The White Picket Fence: Wet, Dry & Privatise: A new political phrasebook

Friday, February 01, 1991

Wet, Dry & Privatise: A new political phrasebook

Ah, si je pouvais pisser comme il parle!
-- Clemenceau, of Lloyd George

ACKNOWLEDGEMENTS

Many people have helped one way or another with this, my longest-running project. I did the basic research and produced a first draft which was circulated. I then undertook the necessary rewriting and added numerous words and senses of words, with the most welcome advice of many people.

I take this opportunity of thanking Lamb Print for assistance with the cost of printing.

No attempt has been made to compete with the full-scale political and economic dictionaries and textbooks, many of which were consulted and some of which have been quoted when their definitions seemed definitive. The-more important are listed in the bibliography; of them all, Roger Scruton's Dictionary of Political Thought and Arthur Seldon and F.G. Pennance's Everyman's Dictionary of Economics gave the most useful cross-bearings and are recommended to readers.

Richard J. Wood

FOREWORD
By Paul Kelly *

Jargon, buzz-words and ideological slogans are the staple of political debate at the end of the 1990s. Unfortunately, the dialogue is driven by technology. The tyranny of the television "grab" or the talkback radio interview is conducive neither to exposition nor to clarity. It is rare to hear a politician who knows what he thinks, let alone means what he says; surely part of Margaret Thatcher's appeal was her violation of this drab orthodoxy. Many politicians cannot really communicate, or fear the power of communication. As for the legions of political commentators and assorted experts, one suspects they complicate to impress. These days, of course, there are too many writers chasing too few ideas; too many politicians as well.

When it was fashionable to be left-of-centre, nearly everyone answered to the label progressive or anti-imperialist. In the 1960s, to be called a free-marketeer would have been seen as an insult. These days, many would regard it as a compliment. The 1980s had its own orthodoxy, driven by the so-called Thatcher and Reagan revolutions and the intellectual and pamphleteering movements which publicise them. Each new orthodoxy re-interprets the past and creates its own new language.

These days we have Wet and Dry in the Liberal Party; the New Left and the Old Left in the Labor Party. The New Right identifies the New Class as its arch-foe and the New Class has made the New Right a target of demonology. So what does it all mean? You can provoke dinner-party consternation by asking where R.G. Menzies and E.G. Whitlam fit into this contemporary schema. But if you want to join the debate in the 1990s and 2000s you must master the terminology. In this book, Richard Wood has provided a pocket guide.

It is clever, often funny, and written from a free-market position. Take the hopelessly confused word Liberalism which it treats in several subsections: Wet Liberalism, Classical Liberalism, Neo-Liberalism -- which, of course, are all different from Conservatism. For the non-economist this is a quick guide to the buzz-words: Monetarism, Mercantilism, Laffer Curve, Laissez-faire, M1, M2 and M3, Poverty Trap, Public Choice Theory, Quango, and many more. For journalists, commentators and politicians of whatever persuasion, it is a handy and important reference.

* Paul Kelly is senior political correspondent for The Australian, and President of the Federal Parliamentary Press Gallery.

INTRODUCTION

This little book was written because there seemed to be a need for it. It defines, describes, and comments on the words that dominate political and economic debate as the 1990s fade. It contains economic terms that political dictionaries omit or get wrong, and it contains political terms that are beneath the dignity of dictionaries of economics. It distinguishes senses that Webster and Oxford ignore. And it always gives priority to Australian usage.

Above all, it is more up-to-date. The last few years have seen major changes in the political and economic scene in Australia and around the world, and new words and phrases, or new senses of old words, have come into use far faster than they can get into the dictionaries: e.g. deregulation, multiculturalism, New Right, perestroika, Thatcherism. Other words are there to provide the necessary background: deficit, laissez-faire, left, right. A few are there not because they are in use, but because they ought to be: the government-business deals of "Western Australia Inc." would not have been so easy had our political vocabulary still included words such as job, place-hunter, and projector (discussed in the article on corruption).

I have not hesitated to express judgments. That a word is sometimes, or often, used in some sense does not mean that the usage is correct, desirable, or even useful. If the effect of a particular usage is to obscure a distinction, then the usage is harmful and should be opposed. We all know politicians and journalists who confuse imply and infer, or who say refute when the facts require deny or attempt to rebut; and too many of them also misunderstand and misuse the political and economic terms that are the tools of their trade.

This is the point at which to pay tribute to George Orwell. He died in 1950, but it is hardly possible to write carefully about political words without referring to him, either explicitly or, implicitly, in the sense of asking oneself "What would he have thought of this sentence?" In the essay "Politics and the English Language", he wrote that the English language

becomes slovenly and inaccurate because our thoughts are foolish, but the slovenliness of our language makes it easier for us to have foolish thoughts. The point is that the process is reversible.

