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Fiscal policy in Australia is undermining the future of our grandchildren

Summary:
Its Wednesday, so just a few short snippets that came to my attention, some comedy and some great music that has kept me company today while I have been working today. The first snippet concerns my revelation that fiscal policy in Australia is undermining the future of our grandchildren. Yes, an out-of-control government is spending our way to a future oblivion. The second snippet is my analysis of the latest INSA/YouGov German poll which shows that the euphoria if you can call it that which followed the formation of the GroKo has now dissipated and the AfD have overtaken the SPD in popularity. Which tells you that the progressive movements in Germany are failing. Why? Because they decided not to be progressive and, instead, decided to ape the conservatives. Not a good idea. The polls are

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Its Wednesday, so just a few short snippets that came to my attention, some comedy and some great music that has kept me company today while I have been working today. The first snippet concerns my revelation that fiscal policy in Australia is undermining the future of our grandchildren. Yes, an out-of-control government is spending our way to a future oblivion. The second snippet is my analysis of the latest INSA/YouGov German poll which shows that the euphoria if you can call it that which followed the formation of the GroKo has now dissipated and the AfD have overtaken the SPD in popularity. Which tells you that the progressive movements in Germany are failing. Why? Because they decided not to be progressive and, instead, decided to ape the conservatives. Not a good idea. The polls are showing why.

Fiscal stupidity undermines the future of our grandchildren

Yes, you read that correctly.

The fiscal policies employed by the Australian government are working against the future of our children and their children.

How do I know that?

The peak body representing Australian Universities – Universities Australia (no less) released a statement yesterday (July 10, 2018) – Government and business must rev up R&D or we’ll risk national prosperity – summarising its submission to the upcoming parliamentary enquiry into research funding.

We learn that:

1. “But, over the past three decades, we’ve seen a worrying trend with Governments conducting less and less R&D – and universities have had to step into the breach to maintain national capacity.”

2. “Australia now spends 1.88 per cent of GDP on research and development, well below the OECD average of 2.38 per cent.”

3. “for the first time since records have been kept, OECD figures show that Australia’s business R&D declined in 2015-16”.

4. Even the austerity-trapped British government “has set a target to spend 2.4 per cent of GDP on R&D.”

5. “Australia’s R&D spend as a percentage of GDP is less than Iceland’s. That’s a country with a population smaller than Canberra” (our capital city).

The OECD data is available HERE.

They produced this interesting bubble chart showing total expenditure as a proportion of GDP on the horizontal axis and the Researchers, per thousand employment on the vertical axis.

That little green bubble is Australia. Look who are to the right and above Australia. Much smarter nations than us it seems.

Fiscal policy in Australia is undermining the future of our grandchildren

Further examination of the data reveals that:

1. Between 2013-14 and 2015-16, private business R&D expenditure fell by 12 per cent ($A2.2 billion).

This highlights a consistent issue in Australia. The private sector has historically underinvested in research and training, preferring to act as a parasite on the public sector efforts in this regard.

The problem then is that over the neoliberal period, public training and research expenditure has not grown sufficiently and the private sector has not picked up the slack.

Lose-lose all round.

2. Over the same period, total R&D expenditure in Australia fell by 7 per cent ($A2.4 billion).

I have worked in universities for a long time now and have been running a research centre since 1998. That centre has to generate all its own funding, which is not an easy task.

As government spending on tertiary education has slowed, universities have been increasingly relying on researchers to generate external funding, in an environment where funding is scarce and getting harder to access.

The overall result is that Australia will fall behind in innovation and productivity growth and our material living standards will fall.

But it won’t be the top-end-of-town that suffers. Unless we (the people) do something about it, the trend where the top-end-of-town captures an increasing share of national income will continue and the rest of us will be left behind.

Real wages growth has been flat for some years now.

Why is R&D being starved of government funds?

The stupid neoliberal policy mindset is the answer.

In 2008, the federal government set up a large fund to help stimulate research in Australia. Then it got caught up in public opinion which demanded that it also set up the National Disability Insurance Scheme (NDIS), which was to be an improved framework for families struggling with mental and physical disabilities.

Funding both you would think would be a Win-win all round.

But not when the Government thinks it has to run fiscal surpluses and so it cut the R&D allocations to ‘pay’ for the NDIS (which started in 2015) among other things.

