No. 159

Rarely wrong often ignored: Why the Crows enjoy The Economist

Some media, like species, seem to make periodic leaps in progress. The Economist is one of them. A century and a half elapsed between when James Wilson began the newspaper and the breakthrough by Margaret Thatcher that turned the product into the ubiquitous, mass-market item that has defined the modern intellectual landscape.

Yet challenges remain. In Australia, for example, the Crows are considering whether to renew their long-standing subscription. Some critics suggest they will not, sinceThe Economist’s  vision of the future is, (as Henry Ford once said of history), bunk. Yet the shift to The Economist’s  ideas is taking place gradually. One day people may wonder why the Crows and their contemporaries ever entrusted economies to people as fallible as non-readers.

If the above has a familiar ring it is because you read the leading article, on driverless cars, in The Economist  this week, which these pars parody. [i]

Imitating The Economist  is easy. After 170 years the house style is set. A Victorian taste for thickets of verbiage aside, a great many of the arguments presented in the 1840s apply today.

Not that the newspaper (which it insists on calling itself) is as authoritative as it implies. An Economist  piece, on any issue you know in depth, is invariably unsatisfying, certainly not inaccurate but definitely once over lightly. The 2011 survey of Australia was variously glib and rich in ponderous opinions, which would sound right to anybody not especially interested in policy and politics. Consider for example:

What then is needed to get the alchemy going? Though government should not seek to direct the chemistry, it should create the conditions for it. That means ensuring that the economy remains open, flexible and resilient, capable, in other words, of getting through harder times when the boom is over (a sovereign-wealth fund would help). It means maintaining a high rate of immigration (which started to fall two years ago). It means, above all, fostering a sense of self-confidence among the people at large to bring about the mix of civic pride, philanthropy and financial investment that so often underpins the success of places like California.[ii]

 And the Crows are still waiting for The Economist’s  long predicted plummet in property prices here.[iii]

There is also a cordial contempt for politicians in the way it urges action, the right course is always obvious and all problems can be solved if only The Economist’s commonsense approach was adopted.

And yet it is hard not to embrace The Economist, if only for the good grace with which it accepts nobody much pays a blind bit of attention to it. Certainly it sells, circulating 1.4 million around the world (10 per cent of which is in the Asia-Pacific). [iv] And it is the equivalent of Who Weekly for people interested in public policy – lots of information on who is in or out and which ideas are winners at the interface between government and business. There is not an airline lounge in the world where you can’t hold your own in conversation on the basis of what you read in the magazine, sorry, newspaper.

As Michael Hirschorn puts it, “The real value of The Economist  lies in its smart analysis of everything it deems worth knowing – and smart packaging, which may be the last truly unique attribute in the digital age.[v]

After 180 years it also knows what it stands for, free trade between economies, free movement of people, free expression of ideas and above all freedom for individuals from the taxing, meddling state.

But while it convinces just about everybody on nodding terms with ministers and CEOs, it has no impact on electors. Admittedly, it is not alone. In the Australian marketplace of ideas the case for the big spending welfare state took a hiding this week, as it has every week since the Rudd Government over-reacted to what turned out to be the North Atlantic Financial Crisis of 2008-09.[vi]

Indeed, the idea that public spending is unsustainable was on the agenda in the 2004 election when The Australian condemned both sides’ give-aways in language which could equally apply to the government’s Gonski scheme and the Opposition’s maternity pay plan.

Clearly, the Charter of Budget Honesty is not doing its work when Labor has been able to present its undertakings in such a piecemeal fashion as to make sound assessment impossible. Worse, both parties are basing their numbers on Treasury projections that are nothing more than that – extensions of the current growth rate that could unravel thanks to any number of internal or external shocks. If they do unravel, and the projected surpluses of $25 billion over the next four years evaporate, who can really see something like Medicare Gold being withdrawn once the oldies have got used to the “Oh, what a feeling!” of free private hospital care?[vii]

 In 2010, Treasury estimated the budget went into structural deficit in 2006-07 and will stay there until the end of this decade, and things have got a good deal worse since then.[viii]

But while the idea that we are spending unsustainably is the long established orthodoxy among readers of The Economist, and The Australian and Financial Review  for that matter, it has no traction in the electorate.