Wet, Dry and Privatise is intended to help with the reversal. One reason for platitudes and equivocation from politicians is that often they can afford neither to remain silent nor to commit themselves to one side of an issue. But if a cry of "weasel word" goes up every time a Minister uses one, if journalists take care with the words they use, then it will be more difficult for public figures to get away with slovenly thinking. As Orwell said, if you straighten out your English, "when you make a stupid remark its stupidity will be obvious, even to yourself".

Richard J. Wood

WET, DRY & PRIVATISE

ALIENATION

A sense of individual powerlessness and depersonalisation in the face of (modern) society.

Alienation "expresses the search for a theory that will describe the condition of the modern consciousness, and also explain its sense of being 'separated' from some truly human way of being" (DPT). The English word alienation translates three or four German words, and represents not only several distinguishable if vague concepts from Hegel, MARX, and Freud, but also attempts (by people such as Marcuse and Fromm) to synthesise MARXIST and Freudian conceptions. Figures on crime and alcoholism from the USSR suggest that alienation is not, as was once claimed, a distinguishing feature of CAPITALISM.

ANARCHISM

The belief that government is bad and that we would be better off without government or state.

Anarchists advocate the abolition of the state and the replacement of all forms of governmental authority by free association and voluntary cooperation of individuals and groups (cf. LIBERTARIANISM). Anarchists disagree about how such a society is to be achieved and what specific forms of relationship (particularly property relationships) it is to be based on. They find it very hard to explain how it would cope with contrary-minded fellow anarchists, psychopaths, and free-loaders, and usually resort to claiming that such personalities would not occur in their ideal society (cf. UTOPIA).

The stereotype anarchist with cape and bomb dates from 19th-century groups which claimed violence as necessary to destroy state institutions; public and politicians seldom distinguished between these and other terrorist groups, and "anarchist" was practically synonymous with "revolutionary".

ANGLOMORPH

The best of British.

Frank Knopfelmacher's useful term to distinguish a society or countries, such as the United Kingdom, the United States, Australia and New Zealand, whose "social and cultural institutions, its language and spirit, both religious and secular, are all derived initially by direct population transfer from the British Isles". Anglomorph people are those born and bred -- formed, socialised, brought up -- in an anglomorph society: contrast with ethnic.

ANTI-COMMUNISM

Behind the cold war excesses, a valid cause.

Milovan Djilas, vice-president of Yugoslavia under Tito until imprisoned by him, puts it well:

There is a kind of gutter-critique of COMMUNIST thinking that was probably justified by its effects during the Cold War but is now wholly counter-productive. ... I am, of course, not saying that we should soften our critique of Communism as a flawed or even impossible social system. But we should address the system with the seriousness and intellectual discernment it deserves. Millions of people have, willy-nilly, come to live under Communism. We owe it to them to offer an intellectually respectable, well-argued, and realistic alternative. The Hollywood type of anti-Communism will not do.

Cf. COMMIE CAN, KICKING THE; NEO-CONSERVATIVE.

AUSTRIAN SCHOOL OF ECONOMICS

Treats the economy as process rather than structure, and stresses the role of markets in transferring information about the demand for goods and the allocation of resources.

Important names include Menger, von Mises, Hayek, all trained in Vienna. Austrian economics:

Treats value as subjective, i.e. all that matters is what the owner and potential purchaser think the good is worth;
Regards markets and prices as information-handling mechanisms (see also MARKET ECONOMY);
Emphasises relative prices and the pattern of demand, as against aggregates (see KEYNESIANISM, MONETARISM);
Stresses the sheer volume of information that must be processed in allocating resources among millions of products to satisfy hundreds of millions of consumers, something that markets do automatically but that presents fearsome difficulties to planners (see COMMAND ECONOMY);
Concentrates on process rather than equilibrium; and
Concentrates on the individual rather than on groups or society as a whole (cf. LIBERTARIANISM).

Do not confuse Austrian economics with the economic policies of Austria.

AUTHORITARIANISM

Government without consent, but lacking TOTALITARIANISM's proscription of independent associations.

Pinochet's Chile is authoritarian, Castro's Cuba totalitarian. Kaiser Bill's Germany was authoritarian, Hitler's was totalitarian.

Authoritarians who think about such matters believe that government ought to, or must, rest on an established system of authority, with the consent of the governed taking second place (but seldom being entirely ignored).

A significant number of authoritarian regimes have given way peacefully to DEMOCRACY (e.g. Spain, Portugal, South Korea), while no totalitarian one has ever done so: a major factor in current developments in Eastern Europe is the relinquishing by COMMUNIST PARTIES of their totalitarian claims.

