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As part of his budget speech to the House of Representatives in April, Josh Frydenberg, the federal treasurer, announced that his suite of policy changes would ‘deliver better outcomes for all Australians’. Such talk is par for the course in parliamentary democracies. Everyone knows that a large portion of the electorate voted against the policy positions of any incumbent government. Yet no politician can expect to get away with publicly conceding that their policies might be aimed at keeping their base happy while also pursuing some swing voters.

This may sound unduly cynical: Whatever the realities of gaining and holding elected office, why shouldn’t politicians hope to serve everyone? Shouldn’t this be their moral duty? Held in abstraction, this is an attractive and plausible view. But a more practical position needs to recognise the ways in which governing for everyone faces special difficulties in specific policy areas. The problem for tax policy is that benefiting everyone is, much of the time, basically impossible.

The short explanation for this is that tax policy can never really start from scratch. The new tax policies in any budget are not like new football seasons, where what happened last time is irrelevant to the benefits and burdens that participants might incur as the next year unfolds. This is because the prevailing regime of tax rules is one around which taxpayers have formed expectations and have planned their affairs in ways that unavoidably look far beyond the next twelve months. Here, citizens really have no choice given what sort of plans they have to make. Almost no mortgage, or pension scheme, or course of higher education, or training can run its course quickly enough to be completed before the next budget. Whether the prevailing rules are fair or unfair, what they already are imposes substantial limits on what they can be turned into by way of the reforms in a single budget. Because so many of our economic activities have a long-term aspect, there needs to be a corresponding long-term stability in the tax system. Otherwise, the uncertainty will be too much for many of these activities to be even feasible.

This means that while there is flexibility in spending following a surplus, budgets are forced to be incremental and conservative with the tax rules. The larger the tax reforms any treasurer ventures to announce, the more the established plans and expectations of taxpayers stand to be upended. In an ideal world, past budgets would have been designed in ways that appreciated this. Treasurers over the years would, ideally, have done more to avoid entrenching tax rules that would narrow the options available to their successors in decades ahead. But once the horse has bolted, new policymakers have to start from where they have been left.

This explains, whenever a big reform does get proposed, the changes are usually subject to a ‘grandfathering’ clause where the old rules stay largely intact for those already invested in them. It bears emphasising that this makes taxation different from other policy domains. The question of whether or not to include grandfathering simply wouldn’t come up in any new legislation about, for example, immigration or marriage equality. Policies on these matters do not need to stay the same simply for the sake of what stability brings. Radical reform can more easily have its day, and the road to greater fairness is more open, even if our politicians don’t always take us down it.

Going back to the specifics of tax, the prospect of grandfathered privileges is especially familiar and especially stark in the case of housing. Longstanding Labor proposals to end the right to negatively gear a loss-making property only apply to future purchases of homes: citizens who already have negatively geared properties can simply keep them that way. This can look like a form of fairness. Those who have a sunk investment (so to speak) into the old way of doing things don’t have to absorb the cost of having it pulled out from under them. Stability is preserved for everyone – what’s fair is that nobody gets their established financial situation disrupted, even though the consequence is that those planning after the change need to do so under different conditions.

But fairness here is not clear-cut. Grandfathering is essentially a way of pulling up the ladder so that those who were around early enough to gain a privilege get to keep it, while those late to the tax party don’t get to join them. And the need for tax stability means that politicians aren’t in a position to simply do away with grandfathering. Apart from the aforementioned moral concern that it goes back on a promise (however short-sighted) made to those who invested accordingly, there remains a more economic concern about triggering a recession or downturn that wouldn’t help young people either.

What I want to suggest is that these difficulties about tax could be better appreciated. Another line from Frydenberg’s speech was that ‘our commitment to fairness means the next generation not having to pick up the tab for the last’. Granted, the treasurer’s party is not the one seeking to change negative gearing. But regardless of policy differences across party divides, all legislators are in the same boat when it comes to the impossibility of starting fresh where tax policy is concerned. It is the very general tendency for tax decisions to separate different generations into winners and losers that makes it so hard to construct tax rules that really do advance the interests of all Australians. And things will tend to get resolved by the fact that the Treasury still has to get its revenue from somewhere. The need to preserve old privileges for those who already have them means it is the young who remain exposed to whatever tax burdens the Treasury must impose to offset the generosity of perks offered to older generations. This really is a case of the young picking up the tab.

