The Great Pause. Alone. Together. What now?
We tore up the Old Normal at light speed so how on earth can we return to it like nothing really happened?
It’s Sunday 17 May 2020, the last day of the first year of the Morrison government and we’ve begun our journey back from Lockdown or the Great Pause. The Virus continues to ravage so much of the earth, the risk of second waves hovers, yet we’re returning to normal. With limited cases and few deaths, Australia has been lucky and sensible, but mainly lucky. We’re an island and sparsely populated. We’re wealthy and have good public health and hospitals. If any country was set up to handle a pandemic it has to be our 25 million people most of whom have the luxury to be able to ignore their neighbours. We have been spared the suffering and panic of Europe and China and the US. Distance so long a tyranny has this time been a blessing. And the weather has been nice and warm. Above all, we’ve pulled together and Locked Down with gusto. Curiously, for all our larrikin spirit, we Aussies are an orderly and obedient lot. We grizzled but obeyed. Well played Australia.
Yet the Great Pause has been like a zombie movie, science fiction. Lockdown tore the fabric of reality asunder. Overnight, the surface of the modern world closed in fear – no flights or malls, no pubs or movies. No hugs. An unseen Godzilla stalked our streets. We are still learning about the Virus. Like bird flu or HIV we’ll learn to live with it and come up, eventually, with vaccines and strategies to cope with it. Our early talk about The Virus is serious and methodical, dominated by statistics, like we’re dealing with the road toll at Easter – a known quantity we can tame by numbers alone. But the Virus is a new enemy, its dynamics across the globe are a long way from becoming stable and clear. And it may even be a friend. One reminding us of simpler pleasures – and frustrations – as we huddle alone, together at home and cook more and talk more, play games more and drive less, shop less and fret more, feeling sad and happy in new and strange ways.
The Great Pause has two masks – not drama and comedy - but Health and Economics. Like many I think the mask of Economics has fallen from the face of the Old Normal. That is the big lesson of the Great Pause. The Old Normal that says that profit maximising capitalism, with its global supply chain, powered by share markets and hedge funds, is the best way of organising human affairs. The Old Normal that says Government must be as small as possible and enable the market to solve our problems and deliver services. That says price signals are king, that human motivations are financial and profits inherently good. The Old Normal that tells us we need an economy that rewards wealth creation to be happy. The Old Normal points, with good cause, to the explosion of production and material wealth across the world that means people are living longer, in better housing and voting more than a century ago. The Old Normal insists Government should be privatised where possible, and as we have accelerated privatisation, outsourcing and deregulation the world seems to be wealthier and healthier. And we are, but the precarious lives of too many people already made me think the Old Normal needed reform. The Virus redoubles my conviction. In fact it emboldens me.
Dismantling the Old Normal
Two years ago I wrote a book about the need to rebuild our common wealth - the things we own and run together for our shared benefit. ‘Making Australia Slightly Better Than Average Again’ was a satirical but serious response to the failure of privatisation; its title a shot at Trumpist slogans. The book was a call to rediscover the grass-roots of our democracy - to get involved, to rebuild politics and reinvent public service, to restore the government to its constructive community building role. A rallying cry to rethink our economy so that it serves its people and our planet. A few people read and liked it. Yet the book seemed almost naive two years ago in its detachment from the reality of politics and government - how power is used and supported in contemporary Australia.
What a difference 24 months makes. The Virus makes the proposals in my book seem almost modest as the fundamentals of the Old Normal were dispensed with. The juvenile, self-referential trivia of media enabled machine politics has been exposed. Who gives a fig for the posturing of Barnaby or Pauline now? Our debates about tinkering with the tax system seem timid and lacking in ambition. Are we about to return to that kind of debate? For all the faults of that dissembling dickhead Angus Taylor and the sins of Sports Rorts, surely we have bigger fish to fry. Surely we will see how shallow that version of politics and so-called reporting is and how it fails to serve us.