BASHING

Union-bashing etc.

Claiming that your opponent's are engaged in union-bashing, police-bashing, or whatever saves you the trouble of listening to what they say and responding to their arguments.

BEANBAG MODEL OF THE ECONOMY

Managing an economy is like folding a beanbag.

By the time you get one part of it into the desired shape, some other part has bulged out of control. Cf. MARKET, GOODHART'S LAW.

BIPARTISANSHIP

Cooperation or agreement between a government and the opposition.
Something a government appeals to in the hope of disarming the opposition.
The attractive thing about bipartisanship is that stable, long-term policies can be developed without party-political point-scoring. The disadvantage is that the policy tends to be removed from the public arena of contending ideas and, like policy in a one-party state, may become too unresponsive to public opinion (cf. CONSENSUS). Attempts to change an established bipartisan policy can too easily be denounced as mere point-scoring or trouble-making, regardless of their merits. See POLITICS, PLAYING.

BRACKET CREEP

The increase in average tax rates caused by inflation.

A PROGRESSIVE income tax such as Australia's means that an increase in your income results in a more than proportionate increase in the amount of tax you have to pay (in other words your average tax rate increases). This is fair enough if your income is really increasing; but under inflation, the real increase is less than the nominal one. In the case where the increase in nominal income equals the inflation rate ("full indexation") the purchasing power of your pre-tax income stays constant, but because your nominal income has increased you pay disproportionately more tax. Your real after-tax income has fallen, and the missing money has gone to the government.

Governments like this, of course. Inflation guarantees them increased revenue without the odium of announcing tax increases; and the "tax cuts" they promise are usually less than those required to offset bracket creep ("tax indexation").

Fiscal drag is another name for the same thing. It draws attention to the fact that the disproportionate increase in revenue has the effect of automatically tightening FISCAL POLICY, putting a brake on growth (which may or may not be desirable in particular circumstances).

BROAD MONEY

See MONEY SUPPLY.

BUREAUCRACY, ECONOMICS OF

See ECONOMICS OF BUREAUCRACY.

CAPITALISM

The social and economic system in which capital is owned by individuals and work is undertaken for individual reward under a system of voluntary contract.
To MARX, the system in which one CLASS, the bourgeoisie, owns and controls the instruments of production (farms, factories, etc., etc.) and is thus able to exploit the proletariat or working class, which possesses only its labour power (capacity to work). Non-MARXISTS agree that capitalism presupposes private property in the means of production (without excluding partial state ownership), but they find the division of the population into bourgeoisie and proletariat impossibly simplistic.
In principle, voluntary transactions in a MARKET ECONOMY rule out exploitation, which requires the exercise of power, which is more an attribute of the state and its agencies than of private capital. In practice, if privately-owned firms are able to exploit CONSUMERS or workers it is usually because state power is being used to restrict COMPETITION (cf. CORPORATISM, CORRUPTION, MONOPOLY, NATURAL MONOPOLY).
Capitalism ... is by nature a form or method of economic change and not only never is but never can be stationary. ... The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers' goods, the new methods of production or transportation, the new markets, the new forms of industrial organisation that capitalist enterprise creates. (Schumpeter)
It is fundamental to capitalism that the individual should be able to apply his labour and his PROPERTY (capital) to purposes chosen by him. This requires a legal system that recognises individual rights, especially PROPERTY rights. Nevertheless, in all actual capitalist societies, government intervention imposes limits on the uses people may make of their labour or capital, over and above those implicit in LIBERALISM. (Cf. INTERVENTIONISM, LAISSEZ-FAIRE, MIXED ECONOMY).
Capitalism has been the most successful economic system in human history in satisfying human wants and providing adequate or more than adequate living standards. Conditions in nineteenth-century factories were bad: but conditions for the landless rural poor were generally worse. Poverty is the lot of the large majority of the population in all pre-capitalist societies. Only the accumulation of capital makes it possible to escape from subsistence agriculture: this is one of the few things on which economists from MARX though Keynes and Friedman to Hayek are agreed. To this extent SOCIALISM itself is capitalist. Conversely, non-socialist countries in which there is severe exploitation of workers and abuse of HUMAN RIGHTS can only usefully be described as capitalist if the goal is to blacken the capitalist DEMOCRACIES by association. What matters is the means by which decisions on the use of capital are made (see MARKET ECONOMY, COMMAND ECONOMY, CORPORATISM, CORRUPTION).
Capitalism's proponents claim that it is more in accord with human nature than is socialism. Although socialists can retort that that is because people have been debased by capitalism, the fact remains that socialist countries prohibit a far wider range of behaviour than capitalist ones, and that on the whole capitalist countries are also democratic ones.
Anything non-socialist or not anti-American.
Too many people divide the world into capitalist and SOCIALIST. Many countries cannot very usefully be described as either (e.g. Afghanistan, Bhutan, Chad, Ghana, Iran, Kiribati, Libya, Mexico, Nepal, Paraguay, Tuvalu).

