Posted: May 18, 2005

A drought is a drought!

This morning on the ABC AM program talk turned to the problems that the on-going drought are posing for the Australian rural communities. The Deputy Prime Minister John Anderson was interviewed and as you would expect, given he heads the National Party, was extremely sympathetic to the farmers who are demanding more income support. Here is the Transcript. Anyway, as I listened it became obvious that once again the politicians see misfortune in different ways depending on which group is experiencing the misfortune.

While not denying the drought is problematic for rural income generation and understanding it is a systemic failure - too little rain, I also know enough about permaculture to know that current farming practices only worsen the situation that drought presents. In that case, while there is too little rain we could easily blame the farmers for their lack of training and lack of endeavour to innovate and introduce new farming methods. If we then started to concentrate on that line of reasoning we could easily start a punitive system of 'activity tests' and other mean-spirited and time-wasting compliance requirements before we provided them with the Newstart allowance. However, wisely, we do not resort to that sort of reasoning and instead construct the problem as a lack of rain. I wish the Federal Government would develop an awareness among farmers of new practices which are more environmentally sustaining but I would not want them to do this in a punitive compliance regime.

In the AM interview, the interview was about the plan by the Federal Government to tie funds for water assistance to the States to the latter's willingness to comply with other Federal demands. In gangster movies we would call this way of doing business 'extortion'. But I digress, so back to my story. The ABC interviewer Alexandra Kirk picks up the interview ...

ALEXANDRA KIRK: Now, the next few weeks are going to be critical for farmers. If it doesn't rain, they're saying that they'll lose another winter crop. How quickly is the Government willing to act?
JOHN ANDERSON: Well, I think quickly. But I'd make this point - one of the reasons, and this is I think significant with your broader audience, it's terribly important to recognise that this has national economic ramifications as well ...
So I just make this point, if you like on behalf of farmers, it's terribly important that we ensure the sector gets through this, for the broader economy's sake as well as for the individual farm families, many of whom - as I think has been widely reported - are experiencing terrible suffering.
I live with it. I'm out in rural areas all the time, and while there are some relatively fortunate areas, I have to say they're few and far between and a lot of people really are experiencing stress levels that I think perhaps your listeners could best understand if they were to say well, how would it be if instead of having an income for the last four years, every year I'd just gone deeper into debt.

Well, it is interesting how the Government (and most nearly all the media) construct economic losses and suffering. This is a Government that allows around 1.8 million Australians to have no work or less work than they desire. The Government has perpetuated the inheritance it received from the incompetent last Labor Government and the previous conservative government before that. For 30 years we have, on a daily basis, wasted millions of dollars of lost income because we have chosen macroeconomic policies that deliberately ensure there is not enough spending to generate the necessary jobs to fully employ the most disadvantaged workers in our communities.

So when the Deputy PM says that we should do some 'role playing' and try to "best understand if they were to say well, how would it be if instead of having an income for the last four years, every year I'd just gone deeper into debt." then I would refer him to the unemployed some of whom have been unemployed for at least that long. The only part of the 'experience' they will not be able to easily relate to is that even though the Government has deprived them of an opportunity to earn an income, they are unlikely to have gone increasingly in debt, given the asymmetries in the credit markets - unemployed farmers facing a lack of rain can borrow because ultimately the Government will bail them out - whereas unemployed workers generally facing a lack (drought) of jobs can never access credit to maintain their lifestyles. In the latter case the living standards fall, the family often breaks down and various other social pathologies drain the self-esteem and motivation of the afflicted.

Of course, the Government is so far off the mark it does not matter. In their ideological verve to get single parents (mothers) and disabled people running around in circles (called the Job Network) with the unemployed, they have decided to change the welfare system. Their so-called welfare-to-work measures in the Budget which are actually welfare-to-circus measures are particularly repugnant. They are now about to get cuts in their benefits (around $22 per week for sole parents and $40 per week for DSP recipients) as a result. It is also the case that the marginal tax rate on the lower benefits is 60 per cent instead of the 40 per cent on their former pensions. This shows clearly that the Government is not even motivated by (erroneous) orthodox economic theory which would predict this change would actually entrench people in non-work (for utility maximising reasons). Anyway, I should not complain, as a high income earner my marginal tax rate is down and the high income superannuation levy gone and so three cheers for the Government, NOT!

Anyway, I am sorry for often appearing simple but the drought bit seems simple enough to me. A drought is a drought. Rain or jobs. Fortunately, a drought of jobs can be readily addressed through appropriate changes in Government macroeconomic policy. A good place to start would be to introduce a Job Guarantee. If only!

Blog entry posted by bill