In a blink – from mid-February to the end of March - the assumptions of politics and government unravelled before us all. The Old Normal of small government and the privatised state was abandoned. The market left to itself had no solution in the COVID-19 crisis. How could it? There were commercial opportunities to be sure – in producing PPE, home deliveries, online communication platforms, video content from Netflix to Pornhub. But this was a moment where order had to be established and maintained. It was a little like Wartime. So the State took charge – it had to. It felt like we were school children who’d been left unattended by teachers for years and now Teacher was back. For years Teacher had left the kids – we the people - to themselves as government shrank from its role. The bullies of business ran the show. People shut up and hoped no one noticed they were there – because most of us try to get through life without incident or pain, looking after the people and things they love. My point is when Chaos arrives and threatens death, only Government can respond. And it responded with a clear assertion of the priorities of life – namely Life itself – and threw away the false primacy of the Dollar as the measure of all things.
With haste we slaughtered sacred cows. We doubled NewStart and rebranded it JobSeeker - because our times are one part George Orwell and one part Harry Potter. We called it ‘stimulus’, as was our habit, for a day or two before seeing this was a rescue package. In event of emergency, break the glass! JobKeeper arrived to keep businesses going and workers connected to their employers. It protected countless proud working people who loathe dependency and the stigma of the dole. It also protected the government from rising jobless data. It was a crude scheme, a broad brush with anomalies and a genuine lack of nuance at the coal face. The arts and micro-businesses were poorly served. But The Plan was brilliant and effective in its real purpose – to avoid mass panic. Especially by saying these measures would last for 6 months, because that sent a clear message: ‘we’ll be ok, no one will starve’. The Crisis was so great this needed to be said. By Government not the Market. By a government not well trusted, especially in the wake of the bushfire fiasco, when few are now anywhere, anyway. But the right message was said and it was good. Well done. Good government by any measure, by any standard throughout human history.
Some say, ‘only a conservative government can do Big Things like this’, a progressive government would never get away with it. Yet the big changes in this country tend to come from Labor. Pensions with Jack Lang. National income tax under Curtin. Superannuation via Hawke and Keating. The ALP runs our war efforts, too. In WWII Menzies handballed to Curtin. But in the end government is Government and the response of ours was a matter of life and death – and certainly a matter of survival for the incumbent leaders of federal and state parliaments. The surprising strength of the states – long seen as expendable, as glorified councils – has oddly restored faith in our federation but also in accountable government. A little closer to daily life perhaps than Canberra whatever the party politics? Differences in character have also been on display among the key players – with Morrison the bureaucratic evangelical working alongside the earnest unionist Andrews and Berejiklian, the pragmatic double-outsider, female, migrant. CHOGM meetings will never be the same, and our policy debates should never be the same. Why? Because our governments have been Governing – making big decisions and proving themselves - rather than playing the media-cycle change-nothing games of the Old Normal. People overlook that the main job of government in recent times has been to avoid government as much as possible!
Isn’t this a time to learn?
In the New Normal we will have deficits and debt. For a long time. We will argue about ‘how the hell are we going to pay all this back?’. We will bail out and nationalise some industries or businesses. That process has just begun. We’ll squabble about why we’re picking winners (ignoring that we always have done and always will – remember the car industry, anyone? Heard of mining, folks?). We have seen unprecedented government intervention in markets with demand manipulation through cashflow grants, tax breaks and direct subsidy of wages. Government will keep on managing the fall out when rent and mortgage deferrals bite and JobKeeper lingers a lot longer than we expect. Wow! Seriously, if you had gone to a book-maker during the bushfires and said: ‘what odds are you offering on the Morrison government launching a wage subsidy by Easter, mate?’ you’d have been sent away, for your own good, for a long rest in a hospital or fancy health spa.
Only weeks ago we cavilled over whether recession was coming – and it was. It has been coming for years, due to structural forces and realities first exposed by the Global Financial Crisis and laid bare now by the Great Pause. All these emergency measures, all this incredible cash ‘coming from nowhere’ has been delivered – by government with the support of the opposition - on the simple and naïve assumption that we will return to the Old Normal. And soon. Because we like our retail factory outlets and our food courts and our pubs and our footy. And why wouldn’t we? Even if we have to stand a couple of metres apart, we will get back to that Old Normal, and all of its preferable rules and details. But … how can we? Seriously, like how the hell is that possible? After even a mild crisis like the one we have had in Australia. Are we mad? Are we bad? Or just dangerous to know?