CAPITALISM, POPULAR

See POPULAR CAPITALISM.

CARTEL

A group of suppliers who agree to divide the market between them.

OPEC is a classic cartel. Usual features are (i) a formal agreement (ii) between firms (or countries) that control a large proportion of the supply or production of a good, (iii) of which the purpose is to benefit cartel members at the expense of CONSUMERS. The agreement may cover any or all of price, output, and investment. Cartels are basically outlawed by Australian trade practices legislation but have been encouraged by government in some countries at some periods. They should be distinguished from informal collusion between suppliers. It takes more than one firm to make a cartel.

Cartels are inherently unstable. Each member can increase his own profits in the short term by increasing output above the agreed level, so there is a permanent temptation to break the agreement (which often provides for side-payments between members to compensate for such forgone opportunities). A cartel's effect on supply and price encourages consumers to seek other suppliers and SUBSTITUTABLE goods OPEC provides excellent examples.

Cartel is sometimes used loosely to include any form of collusion among suppliers, or to mean collusion among buyers (e.g. an auction ring); this is better avoided.

CHURNING

Collecting tax from middle-income people to pay welfare benefits to middle-income people.

The only beneficiaries of "middle-class welfare" are the bureaucrats who administer it. The costs are enormous, in terms both of the resources devoted to administration and in the deadweight losses caused by the higher tax rates that are necessary to raise the money. See PUBLIC CHOICE THEORY, SAFETY NET.

CLAPHAM OMNIBUS, MAN ON THE

See ECONOMIC MAN.

CLASS

A group of pupils commonly taught together.

Most other meanings of the word are emotion-laden and too vague to be useful outside political speeches. Whether one is middle-class or working-class is now more a matter of taste than anything else. Alexander Hamilton said 200 years ago that the only difference among the classes is the type of v which predominates, not its quantity. If people start talking about class, make them explain their rules for deciding which class any individual belongs to and see if they make sense.

COERCIVE UTOPIANS

People who are so sure they know what is right they are willing to force it on everyone else, like it or not.

See UTOPIA.

COLLECTIVE

A group of individuals considered as a whole (see COLLECTIVISM).
A committee whose members want to demonstrate their COMMITMENT.

COLLECTIVISM

A theory advocating collective, rather than individual or state, ownership of the means of production.
A collective might be local inhabitants, a worker's cooperative, a kibbutz, etc. The idea is that major decisions should be made by and for the benefit of the collective rather than to suit individual preferences. Collectivism in this sense can be distinguished from SOCIALISM and COMMUNISM, where state control of the means of production is accompanied by decision-making by (and for the benefit of) the officers of the state. Voluntary collectives are consistent with CAPITALISM.
The belief that the rights of the collective are prior to and override those of the individual.
A collective here may be small or large, traditional or modem: family, tribe, nation, work brigade, state. It is possible to devise hypothetical circumstances which will lead almost anyone into saying that an individual's rights ought to be overridden: but the question is whether they are overridden by the rights of the other members of the collective or by the rights of the collective as such. Those who believe the latter can fairly be described as collectivists. Cf. LIBERALISM, LIBERTARIANISM, SOCIETY.
The tendency of academics, bureaucrats and politicians to forget that it is men and women, not collectives, that think and do, live and die.
Even MARX and Engels remembered this sometimes: "History is nothing but the activity of men in pursuit of their ends." (The Holy Family, 1846).
In some NEW RIGHT usage, collectivist simply means "bad" (cf. FASCISM).