Daniel Halliday (photograph supplied)Daniel Halliday (photograph supplied)

None of this has to mean that Frydenberg’s endorsement of fairness between the generations is an impossible or utopian goal. But for a goal of intergenerational fairness to be realised, there will need to be some recognition that other elements of fiscal policy need to pick up the fairness tab for the tax rules. Budgets are not, after all, just about taxes. Insofar as young people stand to lose out when stability is preserved, Australia could move closer to a fair fiscal system overall if young people got their perks elsewhere.

What form might this take? Policy action on such things as student debt and childcare offers opportunities for the Treasury to spend in ways that will likely make things easier for young people. A better solution would be to address more directly the common feeling that the young, when trying to buy a house, have been dealt a bad hand. But homeownership is desirable in part because renting a home has so many downsides. More favourable legislation for tenants, perhaps in ways that mimic countries where homeownership is considered overrated (like Germany), might promote intergenerational fairness in spite of grandfathering.

This is not to say that there are literally no options for making the tax system fairer. Some tax reforms, though controversial, may not affect stability with respect to citizens’ ongoing financial affairs. The inheritance tax (still common in other Western countries) became extinct in Australia in the 1970s. But one of its advantages is that the dead don’t have any more planning to do. The idea of taxing estates is considered toxic enough that treasurers never mention it (let alone in a budget). But a tax might become more popular when government promises to dedicate its revenue to some cause that citizens can get behind. It would be interesting, for example, to gauge public opinion on an inheritance tax that redistributes all of its revenues as equal cash grants to people between the ages of twenty and thirty-five, or funds a scheme for people seeking to buy their own home and who aren’t lucky enough to have older family members buy it for them.  

Until the conversation can be advanced in ways that recognise the poor prospects for tax justice in isolation, our politicians will remain hamstrung. If they were granted leave to depart from the myth about magically benefiting all citizens all of the time, they could make progress towards policies mitigating the impossibility of designing tax rules that are fair over the short or medium term. Just as importantly, those outside politics would be in a better position to pressure them to do so. And if tax rules continue to benefit the old, as may be unavoidable for some time, then it is the young who should have first dibs on a surplus.

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    As part of his budget speech to the House of Representatives in April, Josh Frydenberg, the federal treasurer, announced that his suite of policy changes would ‘deliver better outcomes for all Australians’. Such talk is par for the course in parliamentary democracies ...

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The world, according to writer Oliver Bullough, has a problem. One unexpected consequence of globalisation and the liberalisation of financial policy has been an increasing flow of money across borders. This has given rise to a new global élite. Aided by seemingly respectable lawyers, bankers, and real estate agents, it operates largely beyond the reach of domestic regulation. That would be concerning enough if the élite’s wealth was hard earned; it becomes particularly alarming when much of that wealth is derived from corruption. In the world this élite inhabits – what Bullough labels ‘Moneyland’ – dollars, pounds, and euros trump all.

Bullough is an Oxford-educated Brit whose cynical worldview was shaped by seven years in Russia, largely as a Reuters correspondent. He witnessed the rise of President Vladimir Putin and specialised in the post-conflict areas of the Caucasus. These experiences were articulated in his first two books, Let Our Fame Be Great (2010, on Chechnya) and The Last Man in Russia (2013, shortlisted for the Orwell Prize). He publishes widely and brings this journalistic pedigree to bear in this deeply reported, fast-paced work of non-fiction.

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    The world, according to writer Oliver Bullough, has a problem. One unexpected consequence of globalisation and the liberalisation of financial policy has been an increasing flow of money across borders. This has given rise to a new global élite. Aided by seemingly respectable lawyers, bankers, and real estate agents ...

