The light's not shining

With its long tradition of constitutional, democratic government and its elections, parliaments, judiciary and the rest, New South Wales looks as though it is well governed. For the most part, a better-than-average public service should see to that.

However, even such a mature government as that in NSW or parties as old and as plausibly well tried as Labor and Liberal do not take easily to revolution; and it is revolution that we have needed ever more urgently since 1969 in the "premier" state of NSW and in the Australia of which New South Wales forms such a vital part.

Right now, in 2011, we are at a point similar to 1932: back then, we had staggered through the 1929 NY Stock Market crash and the financial and economic collapse that followed. Three or four years were spent trying to understand it and remedy its results with a minimum of pain and – yes – a minimum of "revolution". By 1932-33, depression and social misery compelled acceptance of revolution – constitutional and peaceful, of course, in accordance with American – and Australian – traditions but revolution nevertheless.

There's a topical parallel. Lehman Brothers collapsed in 2008. We in the West have spent trillions of dollars trying to rescue, revive or keep on life support financial institutions we should have proclaimed dead long before they arrived in hospital. Now the tsunami they have left behind is ready to engulf us and must be confronted. Revolution is the only course.

Do the contestants for power in New South Wales show any sign that they acknowledge this? Do Labor, Liberal, Green or other parties show any sign that they inhabit the financial and economic world in which we ordinary folks must live?

It is not as though they have not had time. It is not as though the issues are trivial or marginal. The issues have crept up on us ever more insistently over more than a quarter of a century: indeed, as far back as 1969 when the well-conceived policies of the post-war years began to come apart. Those issues were as fundamental as interest rates, knowing what they could and could not do and knowing how to harness them for the good of the country and its people rather than for a plutocratic minority and as an encouragement to speculative frenzy.

A fundamental creed was that raising interest rates "fought inflation" – all inflation. It didn't of course. Consumer-price inflation – and stagnation – increased; but the true believer persisted stubbornly in his belief. He still does. Even the central bankers do, fifty years later.

The rate of consumer-price inflation did fall eventually – in the 1980s; but it did not fall because of hikes in interest rates. It fell largely because we got a massive range of consumer items from abroad at bargain prices. The United States did it and we thought it was a great idea. We gutted our industries to get our inflation down – except of course inflation in industries which were not gutted because their products could not be produced offshore. That zoomed upwards, ever upwards.

We moved away from being a mixed economy of public and private enterprise with a strong public bank to keep the money-merchants honest. We embraced deregulation, privatisation and globalisation. Politically, we moved so far to the right that the left disappeared and the Labor Party gloried in it.

The Leader of the NSW Labor Government hasn't shown much understanding of such things; nor has the Leader of the Coalition Parties or the Greens. Debate on such fundamental issues simply does not and, it seems, will not take place.

Instead, each tends to counter petty accusation with petty accusation; to seek to elevate, not their substance as statesmen, but their "image" with the voting public; and to enhance their place in the party hierarchy.

That is at the State level. Much the same distinguishes Canberra.

Let me be clear: we are at a point of the utmost significance to Australia, the entire global community and even the survival of life on Planet Earth. In recent months, we have suffered many natural disasters: floods and cyclones, earthquakes and a terrible tsunami; but manmade, self-inflicted disasters promise to outdo and outlast them all.

One writer says we are only "Seven meals to anarchy".

Recently, we have seen a revolutionary epidemic spread across the Middle East. It is not only poverty and/or hunger that have provoked the epidemic; but hunger, arising from physical shortage of food or money to pay for it, is already widespread and will almost certainly increase greatly on both a short-term and long-term basis.

More than forty million Americans rely on Food Stamps for their regular sustenance. As prices rise, the real value of the stamps diminishes. As the adequacy of food in men's stomachs is reduced, the anger in their hearts provokes them to violence. Not only are the less developed economies provoked to anger. The richest of us can become angry if we have no food – or not enough.

This is of special interest to the Australian community as a producer, supplier and consumer. We might need to bring more marginal land into agricultural production so that, exposed as we are strategically, we do not over the next few years find that too many people, in Australia or among our neighbours, are now only "seven meals away from anarchy."

The NSW elections are unlikely to provoke much serious debate on food prices; nor will much be said about speculation which has become so rife over recent decades and produced so many billionaires on the one hand and so many that the rich too often see as bums on the other.