COMMAND ECONOMY

Strictly, one in which resources are allocated by centralised administration, and not by MARKETS: the opposite of LAISSEZ-FAIRE.
Decisions on outputs are taken by the administration, and the use of capital, land and labour is brought entirely within its supervision. Examples of command economies include the USSR from the late 1920s to the present, and the United Kingdom for several from 1940 or 1941. State ownership of capital is not fundamental to a command economy, although state control is (cf. MIXED ECONOMY). Planned economy is a nicer-sounding alternative term.
A key characteristic is that allocative decisions must be made "ex ante", in the planning process, whereas the price mechanism in a MARKET ECONOMY achieves coordination "ex post". Individuals and firms in a market economy plan for themselves, of course, and price fluctuations and bankruptcies show when they go wrong; but a full-blown command economy lacks these mechanisms, and allocative errors show up as gluts or shortages. Extensive black markets are a feature of all command economies, and, besides allowing the rich and influential to consume luxury goods not planned for, they play a vital role in mitigating the effects of PLANNING mistakes and GOVERNMENT FAILURE.
AUSTRIAN economists demonstrated in the 1920s the impossibility of central planners assembling in advance all the information about raw materials, technology, capital, and human needs and tastes needed to achieve an optimum, or even reasonably efficient, allocation of resources -- an impossibility that is not overcome even by modern computers (themselves, it is relevant to mention, not the products of a centrally-planned economy). Cf. MARKET SOCIALISM.
The pitfalls of economic planning are illustrated by the Russian story about a nail factory set a production quota of ten tons of nails. It overfulfilled its quota (and gained its work-force a bonus) by producing eleven one-ton nails.
Loosely, that part of a MIXED ECONOMY from which government attempts to exclude the operation of market forces.

COMMITMENT

Often, holding something else more important than truth.

Appealing to people's commitment is commonly a WEASEL WORD for exploiting them. PROGRESSIVE people are committed to causes; lunatics used to be committed to asylums.

COMMIE CAN, KICKING THE

Drawing attention to the fact that the interests of the government of the USSR differ from those of the western democracies.

In the past, to be a DEMOCRAT, even a DEMOCRATIC SOCIALIST, was to be ANTI-COMMUNIST. According to a British Labour Party research unit (in 1957),

The COMMUNIST parties and their FRONT organisations outside USSR have one great purpose -- to spread in other countries the power of the COMMUNIST PARTY of the Soviet Union and the Government of the USSR. They function as part of the apparatus of the Soviet Foreign Office. ... The purpose is to undermine democratic Socialism; to promote Communist wrecking influence and job-hunting in the Trades Unions; to weaken democratic countries politically and economically; and to see to it that the democracies are militarily weak as compared with the heavily armed Communist TOTALITARIAN states. This Communist war against SOCIALISM freedom, liberty and progress has no scruples or principles. REACTIONARY in purpose, it can use "PROGRESSIVE" language. Standing for the superiority of Communist military power, it can shout "peace" even when it is promoting trouble in the world.

Such blunt ANTI-COMMUNISM is now out of fashion, as triumphalism is in Moscow. Nevertheless, the very existence of LIBERAL democracies destabilises totalitarian regimes by showing their subjects that a freer, more prosperous life is possible. Current reforms in the USSR are more like giving a dog a longer lead than like taking off its collar: there is no sign that the party is ready to abandon its monopoly of power (and implicitly admit that seventy years of Soviet history and tens of millions of deaths were all a ghastly mistake). See GLASNOST, PERESTROIKA.

Even if the reader rejects everything in the last two paragraphs, the possibility remains that the Soviet government's perception of its interests will motivate it to act in ways that damage the interests or perceived interests of Australia -- and such a reader is likely to admit that the Soviet government has as much right as any to act in pursuit of its interests.

COMMUNISM

A theory or system of social organisation based on the holding of aII PROPERTY in common (MQD).
It is important to distinguish the desire to eliminate private property altogether from the desire to eliminate private property in the means of production, retaining private property in some or all consumer goods (toothbrushes, umbrellas, houses, Volvos?). The former was the original Christian practice (e.g. Acts 4) and is confined to certain religious or UTOPIAN communities; the latter is the usual communist or SOCIALIST state of affairs. Failure to make this distinction may account for some of the attraction communism and socialism have for modern Christians (cf. LIBERATION THEOLOGY).
For some, communism is evoked by the slogan "from each according to his ability, to each according to his needs". In the real world, this raises problems such as how and by whom ability and needs are to be assessed, and what penalties there should be for shirking. True believers avoid such difficulties by assuming that human nature will be reformed along with the political system and/or that the coming of communism will end SCARCITY. This give the whole thing the status of a messianic religion or, perhaps, a fairy tale. Read Orwell's Animal Farm as an antidote. Cf. COMMUNIST PARTY, MARXISM.
"Communism is about the possession of power" (Milovan Djilas).
"Soviet power plus the electrification of the whole country" (Lenin).
"Successful FASCISM" (Susan Sontag).
COMMUNIST PARTIES in government in various countries claim to have achieved only socialism and to be moving towards communism. The countries they govern display much of the form but very little of the content of DEMOCRACY, and are in general notable for: the power, the privilege and CORRUPTION of their ruling elites; their large armies and police forces; and their suppression of freedoms of expression, association, and economic activity. (Cf. COMMIE CAN, KICKING THE.)
"The longest and most painful route from CAPITALISM to capitalism" (Budapest taxi-drivers).
All communist countries suffer from all the problems of COMMAND ECONOMIES. The fact is admitted from Warsaw to Rangoon arid Budapest to Peking. Communist governments are now attempting to capture the economic benefits of MARKETS (MARKET SOCIALISM) while retaining TOTALITARIAN control of society. It is not clear that this attempt can succeed (see PERESTROIKA). But communist parties justify their seizing and holding power by their claim to superior insight into historical and economic processes. Communist politicians therefore find it even harder than democratic ones to admit they have been wrong.

