Comment

COMMENT
Save
Print
License article

Our government's economic mysticism isn't helping anyone

Show comments

Back in the prehistory of our many societies we used to make sacrifices to our gods for prosperity, with rituals to create a bountiful harvest or to convince the indifferent heavens not to punish us in a bleak winter.

Animals were sacrificed. Effigies were made and destroyed. Altars were erected. Celebrations were had. There was nudity and stuff. It was basically Game of Thrones.

And it didn't actually work, because things like weather and herd migration patterns are not determined by the special wishes of magic people indulging in a blood-soaked, corn-worshipping humpfest, but by forces that humans didn't recognise let alone understand at the time. 

To be clear, it wasn't because humans were stupid: our brains are indistinguishable from those of our cave-dwelling predecessors, let alone our more recent ancestors. It's just that we didn't know enough to realise there was no connection between our sacrifices and the seasons that followed. 

It'd be great if we had gotten to a point where we didn't assume that prosperity was dependent on mystical notions of cause and effect, but the economic indicators have shown our sacrifices are in vain.

Predictably, this has led to government insistence that the reason the gods of the economy are not hearing our prayers about jobs and growth is that we're not rounding up sufficient metaphorical virgins to dump in the slightly-less-metaphorical volcano. 

Advertisement

As Treasurer Scott Morrison has explained, if our mighty job creators are placated through, say, cutting company tax or removing environmental regulations preventing Indian mining conglomerates from building polluting coal mines on Aboriginal land, they will be so grateful for the fat profits being proffered that they will rain down jobs and wage growth like manna from heaven.

And, like our harvest rituals, there is zero connection between the cause and the effect.

The March quarter showed company profits grew by 40 per cent, while employment and wage growth were somewhere between anaemic and non-existent. In the words of my colleague Peter Martin, "Higher commodity prices pushed up company profits almost 40 per cent in the year to March at a time when the wage bill grew 0.9 per cent".

Get that? Profits are soaring, while wages are actually going backwards. 

B-b-but what are we doing wrong? We're constantly told that once our job creators are in profit they will reward the true believers with higher wages and regional employment in important Queensland electorates!

The reason is that the profits and employment are connected softly, if at all. 

People get employed when there is unmet demand in the economy, regardless of whether the people doing the employing are fat with profits or avoiding calls from their lenders. If there's demand out there, a profitable company will hire more people to make more profits; an unprofitable company will hire more people to trade themselves into the black.

If there's no demand in the economy – say, because everyone is terrified about a property crash or the increasingly casual and parlous nature of employment or because they're gripped with an entirely understandable terror that World War III might break out as a result of a misspelled tweet from Donald Trump – then no level of profit is going to make a rich company hire people for funsies. They're for-profit businesses, not charities. 

As for wage growth, workers get pay rises when they have the power to demand it, not when bosses are gripped by a sense of existential largesse.

Individual workers have close to sod-all power, and it's hard to see the current stagnant wage growth as being unconnected with the Abbott/Turnbull governments' furious war on unions over the past few years. 

That's because union membership is poverty immunisation: if the rate drops below a certain threshold then everyone starts getting sick. 

Getting the economy kicking along is a complicated business, especially since Australia's level of prosperity is affected more by decisions made in Washington and Brussels and Beijing than Canberra. Even the least ideologically-driven policymakers are hamstrung by the fact that an Australian government has a limited number of tools at their disposal. 

And maybe that's why Morrison is so keen on perpetuating this level of economic superstition.

After all, once people realise he has no mystical conduit to the economic gods, he looks less like a mighty shaman and more like a mere mortal spouting gobbledygook and frantically waving his hands around. 

3 comments