Reviewed by Charles Richardson
Many years ago the Observer, reviewing Sellar and Yeatman’s 1066 and All That, said ‘Quotation is hopeless: every sentence clamours for it.’ Mark Latham’s Diaries are in the same category. Try this, for example, from 1999 (page 100):
‘The brains trust has finally worked out we can never restore our economic credentials by banging on about tariffs and subsidies. So adaptive Simon and opportunistic Kim are drying out. They should never have got on the industry policy piss in the first place.’
This book has now been available for long enough to dispel the grossest misapprehensions: it is not all about sex (it’s mostly about policy), Latham is not bitter and twisted (he is surprisingly generous to some of his enemies), and he accepts his share of the blame for Labor’s defeat. Even so, most of the reaction to it has fallen into one of two equally unhelpful categories.
Those whom Latham would call ‘insiders’, who belong to the media élite or support the current ALP machine, have defended their turf by throwing everything they can at him. On the other hand, the enemies of those two groups have latched on to Latham’s criticisms, but avoided their context, since the Latham message in its entirety is not one that they want to hear.
Latham is interesting because he belongs to a type that is still rare in Australia, but that we should hope to see more of: a left-wing anti-socialist. His left credentials are plain; he never hides his disdain for the ‘establishment’ and the conservative pundits who act as its cheerleaders. His loyalty to the working class is deep and visceral: ‘When I said I was anti-Establishment, I meant it. It’s not just a political ethos, it’s in my blood, a way of life.’ (294)
Being left-wing means being egalitarian: Latham instinctively distrusts large concentrations of wealth and power. Although he wants to reward hard work and initiative, it should not be at the expense of the poor, and he is scathing about what he calls ‘downward envy’: ‘People live in their highly geared McMansions, on $60-$70 000 a year, couple of kids at a non-government school, and they say to the politicians, “I’m the real battler, help me, make me secure before helping anyone else”.’ (371)
His egalitarianism helps him to see the reality of modern Labor politics, especially when it comes to the unions:
The unions in this country are a minority grouping with a majority complex, and they take out their angst on the ALP. ... If the trade unions want a majority of votes in the Labor Party, why don’t they go out and win a majority of support in the workforce? Can’t have that, their officials might have to get out of their Chinese restaurants and actually do some work.’ (104)
More significant, though, is Latham on public policy. He believes government should serve the masses, not the few, but for him that means giving more power to the individual: free trade, smaller government, genuine democracy, an end to subsidies and special privileges. He is consciously harking back to a time when working class politics involved self-help, not reliance on the state. ‘The horse bolted in the first half of the [20th] century when Labor abandoned its mutualist traditions – socialism in the relationship between people –and embraced the welfare state—socialism in the relationship between government and its citizens.’ (110)
Some critics try to paint this as ‘conservatism’, but there is enough material in this book to put that idea to rest for good. Indeed, one of the surprises in it is the amount of sympathy Latham shows for the Greens. Perhaps they are the answer; certainly Latham sees no hope in the ALP, and even less in the Liberal Party. For him, as for any sane person, parties are means rather than ends, and his devotion to Labor ‘was to a political cause, not an organisational machine.’ (8) He knew all along that it needed drastic change, and had he won last year’s election he vowed to ‘launch World War III on the factional warlords, each and every one of them.’ (251)
None of Latham’s criticisms of the ALP will be a revelation to those who follow it closely, and they might be dismissed as old news – were it not for the quantity of ink spent in the last month denying them, distorting what he says, and trying to reassure us that Kim Beazley is a nice chap and his party is a going concern. What to do about it is a harder question; in Latham’s words, ‘to end our formal association with the trade union movement, the core of the factional system, ... would have split the ALP in two. This option is only feasible if social democrats in Australia are willing to start from scratch with a new party and political purpose.’ (10) Perhaps that option will eventually be forced on them. Maybe some from the Liberal Party will one day join them.
Overall, this is a wonderfully readable book. Latham does have his blind spots. Because he sees ‘border protection’, for example, as a law and order issue, he fails to understand why Tampa hurt Labor so badly. But even when he is defending the indefensible, he can soften the message with a good line. After supporting the Whitlam-Keating policy of appeasement on Timor, he produces this: ‘In faxes to the office, [Whitlam] has started calling me Justinian and himself Solomon ... It is ridiculous, of course. Maybe Gough has run out of historical analogies, so he’s making them up as he goes along.’ (117)
He is also, obviously, a flawed human being (who isn’t?). He takes criticism badly. He is highly strung; as he says, ‘these things affect me more than they should.’ (283) His love of parenthood develops through the course of the book into an obsession: Mill famously said that ‘Whoever has a wife and children has given hostages to Mrs Grundy’, but Latham seems to have delivered them up more willingly than most. In a sense, however, he simply confirms the book’s main thesis, showing that he is not immune from the symptoms of Canberra life that he identifies in others: lack of perspective, mood swings, paranoia.