  • Book Title Moneyland: Why thieves and crooks now rule the world and how to take it back
  • Book Author Oliver Bullough
  • Author Type Author
  • Biblio Profile Books, $39.99 hb, 304 pp, 9781781257920
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Recently I solicited impressions of his job from the new head of external affairs at a big financial organisation. What had struck him first was the manpower at his disposal. The total headcount ran into many hundreds – larger than most if not all Australia’s print and electronic newsrooms. There was not merely one department. Each division of the institution had its own well-resourced team.

Yet what struck him next was a paradox. Only a relatively small proportion of the external affairs personnel dealt with anyone ... well, external. What did they do all day, I asked? ‘That’s easy,’ he replied. ‘They talk to each other.’

Five years ago, this paradox, and others like it, provoked the American anthropologist David Graeber to publish an essay in the magazine Strike! entitled ‘On the Phenomenon of Bullshit Jobs’, based on a ‘hunch’ that corporations were replete with jobs that didn’t ‘do much of anything’: in this category he lumped the like of ‘HR consultants, communications coordinators, PR researchers, financial strategists, corporate lawyers’. It touched, as they say, a chord. In Bullshit Jobs: A theory, Graeber seeks to strum it.

No longer content simply to observe the phenomenon, Graeber aspires to explain it. The bullshit job he defines as a ‘form of paid employment that is so completely pointless, unnecessary or pernicious that even the employee cannot justify its existence even though, as part of the conditions of employment, the employee feels obliged to pretend that this is not the case’.

Bullshit jobs are not to be confused with shit jobs, such as those of cleaners, ditchdiggers etc. The blue collar latter involve being ‘paid and treated badly’ and ‘held in low esteem’ despite involving ‘work that needs to be done’; the white collar former often offer ‘excellent working conditions’ despite their futility. Why? Because bullshit jobs have proliferated as a kind of balm for the workplace attrition wrought by neoliberalism and mechanisation, ‘the ruling class’ having ‘figured out that a happy and productive population with free time on their hands is a mortal danger’. Graeber wants Bullshit Jobs to be ‘an arrow aimed at the heart of our civilization’. With the best will in the world, it is more like a protest rock thrown at a departing tank.

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  • Custom Article Title Gideon Haigh reviews 'Bullshit Jobs: A theory' by David Graeber
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    Recently I solicited impressions of his job from the new head of external affairs at a big financial organisation. What had struck him first was the manpower at his disposal. The total headcount ran into many hundreds – larger than most if not all Australia’s print and electronic newsrooms. There was not merely one department. Each division of the institution had its own well-resourced team ...

  • Book Title Bullshit Jobs
  • Book Author David Graeber
  • Book Subtitle A theory
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  • Biblio Allen Lane, $49.99 hb, 358 pp, 9780241263884

This is not a book with immediate appeal for the general reader, who is likely to be deterred by the denseness of its analysis. That is unfortunate, because its message deserves to be widely disseminated. It provides a useful account of economic history since the end of World War II, both internationally and in Australia, and ultimately offers a bespoke reform agenda.

The authors’ account begins with the 1977 analysis by the OECD of the stagflation then globally rampant. The inter-government organisation argued that the principal cause of this malaise was ‘the competing claims on resources exerted by different socio-economic groups’. According to Stephen Bell and Michael Keating, the main agents propelling such competing claims are workers, business, capital holders, voters, and community and state élites. Forty years later, the authors see those agents still making their competing claims, but now enormous power is in the hands of the wealthy; the result is the vast inequality highlighted by Thomas Picketty’s influential Capital in the Twenty-First Century (2013) and preoccupying economists and politicians alike.

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  • Custom Article Title Richard Walsh reviews 'Fair Share: Competing claims and Australia’s economic future' by Stephen Bell and Michael Keating
  • Contents Category Economics
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    This is not a book with immediate appeal for the general reader, who is likely to be deterred by the denseness of its analysis. That is unfortunate, because its message deserves to be widely disseminated. It provides a useful account of economic history since the end of World War II, both internationally and ...

