There is probably not much that the Rudd Government can do to restore the health of the Australian economy in the face of the global economic collapse. The financial future is a guessing game, much like predicting the course and outcome of war. The pace and extent of the collapse has all the indicators of developing into a global depression. With this a distinct possibility, it behoves the government, the opposition, public servants, advisers, academics and the media to study all aspects of the Great Depression.
The study and analysis of history is not a strong Australian characteristic. History has been used to promote outcomes, prejudice, nationalism, and jingoism at the expense of critical examination and understanding.
Writing in 1927 to warn his fellow Australians against the signs that the country might be heading for a severe economic down turn, the eminent economist, E.O.G. Shann, Professor of Economics at the University of Western Australia, wrote:
The average man who loves a gamble turns a blind eye to any likeness between the sound prosperity on the continuance of which he budgets, and the booms or manias of long ago. Things are different now, he assures you as he shakes off the warning hand on his shoulder. But common prudence bids us turn even the distasteful pages of our history.
Shann was looking at the prospect of a downturn and sought to warn of the danger. We on the other hand are already in a downwards spiral without the tools to predict, prepare or repair. Those that sounded recent warnings were jeered as un-Australian, they were accused of talking the economy down, some observers were accused of doing so for political gain.
Shann concludes his essay by saying:
I am not insensible to the big contrast between the late eighties and the present, in that we are enjoying good prices for wool and wheat. But the level of world prices may not prove stable. Whole sale prices have been falling steadily of late and we cannot afford to mortgage every fresh margin of our living fund. Falling prices and the cessation of overseas credit wrought a painful havoc on the living fund of Australia in the nineties. A like combination of circumstances would do so again. At present the balance for home consumption or exchange, after meeting our overseas interest bill on the public debt, seems very buoyant ... But if the prices of our staples fell, the interest bill ... would not fall pari passu.
Substituting public for private debt was the position that Australia was in 12 months ago. So where are we heading, and what is the way out?
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