Surely the real lesson of the Great Pause is that the Old Normal is vulnerable and lacks resilience. It did not keep us safe from harm. How can you go so quickly from ‘we can’t possibly increase Newstart’ to doubling it? How can we let businesses go to the wall every day of the week then start throwing buckets of cash at them like sailors on shore leave? Most people in the media, politics, sport and business are dying to get back to the way things were. Well, they all have a stake in the Old Normal, so why wouldn’t they? But shouldn’t we stop to ask what we have learned from this historic event? Haven’t we learnt that too many people have precarious jobs, uncertain housing and no buffer to handle financial shocks? Isn’t it now obvious that most people cannot live for a year if they stop working? How is that sensible? Is it the basis of a good society? Why do we never talk about that? It’s nuts! And let’s be honest – when this started we all looked into the abyss and some of us blinked. In mid-March I stopped and asked myself, ‘can I live for 6 months without earning a cent?’. Luckily for me, someone who lives simply and has never sought riches, I could say ‘yes’. But too many can’t. Too many struggle to pay rent or mortgages each month and were sent into a tail spin by the Great Pause. Within days. As we speak there are many more people living in real fear of poverty than there were on March 1 and that is after all the good things governments have done across Australia.
So, are we really just gonna forget all this has happened? Are we going to rationalise the reality of unemployment, of people withdrawing from the workforce, of the recession that was coming anyway because it is just too hard to face the facts? If we do that, we need to get Roy and HG on the job and make us ‘have a good hard look at ourselves’. If we race back to the certain certainties of the Old Normal, we’d be like the kid who cleans their room by shoving everything under the bed instead of, you know, actually cleaning up. And we know that always ends in tears.
I love our fast modern life and all of its entertainments and fun. I love travel and movies, eating out and seeing people, playing and watching sport. Some of that I have missed, but I’ve found other fun and pleasures - dance parties on Zoom, long chats to old friends, more time with family. It’s been great. I’ve also been lucky because my community law firm has kept me busy - lots of unpaid but rewarding work helping people navigate the chaos. I have enough to live, enjoy a good life connected to other people and am indifferent to personal wealth – so I am grateful for the privilege.
But I have acted for clients who’ve been evicted or struggled to get rent reductions, who have been sacked (when they could have been kept on) or asked to work three times longer than usual or not at all, for small business owners who saw everything they’ve worked for vanish in a week, people so freaked out they cannot even apply for the financial support available, people who have gone to the beach or their mum’s house fearful of being arrested. We have strained the fabric of human experience, of ordinary life. It has been damaged for so many. We talk vaguely about mental health impacts – when a kind of social PTSD is almost inevitable. And again we have also enjoyed seeing things that were obscured by our fast lives, even when the Virus has unwound our economic lives. Nothing is ever all bad. More statements of the obvious after the commercials!
The Fake Economics of the Old Normal
The Great Pause has been a bizarre time and we should learn from it. We need to sit back in our Jason Recliner and see what it has taught us. What does spending such massive sums of money to ‘save us’ mean? Why did we do it, and how should we respond? How will we pay it all back? What the bloody hell do we do now? One thing is for sure - the answer is not tax cuts and balanced budgets. That kind of economics is like 10 Man Rugby or Smoking is Good for Asthma or A Woman’s Place is in the Kitchen. Outdated and stupid and ineffective.
Tax Cut economics is lazy and always has been. It gives Business a free hit when it needs to work harder. If the best form of welfare is a job then imagine how good a well-paid job is. A good job with better pay means more people with a stake in society - it means stronger consumer demand, confidence to spend and invest, better parents and families, less kids going to jail, less families on welfare, less call on the public purse. Our politics should have Better Pay as its primary objective not Tax Cuts. Of course Better Pay is a fairer outcome and Tax Cuts protect profits and not jobs. But my argument is economic: Better Pay means a Stronger Economy because it raises the water table of our affluence. Better Pay is the positive path. Tax Cuts are negative, an old story that has run its race.
