WEBVTT 1 00:00:00.000 --> 00:00:03.980 Hello everyone. My name's Mark Cully and I'm going to be chairing this session. 2 00:00:04.180 --> 00:00:11.080 Let me introduce my fellow panellists and make some remarks about our constitution. 3 00:00:12.100 --> 00:00:16.160 This session is called Blame the Economist, Not the Economy. 4 00:00:17.000 --> 00:00:20.680 And just to be clear on that, there are two economists up here. 5 00:00:21.200 --> 00:00:27.720 Myself, I'm the Chief Economist for the Department of Immigration and Citizenship in Canberra. 6 00:00:27.720 --> 00:00:38.000 And also from Canberra, Richard Dennis, who's the Executive Director of the Australian Institute and something of a professional ratbag. 7 00:00:40.620 --> 00:00:50.120 Neither of us, I think, would want to be seen as having apportioned any blame for the current crisis, but we'll get onto that. 8 00:00:50.260 --> 00:00:55.620 And we're joined by two non-economists, both of them from overseas. 9 00:00:55.820 --> 00:00:57.700 And both, I think, can therefore... 10 00:00:57.720 --> 00:01:04.720 offer a useful perspective on this issue, particularly, I think, given myself and Richard's perspective, 11 00:01:04.780 --> 00:01:08.300 we're mostly around Australia and around what's happened in the developed world. 12 00:01:08.460 --> 00:01:14.880 But we have two people here who can offer us a perspective on how this crisis is unfolding in the developing world. 13 00:01:15.680 --> 00:01:22.460 On my immediate right, Dr. Khaled Koza, who's from the Centre for Security Policy in Geneva 14 00:01:22.460 --> 00:01:27.700 and is a geographer by trade with a particular specialism in looking at the world. 15 00:01:27.720 --> 00:01:32.580 He's also working at the movement of people in developing countries around the world. 16 00:01:32.800 --> 00:01:38.140 And next to him is Mr. M. C. Mehta, who is a member of the... 17 00:01:38.140 --> 00:01:43.020 an attorney in the Supreme Court of India and is an environmental lawyer. 18 00:01:43.220 --> 00:01:47.760 And I think one of the real issues that economists are contending with, 19 00:01:47.820 --> 00:01:52.520 in fact, one of the issues that Richard's Centre has done some terrific work in, 20 00:01:52.600 --> 00:01:56.160 is trying to think about how do we bring the notion of the environment 21 00:01:56.720 --> 00:01:57.700 within the purview of the environment and the environment itself. 22 00:01:57.720 --> 00:01:58.460 And how do we bring the notion of the environment within the purview of economics 23 00:01:58.460 --> 00:02:01.400 and how do we think about a sustainable economics. 24 00:02:01.760 --> 00:02:05.720 And I think Richard spoke yesterday about the notion of green capitalism. 25 00:02:06.720 --> 00:02:12.440 So the way we're going to run this particular session is that I'm going to start off with a few preliminaries. 26 00:02:12.520 --> 00:02:14.500 I'm a kind of participating chair. 27 00:02:14.620 --> 00:02:18.640 I have to be a little bit coy about what I say, being a public servant. 28 00:02:21.960 --> 00:02:24.640 So I'm going to set a few preliminary remarks. 29 00:02:24.880 --> 00:02:26.340 I'm going to throw to Richard. 30 00:02:26.340 --> 00:02:27.920 Then to Khaled. 31 00:02:28.080 --> 00:02:29.320 And then to Mr. Mehta. 32 00:02:30.360 --> 00:02:33.160 And then we'll have a bit of a discussion amongst ourselves 33 00:02:33.160 --> 00:02:36.300 and then take some questions from people out here. 34 00:02:36.700 --> 00:02:38.100 And I guess my first... 35 00:02:38.100 --> 00:02:42.560 If I'm reflecting about this event, 36 00:02:43.820 --> 00:02:47.420 which people are using a variety of terms to call, 37 00:02:47.700 --> 00:02:51.240 it seems to be the fact that most governments around the world 38 00:02:51.240 --> 00:02:53.120 are calling it the global financial crisis. 39 00:02:53.420 --> 00:02:54.880 And they do that for two reasons. 40 00:02:55.020 --> 00:02:55.540 One is... 41 00:02:55.540 --> 00:02:56.100 One is... 42 00:02:56.100 --> 00:02:56.320 One is... 43 00:02:56.340 --> 00:02:57.020 One is... 44 00:02:57.020 --> 00:02:59.140 It's not our fault. 