Vacuum of Policy at the G20  (September 2016)

Recently the G20 concluded resulting in a vacuum of policy changes and a multi-million dollar hit for the global tax-payer.  During that summit Prime Minister Malcolm Turnbull of Australia, an ex-Goldman-Sachs banker, expressed concerns about the global rise in populism.  Populism inferred, we assume, by movements like Brexit and Trumpism. 

In Malcolm Turnbull’s speech, the transcript for which is here he links populism to scare campaigning and refers to it as a threat to all the successful transformations that have been seen and which will lift people out of poverty.  It’s not clear exactly what those transformations look like but the comment flies in the face of a documented trend towards declining middle and lower class wealth and growing riches for the elite.  I’m not sure if Mr Turnbull was downplaying the economic Sword of Damocles swinging over our heads for the benefit of good PR and cooperation amongst his establishment counterparts or whether he really believes the economic decline we are all suffering under is just a minor blip in the road. 

I think the current mess created by the very establishment that invented summits like the G20 and the consequent rise in populism needs to be spelled out for our leaders so I faxed a letter to the prime-minister of Australia, the contents of which I’ve published below.  Anyone feeling as I do should write to their own prime-minister, president or treasurer – assuming you live in a country where such communication is allowed, free of reprisal.  Use any part of the following letter to express your disappointment in the political establishment and demand a return to some semblance of honest balanced politics.

Letter to the Prime Minister Of Australia Explaining Populism.

Dear Prime-minister,

In response to the thoughts on rising populism you expressed at the G20, please allow me to enlighten you with a fresh perspective. 

As a saver I suffer a CPI that exceeds my return on investment, growing fear that that my investments and savings will be lost at some point while there are no sane prospects for growing the wealth I will need to avoid becoming a burden on the state.  To add insult to injury the government taxes me for whatever I do make leaving me with a substantial net negative return.

As an engineer I see a decline in professional jobs.  I see no tangible technology industry growth to support them.  I do however see a building industry propped up and inflated by mal-investment, easy credit and money fleeing China and Asia.  Any claim of rising job numbers according to the ABS is mostly part-time.

Meanwhile as one of the minority of savers I look out over the wider community and note that our country is drowning in private debt with one of the highest personal debt-to-GDP ratios in the world.  At the same time the rest of the globe is inundated with both unpayable public and burgeoning private deficits.  The end result is a global economy that simply can’t facilitate any more spending or justify any further rational private investment.

Peak-debt may sound like an alarmist catch phrase used to describe this situation but what it really means to me is that the public is suffering from financial stress.  Lately that financial stress has manifest as low confidence and disenchantment with government.  It is felt as a lack of opportunity and begets hopelessness.  People see no prosperous future where they can pay off their debts, where they can grow their savings, start a business, achieve financial independence, where there is a future for their children or where they can get a better more fulfilling job. 

To put it bluntly, the part time job market, unionism, protectionism, debt and over-regulation have facilitated a sweat-shop economy.  By that I mean veritable enslavement; where an efficiency-drive to reduce costs for greater corporate profits in an economy short on yield has spawned a virtual cat-o-nine-tails over the backs of most employees.  It means lower wages as people get pushed into working part time at higher rates of productivity.  That translates to declining consumerism, low inflation and reduced profits for small business.  In other words there are just too many people at this time for the opportunities on offer and by the law of supply-and-demand labour costs must drop making employees cheap.  Thanks to employment and wage regulation however that leads to no jobs at all (robotisation) or sweat-shop conditions where people on protected incomes, working protected hours are expected to do much more in less time while being pressured under questionable mechanisms (rarely ethical) that elicit intense working conditions.  If you wonder why mental illness is on the rise, this explanation should help.

The unquestionable trigger for this malaise is low or zero interest rate policy maintained by central-banks everywhere.  It is a policy that has promoted mal-investment, share buy-backs, predatory lending and negative bond yields (effective and real) everywhere.  It has incidentally created an artificial market environment controlled by professional funds and banks that no sane or informed individual investor will touch.  I would posit that such a low yield environment garners an atmosphere of hard-sell, snake-oil business behaviour that causes or exacerbates the stresses being endured by the general public. 

That stress and prevailing sense of enslavement is triggering an awakening; one where the public is beginning to distrust the propaganda and optimistic rhetoric that effervesces out of commercial news and electoral campaigns.  Populism therefore is simply a random accretion of that growing sentiment but ultimately it is an expression of the will of the people.

Such growing distrust isn’t helped by the practice of lavish all expenses paid global summits that appear, superficially at least, to achieve nothing.  The awakening public simply see such conventions as political self-aggrandizing at tax-payer cost.  There was a time perhaps when an affluent majority would have overlooked government excess but clearly as an electorate suffers so should its government.

Unfortunately as you perhaps suspect, the future of populism is hung parliaments, more extreme political parties and civil unrest.  Australia may be a few years behind the rest of the world but political mayhem seems inevitable in an incendiary economic environment that inspires zero confidence. 

The solution to the pickle the world finds itself in may seem illusive.  But I would suggest any solution must start with a return to honest balanced politicking with an appropriate modicum of courage to commit to it.  It is integrity that people have begun to search for from their leaders during the systemic decline that is clearly underway.  It is exactly what they are longing for in the USA and Britain.  Clearly the majority middle class electorate will not abide austere policies that attempt to take money from their empty pockets.  But conversely, placating that electorate with welfare or stimulus won’t benefit treasury insolvency, the public’s financial distress or garner any confidence.  At best that will only win the incumbent government one more election while perpetuating stagnation and recession until the pitchforks are finally dusted off. 

I believe that integrity means levelling with people.  It means educating people on the failure of decades of economic and foreign policy.  It means opening one’s mind to the prospect that there has indeed been a failure.  It means chipping away at the entitlement culture by slowly explaining the unsustainability of the welfare state, unionism, protectionism and many ‘isms besides. 

Honest politics might look like this:  Politicians taking a pay cut for the sake of credibility; call it a ‘performance review’.  It might mean imposing severe taxes on individuals whose savings and assets exceed twenty million dollars.  It might mean reforming corporate laws to redistribute dividends and CEO bonuses to employees in place of wages.  It might mean reducing corporate taxes to facilitate that redistribution and promote investment.  At the very least, it means a return to a free-market economy (where opportunity replaces protectionism); if necessary sacrificing gluttonous banks and greedy billionaires in the process.  It will certainly mean finding a way to protect/raise interest rates against or in partial isolation of the financial, currency and political pressures of the rest of the world. 

None of that seems remotely plausible I’m sure, because it requires a paradigm shift in politics away from the decades of establishment-thinking that has obviously failed up to this point.  Dare, I say, that shift will have to happen eventually.  It’s just a case of; will it happen by government decree today or by revolution sometime in the future?

I look forward to your feedback regarding my observations and suggestions.

Further Reading:

Wealth Disparity