  • Book Title Fair Share
  • Book Author Stephen Bell and Michael Keating
  • Book Subtitle Competing claims and Australia’s economic future
  • Author Type Author
  • Biblio Melbourne University Press, $59.99 hb, 408 pp, 9780522872279

What’s an accountant’s favourite book? 50 Shades of Grey. But in a world of transfer pricing and Special Purpose Entities, suddenly accounting isn’t funny anymore. A 1976 Congressional report noted that the Big Eight accounting firms controlled ‘virtually all aspects of accounting and auditing in the US’. Multinationals, presidents, prime ministers, and pro tennis players hide their vast wealth in offshore tax havens like Panama and the Bahamas. The message is clear: to keep your dosh from the tax collector’s greedy grasp, you’ll likely need a Big Four accountant.

Who are the Big Four? Deloitte, Ernst & Young (EY), PricewaterhouseCoopers (PwC), and KPMG are the great survivors of the buccaneering nineteenth-century Gilded Age of silver, wine, art, and gold. Ian D. Gow and Stuart Kells’s book traces the lineage of the original ‘Big Eight’, which became the ‘Big Five’ until Arthur Andersen’s sudden demise in 2002 in the aftermath of the Enron scandal. In 2018 the Big Four employed one million people globally, with 25,000 in Australia alone.

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  • Custom Article Title Rémy Davison reviews 'The Big Four: The curious past and perilous future of the global accounting monopoly' by Ian D. Gow and Stuart Kells
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    What’s an accountant’s favourite book? 50 Shades of Grey. But in a world of transfer pricing and Special Purpose Entities, suddenly accounting isn’t funny anymore. A 1976 Congressional report noted that the Big Eight accounting firms controlled ‘virtually all aspects of accounting and auditing in the US’ ...

  • Book Title The Big Four
  • Book Author Ian D. Gow and Stuart Kells
  • Book Subtitle The curious past and perilous future of the global accounting monopoly
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  • Biblio La Trobe University Press/Black Inc., $32.99 pb, 260pp, 9781863959964

For maybe one century the subject called Economics was monarch of the social sciences. Then the Western world was poorer than it is now, and many economists promised to find a pathway towards the abolition of hunger and unemployment. They also hoped to abolish war: the eager ideologies of free trade were believed by their disciples to be long-term recipes for international peace.

This Little History of Economics, beginning with the ancient Greeks, reaches 1776 after only five chapters. We see Adam Smith, after a sleepless night, walking in his dressing gown along a country road and mentally composing what ‘would become arguably the most celebrated book in the history of economics’. In The Wealth of Nations, this Scottish philosopher proposed that self-interest produced social harmony rather than chaos. As summarised in this valuable book, people do best for their nation by chasing their own interests rather than by playing ‘the Good Samaritan who wants to help strangers’.

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  • Custom Article Title Geoffrey Blainey reviews 'A Little History of Economics' by Niall Kishtainy
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  • Book Title A Little History of Economics
  • Book Author Niall Kishtainy
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  • Biblio Yale University Press (Footprint), $37.99 hb, 256 pp, 9780300206364

The blurb on the back of the book describes Varoufakis as ‘the most interesting man in the world’. It is a wonderful epithet and might even be true considering the interest that Varoufakis excites in the press and media. On another reading, he is also the luckiest man in the world given the extraordinary nature of his leap from talented if unheralded academic economist to Greek finance minister to international speaker and best-selling author. This is an important as well as an entertaining work: part diary, part critique of European political economy, and part thriller featuring a cast of villains of whom Ian Fleming would be proud. It is a heady concoction and a gripping read.

Adults in the Room focuses on Varoufakis’s brief tenure as Greek finance minister in 2015, a matter of weeks marked by extreme turbulence on global markets as the international community digested the possibility of ‘Grexit’ or a Greek exit from the EU. Whilst the details of who owed what to whom on what basis can seem bewildering at times, the gist of the issue that confronted Varoufakis and his comrades in Syriza on being elected was clear enough. Greece, quite simply, was broke. The money it had borrowed on the international markets was being used to pay back interest on its loans with the further requirement to flog off saleable assets to make the payments.

