We are gathering at a critical moment in history – with a world still reeling from the near collapse of the global financial system and threatened by the prospect of catastrophic climate change. Assembling some of the finest minds in Australia and the world provides an opportunity to understand these crises and a range of other pressing issues. It’s an opportunity to rethink the way we live.
Chip Rolley, Artistic Director SWF
The keywords for this year’s SWF program – the first for the wonderfully named Artistic Director, Chip Rolley – were change and renewal. The opening address was given by Reza Aslan who spoke of the political and social changes taking place in Iran, and set the tone for a festival which posited literature as a transformative agent of social and political change. I could only attend a handful of sessions this year but those I chose went to the heart of the artistic vision.
John Ralston Saul is a Canadian writer best known for his books on the dominance of corporatism as a political and economic force. Saul views the rise of corporatism through the prism of eighteenth-century rationalism, the structural organisation of Mussolini’s Italy and the establishment of the multinational global corporate hegemony of today. In conversation with Ramona Koval, Saul had the look of the cat that got the cream. For decades he has been writing about the potentially dire consequences of the marriage of neo-conservatism to free market economics and I suppose he is entitled to some self-satisfaction, albeit cold comfort, in seeing his prescient warnings materialise at the hands of Wall Street, aided and abetted by Alan Greenspan whom Saul delighted in referring to as a ‘not very smart’, pointing to the ex Fed Reserve Chairman’s preference for the novels of Ayn Rand. He also referred to Francis The End of History Fukuyama as ‘one of the fools of his generation of historians’.
Saul is interesting because he eschews left-right political dichotomies. Corporatism, he says, cuts across political lines and has been endemic in both the private and public sectors in capitalist and socialist economies. It is a hierarchical form of organisation that regards the citizen primarily as an object of management. Saul argues that capitalism is essential but that it needs to be rethought to serve the interests of the common good, a view that the Prime Minister is drawing on to sell his proposed minerals resources tax. Pity it is that the government has not heeded Saul’s advice on the twin dangers of an impoverished public language and excessively technocratic public administration. Saul advocates a decrease in the production of consumer goods and an increase in the quality of essential items. Make stuff that lasts longer, looks better and is made under sustainable conditions. He also proposes a view of the relationship between the citizen and the land as ‘spatial’ – along the lines of an indigenous view of spirit, place and people – as opposed to the rationalist view which places the human being at the top of an evolutionary pyramid. Saul’s session was lively, peppered with his acerbic wit and a frank and fearless telling of the failings of the dominant political philosophy of our time.
Ross Garnaut was so busy writing the Report into Climate Change that he barely had time to digest the onset of the global financial crisis in 2008. Once the report was submitted to the federal government, and subsequently largely ignored, he holed up with all the best books written on the subject, and wrote The Great Crash of 2008. The book, co-authored by David Llewellyn-Smith, is an attempt to explain the GFC in lay terms for the general reader. Garnaut was in conversation with David Marr at the SWF. His approach to the book was to first strip away some of the common explanations for the crash and to then regard it in its historical context as a multifaceted, highly complex (he even used the word ‘beautiful’) confection founded on pure avarice. This coming with deadly seriousness from one of Australia’s most esteemed specialists in economics.
His research led him back to the very first domino to tumble, an outfit called Merit Financial, which Garnaut described as a mortgage broking firm run by a group of ex-footballers whose idea of business practice resembled a never-ending frat party. Garnaut explained that the mathematical modelling behind the financial instruments that caused the GFC was superficially convincing but fatally flawed because it was based on a sample of data captured over a ten-year period and therefore failed to take into account full, longer term cycles of boom and bust. And then there was Greenspan, lauded at the time you will recall, driving down interest rates and making money cheap enough to burn, which is exactly what the geniuses behind the toxic derivatives did.
Things were made immeasurably worse by the Bush administration’s decision to direct FBI resources away from investigations of financial fraud in order to pursue the movement of money in the Middle East. And while it was very willing to start wars it seems the administration was not so keen on paying for them. Clinton had clawed back Republican debt and by 2000 had achieved an operating surplus, but Bush was so ideologically committed to tax cuts that when the wars in Iraq ands Afghanistan were started the US was forced to borrow heavily from China to pay the bills. Thus the precarious position in which the Obama administration now finds itself.
In Australia, says Garnaut, the situation was of a different order. Coming out of a boom in the 1990s off the back of structural reform made by Hawke and Keating between 1983 and 2000, the Australian economy was again bolstered by the current resources boom fuelled by exponential growth in China from which the Howard government reaped company tax and royalties. However, as Garnaut puts it, instead of investing the revenue in infrastructure that would strengthen our position into the future, the Howard administration directed it to tax cuts and increased government expenditure. In effect, there has been no real increase in productivity since 2000 which is why the current administration is so keen to build infrastructure by capitalising on resource company profits.
During the early stages GFC, you may recall, the Rudd government moved very quickly to guarantee the deposits of the big banks. What is not so widely known, Garnaut revealed, is the level of exposure the banks had to foreign debt. It seems that the banks had gone offshore to borrow from the wholesale banking sector to fuel property and consumer demand in Australia. In other words, the banks were not following the traditional method of lending based on their own deposits and were lending money they didn’t have. Garnaut insists that our banks would not have survived the crisis without that guarantee and warns of the hubris that can arise in a banking sector underwritten by the federal treasury. That hubris has a name: moral hazard.
Professor Garnaut’s prognosis for the future is measured. While applauding the increase in regulation currently mooted and in some cases being implemented in developed economies – Australia not being one to date – Garnaut believes the culture of Wall Street still prevails due to an inherent corrupting influence in the political and financial systems, especially those in the USA. The level of donations flowing from Wall Street to both political parties has not abated and may have even increased. The tendency to recruit macro financial managers from Wall Street into senior positions in successive US administrations also continues, a pattern that goes precisely to many of the points raised by JR Saul in relation to the closed systems at work in corporatism and constitutes what Garnaut refers to as a blatant conflict of interest that works against the common good. Professor Garnaut concluded his session by saying that it is this influence of vested interests on the policy process that needs to be demonstrated to the broader public so that real change can be driven from the electorate.