COMMUNIST PARTY

Political movement or religious order?

Communist parties are more like religious orders than like ordinary political parties. You cannot just join; and if after serving your novitiate you are accepted as a member, you are expected to devote your life to the Party. The Party, like the Church, claims sole possession of knowledge central to human life: it is the vanguard of history, it alone is free of false consciousness, it alone represents the future happiness of mankind. In this happy position, it does not need to listen to anyone else: groups outside the Party at best represent only partial interests and at worst are class enemies.

The history of the last seventy years makes these claims ring pretty hollow. Where communist parties are in power, they are still made, because they are the only justification for the party's holding power (cf. IDEOLOGY); but they are not believed and the party functions more like a cross between the Freemasons, the Mafia, and Tammany Hall.

Elsewhere, despite all the splits and splinterings, some of this tradition survives both in traditional communist parties, of which Australia has about three, and in the NEW LEFT. But there could be no greater insult to the Party of Paddy Troy and Katherine Susannah Pritchard than the Hawke government's decision that it is no longer a subversive organisation.

COMPARATIVE WAGE JUSTICE

The principle that workers' wages should reflect the fruits of, and demand for, not their labour but some other workers' labour.

Comparative wage justice is used to support the propositions (i) that people in the same occupation, at the same level, be paid the same amount regardless of the employer's ability to pay, the scarcity of their skills in the region, and, often, the local cost of living; and (ii) that people in jobs judged to require comparable effort, skill, and responsibility should receive similar pay and similar pay increases. In other words, a welder in Wollongong should be paid as much as one in Karratha, and if police get a pay rise so should social workers. (Some such principle is, however, probably the best way to set pay in a small proportion of non-market-sector jobs.)

To the extent to which comparative wage justice actually affects wage rates, it tends to worsen the allocation of resources, not least of labour. By holding award wages in some firms or enterprises above the market level it causes some unemployment.

COMPETITION

A feature of markets, to which can be attributed much prosperity and innovation, many satisfied consumers, and many dissatisfied suppliers.

Perfect Competition
A MARKET is perfectly competitive if the following major, and some minor, conditions hold:
1. There are many non-colluding sellers and buyers, none with a substantial market share. This means that no one can influence the market price by selling or buying more or less.
2. The good being traded is standardised or homogeneous (gold bullion, for instance, rather than old masters). This means that if a seller raises his price, he will lose all his sales as his customers can get exactly the same thing cheaper from someone else.
3. There are no barriers to entry to or exit from the market (cf. CONTESTABLE MARKET).
4. Everyone in the market has perfect information, i.e. is fully aware of prices being asked and offered by everyone else.
These conditions are never found in practice, although they are approached in some financial and commodity markets.
Real Competition
Competition pervades CAPITALIST economies. Even in real, imperfect markets it has three important social functions:
1. It stimulates effort and innovation among profit-seeking individuals and firms. This tends to make for satisfaction of CONSUMER wants and optimal allocation of resources among them. It is a great mistake to think of competition only in terms of price-cutting (see also SUBSTITUTE).
2. It induces economic actors to respond promptly to market signals and to maintain flexibility. This means that competitive economies can achieve rapid and untraumatic response to changes in the economic environment. Given good MACRO-ECONOMIC policy they should experience less cyclical instability than more controlled economies.
3. It controls profits and hence limits extremes of wealth and power (cf. RENT, ECONOMIC). Men or firms of whom it is said that "X has too much power" generally owe much of their wealth and most of their influence to government INTERVENTION to reduce competition and favour particular organisations in various areas: airlines, broadcasting, casinos, trade unions, etc. (cf. CORRUPTION).
Competition and cooperation.
Competition and cooperation are often depicted as polar opposites: the former, a degrading struggle, everyone for his or her self and devil take the hindmost; the latter, humane, civilised and desirable. The common human state, however, combines the two. Team games provide a model: competition between teams, cooperation within the team, competition to get into the teams, cooperation in training, and so on. Likewise at work, the usual state involves competition between organisations, and competition within organisations either for positions or to have one's favoured ideas or products taken up; but at the same time no organisation can survive without a great deal of cooperation among those involved. Axelrod and other founders of game theory have shown that cooperation be advantageous even in circumstances that at first appear demand dog-eat-dog competition.
Potential competition in a CONTESTABLE MARKET can make a supplier behave more like a competitor than a MONOPOLIST. See also REGULATION. For competition between government-owned and private sector, see MARKETISATION.