45 00:03:00.400 --> 00:03:04.480 And they call it the financial crisis because its locus, 46 00:03:04.500 --> 00:03:05.980 I think it's true to say its locus, 47 00:03:06.080 --> 00:03:07.260 was in the financial sphere, 48 00:03:07.480 --> 00:03:10.500 but it's also the case that governments can then say, 49 00:03:10.580 --> 00:03:15.240 it's not our fault, it's the fault of the banks, or what have you. 50 00:03:15.460 --> 00:03:18.200 But if I think about the global financial crisis, 51 00:03:18.300 --> 00:03:20.020 and I'll just use that for shorthand, 52 00:03:21.760 --> 00:03:25.080 there are a number of distinguishing features about it, 53 00:03:25.120 --> 00:03:26.320 but in its entirety, 54 00:03:26.340 --> 00:03:31.680 sense what is interesting, at least from an Australian perspective, is the fact that we 55 00:03:31.680 --> 00:03:39.480 haven't had a recession since the very early 1990s. And a recession is a regular recurring 56 00:03:39.480 --> 00:03:45.580 feature of capitalist economies. It has been for a very, very long time. And I can remember, 57 00:03:45.700 --> 00:03:53.100 at least in my lifetime, we had a recession in the mid-1970s due to the OPEC oil shock. 58 00:03:53.100 --> 00:03:58.340 We had a recession in the very early 1980s, which we might characterize as a kind of 59 00:03:58.340 --> 00:04:06.500 cost-push inflation blowout. And we had a recession in the early 1990s that was caused 60 00:04:06.500 --> 00:04:12.780 by very high interest rates that were set. And in a sense, what's unusual about the last couple 61 00:04:12.780 --> 00:04:18.060 of decades is that we've become almost inured to the idea that recessions were possible. And in 62 00:04:18.060 --> 00:04:23.040 fact, you may say there's a degree of complacency amongst policymakers and 63 00:04:23.100 --> 00:04:30.400 amongst economists about having developed policy tools as a means of regulating the economy to 64 00:04:30.400 --> 00:04:36.980 avoid going into deep recessions. And this is probably most exemplified by Ben Bernanke, 65 00:04:37.140 --> 00:04:43.320 who's the chair of the Federal Reserve Bank in the United States, the equivalent of Glenn Stevens 66 00:04:43.320 --> 00:04:48.780 here in Australia, who, before he took up his post, before he succeeded Alan Greenspan, 67 00:04:49.600 --> 00:04:52.880 gave a famous speech. It is now famous. 68 00:04:53.100 --> 00:04:57.980 It was quite widely cited at the time, called The Great Moderation. And he argued in his speech 69 00:04:57.980 --> 00:05:03.260 that economists and policymakers had worked out how to avoid capitalist economies going 70 00:05:03.260 --> 00:05:06.940 into deep recessions. So he obviously got that one wrong. 71 00:05:09.180 --> 00:05:16.020 Now, there is a line, and it's a rather brutal line, but there is nonetheless a line that 72 00:05:16.020 --> 00:05:21.640 economists use going right back to the days of Joseph Schumpeter, that recessions are part of 73 00:05:21.640 --> 00:05:23.080 the process of creative destruction. And it's a rather brutal line, but it's a rather brutal line. 74 00:05:23.100 --> 00:05:28.740 And you saw that echoed, in fact, in the last recession that Australia had when Prime Minister 75 00:05:28.740 --> 00:05:35.840 Keating was famously said, and it came back to bite him quite severely, that this is the 76 00:05:35.840 --> 00:05:41.300 recession that we had to have. So there is a sense in which recessions can be cathartic. 77 00:05:41.780 --> 00:05:49.640 Now, it seems to me there still is a question to be asked about whether this particular global 78 00:05:49.640 --> 00:05:52.420 financial crisis, at least as it's playing out in Australia, 79 00:05:53.100 --> 00:06:01.420 is in fact really a crisis. And I think if you're sitting in a secure job, and you've got a mortgage 80 00:06:01.420 --> 00:06:06.600 to pay, and you're some way off retirement, you might well be wondering what the fuss is about. 