Keynes warned of the grave dangers of speculation going beyond a small margin of the free-market economy; but speculation has been and still is at the heart of the financial system. It is indulged in by respectable "investors" many of whom have actively and greedily helped to devise a wealth of clever devices to feed their addiction. Derivatives, hedge funds and tricky insurance "swaps" attracted massive funds that should have been deployed more productively in the real economy. Their disposal is still largely undetermined.

No attempt has been made to control trade in currencies effectively since 1971 and more especially in the last ten to twenty years. Speculative trading in currencies runs into billions or trillions of dollars a day.

The value of the Australian dollar is determined not by our trade balances or the flow of real, long-term, fixed investment capital into or out of our economy. Rather is it determined by such things as the level of our interest rates and the profitability of the carry trade. As part of the hyperactive casino economy, it takes speculative advantage of arbitrage opportunities – with the risks that attend them.

No attempt has been made to control this massive speculation. Our global financial system has consequently been corrupted from the well-regulated system agreed under the Bretton Woods Articles of 1944 into a global gambling parlour of unprecedented dimensions.

This has direct consequences for the Australian economy. Our banks and other financial institutions are active in carry trades and, through those trades, appear to get much of their wholesale funding to lend, for example, in the Australian housing market. They have skilfully prepared the way for what could be one of the most monumental busts in Australian history.

Important as they are to millions of "ordinary" Australians, these issues will not be discussed, at least in the terms I have described, in the NSW elections. The outcome of those elections will be determined in other ways, applying different criteria.

However, housing, wholesale funding, currency speculation and even more fundamental issues such as the nature and impact of credit and debt will determine the future of virtually every Australian man, woman and child in very real ways. Their children and, unless we are lucky, even their grandchildren, will be blessed or impoverished by decisions we take or do not take on these issues today.

For example, it is not outrageous to suggest that the global economy will suffer a major collapse between now and September or October. Though they have spent trillions of dollars, the United States remains on the edge of an economic and financial abyss much more menacing than anything in its previous history. Allowing for the smaller scale of our economies, we and many other countries are teetering on much the same sort of edge.

Therefore, in the next six months or not much more, we are likely to experience a situation like 1932 in which every country will look after itself and the devil may take the hindmost. The Group of Twenty has done little to resolve issues or avoid conflict. The United Nations has done even less. Each of us will have to take our own desperate, emergency measures to survive. In 1932, we had a "Premiers' Plan" in which NSW played a major role. Formidably austere, it solved nothing. It made things much worse for everyone, within Australia and outside. However, our Federal and State governments believed it to be the only course to take.

The Premiers' Plan was an austere calamity. We had to endure years of economic misery and war before we began to find solutions. We progressed through such serious, long-drawn-out conferences as those at Bretton Woods and Hot Springs as well as those on the United Nations Charter with its economic and social chapters. Then when peace came at last countries like Australia could implement their economic and financial policies within a well-ordered global environment.

It was a long process about which, for the present global economic and financial crisis, we have not even begun to think let alone plan in any responsible way.

In the meantime, we will likely have a hastily drafted equivalent to the Premiers' Plan forced upon us, probably towards the end of 2011. We can have no assurance but can only hope and pray that our plans and those of others do not deliver such grave political and strategic consequences that they will lead to regional or worldwide war as they did in 1939.

The NSW campaign is unlikely to delve into such issues. That does not mean that whoever becomes Premier will not be confronted, among other things, with debt and other financial and economic problems of broadly the same kind as those which confronted Premier Jack Lang in the early 1930s.

Nor does it mean that Kevin Rudd and Julia Gillard have already bitten or will now bite many bullets in preparing us for possible financial and economic calamity.

We have tended to get Premiers and more particularly Prime Ministers of character and purpose only when we have been up against it and we really have no other recourse. Electors are then compelled to exercise responsibility at grass roots level by voting only for those who can genuinely and sincerely carry that responsibility forward.

That is unlikely to happen at the forthcoming NSW elections, if only because the electors seem to see no candidate of the character and purpose needed. We will have to wait at least for the next Federal or State election to start the long process of reform and renewal.

The last time we were in this position, we were in the middle of a war and we got John Curtin and Ben Chifley as successive Prime Ministers of character and purpose. Their eight-year term began in October 1941. Pearl Harbour was just six weeks away.

It was a close-run thing.