CONSENSUS

General agreement.
A deal. See CORPORATISM
Sounds nice, and helps politicians conceal the differing interests that it is their function to reconcile. When the word is used, remember:
- There is a distinction between the rules of the game and the interests of the players. In politics as in football, there can be consensus on rules but lively disputes over goals. Don't let politicians blur the distinction.
- What is presented as community or national "consensus" tends to mean "People we chose as REPRESENTATIVES of the community agreed with us that ...".
- Consensus may be claimed after a tightly-scheduled "summit" meeting which has not allowed the "representatives" time to appreciate all the implications of what they are asked to agree to.
- Even if everyone agrees, they aren't necessarily right. Societies have had consensus on female circumcision, slavery, the White Australia Policy, etc.

CONSERVATION MOVEMENT

PROGRESSIVES who oppose PROGRESS.
Conservation movement is a convenient and neutral umbrella term for the whole phenomenon. Four strands can be traced:
1. a love of the land and its denizens: in this regard the conservation movement is an heir of traditionalist CONSERVATISM, although concern for the preservation of species and landscape overshadows concern for the preservation of attitudes, customs and institutions. Mrs Thatcher's recent conservationist professions are a return to Tory tradition, not a departure from it (although they are also influenced by the growing public concern for the environment).
2. "New Age" irrationalism.
3. NEW LEFT radicalism and its professed discontent with all features of modern Western life (but not in practice with Volvos, Walkmen, nouvelle cuisine, etc.).
4. Attempts to undermine the economies and the cultural confidence of the West by agents and tools of COMMUNIST governments.
The first of these undoubtedly motivates the vast majority of the conservationist RANK AND FILE. So much of the statements and actions of the movement's leaders are OBJECTIVELY in the interests of the USSR, however, that it appears that they are more influenced by (iii) and (iv). A striking example of this was provided by their slow and confused response to the Chernobyl nuclear accident (especially when compared with the response to the earlier, and much less serious, Three Mile Island incident).
Terminology
The conservation movement is large, diverse, and important enough to make it necessary to distinguish groups or tendencies within it. Unfortunately, the terms commonly used are vague and ambiguous. What follows is an attempt both to distinguish various present usages and to stake out a useful, consistent terminology.
1. Conservationist: One who tries to ensure the thoughtful use of resources without doing unnecessary harm to them (adapted from DGI). Conservation is intellectually, socially and politically respectable, and is the oldest of the cluster of ideas that include environmentalism, ecological activism, and greenness. Governments have departments of conservation. Executives of mining or timber companies can without contradiction be conservationists.
2. Environmentalist: more COMMITMENT and less compromise than a conservationist, and a focus on the natural environment only. Many environmentalists find it hard to take a balanced view of the needs and aspirations of other people (cf. SINGLE-ISSUE POLITICS), or to accept the outcomes of DEMOCRATIC processes. In practice, they oppose almost all development. According to former British Labour Minister Anthony Crosland, they are "kindly and dedicated people. But they are affluent, and fundamentally, though of course not consciously, they want to kick the ladder down behind them." Environmentalists wouldn't be seen dead working for a mining or timber company. Some think the environment should be protected by sabotaging their plant.
3. Ecologist: two quite distinct main meanings, and some subsidiary ones.
4. Green: One who makes conservation and environmentalism into a whole way of life. The core of green-ness combines environmentalism, more or less mystical ecology, the "peace" and anti-nuclear movement, ostentatious anti-sexism and anti-racism, zero population growth (or reductions in population levels), animal liberation, Small is Beautiful appropriate technology, and so on, leading up to a complete, preferably peaceful, revolution in government, society, and economy. UTOPIAN literature sketches life after the revolution, but (as with the NEW LEFT) it is not clear how the changes will take place. Lesser elements of green-ness include beards and sandals, marijuana, vegetarianism and dietary fads, alternative medicine, the craft movement, healing crystals and other New Agery, animal liberationist atrocities and other "ecological sabotage", and New Left political tactics.
There is a lot of overlap in these terms and inconsistency in their usage. How green is the Australian Conservation Foundation? Is David Bellamy a conservationist or an environmentalist? Were he alive today, George Bernard Shaw would be green, attracted by the movement's cranky high-mindedness and the tincture of violence and ruthlessness imparted by "direct action", ecological sabotage and other manifestations of elitism and COERCIVE UTOPIANISM.
Die Grünen.
There are now Green political parties in many countries. A few have won significant parliamentary representation (e.g. in West German State and federal assemblies). The collision of ideology and practical politics of course divides them into FACTIONS and produces personal clashes. In West Germany, the principal, and most interesting, division is between fundamentalists (Fundis) and realists (Realos). The latter want to work -- at least until the revolution -- within the existing system, so as to maximise their ability to protect the environment and achieve short-term progress towards their goals. The Fundis reject the compromises that this involves, preferring to maintain their purity. All have to live down the joke that Green parties are like watermelons because they are Red on the inside.

