Knockout punch for national treasure

Remember that awful, conspiratorial-sounding polemic by the man in charge of Australia’s economy the other week? Well it’s been responded to by… the Opposition’s communications spokesperson. Will somebody please get rid of Hockey?

Meanwhile, there is no commentary needed really. Turnbull absolutely destroys Swan. Just take a look.

Swan:

The 0.01 Per Cent: The Rising Influence of Vested Interests in Australia | Wayne Swan | The Monthly.

Today, surveying the wreckage of the worst global downturn since the Great Depression, many leading thinkers argue the ideal of the middle-class society is under mortal threat in the West, even as a growing middle class is lifting hundreds of millions out of poverty in the East. One of the most compelling contributions to the debate comes from Francis Fukuyama, who wrote in Foreign Affairs about the dangers of the erosion of the middle-class social base in the developed world. “From the days of Aristotle,” writes Fukuyama, “thinkers have believed that stable democracy rests on a broad middle class and that societies with extremes of wealth and poverty are susceptible either to oligarchic domination or populist revolution.” These are the extremes, but, as he goes on to argue, we are already witnessing “some very troubling economic and social trends … which threaten the stability of contemporary liberal democracies and dethrone democratic ideology as it is now understood.”

These trends are all too evident in a recently released and widely discussed report by the OECD, ‘Divided We Stand: Why Inequality Keeps Rising’. It found that starting in the 1970s and through the 1980s, coinciding with the Reagan–Thatcher revolutions, inequality in the West has widened considerably. Across the developed world, the top is accelerating away from the middle much faster than the middle is moving away from the bottom.

The catchcry of Wall Street’s Zuccotti Park and the Occupy movement, ‘We are the 99%’, has shone a spotlight on the top 1%. Between 1979 and 2007 in the US, the top 1% saw their after-tax incomes rise 275%, while the middle two thirds saw their after-tax incomes increase by less than 40%.

And Turnbull:

Not classy, Wayne.

Defending workplace re-regulation, he claims “Australia’s egalitarian social contract is also underpinned by a fair and flexible industrial relations system”. But evidence for this is dubious –most studies say increased labour market regulation is, on balance, detrimental to equality, because any boost to earnings, conditions or job security for insiders are offset by diminished opportunities and social exclusion for more marginal outsiders, including young people seeking to enter the workforce.

The Treasurer also cites “a quiet revolution under way in recent years in our tax and transfer system”, presumably referring to changes since 2007. Targeting of transfers indeed matters, as we will see. But OECD comparisons of household income inequality which show Australia in a fairly favourable light are only available to 2008 – so if any “quiet revolution” had an impact, it wasn’t his. The jury is out on whether Labor has increased or decreased inequality.

In reality Australia has above-average inequality in individual earnings by advanced economy standards, though not as unequal as the US. But inequality in household incomes has increased only slightly over the past decade, because our below-average spend on transfers as a share of gross domestic product is closely targeted, and we barely tax poor households at all.

… Swan pays lip service at least to the education part of this agenda. But in the end he completely fails to link his many words about inequality (the bulk of which refer to other countries, not to Australia) to the allegedly baleful influence of “vested interests”.