81 00:06:06.900 --> 00:06:13.940 You've got very low interest rates, you've got reductions in fuel prices, and you've got the 82 00:06:13.940 --> 00:06:21.200 government handing out stimulus payments, direct cash payments to you, enabling people to go out 83 00:06:21.200 --> 00:06:22.400 and buy their plasma televisions. 84 00:06:23.100 --> 00:06:24.960 This is the plasma television-led recovery. 85 00:06:26.620 --> 00:06:29.120 And you may well be wondering what the fuss is about. 86 00:06:29.280 --> 00:06:35.840 But even standing back from that, I think there is a question yet to be answered about whether this is 87 00:06:37.280 --> 00:06:44.480 really an epochal event, or is it something that we will ride out. 88 00:06:44.660 --> 00:06:50.720 And it must be said, I think, at the moment, that Australia is faring extremely well relative to 89 00:06:50.720 --> 00:06:52.620 other countries in the developed world. 90 00:06:53.180 --> 00:06:57.840 And I wait to hear from my friends here about how this is playing out in the developing world. 91 00:06:57.940 --> 00:07:04.140 But certainly in terms of the developed world, Australia is riding out this crisis in pretty good fashion. 92 00:07:05.420 --> 00:07:12.020 If I go to the title of this, clearly the organisers of the program are having a little bit of fun 93 00:07:12.020 --> 00:07:13.440 at the expense of economists. 94 00:07:14.780 --> 00:07:20.420 But there is a serious point to be made, and seeing that I'm the first one, I'll be the first to use this quote. 95 00:07:20.560 --> 00:07:22.640 There is a very famous quote that gets... 96 00:07:23.100 --> 00:07:30.360 used from time to time, from John Maynard Keynes, who is very much back in fashion at the moment. 97 00:07:30.860 --> 00:07:36.600 And right in the very last chapter of the general theory of employment, interest and money, 98 00:07:36.660 --> 00:07:40.160 I think I got the order right, Keynes says, 99 00:07:40.920 --> 00:07:45.560 Practical men who believe themselves to be quite exempt from any intellectual influence 100 00:07:45.560 --> 00:07:48.260 are usually the slaves of some defunct economist. 101 00:07:50.160 --> 00:07:52.540 Mad men in authority, that's the government, 102 00:07:53.100 --> 00:07:59.380 who hear voices in the air are distilling their frenzy from some academic scribbler of a few years back. 103 00:08:00.060 --> 00:08:06.400 And I think the organisers of the program very much had that kind of quote in their mind when they framed this session. 104 00:08:07.380 --> 00:08:10.380 Now there are a number of things that you might want to blame economists for, 105 00:08:10.600 --> 00:08:15.960 in respect of this global financial crisis, and I suspect Richard will touch on them. 106 00:08:16.440 --> 00:08:21.940 One is inability to forecast accurately. 107 00:08:23.340 --> 00:08:28.260 Economists are very bad, particularly at picking turning points in where an economy's got to, 108 00:08:28.400 --> 00:08:32.940 and they might be put in a dock for that, and whether it's fair for them to be done. 109 00:08:33.040 --> 00:08:35.200 So or not, maybe we'll hear a bit from Richard about that. 110 00:08:35.460 --> 00:08:38.820 The second one is the degree of complacency, 111 00:08:38.940 --> 00:08:44.440 and I think I made reference to that speech that Ben Bernanke made about the great moderation. 112 00:08:44.780 --> 00:08:50.940 And in a sense, less attention, you might argue, 113 00:08:51.060 --> 00:08:52.400 has been paid to... 114 00:08:53.660 --> 00:08:59.640 macroeconomics by the economics profession than ought to have been the case. 115 00:08:59.980 --> 00:09:06.380 And moving on to that, I guess the third point might be for those who really kind of dwell into 116 00:09:06.380 --> 00:09:08.360 and look at the intricacies of economics, 117 00:09:10.200 --> 00:09:14.200 the inattention to what you might call real world economics, 118 00:09:14.480 --> 00:09:18.280 where economists seem to either fall into one of two camps. 