The Great Pause also has a lesson in what matters to us most. We’ve had more time together, alone. We’ve missed work but for the sense of purpose and human contact as much as the money. For the company of our colleagues, not the companies we work for. We should learn the lesson of togetherness. We should see the old wounds and divisions seen for the illusions they always were. We should not be lazily thinking Tax Cuts are the answer because we’ve racked up a huge government spending bill. Business should not be overtaxed but government should make it work hard – as we all need to work hard to rebuild our country and the world, using what we have learnt from The Great Pause.
The Old Normal got to the money-begets-money stage. Our success stories of modern economics are less about hard work than the application of huge amounts of money that allow a company to disrupt and dominate a market. Amazon and Costco, Netflix and Uber show what you can achieve with massive sack of cash to smash up the existing way of doing things. Nothing new is created but huge wealth is transferred from the owners of the old supply chain to the new owners. The price paid has included the destruction of secure jobs and the stake in society of millions of workers and managers all over the world. Disruption offers little real invention. Nothing like Edison or Ford. Money is being rewarded for having money, with a cheaper outcome for the consumer as the pay-off. It is a deadly selfishness. We don’t properly discuss this because the Old Normal measures success by cash outcomes only. Right? Jeff Bezos must be a good guy and smart – look at his billions. He’s a dick who doesn’t look after others and we should wise up!
Meanwhile we’re all asking – ‘bloody hell how are we going to pay for all this?’ An obvious question. Well, what if we didn’t have to? Or not in the way we think we do. Let me explain. Modern economics is based on the lie that a national economy is like a household. It isn’t. Australia is not like your household because households as cannot print their own money. There is no money tree in the backyard, despite our best efforts. But when economies get into trouble these days our Reserve Banks do exactly that. They print money. We call it quantitative easing because anything earth-shattering needs a weird euphemism. One arm of government lends another arm of government money. It is printing money in simple terms and we have done it for years since the GFC in the USA, in the UK, in Europe and even here now in backwater Australia. Yes, in 2020 we manage crises, in the end, by just printing money. This is a fact and one poorly understood in the pubs and lounge rooms of Australia and every country on earth.
For good reason. Ultimately, no one quite understands how QE – or money printing - works. Got that? The politicians and economists pretend they do but no one does. You will notice that politicians talk about QE as little and as quickly as possible - they also know no one understands the issues so no will ask them about it. Because they can’t! See, just as the only real value of a house is the price you can get for it, the real measure of economic policy is whether you can get away with it. When the countries of South America printed money to dig themselves out of crisis that was bad. But why? Because the big countries didn’t like it - it wasn’t their idea, it freaked them out, and threatened what they call stability. So the South American currencies went to the doghouse. Not because of money-printing in itself because of a kind of bullying, an exclusion from the economic international mainstream. So, listen up - that was the problem - not printing money but the response to it, the impact on currencies. And that is the case now, the real issue is how we respond to money printing now we have discovered we can do it. And if everyone does it, we can avoid nasty shocks.
Here’s the other thing about economics everyone should realise. All economic theory is designed to rationalise the status quo or justify a change of course. If you look at Keynes, why did people follow him in the 1930s and 40s and for a generation after? The basic Keynesian idea is that government should invest to generate demand and production. Well, enough people with money and power at the time thought, ‘we could lose our money and power’ so they thought his recipe was worth a crack. In those days many feared, rightly, that the communists would take over. The welfare state of the mid-twentieth century was a vaccine that offered a bit of socialism (a promise no one would starve or be homeless) to prevent people getting serious about communism. The next key economist, Milton Friedman, is not important for his insights on the velocity of money supply but the intellectual cover he gave Business for its plan to regain control of the economy from governments. Our economic thinking has changed little since Friedman, and the Great Pause is a reminder that we’re due for a system upgrade!