Mark Latham would clearly have been a happier and healthier person if he had left politics, as he planned, before the 2001 election. But he would have deprived the country of a great spectacle, a piece of tragic theatre that we are better for having witnessed, and better also for having this book to record.
‘Losing It: The Inside Story of the Labor Party in Opposition’
by Annabel Crabb
(Picador, 294pp, ISBN 0330422162, $25)
Reviewed by Richard Allsop
It is hard to know whether the intense focus on The Latham Diaries will prove a help or a hindrance to the sales of this alternative book, published in the same month and covering much of the same territory.
Young ex-Canberra press gallery journalist Annabel Crabb is much less polemical and more balanced than Mark Latham, and her book provides a lively and highly readable account of recent Australian political history. It must be said, however, that if you are only going to read one Australian political book this summer it should be The Latham Diaries. If you have time for two, then Losing It makes a very useful companion volume.
While Losing It covers the ALP’s years in Opposition from March 1996 to early 2005, it is clearly not intended to provide a comprehensive coverage of all that period. Instead,
it is very clearly focused on Labor’s third term in Opposition, a period to which more than two-thirds of the book is devoted.
It says something for the impact of Latham that he tends to dominate this book as well as his own, a point that Crabb acknowledges:
‘… this book pays more attention to the development of Mark Latham than was accorded him at the time. This may seems unnecessarily revisionist, but is done because Latham’s writings and criticisms partially reflected the economic debate going on within the Labor Party over the years, and the story of his rise prepares the ground for the story of his decline.’
Hence, when Crabb provides a brief sketch of the 1998 election campaign, there is more focus on how Latham’s education policy was re-written by party headquarters, than on all the other features of the campaign put together.
It is in relation to the 1998 campaign that one of the most striking comments in the book is made: Labor’s Campaign Director Gary Gray is quoted as saying that ‘at no point did any of us believe that we could have won in 1998’. Gray now accepts that, by selecting better candidates and applying a few more campaign resources, Labor could indeed have won in 1998. So despite the published polls indicating that the result was going to be desperately close and actually garnering 51% of the two party preferred vote, Labor was not campaigning to win. For that piece of incompetence alone, Labor perhaps deserves its subsequent years of purgatory.
Losing It starts its more detailed faze with the Tampa incident and then provides all the gory detail of the destruction of Simon Crean’s leadership. Once Crean goes, we get Latham’s elevation to the leadership, a choice very cleverly captured in the chapter title ‘Putting all your eggs in the one basket case’. Incidentally, Crabb displays her deft comic touch at other points in the book, such as describing an incident where Stephen Smith admonishes Julia Gillard for eating a banana in the afternoon.
Considering the failure of many of those criticised in The Latham Diaries to respond directly to the allegations against them, this book provides an insight into their perspectives. Gary Gray is but one of the many insiders provided by Crabb with opportunities to have their sides of the story placed on the public record, where they sit in stark contrast to Latham’s recollections of the same events. This seems to be a luxury afforded, in particular, to party machine types, a class of person for whom Crabb clearly has a high regard. Hence, the Liberals’ pollster Mark Textor is described as ‘legendary’ and Labor’s 2004 Campaign Director Tim Gartrell is lauded for his ‘expertise in polling and marginal seats campaigning’.
Crabb’s write-up of Labor’s 2004 campaign is very much written from the perspective of Gartrell and his deputy, Mike Kaiser. Kaiser gets a dream run. There is no reference to why he is no longer a member of the Queensland Parliament. There is no criticism of his clear incompetence in not having considered the possibility that the 2004 campaign could be longer than the minimum 33 days when drawing up the Leader’s program or for organising a function (that Latham justifiably canned) with Government-supporting mortgagees in Melbourne.
Clearly, there are some matters of debate about the campaign where the outsider can only speculate on the truth, such as whether Latham approved the anti-Costello television advertisements, which so hopelessly misjudged the public mood on the prospect of Peter Costello becoming Prime Minister. The fact the ads are not discussed here may provide a clue. Generally, it can be said that the aspects of the campaign that directly involved Latham (debate, launch, etc.) went quite well and those that were more the responsibility of the backroom boys (advertising, etc.) went badly.
