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Living standards and our material prosperity

By James Sinnamon - posted Thursday, 6 September 2007

The myth of the Howard Government's superior ability to manage the Australian economy may prove in this election, as in the last, to be the Achilles heel of an otherwise damning case against Howard. The indicators that purportedly confirm this myth are incessantly drummed into our collective consciousness by a news-media sympathetic to the Howard Government. These are low (but no longer quite so low) interest rates, low inflation, low unemployment, the elimination of Labor's debt, economic growth and “real wages” growth.

These claims of economic management superiority have not only been left largely unchallenged, but have sometimes even been propagated, by people who ostensibly oppose the Howard Government. Perversely, even former Labor Prime Minister Paul Keating has endorsed Treasurer Peter Costello's management of the economy on at least two occasions.

For this reason we have the strange situation where opinion polls show low public support for the Government but favorable support for its economic policies.


Unless this situation changes we may find the same dynamic that got Howard over the line in 2004 will play out again this time. Past experience should have taught Howard's opponents that simply exposing Howard as deceitful and heartless will not win the day.

As the elections draw closer, the newspapers will try to further downplay public concern over the Iraq War, the AWB scandal, the Medicare shambles, cuts to spending on education, privatisation, health, research, social welfare, industrial relations, record high immigration and the Government's failure to act in a more timely and decisive fashion against the threat of global warming. Instead, the news media will seek to focus public attention very narrowly on its depiction of the Australian economy and what's supposedly in it for us.

The issues of concern may still hold the attention of some voters but many are likely once again to swallow the notion of a necessary trade-off between dealing with those issues of concern or ensuring their personal material wellbeing by opting for Howard's allegedly superb economic management.

Uncertainty about the economic prospects under the alternative Labor Government or narrow short-term self-interest may again convince sufficient numbers to vote for the return of Howard's Government.

So just how valid are those claims of the Government's impeccable economic credentials?

The GDP is a poor measure of prosperity and economic performance

The measures of inflation, from which real wage figures are calculated, as well as the Gross Domestic Product (GDP), which supposedly measures our national prosperity, are seriously flawed. Even the GDP measure originator, Simon Kuznets of the United States, warned in 1934 that: "the welfare of a nation can scarcely be inferred from a measure of national income as defined (from the GDP)". The vast economist herd has ignored this warning, but thinking economists have not.


In his article "How Far Will the Crash Go, and What Do we Do Now?" published in the Atlantic Free Press on August 20, Richard Cook tells us that although "the US producing economy has been in a recession for the last year," this has been masked by factors which include "the government's phony GDP numbers, where the 'churning' of financial transactions masquerades as production".

As people are increasingly aware, the GDP measure interprets all economic activity as adding to national prosperity, including that generated by debt, natural disasters and man-made ills.

In spite of these glaring shortcomings economists persistently use the GDP to depict the economic performance of right-wing pro-big business governments, such as John Howard's, in a far more favourable light than is warranted.

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About the Author

James Sinnamon is an environmental and political writer, part-time Linux consultant and web administrator. He administers web sites for progressive and environmental causes. Sites include: and In March 2008 he stood as a candidate for Lord Mayor of Brisbane. His day job is as a cleaner and he is a member of the Australian Workers Union.

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