Neoliberalism: fact or fiction?

Whereas Manne criticises the US, as if that nation has done nothing positive for the world, I note the US’s past importance to the international economy. With the US current account deficit reaching $US731 billion in 2007, this was equivalent to about half of the combined $US1.5 trillion current account deficits held by 127 deficit nations that year, while the UK had the second highest current account deficit ($US145 billion) and Australia fourth ($US56 billion) (IMF 2008). Those stupid nations, as Manne implies, were largely responsible for another 63 nations enjoying a surplus with China leading the way ($US371 billion) followed by Germany ($US252 billion) and Japan ($US210 billion).

Manne should not simply criticise but offer real ideas that can make a difference that take account of national and international considerations. While we too do not offer any radical policy alternatives, as greater protection will bring its own consequences, we do suggest difficult policy difficulties ahead. A recent study of 200 years of economic data in 44 countries concluded that economic growth declines (on average by two percentage points) once external debt reaches 60 per cent of GDP with growth rates barely existent when debt reaches 90 per cent of GDP (Carmen Reinhart and Kenneth Rogoff, ‘Growth in a Time of Debt’, 31 December 2009).

It remains to be seen what policy mix will occur in the future given that debt in Australia reached $56,000 for every man, woman and child in Australia by late 2009 (equal to 100 per cent of GDP) even higher than the $A50,000 debt attributed to every American (Nick Gardner, ‘Household debt tops national income for first time’, The Sunday Telegraph December 27, 2009).

As a political scholar committed to the truth, or at least highlighting the complexity of a situation, I am embarrassed by Robert Manne. Manne should express some humility and recognise the difficulty of finding real policy solutions in a competitive world which must balance national and international aspirations. I suspect, however, it will all be too hard for him as preaching a simple message (that he knows best) is that much easier.