Part of the brief Crabb has set herself is to expound ‘a theory about the elements that keep’ Labor in Opposition. She accuses Labor of a ‘failure to capitalise on the economic achievements engineered by their reformist predecessors’ and ‘vacating the economic debate for a decade’.
However, this tends to overlook the important distinction between economic reform and economic management. Under the stewardship of Hawke and Keating, Labor delivered long overdue economic reform, but they also presided over the ‘recession we had to have’.
Until the recession of the early 1990s ceases to be the most recent economic downturn in Australia’s history, it is hard to see how the economy can become a winning issue for Labor.
After the 2004 election it became the fashion to say that Latham’s Labor had failed to focus sufficiently on the economy. With the lowest inflation, unemployment and interest rates for a generation it remains unclear exactly what Labor could have said about the economy in the 2004 campaign to turn it into a winning issue for them.
More fundamental than worrying about how many days in a campaign should be spent talking about the economy, Labor must find some way of reconciling the completely divergent constituencies of its traditional base in the suburbs and its inner-urban elites. More than any other person in the Labor Party, Latham understood that this was the problem. It is Labor’s tragedy that he also lacked the political stamina and constructive mindset to address the problem seriously.
In 2004, there were a string of laudatory Latham biographies published. Losing It will stand the test of time better than those books have. Whether Labor stages a miraculous recovery to win in 2007, or endures more years in Opposition, Crabb’s work will provide a worthwhile snapshot of a period that sees an Opposition struggling in much the same way Labor did from 1949 to 1972 and the Coalition from 1983 to 1996.
The End of Poverty: How we can make it happen in our lifetime
by Jeffrey Sachs
Penguin Books, 2005, 416pp, $24.95
ISBN 0141018666
Reviewed by Helen Hughes
This is the most depressing book ever written about development. Jeffrey Sachs’ developing country travelogue is heart wrenching when he writes on poverty. Conditions in many developing countries are indeed unconscionable and should not be tolerated. But his book is depressing because his analysis and solutions support the ‘rockeconomics’ of U2’s Bono who, appropriately, wrote the foreword.
Sachs’ book is not about the hard work of mainstream economic, social and ultimately political reforms that, starting with Japan, have set Asian countries on so rapid a road to development that they are catching up with, and some are even by-passing, the old industrial West. Millions have been lifted out of poverty in small, medium sized and large Asian countries since the 1950s. But instead of analysing why so many Asian countries but only a few developing countries outside Asia (Chile in Latin America and Mauritius and Botswana in Africa) have opted to end poverty through policies that deliver growth, Sachs concentrates on ‘silver bullets’ that the aid industry is now promoting ‘to end poverty in our lifetime’.
The bits of analysis scattered through the book are highly misleading. The discussion of the ‘green revolution’ – a major component of Asian development - focuses on the aid industry’s contributions through its agricultural research station network. Although of some use, these were marginal in comparison to the economic policy changes that enabled new technologies to be adopted. Taiwan led the way with ‘new’ rices and two or three harvests a year before the research stations were in place and the International Rice Research Institute (IRRI) built on Taiwan’s work. When IRRI researchers came to Thailand to demonstrate the new mechanised ploughs based on motorcycle engines they had invented in their luxuriously equipped Institute, Thai farmers showed them the more fuel-efficient models produced by small workshops that they were already using.
A discussion of export-processing zones as the mainspring of integration into global markets is a ludicrously inadequate explanation of the major macro- and microeconomic policy reforms that had to be adopted by the ‘four tiger’ pioneers (Hong Kong, Taiwan, South Korea and Singapore). The other growing Asian countries have built on these foundations. The Philippines, which has not opted for growth, survives on the remittances of its overseas workers; it still has large numbers of people living in inexcusable poverty. Borrowers from the Grameen Bank in Bangladesh, the icon of micro finance, struggled with minimal returns on their loans despite heavy subsidies which would have been better spent on rural roads, until high emigration to the Middle East created a demand for weekly international phone calls. Village women could then make an income from mobile phones. But had the Grameen Telecom monopoly not stultified competition, mobile phones would have been more widely and quickly available at lower cost to consumers. Unfortunately, other countries, notably Papua New Guinea, are seeking to adopt this costly and inefficient monopoly model as Sachs suggests.
The book is also depressing because it is almost incredibly self-indulgent. According to Sachs he has been the principal aid advisor to the world. He gives a highly biased account of his principal stints in Bolivia, Poland and Russia where he claims, at least for a period, to have been the dominant source of economic policy.
