Economics is like a tyre lever, it can either be used to solve a problem or to beat someone over the head. Unfortunately, over the past couple of decades politicians and self-described business leaders have primarily used economics as a tool of mass confusion to conceal the scope of the policy options we face and persuade us to "take our medicine", no matter how bitter or ineffective it may be.
Done well, economics should both broaden the menu of policy ideas we can choose from while helping us to understand the costs, and benefits, of those choices. Done badly, economics excludes people from the conversation through cryptic nonsense and belittling elitist language. I call that "Econobabble".
Nintendo looks at new corprate strategy
Samsung soars with AUS$9.3b earnings
Will we see a 1.5% cash rate, and how will markets react?
Greece, lenders clinch bailout deal
Facebook shares to fall bets expert
Netflix misses subscriber growth expectations
Tesla safety on Australia's roads
Business Council of Australia chief executive Jennifer Westacott says she's concerned about the deficit levy and has called for the government to reconsider the GST.
Unfortunately, the primary role of economics in Australian political debate has become the narrowing of the choices we face and scaring the public into doing things we don't want to do. You know the stuff: if we don't cut the company tax rate we will become "uncompetitive"; if we don't cut the top tax rate then rich people will have no "incentive" to work hard; and if we don't cut the meagre welfare benefits of the poor then the budget will become "unsustainable".
Proposals to simply increase tax and invest more in our health and education systems are, we are told, "reckless". And government proposing such "fiscally irresponsible" policy change would "spook the markets" and we would be "marked down by the rating agencies". Econobabble at its finest.
One of the main reasons public debate makes so little sense these days is that our airwaves and newspapers are full of people using pseudo economic nonsense and jargon when they could use plain English. Those who really understand economics can explain it in plain English, which raises the question of whether the econobabblers understand much economics, or if they are deliberately being confusing.
Australia is one of the richest countries in the world, living at the richest point in world history. While poverty and disadvantage dominate the lives of many Australians, collectively we have the resources to solve any problem we want. We could spend as much on education as Finland does. We could spend as much in child care as France does. Or we can collect as little tax as Singapore does. These are choices we face, and their consequences are extremely important.
But rather than have an open debate about the kind of country we want to build, we have a closed debate about tax reform. Rather than have a democratic debate about our national priorities, we have a technocratic debate about the merits of capital gains tax concessions.
Like the gods of cultures past, "the markets" are used to scare the public into accepting the need to cut corporate tax rates just 12 months after we cut spending on health and education. Econobabble plays a central role in convincing the public that there is no alternative to the policies that have done nothing to close the gap between rich and poor, men and women or indigenous and non-indigenous Australians.
Econobabble is so powerful it has made the choices made by northern Europeans vanish from our policy debates. Norway has accumulated a trillion dollar sovereign wealth fund by taxing fossil fuel extraction in the way Australians were told would "drive investment offshore". Denmark has one of the highest shares of tax-to-GDP in the world and yet it is one of the richest countries in the world. Northern Europeans work shorter hours and take longer annual holidays than Australians and their economies have not collapsed.
Of course, we may not aspire to having more leisure, high labour productivity and a world-class education system. As a nation we may instead prefer go down the road of lower taxes, less public infrastructure, fewer public services and the approach outlined by Joe Hockey in his speeches on the "age of entitlement". It's actually up to us, not "the markets".
There are no easy choices and no magic puddings. It's up to you what kind of society you want to live in and the price you are willing to pay for it.
Clear speaking economists can play a role in helping people understand the choices they face, and econobabblers can play a role in concealing them. It's up to you if you want to call bullshit, or "econobabble" when you hear it. It's not hard to do. Just demand that people speak to you in plain English and ignore those who won't, or can't.
It's up to you if you want to call bullsh-t, or 'econobabble' when you hear it.
Richard Denniss is the author of Econobabble, published by Redback Quarterly, and chief economist for The Australia Institute.