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  • Custom Article Title Simon Tormey reviews ‘Adults in the room: My battle with Europe’s deep establishment’ by Yanis Varoufakis
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    The blurb on the back of the book describes Varoufakis as ‘the most interesting man in the world’. It is a wonderful epithet and might even be true considering the interest that Varoufakis excites in the press and media. On another reading, he is also the luckiest man in the world given the extraordinary nature of his leap from talented if unheralded academic economist to Greek finance minister to international speaker and best-selling author. This is an important as well as an entertaining work: part diary, part critique of European political economy, and part thriller featuring a cast of villains of whom Ian Fleming would be proud. It is a heady concoction and a gripping read.

  • Book Title Adults in the Room
  • Book Author Yanis Varoufakis
  • Book Subtitle My battle with Europe’s deep establishment
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  • Biblio The Bodley Head, $35 pb, 559 pp, 9781847924469

What is money, how do we create it, and how politically significant is its production? In The Production of Money, political economist Ann Pettifor makes the striking claim that the way we currently produce money gives rise to one of the most substantial challenges facing Western democracy. But how could this be so? Money is produced by printing presses and there we have the end of it. What threat could it represent for democracy?

At present, the Western democratic institutions that have remained fundamentally unchanged since the settlements at the end of World War II are under considerable threat. Most notably – and this has been much discussed by various political pundits – there are powerful political groups who reject ideals such as the separation of powers and limits upon executive authority and who have used the economic upheavals and social dislocations resulting from the global financial crisis to pursue what are fundamentally anti-democratic agendas.

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  • Custom Article Title Adrian Walsh reviews 'The Production of Money: How to break the power of bankers' by Ann Pettifor
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  • Book Title The Production of Money
  • Book Author Ann Pettifor
  • Book Subtitle How to break the power of bankers
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  • Biblio Verso, $26.99 hb, 192 pp, 9781786631343

Given the damage done to the global economy by the finance industry this century, and the apparent determination of its major players to keep on doing it, this would seem a rather ill-chosen time to produce a book singing its praises. Justification lies in the fact that the work is a tour de force of historical scholarship. Goetzmann offers an extraordinarily wide-ranging and thorough investigation of financial activity from earliest times to the present day, and his enthusiasm for the subject and his lively writing style make the topic much more engaging than one might expect. The immense breadth of his research means that every reader, no matter how expert in history or finance, will learn much. How many ancient historians, for instance, would have known that the Code of Hammurabi set different interest rates for silver and barley, or that the financing of the Ur basket trade prefigured Athenian maritime loans, or that seventy per cent of industrial lead pollution in the northern hemisphere between 366 BCE and 36 CE came from the Rio Tinto mines in Iberia, or that China made contracts on bamboo that was then split so that precise matching could not be forged?

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  • Custom Article Title Peter Acton reviews 'Money Changes Everything: How finance made civilization possible' by William N. Goetzmann
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    Given the damage done to the global economy by the finance industry this century, and the apparent determination of its major players to keep on doing it, this would ...

  • Book Title Money Changes Everything
  • Book Author William N. Goetzmann
  • Book Subtitle How Finance Made Civilization Possible
  • Author Type Author
  • Biblio Princeton University Press (Footprint), $79 hb, 592 pp, 9780691143781

Thomas Piketty is of course the French economist who shot to fame, somewhat improbably, on the back of an 800-page tub thumper Capital in the Twenty-First Century, published in 2013. Notwithstanding the exorbitant length of the book, one that defeated all but determined professional readers, the message was handily clear. While economic growth is making societies richer, they are also becoming more unequal. This growing inequality is not the result of the rich working harder or longer, but because passive income, or 'rents' earned from land and patents, is far outstripping growth in salaries. Moreover, since these rents can be passed on down the generations, wealth and privilege encrusts itself in the hands of the few, irrespective of talent, merit, or ability.

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  • Custom Article Title Simon Tormey reviews 'Chronicles: On our troubled times' by Thomas Piketty
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    Thomas Piketty is of course the French economist who shot to fame, somewhat improbably, on the back of an 800-page tub thumper Capital in the Twenty-First Century ...

  • Book Title Chronicles
  • Book Author by Thomas Piketty, translated by Seth Ackerman
  • Book Subtitle On our troubled times
  • Author Type Author
  • Biblio Viking, $29.99 pb, 191 pp, 9780241234914
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