It is certainly arguable that in all three cases his advice was counterproductive. The Bolivian economy is in crisis with consequent political upheavals. Poland has not fulfilled the promise of the Solidarity movement. Its failure to undertake basic economic reforms has led to slow growth. A bureaucracy still living by rules derived from its communist origins stultifies the entrepreneurial initiatives at the grassroots level that have been the principal sources of growth in Asia.
But the largest and principal victim of Sachs was Russia. Sachs does not report that while advising Russia he was the head of the Harvard Institute of International Development (HIID) that had more than 30 years of experience of working in developing countries. By and large, it dispensed sensible economic advice in developing countries, backed by the considerable wisdom and experience of the Harvard economics faculty. Under Sachs’ leadership HIID had the carriage of considerable USAID (Agency for International Development) funding for Russia. How this funding helped the St Petersburg ‘mafia’ appropriate swathes of the country’s privatisation benefits has been publicly discussed in The National Interest (Spring 2005). That the privatisation undermined the development of a market economy with difficulties still being played out in the economy and politically are not in doubt.
Harvard University had to close down HIID because of this episode. Poverty in Russia increased. Sachs moved to his present position as professor and director of the Earth Institute at Columbia University.
Sachs’ principal purpose is to support the UN’s Millennium Project to focus on alleviating poverty and increase aid it until it reaches 0.7% of Western countries’ GNP. New ‘silver bullet’ organisations, notably the well-intentioned Global Fund to fight malaria, HIV/AIDS and tuberculosis, have been created to support the UN and its agencies in improving health for the poor. The multilateral financial organisations have been deflected from their lending for growth to ‘social’ lending to alleviate poverty.
Although the only poverty reduction since Bono’s first ‘Bandaid’ concert in 1985 has been in countries that adopted strong growth policies, and although large flows of aid to alleviate poverty directly have failed to stem increases, the numbers living in poverty--not only in Africa but also in countries like Haiti and Papua New Guinea—mean that ‘rockeconomics’, fed by NGO politics, continues to resonate. Australia is one of the few Western donor countries that has not succumbed to the blandishments of instant rewards for its aid, focusing on the contribution of infrastructure after the tsunami in Indonesia and attempting to foster growth in the Pacific.
Peter Bauer accurately described the ‘Dutch Disease’ effects of aid in undermining developing country economies and keeping corrupt rulers in power, so that aid transfers funds from low income earners in the West to wealthy elites in developing countries. He did not anticipate that leading aid practitioners would earn millions from the advice they gave to developing country governments, international and national aid organisations. It is not surprising that those who are ‘doing well by doing good’ have become the leading vested interests for aid, but it is not helping development.
Selling the Australian Government: Politics and Propaganda from Whitlam to Howard
By Greg Barns
Sydney, UNSW Press, 2005, 93pp, $16.95
ISBN 0 86840 802 6
Reviewed by Philip Senior
Greg Barns’ Selling the Australian Government is part of a burgeoning industry examining the increased professionalisation of Australian politics. Its focus is the use of government resources for party political gain, and the implications this has for our democracy.
Barns worked in politics for a decade and was a Senior Adviser in John Fahey’s office in the Howard Government from 1996 to 1999. He was pre-selected but disendorsed for a seat in the Tasmanian parliament. His experience clearly caused misgivings about the direction of the Liberal Party and Australian democracy – leading him to pen What’s Wrong with the Liberal Party? and to join the Australian Democrats, of which he remains a member. However in Selling the Australian Government Barns is careful to point out that his concerns apply equally to the Coalition and Labor.
In Australia, Stephen Mills wrote the first major study of Australian professional political campaign and advertising practice, The New Machine Men (1986). More recently Sally Young’s The Persuaders: Inside the Hidden Machine of Political Advertising (2004) provided an in-depth discussion of political advertising in modern Australian campaigning.
Whilst not as detailed as either Mills’ or Young’s texts, Barns’ study is a valuable contribution, because it focuses on the political practices of parties beyond the campaigns, including the use of government media management units, electoral databases and government advertising for party political purposes.
The Government Members Secretariat (GMS) is the Howard Government’s communications unit. Barns argues that its activities and functions are patently party political. The Government argues that it has a legitimate role to play, particularly in assisting backbenchers and providing appropriate training to electorate office staff. Barns characterises the GMS as a ‘political flying squad’, noting the massive increase in their travel expenses during the 2001 campaign year versus previous years. He also discusses GMS’s role in helping Coalition MPs’ offices use their electoral database, Feedback, an obviously political weapon.