Of course, it could have had both.

It has since also gone cold on the NDIS idea because it ‘costs too much’.

Go figure.

I am sure our children and their children will work this out and look back on their parents and grandparents as being absolute mindless dolts.

Social Democratic Party in Germany heading for extinction – hopefully

The latest INSA/YouGov poll in Germany is interesting because it reveals that public opinion now ranks the Social Democratic Party (SPD) below the Alternative for Germany (AfD).

The German general election was held on September 24, 2017.

It took until March for the GroKo (Große Koalition) between the CDU/CSU and the SPD to be agreed. The SPD membership voted to enter the GroKo on March 4, 2018, after their party officials swore they would not.

The new German government resumed office on March 14, 2018.

At the time of the election, the voting patterns were:

Party % of vote Seats INSA poll %
CDU/CSU 32.9 246 34.0
SPD 20.5 153 21.0
AfD 12.6 94 8.0
FDP 10.7 80 9.0
Left 9.2 69 11.0
Green 8.9 67 8.0

Note: The INSA poll was taken on September 22, 2017, two days before the election.
AfD = Alternative for Germany
CDU = Christian Democratic Union of Germany
CSU = Christian Social Union in Bavaria
SPD = Social Democratic Party of Germany
Green = ALLIANCE 90 / THE GREENS
FDP = Free Democratic Party
Left = DIE LINKE

In terms of the INSA/YouGov poll, the AfD was considered more popular in the February 19, 2018 poll and maintained that position for 2 weeks, only to slip back below the SPD, as the latter firmed as the GroKo partner with the CDU/CSU.

But in the latest poll from Monday, the SPD has slipped 2 percentage points (19 to 17 per cent) while the AfD has risen from 16.5 to 17.5 per cent. The CDU/CSU remained firm on 29 per cent, well down on its September election result.

The trend is for growing popularity of the AfD and declining SPD appeal, which was interrupted when it entered the GroKo in early March.

This graph shows the movement in voter intentions from the general election on September 28, 2009 to the latest poll on July 9, 2018.

The vertical red line denotes when the general elections were held.

The respondents were responding to the question: “Who would you vote for if the Bundestag election was tomorrow?”

You can download the entire dataset – HERE.

The patterns are fairly clear.

Fiscal policy in Australia is undermining the future of our grandchildren

Here is a more focused view of the same data since the September 24, 2017 election.

Fiscal policy in Australia is undermining the future of our grandchildren

The loss in SPD (under the leadership of Martin Schulz) after the election was stunning. There was some recovery in support after Schulz stood down as party chair on February 13, 2018.

The GroKo deal saw a blip in support upwards as Deputy chair Olaf Scholz was installed as the Finance Minister.

But his conservatism and adoption of a new middle name – to wit “Wolfgang Schäuble” – has not helped maintain the SPD popularity. Quite the opposite.

Germans now prefer the hard-right party AfD to the SPD, which has abandoned its ideals and mission.

The recent shift in voting sentiment is not likely to reverse any time soon and demonstrates the bereftness of the social democratic political movement in Germany.

By playing along with Merkel’s conservatives and pushing a strong Europhile sentiment, the SPD has opened the door for the AfD, which is exploiting the hardships that people are feeling as a result of Germany’s economic policies among other things.

The hope for Eurozone reform

And while on Germany, this is very entertaining.

Brooklyn Funk Essentials

Alexandria Ocasio-Cortez is not the only good thing from New York.

Here is one of my favourite bands – Brooklyn Funk Essentials – which:

… is a music collective who mix jazz, funk, and hip hop, featuring musicians and poets from different cultures.

Their first album from 1995 – Cool and Steady and Easy – is a masterpiece. I listen to it regularly and was doing so today.

Here are two tracks from that album.

The first is Take The L Train (To Brooklyn)

And when you get there Take The L Train (To 8 Avenue) – which is my favourite.

That is enough for today!

(c) Copyright 2018 William Mitchell. All Rights Reserved.

Bill Mitchell
Bill Mitchell is a Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the University of Newcastle, NSW, Australia. He is also a professional musician and plays guitar with the Melbourne Reggae-Dub band – Pressure Drop. The band was popular around the live music scene in Melbourne in the late 1970s and early 1980s. The band reformed in late 2010.

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