119 00:09:18.480 --> 00:09:21.800 One is an excessive degree of formalism, 120 00:09:21.800 --> 00:09:22.820 and using mathematics, 121 00:09:22.820 --> 00:09:25.300 and playing with very abstract models, 122 00:09:26.500 --> 00:09:28.980 which sometimes is called physics envy. 123 00:09:33.480 --> 00:09:38.820 Or indulging in what you might consider to be kind of whimsical research, 124 00:09:39.040 --> 00:09:47.920 of the kind that I guess the freeconomics kind of genre of book really exemplifies, 125 00:09:47.920 --> 00:09:51.700 where people are putting their talents to look at, you know, really rather indulgent, 126 00:09:52.900 --> 00:09:56.660 rather than looking at real world economics and how it bites on people. 127 00:09:58.980 --> 00:10:02.720 So I wonder whether it's just too pat to blame economists. 128 00:10:04.320 --> 00:10:08.080 Yesterday, I didn't go to it, but I gather there was a very entertaining session on greed. 129 00:10:08.840 --> 00:10:13.880 And I wonder to what extent people might use economists as scapegoats, 130 00:10:13.960 --> 00:10:16.680 when really we ought to be looking a bit more at ourselves, 131 00:10:16.940 --> 00:10:19.240 and the way in which we've gorged ourselves on debt, 132 00:10:20.040 --> 00:10:22.800 and speculating on rising house prices, 133 00:10:22.820 --> 00:10:25.640 and a rising stock market. 134 00:10:26.820 --> 00:10:28.880 Alternatively, rather than the economists, 135 00:10:28.980 --> 00:10:33.900 we might want to blame the financial whiz kids on Wall Street. 136 00:10:34.160 --> 00:10:39.560 And, you know, I think they're probably more lawyers and accountants 137 00:10:40.800 --> 00:10:45.780 that make up that cohort of financial wizardry rather than economists. 138 00:10:46.700 --> 00:10:49.380 Or, indeed, one might want to, 139 00:10:49.440 --> 00:10:52.740 and I don't know to what extent they are economists or not, 140 00:10:52.740 --> 00:10:55.440 look at the role of regulators, 141 00:10:55.620 --> 00:10:57.720 and whether we've been too lax, 142 00:10:57.800 --> 00:11:02.880 particularly the regulators of financial institutions in the United States, I should say. 143 00:11:03.080 --> 00:11:05.180 And again, the extent to which they are, 144 00:11:05.280 --> 00:11:14.220 their laxity was informed by economic theories about the perfectibility of markets, or not. 145 00:11:15.040 --> 00:11:16.100 That's the backdrop. 146 00:11:16.920 --> 00:11:21.340 Hopefully that's given enough context for you to maybe, 147 00:11:21.420 --> 00:11:22.540 I'll pass over to, 148 00:11:22.540 --> 00:11:23.600 to Richard now, 149 00:11:23.700 --> 00:11:27.180 who'll probably say a little bit about Australia, 150 00:11:27.320 --> 00:11:28.680 and give a little bit of a, 151 00:11:28.700 --> 00:11:30.160 I suspect an outsider's, 152 00:11:30.880 --> 00:11:32.160 insider's perspective on economics. 153 00:11:33.060 --> 00:11:33.880 Thanks, Mark. 154 00:11:34.100 --> 00:11:35.520 As a professional ratbag. 155 00:11:38.120 --> 00:11:40.300 Look, economics, or economists, 156 00:11:40.420 --> 00:11:44.300 I would argue, have become the witch doctors of modern society. 157 00:11:44.780 --> 00:11:48.500 They are the small group of high priests 158 00:11:49.080 --> 00:11:50.720 who we turn to, 159 00:11:50.720 --> 00:11:53.840 both for direction, 160 00:11:54.720 --> 00:11:56.140 and for excuses. 161 00:11:56.640 --> 00:12:00.460 And if you understand your ancient history well, 162 00:12:00.580 --> 00:12:02.500 or, I don't know, I'm enough, 163 00:12:02.660 --> 00:12:04.280 I don't claim myself to be an expert, 164 00:12:04.380 --> 00:12:07.360 but if you understand a little bit about ancient cultures, 165 00:12:07.400 --> 00:12:11.020 and how witch doctors and high priests, 166 00:12:11.060 --> 00:12:13.860 depending on the culture you're looking at, 167 00:12:14.720 --> 00:12:16.020 if you understand their role, 168 00:12:16.160 --> 00:12:19.200 their role was that of the sycophant. 169 00:12:19.920 --> 00:12:20.700 They got the job done. 170 00:12:20.700 --> 00:12:22.940 That is, they worked for the king, 171 00:12:23.700 --> 00:12:25.580 or whoever was actually in charge, 172 00:12:25.860 --> 00:12:27.680 and they provided an excuse. 173 00:12:27.880 --> 00:12:29.400 They provided a narrative. 