Another reason you should distrust the idea that budget deficits matter is the GFC. Its mega-debts were magicked out of existence, like book-entries in a dusty old accounting ledger that got lost at a May Day picnic. That’s because so much of modern economies is made up stuff that has little to do with how people live real life. Who cares if Bear Stearns goes down and so on? It’s a Wall Street reporting adjustment. The effects are real when people lose jobs and homes - or die, go mad or get sick – but the assets are re-allocated and the markets move on. We need to get real about the unreality of modern economics, its disconnection from ordinary life. People think it’s too complex or too boring to get into but the truth of it is this: it is bullshit. Mostly. It’s time to call it out. More than anything else that is the gift of the Virus and the Great Pause. Much of what we think of as economics is nonsense.
We’re told a government must balance its budget and avoid debt because that’s we do with our own households. Yet few households do that. Most households have debt - mortgages and credit cards and struggle to keep it all going. That’s what the Great Pause exposes. If we had a few acorns in the tree for winter then there would be no need for government interventions like JobKeeper and other cash bonanzas. Let’s be honest - when most people say they own their home or car or holiday cottage, they don’t - it is loaded with debt. Our entire economy is based on that debt. We assume that all asset values will rise. Many use their houses so they can secure more debt and renovate more houses. Those of us with jobs assume this is good and normal and all is going well. The Great Pause shows the limits of that wisdom.
To cut to the chase: if households are loaded with debt, often many multiples of the annual earnings of the household, why can’t the country do the same? No one ever asks this. Let’s look at this narrowly and broadly. Narrowly if a household can borrow then a nation can right? You put that borrowing, your repayments, in the budget. You do not get rid of debt, you manage it. Because like a household a nation has earning capacity. A household can borrow at least 3 times what it earns in a year and that’s normal. If you earn $100k a year you easily get a loan for $300k. So a country - with all of its people and resources behind it – should be able to borrow 3 times its annual income or GDP, right? For us that would be over $4 trillion with our GDP at over $1.5 trillion but our national debt is nowhere near that! Our national debt is closer to half a trillion, or $500 billion, which is roughly our annual national budget, funnily enough. Our debt is around 30 per cent of our national income when household debt is often 300 per cent. No one talks about it this way. Why is that? Because it is a revelatory insight that terrifies the owners of the Old Normal. Australia could spend a lot more on developing itself and our debt would be manageable. I am not talking about spending 300 percent of our national income, just a lot more than 30 per cent.
So why is the Old Normal obsessed with balance budgets? Because it suits people with money and power to keep things this way. Grab a chair, sit down and think about it. The people who control our economy and government are bullshitting us. And you know it. Ask yourself why the USA never has to repay its huge debt. It’s because it doesn’t have to. And never will. Because it is the bank. It prints its own money and makes its own rules. It is the template for how the economy really works. The Balanced Budget is a tool of control. It’s politics not economics. The new theory behind all this is called Modern Monetary Theory. If you’re interested, read Stephanie Kelton. Whatever you think of the economic debate, the case for Budget Deficits is simple – if households have significant debts, so can government. Just like households, debt should be manageable but it should not be zero and it can be used, as we all do with our mortgages, to build wealth over decades for our family – or for the whole country. We need a grown-up, honest conversation about how much we can really invest in our country rather than trying to balance the budget as an end in itself.
On another level we show our ignorance of economics when we talk about the Shutdown of the Economy. The Great Pause has not done that. Most economic activity has continued. The most visible things – travel, retail, food, entertainment - stopped but most businesses worked through the Crisis. If unemployment gets to 10 per cent that means 90 per cent of us are still going to work, even at 20 per cent we have 80 per cent of people on the job. See, I did maths at a selective school! Of course it gets worse because confidence dives, investment plummets and consumers get scared. The negative multiplier is real. But life and economics does go on. Most of it. Economic life – the making of things, the completion of work, the whirring of computers and book-keeping continues uninterrupted. As does so much useful activity that never gets recorded in the official stats from house-work and family care to volunteering and the cash economy. We should also be careful not to overstate the carnage unleashed by the Lockdown and be more circumspect about the reasons being given for a rapid return to the Old Normal.
What is to be done?
So what to do now? We must learn from the Great Pause. Government must frame our societies, we must invest in social infrastructure. We must not lamely return to the Old Normal and leave the Market to itself. We must not believe Business will look after us because it is smart and has the answers. We must not be cowed into austerity by an obsession with a balanced budget and tax cuts. We must also learn the lessons of the bushfires, seen by the world as a bellwether of the looming slow-burn disaster of climate change. After all, interest rates and petrol prices have never been lower. Now is the time for a New Normal Economy. New Normal. A Next Level Economy. Call it what you like.