Whilst the author’s position is a critical one, he reminds readers that units such as these are neither new nor the exclusive domain of one party. Rather, they are a long standing feature of our political landscape. Two chapters trace the history and evolution of the predecessors to the GMS on both sides of politics. The discussion begins with the Whitlam Government’s Australian Government Liaison Service (AGLS), moves on to the Fraser Government’s Government Information Unit (GIU), and finally considers the Hawke Government’s infamous National Media Liaison Service (NMLS).
In each case the Government argued these bodies were needed to ensure its message was delivered clearly to the Australian people, an obligation in a modern democracy. However Barns sees these bodies as part of a new dynamic in the media-government relationship, necessitating media management techniques and ‘spin doctors’.
Parties in opposition rail against these units as an abuse of public funds for party political ends, but in government promptly replace them with a revamped version more to their own liking. Barns shows how politicians use different arguments depending on whether they are in opposition or government, and highlights the logical contortions employed to justify evident hypocrisy.
Barns also shows that beginning with NMLS these units took on a more ‘attacking role’, focussing on the opposition and on accumulating and disseminating damaging comments and gaffes. Confronted by potentially damaging allegations in the run-up to the 2004 election, Mark Latham held an emotion-charged press conference and called on the Prime Minister to disband the ‘dirt units’. A number of sources focussed on the possible role of government staffer Ian Hanke, but the role if any of the GMS in such a dirt machine was never clear. The Government’s Chief Whip, Jim Lloyd, denied the GMS played any part in finding dirt on Mark Latham.
Barns does not implicate the GMS as a dirt digging unit, but he does correctly point to the lack of oversight of its activities and the Government’s reluctance to have its operations scrutinised. Unlike the NMLS, the GMS is supervised by the Chief Whip’s Office, and whilst it is accountable to the Department of Finance, it is not able to be scrutinised in the Senate by opposition and minor party members. In this way it is less transparent than its predecessors.
While Barns admits that no journalist has been willing to confirm the existence of a dirt unit, he does argue that personal attacks are part of the Howard Government’s ongoing modus operandi. He traces the Government’s use of personal attacks to undermine the credibility of opponents, from the Paul Keating piggery fiasco through to the more recent episodes with whistleblowers Mike Scrafton and Andrew Wilkie. Is the GMS involved? Barns’ answer appears to be that we don’t know, but only because the Government won’t let us know what the GMS does on a day-to-day basis – other than providing training for MPs, that is.
One of the most interesting sections of the book, drawing heavily on the work of academics Peter van Onselen and Wayne Errington, concerns the use of public funds to operate political databases used to track voters, their policy preferences and their voting preferences. The large subsidies provided by parliamentary entitlements mean direct mail based on database information assists incumbents over competing candidates. The expense of running database operations ensures that only the major parties can truly take advantage of this technology, further advantaging them over the minor parties. Barns laments the tendency for this sort of technology to lead to politics as marketing, where parties try to discover the product their consumers want, then convince them they offer it, rather than creating policy in the national interest.
Barns also tackles the grey area of using government advertising for party political advantage. It is almost axiomatic that ordinary advertising on government policy and programmes provides some political advantage. However, the concern is with the scale of such government funded advertising in election years. Though apparent in the last six elections, it has been particularly evident under the Howard Government, initially prior to the 1998 GST election, then in the 2001 security election, and in the 2004 election principally through the “Strengthening Medicare” campaign. The government has managed to neutralise significantly Labor’s long held advantage as the party that best handles the issue of health and Medicare. The extensive taxpayer funded advertising campaigns extolling the merits of the government’s approach on these issues has almost certainly been a key factor underpinning this development.
Barns lays out a number of reforms that should be pursued. He suggests that units such as the GMS should be funded by the parties themselves, not taxpayers. He argues that political parties should be subject to the same privacy laws as other groups, which would allow their database operations to be scrutinised. Finally, he suggests a cap for government advertising in election years. The reforms suggested have merit, but their discussion is relatively brief.
Barns’ breadth in such a concise book is both a positive and a negative. Almost inevitably this results in certain issues being discussed in insufficient detail to leave the reader truly satisfied, and this is the case with Barns’ study. In particular, the discussion of the use of government advertising for political ends is too brief. However, by covering so much in a short book Barns allows readers to ‘get their feet wet’ in a number of areas whilst remaining very readable. Whilst drawing on academic sources in parts, the book is largely polemic and is accessible throughout. I recommend Selling the Australian Government: Politics and Propaganda from Whitlam to Howard as an interesting, easy read for students of political science and observers of politics.
