theory, massively increase freedom of production and freedom of consumption. The interplay between all of these individual effects on supply and demand will tend towards equilibrium, affect prices and profits, and itself stimulate new investment in areas where new fields for profits are perceived. Saying that this is the theory that seems to underpin this budget is not to say that Josh Frydenberg and Scott Morrison have not tried to simultaneously deal with some individual social problems, or to set aspects of the physical, social or economic environment in ways designed to make them more active areas of investment. The government, for example, has recognised that the pandemic had particularly harsh economic effects on younger Australians (relatively few of whom suffered directly from the virus itself). Thus it has produced an array of job subsidies, training opportunities and labour market programs designed to sop up youth unemployment, generally always at higher levels than for older Australians. Some of its efforts extend to men and women up to the age of 35. Though the term “apprenticeships” generally invites thoughts of carpenters, plumbers and electricians, the government’s system is not prescriptive – and could well involve jobs not traditionally regarded as blue-collar ones, or tradies’ jobs. Likewise, allowing almost instant write-off of capital spending (no doubt generously defined) and back-ending of losses to offset future profits is not pushing business towards any particular destination. It’s a brave, bold experiment, made more dicey by a host of considerations. First, the costs to government are calculated according to a host of assumptions about how Australia walks away from the pandemic, and with Australians well-vaccinated. The evidence already suggests that the “snap back” will be more regional and patchy than forecast, and the hopes about vaccines and vaccination programs are just that. READ MORE: There are whole areas of the economy that will recover much more slowly than the average, even if Australians go on a consumption rampage. Air traffic, tourism, and our export dollars from university students, overseas visitors and consumer demand from nations we have not gone out of our way to insult might be examples of industries not much helped by Tuesday’s budget. In some cases – as with the conscious and deliberate damage done to universities on top of the closed borders, or to the arts (regarded as a cultural enemy of the philistine Morrison government) – the wreckage, including to lives, careers and hopes, will take a long time to undo, even as the nation desperately needs just the sort of educational and cultural outcomes that a free market ought to be able to produce. It is one thing to acknowledge the increased unemployment of younger Australians. But this budget has offered little to older Australians, and by failing to offer much in the way of childcare accessibility or affordability may have created fresh obstacles to sopping up unemployment, or falls in the participation rate. But the most heroic decision of all is in the assumption that in this new market the public sector is but dead wood, and that only the private sector – the business of capitalism – can create wealth and growth. It is from the public sector that Australians most get basic economic activity such as care for the aged, for young children, hospitals and health in the community, education for life and work, mental health care, and the system of law and order that makes the Australian nation, and Australian society, a safe, stable and forward-looking place where businesses of all sort can develop and prosper, attractive to outsiders for work, settlement or tourism. Economic activity by these ignored centres amounts to about a quarter of the national income. Ignoring it – or, as in this case, consciously spurning it – is the biggest gamble of all.

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