Richard Denniss - Econobabble

ALSO BY RICHARD DENNISS

Affluenza: When Too Much Is Never Enough (with Clive Hamilton)

Curing Affluenza: How to Buy Less Stuff and Save the World

Dead Right: How Neoliberalism Ate Itself and What Comes Next

This eBook is licensed to Sebastian Mensink, seb.mensink@gmail.com

This eBook is licensed to Sebastian Mensink, seb.mensink@gmail.com

Published by Black Inc.,

an imprint of Schwartz Books Pty Ltd

Level 1, 221 Drummond Street

Carlton VIC 3053, Australia

www.blackincbooks.com

Copyright Richard Denniss 2021

First published in 2016; this revised edition published in 2021

Richard Denniss asserts his right to be known as the author of this work.

ALL RIGHTS RESERVED.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means electronic, mechanical, photocopying, recording or otherwise without the prior consent of the publishers.

9781760643225 (paperback)

9781925203806 (ebook)

Cover and text design by Tristan Main

Typesetting by Typography Studio

Cover illustration www.CartoonStock.com

This eBook is licensed to Sebastian Mensink, seb.mensink@gmail.com

Contents

Introduction
What Is Econobabble?

The Language of Deception

Tackling Climate Change

What Really Causes Unemployment?

Debt, Deficits and Budget Honesty

The Truth about the Free Market

The Myth of Free Trade

The Use and Abuse of Economic Modelling

What Can Be Done?

This eBook is licensed to Sebastian Mensink, seb.mensink@gmail.com

Introduction
What Is Econobabble?

If I turn out to be particularly clear, youve probably misunderstood what Ive said.

Alan Greenspan, former governor of the US Federal Reserve

E conomics is like a tyre lever: it can be used to solve a problem, or to beat someone over the head. Its not the tyre lever that is good or bad its the person who wields it, and what they try to do with it.

Scott Morrison has made the distinction between good and bad central to his approach to economic management. According to the prime minister: Australians understand taking out a mortgage to pay for their home is a wise investment for their future. But they also know that putting your everyday expenses on the credit card is not a good idea. It doesnt end well. This is basically the difference between good and bad debt. The same is true for government.

Except, of course, its not. Sometimes it makes sense to put your groceries on your credit card, especially if your car just broke down and needs repairs. And sometimes borrowing to buy a house is a bad idea, especially if you are borrowing to buy a house in a mining town at the end of a mining boom. Making choices is not easy, and while economics is all about the science of decision-making, that doesnt mean economists know what is right and what is wrong and it certainly doesnt mean we know what the best thing to do is, for a person, a company or a country.

Australia is one of the richest countries in the world. We can afford to do almost anything that any other country can do, but we cant afford to do everything that every other country can do. We have to make choices, hard choices.

Economics has some simple but powerful analytical tools that can be used to help us make those choices, but no economist, and no economic model, can tell us what we should or must do. Like a waiter explaining a menu, economists can help explain the choices available, and can help us understand the cost of the different options, but just as it is not the job of a waiter to tell us what to eat, it is not the job of economists to tell us what we must do.

But economics is not just a set of analytical tools it is also a powerful language that can conceal simple truths from the public. I call this language econobabble, and it includes two things: incomprehensible economic jargon, and apparently simple words that have been stripped of their normal meanings. When public figures and commentators use this sort of language in order to dress up their self-interest as the national interest, to make the absurd seem inevitable or the inequitable seem fair, or even to make the destructive seem prudent, they are econobabbling.

Every day, econobabble is used by powerful people to silence democratic debate about our nations priorities and values, and to conceal the full range of policy options that we have at our disposal. As the COVID-19 crisis has shown, Australia can afford to provide free childcare and to significantly increase unemployment benefits, and we all now know that there is nothing reckless about running a large budget deficit. But for decades, econobabble has been used to hide these simple truths from the public. The aim of this book is to expose the stupid arguments, bizarre contradictions and complete lack of evidence which econobabble is designed to conceal.

I am sorry to say it, but in our nation today confidence is usually more important than qualifications. Bad economic arguments, without the faintest theoretical or empirical foundation, dominate public debate. Take Scott Morrison, for example. When asked by Leigh Sales, Where is your evidence that higher taxes weaken an economy?, the prime minister responded: Well, I think its just fundamental Economics 101, Leigh.

But, of course, its not. Such an opinion isnt fundamental, and no Economics 101 textbook teaches students any such thing. Moreover, the claim is demonstrably wrong. The highest-taxed countries in the world, the Nordic nations, have some of the highest levels of income, life expectancy and happiness.

When nonsense is repeated often enough especially by prime ministers, well-paid lobbyists, commentators and businesspeople it can start to seem as though everyone believes that black is white or up is down, especially in the post-truth world of social media. After enough exposure to econobabble, you might even come to think that the best way to help poor people is to give tax cuts to the rich.

This book wont train you as an economist. (Given the lack of qualifications of most people who spout econobabble, however, that shouldnt worry you too much.) But it will give you the evidence, the arguments and, most importantly, the confidence to question assertions you might once have simply accepted, or lacked the confidence to challenge.

This book is for those who, deep down, have never believed that it makes sense, economic or otherwise, to help poor people by slashing public spending on the services they rely on. Its for those who have a sneaking suspicion that it would be cheaper and better to avoid climate change and COVID-19 than to let them rip and cope with the consequences. And its for those who think it would be more efficient to reduce unemployment than to ship jobs offshore. It will show you how to take on those who pride themselves on being great economic managers but then do nothing more than blame the unemployed for the lack of jobs and then use dodgy algorithms to try to collect robodebts.