Isaiah Berlin: Liberty and Pluralism
By George Crowder
Polity Press, Cambridge, 2004.
224pp, AUD $65.95
ISBN: 0-7456-2477-4
Reviewed by Christian Porter
Isaiah Berlin was one of the 20th century’s best known liberal thinkers. His seminal essay ‘Two Concepts of Liberty’ was one of many he wrote on the themes of liberalism and pluralism. The vast body of Berlin’s work, however, rarely descends into conjecture about the proper limits of the state’s coercive power. His friend Noel Annan said in the Introduction to Berlin’s Personal Impressions (1980) that ‘[W]hat fascinates him is not the political consequences of pluralism but its justification.’ Ironically, much contemporary interest in Berlin’s work involves attempts to discern the political consequences of his pluralism.
What particularly enlivens modern interest is the sense among academics that Berlin’s pluralist view of the world may either provide some new and better justification for the universalist claims of liberal political systems or do the opposite. This debate involves first analysing the pluralist view (at least as much to understand what it actually is as to ascertain its truth or accuracy). Second, it attempts to extract from the idea of pluralism a justification for certain political systems.
This debate tends to fall into two broad camps. Those, like George Crowder, who believe pluralism tends to support the validity of liberal systems, and those, like John Gray of the London School of Economics, who see pluralism as having a radical unintended consequence of undermining liberal systems and validating certain anti-liberal political models. It should be noted here that Gray’s attempts to decipher the meaning of pluralism for political systems could be best described as an ongoing project and whilst several strong criticisms of his ‘anti-liberal’ conclusions have been offered (including Crowder’s), Gray’s work is constantly evolving and is inventive and engaging.
Crowder, in his book Isaiah Berlin: Liberty and Pluralism, weighs in on this debate about the consequences of pluralism in an accessible and interesting fashion.
Berlin believed that the pluralist conception of the world reaches back to Machiavelli. In essence, it is a view that ultimate values or ‘goods’ (liberty, equality, happiness, efficiency, mercy, justice, etc.) are not susceptible to an ordinal ranking. Further, that they are often fundamentally incompatible and reveal a tendency to crowd each other out so that they cannot be simultaneously attained. Consequently, different bundles of goods are incomparable and different ‘good’ lives incommensurate, and so there exist multiple equally valid answers to moral questions.
Berlin originally used pluralism to argue against 20th century regimes that demonstrated a monist tendency to believe in and implement schemes (most often at great suffering to the populace) based on singular, unified theories of human action. The profound and intuitive idea of a pluralist world appeared so successful in its critique of monist regimes that the idea’s exposition has graduated from a consideration of which political systems it appeared to denounce to those it seems to support.
What is common to all recent attempts to argue from a pluralist worldview to a justification of liberal political systems is that they are as fascinating as they are frustrating.
To argue from pluralism to liberalism it is necessary to cover a great deal of ground in Berlin’s writings. This is because, as the author well demonstrates, whilst the idea of pluralism is central to Berlin’s thought, it emerges subtly from a variety of sources. And so the first two-thirds of Crowder’s book set the scene for the debate about the consequences of pluralism by explaining a great many of Berlin’s ideas. For a number of reasons, this background will make for enjoyable reading for amateurs and would-be political philosophers alike. The sheer variety of concepts covered, from individual thinkers, the enlightenment, romanticism, liberalism, monism, determinism, positive and negative liberty (to name but a few), gives readers familiar or unfamiliar with Berlin a tour of some of the major ideas and figures in both modern and ancient intellectual history.
Further, the author’s treatment of the concepts covered is concise and contextualizes the review of these seemingly disparate ideas with a focus to setting out the operation and terms of the pluralist worldview, rewarding readers with a picture that eventually emerges from a jigsaw puzzle of ideas. Finally, a refreshing feature of Crowder’s review of Berlin’s work is his forthright assessment of the instances in which Berlin’s pluralist ideas either shift or conflict. In setting out the idea of pluralism, Crowder is clever not to engage in an overly legalistic exercise of textual interpretation and does not attempt to ascribe consistency to Berlin’s writings where it is not apparent.
Crowder does not pretend to have plotted a perfect definitive path from pluralism to liberalism. No doubt academic celebrity awaits the person who can. Rather, in Chapter 7 he suggests four separate components of the pluralist view that might support universalist liberal claims.
