Ideas@TheCentre – The Centre for Independent Studies

Ideas@TheCentre

Ideas@TheCentre brings you ammunition for conversations around the table.  3 short articles from CIS researchers emailed every Friday on the issues of the week.

Greece must deal with its past before its creditors

Simon Cowan

19 June 2015 | Ideas@TheCentre

ideas-image-150619-1It may well be true that Greece will never pay back its debts, as Greek Finance Minister ‘Aussie’ Yanis Varoufakis claims. Varoufakis uses this argument to condemn the troika (the IMF, the European commission and the European Central Bank) for providing handouts to Greece in 2010 when it was ‘bankrupt’.

It seems bizarre to start the accounting for the Greek economic collapse at that point. Of course it would be highly inconvenient for the Greek government to admit the truth: that the Greeks themselves spent decades borrowing money to support their welfare habit, and avoiding paying taxes.

To portray the crisis in Greece as simply a case of austerity killing demand, and propose the Keynesian solution of more spending, requires plastering ideological paper over the cracks in the economic foundations.

Forget austerity, what has ruined the Greek economy is uncompetitiveness and the debt burden of the unfunded Greek welfare system. The Greek people do not accept this fact, hence the churn of prime ministers and parties in Greece since 2009, culminating in the election of the socialist Syriza basically on the platform of rejecting economic reality.

A country with no money cannot increase pension payments. A country with no functioning private sector economy cannot raise the minimum wage. A country with no credit cannot demand more money.

The kind of reforms Greece needs to make their government spending sustainable and their economy competitive would require fundamentally changing the attitude of Greeks towards their government and their entitlements. The first step is accepting that the Greek crisis is not the fault of the Germans or the troika but of the Greeks themselves.

It is not always helpful to rake over the past looking for blame, but in this case without a change in Greek expectations of government, no amount of debt relief or bailout funds will generate a long term functioning economy in Greece.

The Germans should not accept further demands for free taxpayers’ money to be handed out to Greece until there is evidence the Greeks have come to terms with the past.

50 shades of youth unemployment

Patrick Carvalho

19 June 2015 | Ideas@TheCentre

ideas-image-150619-2The rise of a jobless youth contingent in Australia is a growing concern. But we cannot get a clear picture of the problem without examining the  different measurements of it.

The most traditional measurement is the youth unemployment rate, which is defined as the ratio of unemployed (i.e. not at work but actively job seeking) youth relative to the respective 15-to24-year-old labour force group.

However, the youth unemployment rate ignores a considerable portion:  those who would like to – or could – be working, but since they are not seeking work are considered unemployed. That is, young people at working age who are outside the labour market.
While some choose to invest in human capital full-time by studying or training; others are completely missing out on the opportunity to either work and/or study. The latter constitutes a worrying subset of young people not captured by youth unemployment statistics.

Hence, a careful analysis of the issue should also include measurements of young people not in education, employment or training (NEETs). In particular, it is important to separate the active NEETs (unemployed youth not studying/training) and inactive NEETs (completely outside the labour market and education/training).

Additionally, the youth unemployment rate might overstate the unemployment problem, since the young labour force – which is the denominator of the youth unemployment rate – is severely constrained by the large proportion of those enrolled at education/training and simply not interested in working.

In this respect, it is important to add other statistics to the analysis menu. The first is the youth unemployment-to-population ratio, or most commonly addressed as youth unemployment ratio, which considers the number of jobless youth as a percentage of the respective young population.

Measurements regarding NEETs (including the distinction between active and inactive NEETs) can help to devise targeted policies, since the youth unemployment rate (or ratio) does not reveal potential problems with those who are not in education, employment or training – especially why and how many are outside the labour market.

The important message is that there is no single statistics able to fully inform about the youth unemployment subject. The issue comes in many shades, shapes and sizes, with no black-and-white, one-size-fits-all picture.

Death, taxes and political advertising

Trisha Jha

19 June 2015 | Ideas@TheCentre

ideas-image-150619-3It feels like aeons ago that Kevin Rudd referred to taxpayer-funded political advertising commissioned by governments as “a long term cancer on our democracy.” Over the course of their first term in office, the Rudd government went from having advertising campaigns of more than $250,000 approved by the Auditor-General, to replacing this role with a hand-picked ‘independent’ committee of former public servants.

And now? It seems whatever guidelines may exist to ensure proper use of taxpayer funds for information campaigns, they are being rather liberally interpreted. In the last few months, the Abbott Government embarked on a $15 million campaign for its higher education reform package before the policy had even passed the Senate. And this week it was announced they would do the same with the Jobs for Families package (the childcare reforms), spending $18 million when it also hasn’t passed the Senate.

Not that this is a new trend. Rudd MkI spent $38 million to defend the mining tax, before the campaign against the policy was even fully formed. There was the Gillard Government’s $12 million to sell the carbon tax. And then Rudd MkII’s $30 million domestic campaign that spruiked their border protection policies, in the midst of an election campaign no less.

These advertising programs are definitely a waste of taxpayer money in that they serve naked political self-interest. Being obliged to pay for an advertising campaign, which has arisen directly out of government’s inability to campaign on reform, is an indignity.

But the fact that they happen so frequently — and that governments that attempt to curtail the practice eventually give up — speaks to a broader truth about politics: survival is the main game. Ultimately, the dignity of taxpayers and voters will always play second fiddle.