For all the talk about tough budgets and lower spending, this week the chance of cuts to health and welfare in the Gillard Government’s budget and the widely anticipated Abbott Government mini-budget in November are somewhere between statistical insignificance and less than zero. The campaign in the media on behalf of single mothers who are having their welfare payment reduced makes the point.[ix] These women have no political clout but their cause is heavily promoted. Imagine the outcry if a co-payment was introduced for doctor visits, or hospital care was rationed or family welfare outlays were seriously slashed.

The Crows can, which is why they think we will, see tax increases for all singles and childless upper middle income earners before we see real reform to spending.

The problem is the electorate less likes what they have than assumes that is their’s by right. Think not? By 2015-2016 the feds expect to spend $230bn of health, housing and welfare, over 50 per cent of total national government spending. [x]

And for as long as Canberra can raise or borrow the revenue to fund the payments the electorate will expect the state to provide. That Opposition Leader Tony Abbott argues his proposed parental leave scheme, which will pay a recipient’s wage for six months, is a workplace entitlement not a welfare payment. However, it is defined it still has to be paid for.[xi] Treasurer Wayne Swan has abandoned his belief in the sovereign strength of surpluses, arguing “you can’t cut your way to growth”.[xii] This ignores the obvious, that vast areas of outlays are in areas which produce no wealth and it avoids the inevitable – funding deficits takes resources out of the productive economy.

That the welfare state model we bought from the Brits is immensely difficult to sustain drives economistas, the sorts of citizens who are as heavier on policy logic than political nous, absolutely nuts. Brian Toohey has long campaigned for cuts to superannuation tax benefits and a reduction in free health care for the affluent old, both on the not unreasonable grounds that the way things are going, taxpayers will provide, “government services for retirees, many of whom will have higher disposable incomes than some of the workers who subsidise them”. [xiii]

But Geoff Kitney goes further, trotting out the old elitist argument that we plebs bring everything on ourselves, “there is too little recognition that a nation gets the political leadership it deserves. If the poor quality of political representation and the shallowness of political debates is a problem – and few would doubt that it is – it can only be fixed by the engagement of the community with the political process.”[xiv]

Good-oh, but the Crows wonder whether explaining to a middle income mortgaged couple with kids and pensioner parents who make liberal use of free health-care that they are a big part of the deficit problem and see how you go.

Which is why the Crows admire The Economist; it makes the case for welfare reform with a charming and elegant erudition, none the less appealing for its occasionally appearing bunged-on. It does not make a habit of blaming poor and middle-income people for accepting state support. And it accepts that while it is on the side of the angels this is one battle the forces of righteousness do not look like winning. As it wrote the other week about UK welfare cuts:

 The government is right to reform welfare and try to make work consistently worthwhile. But its efforts are less revolutionary than billed. They neither change the principles by which the welfare state operates nor the means by which it is funded. In many ways, Britain’s welfare system will carry on much the same, just with some nips and tucks.[xv]

 That’s why (what a surprise) the Crows decided to stay a subscriber. The Economist makes worrying about the state of the economy feel less mean spirited. Now if the magazine, sorry newspaper, could just work out a way to pay for welfare systems, nobody can afford.



[i] “Clean safe and it drives itself, The Economist, April 20

[ii] “Australia’s promise: the next golden state,” The Economist, May 26 2011

[iii] “Ready, steady, vote: a budget for an imminent election,” The Economist, May 13 2004

[iv] The Economist Group, “Circulation/Traffic” @ recovered on April 27

[v] Michael Hirschorn, “The newsweekly’s last stand” The Atlantic, July 2009

[vi] Adam Creighton sets out the substance of the week’s mass of articles and opinion pieces in, “Surplus energy spent,” Weekend Australian, April 27

[vii] “Campaign has been a fiscal extravaganza,” The Australian, October 7 2004

[viii] Tony McDonald et al, “Estimating the structural budget balance of the Australian government,” The Treasury, 2010 @ recovered on April 27

[ix] For example, Rick Morton, “This working single mum has news for Julia,” Weekend Australian, April 27

[x] Australian Government Budget 20212-13, “Statement Six; Expenses and net capital investment,” @ recovered on April 27

[xii] Lisa Martin and Nick Perry, “Swan warns of ‘sledgehammer’ revenue hit,” The Australian, April 21

[xiii] For example, Brian Toohey, “Self-reliance the key to creating a surplus,” Australian Financial Review, April 27

[xiv] Geoff Kitney, “Nations get the political leadership they deserve,” Australian Financial Review, April 27

[xv] “Chipping away,” The Economist, April 6