We must take the lessons of the Great Pause and apply them to the long term. Let’s sketch an agenda starting with Job Keeper. This program shores up short term demand but that money longer term - $130 billion odd - can be invested in community building projects – ones that create jobs and businesses. We should invest in assets that deliver rewards for generations like social housing – to meet immediate needs and reduce mortgage and rental stress; in public education – to improve standards for all our children and families and our future economic capacity and creativity; and in state-owned alternatives in key markets – to ensure we’re not exposed to corporate failures and have relative control of our destinies.
The Great Pause exposed the limits of the global supply chain, so we must now invest in local industry and set policy that maximises local production for food and health, manufacturing and energy. This will be the longest lasting shift in government policy whether we like it or not. Our confidence in trading partners is shaken. We must carefully manage the risks of being cut off from overseas markets and the reliance upon imports.
The Great Pause reminds us that people can come together to solve problems – with mutual aid networks springing up all over the country to deliver food and medicine, to provide transport and company. We must develop this co-operative muscle and encourage organisations that bring neighbours together to build good things for our communities – from locally owned energy to credit unions, from housing co-ops to market gardens.
The Great Pause shows we need to rethink ‘welfare’. Job Keeper and Job Seeker can frame a new approach to social security. A Safety Net means something else now. Employment will take years to recover and has changed anyway with the gig economy. We need to provide a buffer, a guarantee of basic subsistence to everyone. The concept of Universal Basic Income is new but its time has come and it will happen in some form, building on the band-aids we’ve applied in this crisis.
The Great Pause stopped the arts and entertainment in its tracks. Our theatres and venues have been empty and dark. Yet money we invest in the arts is small change. Australia needs a major cultural re-set. The economics are easy – we spent a pittance on the arts and must invest in the people and institutions who make us who we are and tell our stories.
The Great Pause saw prominent sectors in the economy come cap in hand to government. We need to question business models that fall-over so quickly. Sport, our main entertainment, needs prudential regulation, because without tv money the business model fails almost immediately. Aviation could use a proper review, too, as anyone can see.
The Great Pause shows that need to invest in government itself – in an independent public service, in institutions we can trust, in experts on whom we can rely to deliver outcomes in a life and death situation. We must stop outsourcing. The Virus reminds us that the public interest is our private interest. Working with and for each other in government and elsewhere is not weird or soft but necessary and valuable. The nurse and teacher must be celebrated not so poorly paid.
A Final Rousing Word
A so-called Snap Back to the Old Normal is a delusion and a mistake. You cannot tear up an inviolable consensus in a few weeks then reassemble it like nothing happened. That would be like ignoring 9/11 or the rise of OPEC in the 70s. Not possible. This moment is not so much a correction as a gigantic admission of limits. We had developed a society that was not served by its economy and that cannot be allowed to persist.
The Virus teaches us we are no more or less than an organism in nature. Our buildings and toys, our computers and tools cannot protect us from that fact. The bushfires of Christmas and New Year made the fragility of our environment suddenly vividly real. Countless animals died, their habitats were destroyed. Vast stretches of forest, some ancient and irrecoverable, were burnt forever along with productive agricultural land. Yet that recent apocalypse now feels oddly distant, almost erased.
The Virus, Corona, COVID-19 is a leveller for all time, a colossal spanner in the works. Australia has been shaken but not horrified by its health impact but the economic impact cuts deeper. The Old Normal is life on steroids - our economy like a formula one car running on by nitro glycerine with one gear - top speed - and no brakes, able only to go forward. Now it has crashed and we are collecting the pieces of the car from the track and the grandstand. We need to build a new vehicle. Something more durable and human. It will take time. But we can do it. If we work hard and co-operate. If we look to our neighbours. We must rebuild the economy in the image of the people of the world. We must love one another and this earth or die. And we can. Alone. Together. With the Virus among us.
Mark Swivel 17 May 2020