No Shortcuts on the Road to Recovery

No Shortcuts on the Road to Recovery

This is the editorial from the Autumn 2020 edition of the IPA Review by Editor of the IPA Review, Scott Hargreaves.  A Table of Contents can viewed here.
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Australia faces a long road back from the current economic and social crisis. Fantasists like those at the IMF who forecast a “V-shaped recovery” in which the economy bounces back from the current “hibernation” ignore two things.  

First, wealth creation occurs in dynamic and interconnected social environments, built on unhindered exchange between people free to choose. In this lockdown our freedoms have been severely curtailed and relationships broken, in many cases for good as otherwise viable firms are driven out of business (I wrote about this in an email to IPA Members on March 24, 2020).

Second, as we entered this crisis the so-called long boom in Australia had bred a sense of complacency and Governments have been unwilling to tackle issues such as industrial relations, red tape and our increasingly dysfunctional education system. As a result, business investment levels have collapsed to lower than the economically disastrous Whitlam years. 

Keynesian pump-priming measures will fail because work is needed on the economy’s supply side—not demand. Indeed, the debt so rapidly being accumulated in the (hopefully) six-month window set by the Prime Minister will be a further drag on growth as the prospect of tax rises further deters investment and entrepreneurship.

The issues and necessary measures have been outlined in many articles in the IPA Review. A recent example is IPA Director of Research, Daniel Wild, outlining the need for supply-side reform in Lift Your Game  in the August 2019 edition.  

A glimmer of hope amid current troubles is that finally the bubble of smug complacency has been popped. Daniel has for nearly three years been pointing out that Australia’s supposedly impressive record of economic growth was in large part a statistical artefact created by record levels of permanent and temporary immigration. With movement between countries severely curtailed for some time, there is a realisation we are left only with the dismal record of per capita growth of most interest to ordinary Australians.  

As Editor of the IPA Review I have had to grapple with the sudden eruption of pandemic and lockdown in both an organisational and editorial sense. Organisationally, some difficulties and delayed publication resulted as—like so many Australians—key personnel were suddenly pushed into working from home.  

Editorially, the question was whether articles so carefully nurtured for months should now be set aside for a total focus on COVID-19. We chose to publish this edition for the most part as planned because the contributions concern underlying issues and themes that will be essential to consider if we are to find our way back.  

Andrew Stone, for example, contributed, a terrific article on our bloated Higher Education sector. In one sense it is dated, as the analysis was predicated on the world as it was. But in another more important sense it is very timely as COVID-19 has laid bare the vulnerabilities and pathologies of the Higher Education system outlined by Andrew. Restoration will not come by once again opening the doors to a massive influx of foreign students, but through deep and lasting reform.  

Similarly, we have been looking with alarm at the Victorian Government’s plans for massive building programs undertaken without regard to value for money. At the best of times the inefficiencies built into the construction and operating models are outrageous, and the levels of projected debt extremely concerning. The article written by Daniel Wild and me has been months in preparation, and intended to open up this line of inquiry to further work. 

Again, is this made redundant by COVID-19? No, because the shrunken Victorian economy will have even more difficulty carrying the load of debt, and superannuation funds who are supposedly to share their burden of infrastructure investment now have their own troubles. 

On it goes: a terrific review by Generation Liberty Campus Coordinator, Theodora Pantelich of Socialism Sucks: Two Economists Drink Their Way Through the Unfree World  (by Robert Lawson and Benjamin Powell) focusses attention on a possible future in which the temporary restrictions we have seen become permanent. More than a few Generation Liberty members have pointed out the current regime is giving Australians a taste of socialism in practice, which is hopefully the inoculation their friends need. 

Conversely, IPA researchers are doing great work on issues with the current health and economic strategies but the picture is changing on a weekly if not daily basis so any article I commissioned would have been out of date as soon as published due to production lead times. Instead, the everthoughtful Andrew Bushnell has written about reconciling the twin objectives of public health and socioeconomic health. Even to suggest the latter is important seems to draw outrage is some quarters, so the principles laid down by Andrew will be timeless as we continue to argue for swift and wide-ranging measures to find a way back. 

Finally, for some time we’ve been planning a move to a bound edition with a spine and modern matte paper stock, and we wouldn’t let a virus stop us! We hope you like it. 

 

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