Greed is (not) good

ON LINE opinion – Australia’s e-journal of social and political debate

Posted Tuesday, 10 February 2009

Governments around the world are falling over themselves to engage in a Keynesian-style pump-priming of their economies. Until the mid-1970s Keynesian economics dominated fiscal thinking in Australia and much of the English-speaking world. Then came the neo-conservative economic fundamentalist-drive, led by Milton Friedman: Thatcherism in Britain, Reaganonomic supply-side economics in the United States, Rodgernomics in New Zealand and John Howard’s fiscal conservatism in Australia. In Australia, there were some promoters of economic fundamentalism whose grip on reality was so loose that they called their beliefs “economic rationalism”. There was no shortage of overpaid economists prepared to deride counter-cyclical pump-priming of the economy or anything else which sounded reminiscent of Keynesian thought.

There were always a few, like economic journalist Kenneth Davidson and Economics Professor Frank Stilwell, who clung tenaciously to a belief that Lord Keynes had a substantial contribution to make to modern economic thinking. But throughout the 1980s and 1990s the “greed is good” crowd, as aptly portrayed by Gordon Gekko, in the 1987 film Wall Street, proliferated. In the run-up to the 1993 election, John Hewson, who led the Liberal Party to defeat, repeated the mantra that “greed is good”.

The problem, which the elevation of greed to a moral virtue creates, is not so much the intense personal rivalries, or excessive competiveness it engenders as the lack of solidarity and downward envy (see Tomlinson, J. (1999) “The Politics of Envy.” Union Song Site) which emerge in the minds of those who are attracted to such a debilitating philosophical position. It matters not one jot whether it is:

  • President Clinton enforcing time-limited welfare assistance on supporting parents;
  • John Howard introducing “Work for the dole”, with more severe breaching regimes for supporting parents, or restricted eligibility conditions for Disability Support pensions; or
  • Jenny Macklin’s Intervention in Aboriginal communities in the Northern Territory.

Once people come to accept the corrosive belief that because they don’t get government assistance to help raise their children or cope with a disability then no one should. And if they do then it should be doled out like charity from the parish poor box. Such people forget that they get tax cuts and government superannuation subsidies which the poor don’t get, nor do they seem to notice that they aren’t poor and they don’t have a disability.

It is not so long ago that our Treasurer was running around telling anyone who would listen that the inflation genie was out of the bottle. Then he argued that, because of the resources boom, Australia was well placed to avoid the worst of the world’s recession. In the wake of the downturn in international trade and the slowing of demand for our minerals, it would now seem that we may not be as well insulated as we once thought. Share and house prices are falling, unemployment is rising, inflation is falling, we are heading for budget deficits, business confidence is low and ordinary workers are worried about the coming economic downturn. Those with private superannuation investment accounts have seen the value of their savings shrink. They look at an older generation of retirees who have indexed superannuation pensions and wonder how it is that many of the recently retired were conned into investing in accumulation accounts. Worse off still are those who have invested in developers or retailers who have gone into receivership.

In 1976, the Hancock Committee recommended to the Australian Government a national superannuation scheme which would have been a taxpayer-funded social insurance superannuation scheme similar to that of New Zealand and several countries in Europe. Hancock’s idea was not embraced and superannuation was put on the back burner until the Hawke/Keating government introduced a compulsory private superannuation scheme. Many of those currently seeing their private superannuation savings dribble away might reflect on the advantages of universal payments over individual investment accounts.

During the Howard years those who looked closely at the social security system in Australia witnessed just how easily various categories of recipients could be scapegoated. First it was the young unemployed who were subjected to the euphemistically named “Mutual Obligation” regime. Eventually all recipients were subjected to the regime. The many categories of social security benefit with their differing rates and eligibility conditions make it nearly impossible to generate solidarity across the entire range of recipients. Downward envy was cleverly employed by Howard and his associates to divide those in paid work from those outside the labor market.

During times of war and economic depression/recession many learn or relearn the lesson of Aesop’s fable about the four oxen and the lion and remember that “united we stand, divided we fall”. Instead of having many types of welfare payments, retirement incomes, student allowances, family payments, privatised superannuation, tax cuts and rural assistance schemes, all with their different levels of payment, we could have a system of Basic Income which paid every permanent resident an above poverty line income. This would ensure there was a financial floor beneath every individual and family in Australia without imposing a ceiling beyond which no one could rise.

In addition to ensuring economic security, because a Basic Income is an equal payment which is paid unconditionally as a right of residency/citizenship, such a universal payment enhances egalitarianism and feelings of social solidarity.

Whether it is President Obama calling on the US Senate or speaking to the population at large he is asking all Americans to make a sacrifice in the common interest. Similar mechanisms are in place in the Australian context when Prime Minister Rudd speaks about fiscal stimulus measures to support the economy. Leaders around the world when they speak to their people about the need to work together to escape the current recession are evoking the spirit of Aesop’s fable. President Obama explicitly criticised Wall Street banking executives for awarding themselves $20 billion in bonus payments at a time when the tax payer is bailing out failing banks.

Greed does not even seem to be good for rich banking executives. They don’t seem to understand that it has been their behaviour which has, at least in part, led to the current economic meltdown. Unless a more egalitarian solidarity begins to emerge then the chances that US bankers and their physicians will heal themselves is slim indeed. Alaska has a small Basic Income scheme in place and it is the most egalitarian of the states of the United States.

The idea of introducing a Basic Income for every person on the entire planet seemed very optimistic a couple of years ago, but if the US is going to cure its Wall Street bankers of their excessive bonus problem then it could find that a worldwide Basic Income might help. Bankers might just come to see that humanitarian ideas are productive rather than being an obstacle to sustainable growth and capital accumulation. The real advantage which a worldwide Basic Income delivers is healthier populations which could increase production of more tradable products and more self-sustaining food production. This would increase world trade and with that help lift many nations out of this recession.

I fear, however, that the lack of trust and the fear that someone else is getting something for nothing will stand in the way. That is, the “greed is good” mentality still lingers in the minds of the power elites. Too many of them think it’s all right for privileged individuals to get something for nothing – that is how they’ve lived their entire lives – but it is abhorrent that poor people should get justice, equality, decency, and humanity; let alone something for nothing.