The final three of these arguments are, in effect, as follows. First, that if goods are incommensurate then certain systems which suppose political perfectibility must be deemed impossible or undesirable. And second and third, that if there is, as a matter of fact, a diversity of worthwhile valuable ways of life, then liberalism best allows for the co-existence of those lives and for reasonable disagreement between them. The author acknowledges that these three ideas, while probably buttressing liberal claims to superiority, perhaps operate most effectively as refutations of Gray’s claim that pluralism supports the validity of non-liberal political systems.
What then remains is Crowder’s fourth pluralist justification for liberalism. This is the idea that while pluralism is anti-rational (in that it supposes an inability to choose between various moral goods), it nevertheless presumes, as Crowder puts it, ‘a minimal universal morality’. Indeed, as Crowder points out, this is what makes Berlin’s pluralism distinguishable from a thoroughgoing methodological moral relativism. Thus, while Berlin claims finite limits to our rational abilities to be certain about moral choice he also claims that we are able to determine good from bad ends by reference to shared human nature. This has two consequences.
First, to the extent that Berlin’s pluralism supports liberalism, it appears to do so by a recourse to claims about ‘human nature’. This is not a new or better justification, but rather a justification that has been raised under various banners by various thinkers. Ultimately, it is a justification no different to claims of ‘natural rights’, the word of god, ‘natural law’ or the permanent interests of man.
Second, it means that the most desirable political system in turn depends on the degree of shared human nature. As described by Crowder in Chapter 6, Berlin’s idea of universal traits in human nature is somewhat thin. Indeed, it starts to look overly convenient with respect to his pluralist position because the strength and depth of common human nature will allow humans to discern rationally what the ultimate goods are, but this commonality evaporates precisely at the point at which it might be able to assist in decisions between bundles of ultimate ‘goods’.
In this sense, if Crowder seeks to crack the code and argue from pluralism to liberalism then what may be required is a development of his Chapter 6 assessment of Berlin’s treatment of universal values. Particularly, how the value of freedom might be seen to sit in that scheme and whether and how it might be ascribed a pre-eminence amongst goods.
Bubble Man: Alan Greenspan & the Missing 7 Trillion Dollars
By Peter Hartcher
Black Inc: 2005
$27.95 201pp.
ISBN 186 395 3973
Reviewed by Stephen Kirchner, www.institutional-economics.com
Hartcher’s book follows his stint as a Washington correspondent, was written while a fellow at the Lowy Institute and is published by Morry Schwartz’s Black Inc. The book covers much the same ground as earlier works on the Greenspan Fed by Steve Beckner, Justin Martin and Bob Woodward, as well as Robert Shiller’s Irrational Exuberance .
As its title suggests, the book seeks to lay blame for the turn of the century boom and bust in US equities and subsequent recession at the feet of Federal Reserve Chairman Alan Greenspan. Hartcher is not alone in making this argument and it is one that crosses party lines. Economists at the otherwise respectable American Enterprise Institute have made similar claims. Few have made it quite as forcefully as Hartcher, who often substitutes hyperbole for analysis, trying to carry the argument by sheer force of exaggeration: ‘Alan Greenspan was not prepared to contain or manage in any way one of the most deluded and dangerous market manias in four centuries of financial capitalism’ (p. 175). Hartcher maintains that from 1996, Greenspan understood the risks associated with the stock market boom, but out of political timidity, did ‘absolutely nothing about it’ (p. xv).
The main evidence offered for Hartcher’s claim that monetary policy from 1996 onwards was excessively accommodative of rising stock prices is that ‘Greenspan’s Fed made a net change to official interest rates of -1.25 percentage points during the bubble years’ (p. 132). Both inflation and nominal interest rates have been in secular decline throughout the industrialised world since the early 1980s, so any sum of changes in nominal interest rates is likely to pick up this downtrend. The Fed was hardly alone in this. The figure for the Reserve Bank of Australia over the same period referenced by Hartcher was -2.75 percentage points. Hartcher’s reference to a ‘21%’ fall in the Fed funds rate (p. 147) tells us a lot about the global decline in inflation over this period, but very little about actual the stance of US monetary policy. What really matters is the average level of the real rate over time relative to a (not necessarily constant) equilibrium real rate.
Hartcher acknowledges that the reductions in interest rates at the end of 1998 in response to the aftermath of the Asian crisis and the collapse of the hedge fund LTCM were necessary and even concedes that these episodes were ‘handled judiciously and well’ by the Fed (p. 147), so he can really only claim three easings, summing to -0.75 percentage points, for his ‘bubble’ accommodation thesis. The Fed tightened aggressively from 1999 and Hartcher acknowledges the role of these tightenings in the undoing of the stock market boom and subsequent recession. He also claims that the Fed tightening of the mid-1990s was appropriate. So Hartcher’s claim boils down to the very implausible one that somewhere between the easing cycle that began in July 1995 and the concerted tightening that began in June 1999, US monetary policy was accommodative of what he calls ‘the biggest speculative mania the world has seen’ (p. 1).