174 00:12:29.780 --> 00:12:31.080 They provided a, 175 00:12:32.100 --> 00:12:34.380 they provided a cosmic, 176 00:12:34.520 --> 00:12:36.460 or theological explanation, 177 00:12:36.540 --> 00:12:39.680 to do exactly what those in power wanted to do. 178 00:12:40.320 --> 00:12:41.960 That's what economists do. 179 00:12:45.300 --> 00:12:48.120 John Howard was not an economist. 180 00:12:48.180 --> 00:12:50.180 Peter Costello was not an economist. 181 00:12:50.180 --> 00:12:50.680 Kevin Kennedy was not an economist. 182 00:12:50.700 --> 00:12:52.140 John Rudd is not an economist. 183 00:12:52.300 --> 00:12:54.340 Economists have not, do not, 184 00:12:54.440 --> 00:12:56.520 and will not ever run Australia. 185 00:12:57.440 --> 00:12:58.500 John Hewson? 186 00:12:58.780 --> 00:13:00.340 John Hewson was an economist, 187 00:13:00.380 --> 00:13:03.340 who was a spectacularly unsuccessful politician. 188 00:13:07.560 --> 00:13:12.140 The claim that economists run the country 189 00:13:12.140 --> 00:13:16.820 is a very convenient excuse for those who do. 190 00:13:17.440 --> 00:13:20.160 Because when you say to the prime minister, 191 00:13:20.160 --> 00:13:22.040 I want you to tackle climate change, 192 00:13:22.260 --> 00:13:24.220 I'm serious, I'm worried for my children, 193 00:13:24.340 --> 00:13:25.940 I want you to tackle climate change, 194 00:13:26.060 --> 00:13:27.300 he says, and so do I. 195 00:13:28.140 --> 00:13:31.040 But the economists say we really shouldn't. 196 00:13:32.860 --> 00:13:34.520 When you say prime minister, 197 00:13:34.720 --> 00:13:36.060 any prime minister, 198 00:13:36.280 --> 00:13:37.280 Labour or Liberal, 199 00:13:37.380 --> 00:13:40.100 I think that the banks are robbing me blind. 200 00:13:41.280 --> 00:13:43.040 I want you to regulate, 201 00:13:43.280 --> 00:13:44.620 and so do I. 202 00:13:45.080 --> 00:13:47.600 I would love to regulate those banks, 203 00:13:47.720 --> 00:13:49.300 but you know what the economists say? 204 00:13:49.300 --> 00:13:51.540 We can't do it. 205 00:13:52.100 --> 00:13:53.440 Once upon a time, 206 00:13:53.440 --> 00:13:56.580 the high priests would rip the chicken open 207 00:13:56.580 --> 00:13:58.480 in front of the assembled masses, 208 00:13:58.560 --> 00:14:01.660 and peer into the guts of the chicken 209 00:14:01.660 --> 00:14:03.540 and find the spot on the liver, 210 00:14:03.600 --> 00:14:04.960 which as luck would have it, 211 00:14:05.740 --> 00:14:08.180 would assure us it was time to go to war. 212 00:14:09.540 --> 00:14:11.720 And that you, my army, 213 00:14:11.880 --> 00:14:13.420 are going to go and risk your life. 214 00:14:13.520 --> 00:14:16.820 Because in fact, it's the gods that are telling us 215 00:14:16.820 --> 00:14:18.360 it's a great time for war. 216 00:14:18.360 --> 00:14:19.780 And as I said, 217 00:14:19.800 --> 00:14:22.640 all good high priests and all good witch doctors 218 00:14:22.640 --> 00:14:24.120 knew that that chicken gut 219 00:14:24.120 --> 00:14:26.720 better pretty much tell them exactly what the guy 220 00:14:26.720 --> 00:14:27.940 that's really running the show 221 00:14:27.940 --> 00:14:30.560 wanted those chicken guts to say. 222 00:14:30.880 --> 00:14:35.160 So economists perform an incredible function 223 00:14:35.160 --> 00:14:37.580 in concealing in a democracy 224 00:14:37.580 --> 00:14:39.760 the way decisions are really made. 225 00:14:40.160 --> 00:14:42.580 They allow people to agree with you 226 00:14:42.580 --> 00:14:44.100 while doing nothing that you want. 227 00:14:45.320 --> 00:14:48.340 You know, for those who were here for the last session, 228 00:14:48.340 --> 00:14:51.180 I talked about the idea that, you know, 229 00:14:51.200 --> 00:14:54.080 always be afraid of people who agree with you in principle. 230 00:14:55.300 --> 00:14:57.060 Oh, no, I agree. 231 00:14:57.220 --> 00:14:58.860 Yeah, those markets are bad. 232 00:14:59.060 --> 00:15:00.340 But we'll be sticking with them. 233 00:15:01.560 --> 00:15:02.360 All right? 234 00:15:02.720 --> 00:15:04.600 Agreeing in principle in politics 235 00:15:04.600 --> 00:15:07.840 is a very easy way to just shift, 236 00:15:07.940 --> 00:15:08.900 to move people along. 