It looks like Steve Kates will never get it right on the Great Depression. Harold L. Cole and Lee E. Ohanian wrote a paper blaming Roosevelt’s economic policies for keeping America in depression. Any genuinely informed and honest person would have to agree with them, at least in principle. Now Kates quoted from an article on the work of these two economists that ended with the following quote from Cole:
The fact that the Depression dragged on for years convinced generations of economists and policy-makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes… Ironically, our work shows that the recovery would have been very rapid had the government not intervened.
Steve Kates took immediate umbrage with this view, asserting that “what it doesn’t do is put the blame on public spending which is where the blame truly belongs.” Now there is a fundamental error in Ohanian and Cole’s work but it has nothing to do with public spending, an issue about which Steve Kates is utterly wrong. We get the same nonsense from Sinclair Davidson and Julie Novak who argue that Australia’s recovery from the Great Depression was due to cuts in public spending plus interest rate reductions and devaluation. Continue reading Steve Kates gets it badly wrong on Roosevelt, the Great Depression and government spending
I am frequently asked why free-market thinking in Australia doesn’t seem to be making any headway against the statist thinking. Needless to say, these people also expressed considerable disappointment in Tony Abbott’s economic record, which brings me to the right-wing’s sorry record. No serious scientist ever disconnects from first principles, and the same should go for economists. Unfortunately, first principles are something that our self-appointed advocates of the free market seem incapable of applying, particularly when it comes to the pricing of labour. And this is why, after more than 30 years of intellectual grandstanding, they have failed dismally to persuade the great majority of Australians that the effective minimum wage destroys jobs. Continue reading The minimum wage and defending the free market
I have been asked a number of times what the hell is wrong with Tony Abbott. The answer is simple: The same thing that is wrong with the Liberal Party. The Liberals are still largely governed by statist thinking and Keynesian economics. It is a party without a grasp of sound economic theory, any knowledge of the history of economic thought and thoroughly ignorant of economic history. James Guest, former Liberal MP, is a perfect and depressing example of this dangerous mixture of sanctimonious witlessness.
Five years ago James Guest did the public a service by openly displaying his staggering ignorance of these subjects in an article he wrote for Quadrant in which he attacked Steve Kates for rightly taking issue with the Labor Government’s reckless spending policy to counter the recession. (One can read Kates’ tepid response here). Continue reading Tony Abbott’s lousy economics and the menace of Keynesianism
Over the weekend a friend asked me whether I rated George Megalogenis, a former economics writer for The Australian, as a decent economic thinker. No way. That people with Megalogenis’s low level of economic thinking get respect as economic commentators should bother anyone who holds economics in high esteem. My criticism of Megalogenis applies equally across the political spectrum. Economic arrogance and stupidity is not confined to one politically oriented group.
For example, he supported the destructive carbon tax and the daft idea that it would compel businesses to “switch to cleaner energy sources.” The idea that the tax would instead force them out of business did not occur to him anymore than the idea that the tax would lead to the dissipation of capital. But Megalogenis was not alone in this lunacy. In 2008 the Centre for Independent Studies published a monograph by John Humphreys making the same utterly absurd claims. Since then Alan Moran, Judith Sloan, Steve Kates, Sinclair Davidson, et al., have piled it on the carbon tax and also the assertion that so-called “cleaner energy sources” can support the economy.
Continue reading Bad economics and double-dealing
I think this article about Australia and the Great Depression might open up another chapter on that economic tragedy. It reveals that contrary to the standard view Australia in fact suffered a near monetary collapse and it was this massive deflation that sent the Australian economy into depression. It is a known fact that manufacturing led the recovery. What is revealed here is that though real wages (nominal wages divided by the price level) remained stable during the depression the real factory wage in terms of output fell by 43 per cent! It comes to the remarkable conclusion that Australia recovered not because of the Premiers’ Plan but because the Plan did so little while allowing prices to do their work.
Continue reading Australia and the Great Depression: What you don’t know but should