LOOKING INTO THE ABYSS

Last week’s Consilium hosted by the Centre for Independent Studies took a look into the abyss of sovereign default in Back from the Brink: Fiscal Disasters and Recoveries. “Kicking the can down the road” was definitely the phrase du jour on the topic, and among numerous memorable remarks were these from Czech Republic President Vaclav Klaus on Europe: “Europe is too heterogeneous for anyone to speak on its behalf” (how true) and “Capitalism without bankruptcy is like heaven without hell”. And from Oliver Hartwich: “Europe will have the next financial crisis and it will make the GFC of 2008 look like the good old days.”  Argentinian former politician, presidential contender and would-be reformer Ricardo Lopez Murphy spoke passionately about the difficulty and pain of adjustment. He entered politics in 1999 and was made Minister of Economy in 2001, but was fired by the president eight days later over his proposed fiscal austerity project.

Depressing stuff, and not surprisingly the session rapidly descended into an Eeyore-type gloomy patch about the debt crises. I felt obliged to ask why no one had mentioned the underlying problem, namely the intolerable government expenditure problems facing all the big welfare states (including New Zealand). The burdens of their entitlement programmes can only get worse with demographic trends, yet there is little evidence anywhere that governments are seriously grappling with them. It was pleasing to see the direction of the session shift somewhat. Vaclav Klaus was in strong agreement. As former 2025 Taskforce member, Trotter lecturer and smart labour market economist Judith Sloan said, the issue is all about the role of government :  if governments hand out free beer to people they will want more and will resist being deprived of it. Which is why the fiscal consolidation required on economic grounds in all these struggling welfare states is so very challenging politically. 

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ON HOPE AND LOVE OF COUNTRY

I’m at Consilium this week in Coolum as a guest of the Centre for Independent Studies and the recipient of their Alan McGregor Fellowship.  Consilium is the CIS’ annual ideas and think fest that brings together a great cross section of Australia’s leaders of business, politics, academia, and the wider community to deliberate on the major economic, social, cultural and regional issues facing Australia and New Zealand. It’s an impressive gathering with all 150 attendees microphoned and seated around a massive oval table.

The forum opened with a dinner last night where I and former Australian PM John Howard were presented with the two annual Alan McGregor Fellowships. The late Alan McGregor AO was a former CIS chairman who played a major role in the organisation’s development and success. The awards are given to honour individuals ‘who have made a significant contribution to the advancement of the principles for which the CIS stands’ – free markets, a liberal society, and personal responsibility  I’ve enjoyed a close collaborative relationship with the CIS over more than 30 years and greatly appreciated the honour.

The awards ceremony was followed by ‘Life Under Challenging Regimes’,a conversation with Professor Ricardo Lopez Murphy, Argentine economist, and Senator David Coltart, Minister of Education, Sport, Arts and Culture, Zimbabwe, moderated by Paul Kelly, Editor-at-Large of The Australian.  David Coltart is the only white elected MP in a cabinet of 39, and represents a constituency that is 98 percent black.  He spoke of a once highly successful country devastated by a succession of fascist governments, draconian political restrictions, genocide, economic ruin and inflation beyond the believable (a hundred trillion dollar note, that even after 21 zeros were taken off it, still did not buy a loaf of bread).  Yet in the last three years, he explained, while life in Zambabwe remains fraught with risk and social turmoil, the currency has been abandoned, exchange controls and tariffs are coming down, economic growth is picking up – to over 8% last year – and there is hope that Zimbabwe could yet regain its former status as the jewel of Africa.

Ricardo Lopez Murphy was an unsuccessful candidate for the Argentinian presidency on two occasions. He told a similar story of a man committed to achieving democracy and economic prosperity for his country.

The session was, in short, a tale of two people explaining why they love their countries and stick with them, and their grounds for hope that through the restoration of the rule of law and common sense economics, these two countries will rise again.