Category: Tax & spend

The symbiosis of capitalism and democracy

~ Andrew Norton ~ Leave a comment

(This review is cross-posted at Goodreads.)

Theorists of the left and the right argue that there are tensions if not contradictions between democracy and capitalism. Left-wing theorists argue that business has undemocratic power, buying influence through political donations and altering policy by threatening to invest elsewhere. Right-wing theorists argue that democratic majorities vote for taxes and regulations that weaken incentives and undermine the efficiency of capitalist enterprises.

Judged by the normative standards of these theorists, these critiques have something to them. But judged by some other standard, such as elected governments maintaining capitalist economic systems with widespread high living standards over long periods of time, the ‘advanced capitalist democracies’ discussed in Democracy and prosperity: reinventing capitalism through a turbulent century, look very successful compared to other political and economic combinations.

democracy and prosperity

 

One contention of the book’s authors, Torben Iversen and David Soskice, is that a symbiotic relationship between democracy and capitalism contributes to the success of these countries. Although business and rich people may, at least initially, resist the increased taxes that democracies impose for social policy programs, often in the long run these programs contribute to economic success.

For example, education is electorally popular and provides business with the highly-skilled workforces they need. Government unemployment, health, and retirement programs reduce workers’ uncertainty about their future welfare, reducing short-termist behaviour and industrial conflict. Workers are less dependent on their employers.

In turn, key constituencies in advanced capitalist democracies depend on a successful economy for their own jobs and the tax revenues that support social programs. They support political parties that competently deliver economic growth, limiting the political potential of parties that would damage the capitalist economy. The rejection of Jeremy Corbyn’s Labour in Britain is an example. Continue reading “The symbiosis of capitalism and democracy” →

The start of a tax and spend turnaround?

~ Andrew Norton ~ 6 Comments

The 2010 Australian Election Study is now available at the Australian Social Science Data Archive, so we can see the latest results in a long series of similarly-worded questions on tax and spend.


Question: If the government had a choice between reducing taxes or spending more on social services, which do you think it should do?

For the first time since 2001, more people say they want reduced taxes than more spending on social services. However the proportion of respondents wanting less tax is up only 3 percentage points. The main thing that has happened is a move from clear support for more spending on social services to a ‘depends’ option.

There are problems with this question. It omits the status quo, which is always popular if presented. It doesn’t make completely clear the options it is presenting, reducing taxes AND reducing social services (at least compared to what they might otherwise be) or spending more on social services AND paying higher taxes (at least compared to what they might otherwise be). But I think the consistent question lets us track broad sentiment over time. Maybe here there are some small signs of some changing views on this issue.

False tax and spend choices

~ Andrew Norton ~ 7 Comments

Essential Research today kicked off the annual round of pre-budget tax and spend polls, but with some pretty bad questions. Take the question below on the goal of returning to surplus by 2012-13, which according to this poll most people think should be abandoned:

But how about if the question had been phrased:

Q. Do you think it is more important for the Government to return the budget to surplus by 2012/13 as planned – which may mean cutting services and raising taxes – OR should they delay the return to surplus and go deeper and deeper into debt, with more government spending each year diverted to paying interest?

Tax and spend questions need to spell out the full implications of choices for the results to be meaningful. The failure to explain the real alternatives also renders pointless a question on increased spending.

Selling a carbon tax to an unconvinced public

~ Andrew Norton ~ 13 Comments

Today Julia Gillard took important further steps on the way to a carbon price.

The IPA also put out another Galaxy Poll on climate science. It’s almost exactly the same as their poll from last year, suggesting that the substantial inroads the sceptics had made have stabilised.

However a comparison with an Essential Research poll from last December suggests that attitudes are still fluid. An option in Galaxy reading ‘There is conflicting evidence and I’m not sure what the truth is’ takes numbers from both both camps.

So it looks like about a third of the population are manmade climate change true believers, with another 10% leaning that way. We’ve debated this recently, but I think things are looking bad for Julia Gillard on this one.

Flood levy, pollster 3

~ Andrew Norton ~ 19 Comments

A third pollster, Nielsen, has now joined Newspoll and Essential Research in asking voters about the flood levy. Annoyingly – but in line with typical poor Fairfax broadsheet practice on these things – we are not told the actual question.

However the result is that 52% of voters support the levy, and 44% oppose it.