This period was in fact punctuated by one Fed tightening, in March 1997, but Hartcher maintains this was not enough. Hartcher never ventures to suggest by how much the Fed should have tightened over this period. Instead, he quotes Fed research on the elasticity of stock prices to Fed funds rate shocks contained in a 2003 speech by then Federal Reserve Board Governor Ben Bernanke. In this context, Hartcher says that the idea that ‘monetary policy has a strong influence over the market…is supported by all the evidence from within the Fed itself’ (p. 151 emphasis added).
Hartcher neglects to mention that the rest of Bernanke’s speech is in fact a compelling review of the theory and evidence against the proposition that monetary policy should respond to asset prices, citing no less than 20 academic papers and other sources on the subject. In particular, Bernanke summarises his argument by noting that ‘monetary policy can lower stock values only to the extent that it weakens the broader economy, and in particular that it makes households considerably worse off. Indeed, according to our analysis, policy would have to weaken the general economy quite significantly to obtain a large decline in stock prices.’
Hartcher maintains that the Fed Chairman acknowledged that there was, in Greenspan’s own words, ‘a stock market bubble problem’ in 1996, but failed to act against it, because of a combination of political timidity and personal fallibility. However, it does not follow from Greenspan’s acknowledgment of a ‘stock market bubble problem’ that monetary policy should respond to it. Greenspan’s famous ‘irrational exuberance’ speech to the American Enterprise Institute at the end of 1996 was deliberately couched in rhetorical terms because, as Hartcher concedes, most central bankers and economists think that targeting asset prices is an extremely risky proposition. This is a view shared by RBA Governor Ian Macfarlane, who has argued against targeting asset prices in terms almost identical to Alan Greenspan.
The weaker the connection between asset prices and economic fundamentals, the stronger the argument against using asset prices as either targets or conditioning variables for monetary policy. There is only one major recent example of a central bank targeting asset prices in a systematic way: the Reserve Bank of New Zealand’s use of the exchange rate as part of a composite operating target between 1996 and 1999. This practice was abandoned, because the well known volatility of exchange rates and their very loose relationship with economic fundamentals made it a very poor basis for conducting monetary policy. This is even more true of stock prices. A direct and systematic response of monetary policy to asset prices would inject more volatility into financial markets and the economy and would be far more destabilising than the routine asset price inflation and deflation which for the most part has benign implications for the real economy and is necessary for the efficient allocation of capital.
There is a glaring contradiction at the heart of Hartcher’s argument: if central bankers are as personally and politically fallible as Hartcher suggests Greenspan was, then this is a very strong argument against a discretionary monetary policy that seeks to second-guess the market on asset prices. Hartcher is effectively arguing that we need a central banker who is prepared to back his own judgement on asset prices against the market, but we have no basis for believing that any other individual would be more or less error prone or fallible than Greenspan, given the institutional environment in which the Fed Chair operates. Hartcher acknowledges that Greenspan conducted monetary policy in a highly discretionary way, yet concludes from his supposed failings that central bankers should exercise even more discretion to target asset prices. Like most journalists, Hartcher is preoccupied with personalities at the expense of processes, showing no interest in institutional reforms that might make the process of setting US monetary policy less subject to discretionary policy error, such as the adoption of a formal inflation targeting regime.
The idea that central banks should manage asset prices through monetary policy is antithetical to the very reason we have financial markets. The debate over how monetary policy should respond to ‘bubbles’ is the asset market equivalent of the socialist calculation debate of the 1930s. Unfortunately, the idea that monetary policy should respond to asset prices is gaining ground, in large part because of the growing tendency to view markets as being ‘bubble’ prone. There is not a single asset class that has not been pronounced as being in a ‘bubble’ in recent years and the term is now so overused as to be bereft of analytical content. If ‘bubbles’ are as common as Hartcher and others would have us believe, then this is strong grounds for believing that they are normal part of the functioning of markets. If asset prices had simple and deterministic relationships with known fundamentals, there would in fact be no need for financial markets to set prices. Asset price inflation and deflation is a necessary part of the market discovery process. The notion that the authorities can know better than the market the appropriate level or growth rate for asset prices is a seductive, but dangerous one, not least in the hands of central bankers.