237 00:15:09.300 --> 00:15:11.880 And economists, unfortunately, 238 00:15:13.360 --> 00:15:16.440 you know, have willingly allowed themselves 239 00:15:16.440 --> 00:15:18.320 to be used in such a way. 240 00:15:18.340 --> 00:15:20.840 And, you know, while I'm critical 241 00:15:20.840 --> 00:15:22.160 of the economics profession, 242 00:15:22.520 --> 00:15:24.120 there are great economists in Australia 243 00:15:24.120 --> 00:15:25.600 around the world who speak up. 244 00:15:26.460 --> 00:15:27.260 Excuse me. 245 00:15:30.680 --> 00:15:34.020 That was one of them trying to get their voice heard. 246 00:15:35.860 --> 00:15:38.420 But unfortunately, you know, 247 00:15:38.420 --> 00:15:41.180 we're talking about global financial crisis. 248 00:15:41.280 --> 00:15:42.880 Well, in politics, there's a saying, 249 00:15:43.020 --> 00:15:44.540 never let a crisis go to waste. 250 00:15:45.740 --> 00:15:47.640 All right? We love the GFC. 251 00:15:47.640 --> 00:15:50.040 It's a great excuse to not tackle climate change. 252 00:15:50.400 --> 00:15:51.720 We love the GFC. 253 00:15:51.760 --> 00:15:54.520 It's a great excuse to not spend money on Indigenous health. 254 00:15:54.740 --> 00:15:56.780 Oh, I'd love to. I agree in principle. 255 00:15:57.660 --> 00:15:59.700 But now is not quite the time. 256 00:15:59.940 --> 00:16:02.420 So, look, I think economists collectively 257 00:16:02.420 --> 00:16:04.660 need to hang their heads in shame. 258 00:16:05.380 --> 00:16:06.680 On their behalf, 259 00:16:06.840 --> 00:16:09.340 I'll debase myself before you today. 260 00:16:10.860 --> 00:16:13.340 You can direct as much vitriol 261 00:16:13.340 --> 00:16:15.480 as you would like at me. 262 00:16:16.280 --> 00:16:17.620 But, look, the problem is, 263 00:16:17.620 --> 00:16:21.060 you know, the economists that you hear the most from 264 00:16:21.060 --> 00:16:22.760 are not the good economists 265 00:16:22.760 --> 00:16:25.380 that do actually have interesting things to say, 266 00:16:25.540 --> 00:16:27.540 whose forecasts and whose knowledge 267 00:16:27.540 --> 00:16:29.060 are worth paying attention to, 268 00:16:29.160 --> 00:16:31.760 who make simple truths, like Mark said before, 269 00:16:31.940 --> 00:16:33.700 that these things called recessions 270 00:16:33.700 --> 00:16:35.820 actually show up every seven years. 271 00:16:36.300 --> 00:16:38.740 We get surprised by every one of them. 272 00:16:39.580 --> 00:16:40.320 All right? 273 00:16:40.320 --> 00:16:41.700 And the miracle in Australia, 274 00:16:42.000 --> 00:16:44.520 the economic miracle is we missed one recession. 275 00:16:44.880 --> 00:16:47.600 And that's why, truly, and that's why it's 15 years. 276 00:16:47.620 --> 00:16:49.840 Since our last recession, a little bit more, 277 00:16:49.980 --> 00:16:51.580 that's just two business cycles. 278 00:16:51.780 --> 00:16:53.400 We missed one. We were due for this one. 279 00:16:53.460 --> 00:16:53.920 We got it. 280 00:16:54.200 --> 00:16:56.700 So there are plenty of good economists out there playing, 281 00:16:56.840 --> 00:16:58.180 saying plenty of good things. 282 00:16:58.980 --> 00:17:01.040 But I fear most of what you hear 283 00:17:01.040 --> 00:17:03.280 is from Craig James from ComSec 284 00:17:03.280 --> 00:17:05.800 telling you what happened to the Nick Idao today. 285 00:17:06.520 --> 00:17:09.100 And I put it to you that anyone that needs to know 286 00:17:09.100 --> 00:17:10.880 what happened to the Nick Idao today 287 00:17:10.880 --> 00:17:13.380 is not tuning into the Channel 10 News 288 00:17:13.380 --> 00:17:14.740 to find out about it. 289 00:17:17.620 --> 00:17:18.480 All right? 290 00:17:20.660 --> 00:17:24.580 What the hell is that doing on our news every night? 291 00:17:24.960 --> 00:17:26.900 Well, what it's telling you 292 00:17:26.900 --> 00:17:30.700 is that important things that you don't understand 293 00:17:30.700 --> 00:17:31.560 are happening. 