Corrected Nielsen flood levy pie chart


That’s quite similar to Newspoll’s 55%/41%.

Of more concern to the government will be the 46% in favour/ 44% against result on a carbon price. This is the issue that is most likely to be fatal for the Gillard government.

Assorted links and comments

~ Andrew Norton ~ 5 Comments

The first poll on the flood levy finds opinion heavily polarised on partisan lines, but overall against, 53% disapproving to 39% approving.

A different question on the same poll finds that 64% of respondents believe that universities would be better run by the public sector and 20% believe universities would be better run by the private sector. This dichotomy does not include the public-private hybrid nature of Australian universities as an option.

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In the context of the fascinating events in Egypt, Tyler Cowen reminds us of an outstanding book on public opinion, Timur Kuran’s Private Truths, Public Lies. In authoritarian regimes people conceal their true political views, but new dynamics can take over in which more and more people are emboldened to express their opinions. With no real support, in these circumstances regimes can crumble quickly when they lose the will to kill.

An interesting post on the signalling dynamics of cutting communications.

——- Continue reading “Assorted links and comments” →

Will uni finances be washed away by the floods?

~ Andrew Norton ~ 15 Comments

We should of course be a little sceptical when Julia Gillard talks about cutbacks. But if cuts need to be made, who will take a hit?

Step forward, Australia’s vice-chancellors. Higher education has long been near the top of the list when money needs to be saved. And in recent times, higher education spending has been out of control. As I noted last year, massive over-enrolments have forced multiple large upward revisions of federal spending on higher education. Postponing the decision to ‘fully fund’ these places (unis receive only student contributions if they exceed their funding agreements by more than 10%), promised for 2012, could produce nine figure savings.

If this does happen, it will confirm my view that there have been some reckless decisions to take so many students. And there is little sign in this month’s offers figures that there has been any attempt to bring numbers under control. In NSW and the ACT, where much of the 2010 over-enrolment is concentrated, offers are up 2.6% on last year (acceptances may be higher or lower, so we can’t directly infer commencing student numbers from this figure). In Victoria, offers are up 1.1%.

The 2011 intake will ‘replace’ (in terms of total student load) smaller commencing cohorts from 2008 and preceding years who have now completed, so total over-enrolments are likely to be well-up on 2010.

Unless unis really do have very low marginal costs, cutbacks could mean that the ‘irrational exuberance’ of 2010 and 2011 enrolments leaves some universities with students they cannot afford.

Low-tax egalitarianism?

~ Andrew Norton ~ 9 Comments

The latest issue of Policy has an article by former Costello adviser Dave Alexander defending what he calls Australia’s low-tax egalitarianism.

Compared to other OECD countries Australia’s tax-welfare system combines a relatively low tax take with relatively egalitarian outcomes because benefits are more targeted on lower-income earners. Australia also has unusually high rates of voluntary opt-out from full government entitlements, with many people taking partially subsidised private options in education and health.

For Alexander, this policy mix helps Australia avoid some of the pathologies and dysfunction associated with either high levels of inequality or over-sized government.

The Catallaxy crowd aren’t convinced. And indeed in publishing the piece I expected some flak from my classical liberal comrades. But I thought the Alexander article was a strong one. In my own political life I have always been torn between my philosophical commitment to smaller government and my pragmatic sense of what it takes to achieve even incremental change towards that goal. Politically, relatively low-tax egalitarianism may be the only viable model we have.

A crisis of capitalism turns into a crisis of social democracy

~ Andrew Norton ~ 15 Comments

Higher education has been hit hard in the British spending review, with funding to be reduced from £7.1 billion to £4.9 billion by 2014-15. Reports suggest that their low-tech subjects may have their funding cut entirely. The fee increases flowing from the Browne report will presumably make up most if not all the losses.

In Australia HECS successfully transferred costs from taxpayers to students/graduates with no loss of graduate numbers. It will be interesting to see how these UK changes go, as the cuts are much larger and quicker than anything seen here.

This financial crisis is not having the political consequences I expected two years ago, or what our unlamented former leader predicted in his Monthly essays. In Europe, it has become a crisis of social democracy. Their bloated welfare states were in bad financial shape before the financial crisis struck; now they simply unable to cope. Continue reading “A crisis of capitalism turns into a crisis of social democracy” →