294 00:17:32.320 --> 00:17:34.720 And in fact, that's the reason 295 00:17:34.720 --> 00:17:36.640 you can't have all the things you want. 296 00:17:38.100 --> 00:17:39.900 It bookends the news. 297 00:17:40.460 --> 00:17:42.480 Oh, health, education, fine. 298 00:17:42.680 --> 00:17:44.280 But before we end for tonight, 299 00:17:44.420 --> 00:17:46.460 the markets said it was a good day. 300 00:17:46.460 --> 00:17:49.220 The markets said it was a bad day. 301 00:17:49.280 --> 00:17:50.740 Let's not offend the gods. 302 00:17:51.100 --> 00:17:51.780 All right? 303 00:17:51.960 --> 00:17:53.220 They're the witch doctors. 304 00:17:53.540 --> 00:17:54.300 Offend them. 305 00:17:54.660 --> 00:17:58.820 So, look, we'll be having plenty of time for Q&A. 306 00:17:58.980 --> 00:18:00.820 Shameless plug for the Australia Institute 307 00:18:00.820 --> 00:18:03.460 because I'm not on with Craig James every night. 308 00:18:04.040 --> 00:18:06.180 If you want to hear from economists 309 00:18:06.180 --> 00:18:08.640 that don't think the world revolves around economics, 310 00:18:08.960 --> 00:18:09.840 give me your email address. 311 00:18:18.000 --> 00:18:19.440 I told you he was a rat bag. 312 00:18:23.340 --> 00:18:25.120 So, look, there are a number of issues there 313 00:18:25.120 --> 00:18:29.640 which I want to pick up in some panel discussion 314 00:18:30.280 --> 00:18:31.300 with Richard there 315 00:18:31.300 --> 00:18:33.020 because I think he's probably... 316 00:18:34.300 --> 00:18:36.040 He's probably gone a little bit over the top. 317 00:18:38.460 --> 00:18:40.000 I do want to hear his views 318 00:18:40.000 --> 00:18:42.660 on who the better economists are in Australia 319 00:18:42.660 --> 00:18:44.480 where they're hiding so I can hire some of them. 320 00:18:45.760 --> 00:18:46.440 But I think he's probably gone a little bit over the top. 321 00:18:46.440 --> 00:18:48.560 And I think there's a serious discussion to be had 322 00:18:48.560 --> 00:18:51.000 about the extent to which economists do good 323 00:18:52.000 --> 00:18:55.100 and the extent to which the market does good. 324 00:18:55.640 --> 00:18:57.700 And we might pick up some of those in discussion. 325 00:18:57.840 --> 00:19:01.180 But let me move over to Khaled Khosa 326 00:19:01.820 --> 00:19:03.500 for his perspective on this question. 327 00:19:03.800 --> 00:19:05.380 Thanks very much indeed, Mark. 328 00:19:05.600 --> 00:19:08.440 Let me just make three preliminary comments. 329 00:19:09.160 --> 00:19:12.420 Firstly, I trained many years ago as an undergraduate as a geographer 330 00:19:12.420 --> 00:19:14.580 and spent my time being bullied by economists 331 00:19:14.580 --> 00:19:15.880 for not doing a serious subject. 332 00:19:15.960 --> 00:19:16.420 So it's very nice to hear 333 00:19:16.440 --> 00:19:16.960 that I must be on the panel 334 00:19:16.960 --> 00:19:19.340 where economists are taking the flak for once. 335 00:19:20.220 --> 00:19:21.800 Secondly, just to reinforce what Mark said, 336 00:19:21.900 --> 00:19:24.580 I've spent a lot of time recently in the UK and the USA 337 00:19:24.580 --> 00:19:26.980 and the recession is visible there 338 00:19:26.980 --> 00:19:28.760 and I found it not particularly visible in Australia. 339 00:19:28.920 --> 00:19:30.780 So it seems Australia really is riding this out 340 00:19:30.780 --> 00:19:32.780 and perhaps it's not as big a crisis in this country 341 00:19:32.780 --> 00:19:34.920 as I think it is in many other parts of the world. 342 00:19:35.280 --> 00:19:38.460 And I think thirdly, just to reiterate something said there, 343 00:19:39.340 --> 00:19:41.820 Gordon Brown, apparently a very able economist, 344 00:19:41.940 --> 00:19:43.400 a very able Chancellor of Exchequer, 345 00:19:43.480 --> 00:19:45.760 absolutely devastatingly terrible Prime Minister. 346 00:19:45.920 --> 00:19:46.320 So I think that... 347 00:19:46.320 --> 00:19:46.420 LAUGHTER 348 00:19:46.440 --> 00:19:49.360 That probably tells us something about the truism of what you just said. 349 00:19:50.040 --> 00:19:53.080 I want to spend a few minutes just focusing our attention 350 00:19:53.080 --> 00:19:55.020 on the impact of the global financial crisis 351 00:19:55.020 --> 00:19:57.020 on the very least developed countries in the world, 352 00:19:57.060 --> 00:19:58.940 the poorest parts of the world. 353 00:19:59.400 --> 00:20:02.420 I think we're only just beginning to see the impact in those parts of the world, 354 00:20:02.440 --> 00:20:03.940 mainly I'm talking about sub-Saharan Africa, 355 00:20:04.560 --> 00:20:07.980 and I think potentially this is an epochal event. 356 00:20:08.160 --> 00:20:10.980 This is an event that's going to transform, for the worse, 357 00:20:11.040 --> 00:20:13.120 many countries in those parts of the world. 358 00:20:13.380 --> 00:20:15.320 I'm not here to blame the economy. 359 00:20:15.320 --> 00:20:17.100 I'm not here to blame economists. 360 00:20:17.500 --> 00:20:20.320 But I think I am here to blame the current development paradigm, 361 00:20:20.620 --> 00:20:23.280 the current development model that allows the world 362 00:20:23.280 --> 00:20:25.220 to be in the situation it is at the moment. 363 00:20:25.500 --> 00:20:27.360 I think I'd argue the global financial crisis 364 00:20:27.360 --> 00:20:29.320 isn't simply a failure of the financial system, 365 00:20:30.120 --> 00:20:33.520 lacks financial regulation, misunderstood financial innovations, 366 00:20:33.720 --> 00:20:35.600 outrageous financial incentives. 367 00:20:35.900 --> 00:20:38.800 I think I'd argue it's rooted in the contradictions 368 00:20:38.800 --> 00:20:41.400 of the current development trajectory or model. 369 00:20:41.920 --> 00:20:44.180 This is the development model which has resulted 370 00:20:44.180 --> 00:20:47.100 in the richest 1% of the world receiving as much 371 00:20:47.100 --> 00:20:49.620 as the poorest 57% of the world. 372 00:20:50.140 --> 00:20:52.080 This is a development model which has resulted 373 00:20:52.080 --> 00:20:57.160 in the poorest 40% of the world receiving just 5% of the world's income. 374 00:20:57.780 --> 00:21:01.900 This is the development model which has created no world middle class at all. 375 00:21:02.200 --> 00:21:07.060 Only 17% of the world's population earns between 75% and 125% 376 00:21:07.060 --> 00:21:08.240 of the world's median income. 377 00:21:08.400 --> 00:21:11.040 There is no global middle class to speak of. 378 00:21:11.200 --> 00:21:13.820 And finally, it's a development model which has, I think, 379 00:21:14.180 --> 00:21:15.780 resulted in a globalisation of expectations 380 00:21:17.180 --> 00:21:18.920 without a globalisation of opportunity. 381 00:21:19.960 --> 00:21:23.400 What this means is that the very poorest parts of the world, 382 00:21:23.480 --> 00:21:25.660 the very poorest people, the least developed countries, 383 00:21:25.800 --> 00:21:28.580 are particularly ill-prepared to weather the shock 384 00:21:28.580 --> 00:21:29.860 of the global financial crisis. 385 00:21:30.020 --> 00:21:33.280 And I think it's only just beginning to be felt in those countries. 386 00:21:33.700 --> 00:21:35.900 A few figures just to illustrate that. 387 00:21:36.640 --> 00:21:41.500 Exports from the African continent have halved between 2008 and 2009, 388 00:21:41.640 --> 00:21:44.160 from something like 630 billion US dollars 389 00:21:44.180 --> 00:21:46.660 to about 300 billion US dollars, 390 00:21:46.740 --> 00:21:49.340 a halving of export from the African continent. 391 00:21:50.580 --> 00:21:53.240 Remittances to the least developed countries, 392 00:21:53.460 --> 00:21:55.760 especially in sub-Saharan Africa, are down significantly. 393 00:21:55.780 --> 00:21:58.500 The World Bank is forecasting somewhere in the region 394 00:21:58.500 --> 00:22:00.400 of 6% reduction in remittances. 395 00:22:00.560 --> 00:22:03.460 That may sound trivial to many of us here. 396 00:22:03.680 --> 00:22:06.520 Don't forget that household incomes in Somaliland 397 00:22:06.520 --> 00:22:08.380 are doubled each year by remittances. 398 00:22:08.960 --> 00:22:12.980 Household remittances in Lesotho are added to by 80% a year 399 00:22:12.980 --> 00:22:13.900 as a result of remittances. 400 00:22:13.940 --> 00:22:14.160 And this is a very important factor. 401 00:22:14.180 --> 00:22:16.020