CONSERVATISM

"Adherence to the old and tried, against the new and untried" (Abraham Lincoln).
Near the heart of conservatism are the presumptions that traditional institutions help form society and have grown or evolved to fit society's needs, and that even their apparently useless or harmful aspects may have important if unobvious functions. (Interestingly, more people seem to believe this of traditional Aboriginal institutions than of traditional English ones.) From this viewpoint, setting out to change society is pitting the wits of today's reformers against the accumulated wisdom and experience of generations.
Few CONSERVATIVES condemn all change out of hand (cf. REACTIONARY); but all are wary of change per se and especially wary of change "imposed from above, in terms of some currently fashionable idea ... rather than grown from below out of the vast resources of adaptability found in the lives of the people themselves" (Kenneth Minogue).
Some conservatives do not accept even the possibility of an adequate theoretical basis for political action: for them, politics has no goal and perhaps no principles. Thus, the British philosopher Michael Oakeshott writes:
In political activity, then, men sail a boundless and bottomless sea; there is neither harbour for shelter nor floor for anchorage, neither starting-place nor appointed destination. The enterprise is to keep afloat on an even keel; the sea is both friend and enemy; and the seamanship consists in using the resources of a traditional manner of behaviour in order to make a friend of every hostile occasion.
Conservatives are often ÉTATIST, willing to use state power to preserve or protect traditional institutions: but traditional conservatism does not offer a reliable guide as to what it is most important to conserve, or what changes ought to be reversed if the opportunity comes.
Liberal conservatism.
The principles (or traditions) and practices of conservatism as outlined above apply almost equally to the administration of a very wide range of polities, certainly including authoritarian and slave-owning ones. It need not be associated with a free (and therefore CAPITALIST) economic order or with a free society. Conservatism's thus being able to take things as they are has handicapped conservative attempts to resist or reverse SOCIAL ENGINEERING policies of SOCIALIST parties.
In what is in part an explicit attempt to overcome this handicap, philosophers such as John Gray attempt to recruit LIBERALISM'S emphasis on the political and economic freedom of the individual to supplement conservatism's traditional pragmatism and its sceptical approach to social engineering. This liberal conservatism is intended to give conservatives convictions to have the courage of (and also, perhaps, to stop NEO-LIBERALS becoming too LIBERTARIAN). It is sometimes not easy to distinguish from neo-liberalism or classical liberalism, and often produces identical policy prescriptions. Its proponents envisage a conservative-liberal alliance to reduce the size of government and restore diminished freedoms.

CONSERVATIVE

Non-Labor.
In most current Australian usage, conservative simply means "Liberal Party and/or National Party and/or those who would support either against the Labor Party". This quite recent development saves space, but has nothing to do with CONSERVATISM as a political philosophy.
SOCIALIST.
In COMMUNIST countries, a conservative is now "somebody who believes in state ownership of the means of production, distribution and exchange" (The Economist) and resists MARKET-oriented reform.
Moderate.
The (mainly Zulu) anti-apartheid movement Inkatha is often described as conservative, apparently because it seeks peaceful, rather than revolutionary, change.
The British Conservative Party.
Sir Alec Douglas-Home was the last Conservative Prime Minister in the patrician tradition. Mr Heath belonged to the post-war SOCIAL-DEMOCRATIC consensus. Mrs Thatcher is not easy to classify; in many ways she seems a classical LIBERAL, while in others, particularly in her third term in office, she looks like a true conservative.

CONSUMER

In a market: the natural enemy of boss and worker alike.
The interest of the consumer is the best combination of quality and price to suit his or her needs (now, and to some extent into the future). The boss's interest is profit, and the worker's interest is a stable, congenial and well-paid job. Tension between these is inevitable. Given COMPETITION in a free MARKET, consumers are in the dominant position: by switching away from expensive or low-quality suppliers they force them to shape up or go bust. Consumers, not bosses, are the brake on wages and working conditions; consumers, not unions, are the brake on profits.
Elsewhere: victim or dupe.
REGULATION, in fact, is more likely to protect workers and bosses from the tyranny of the consumer than consumers from rapacious business. MONOPOLIES typically exploit consumers, sharing the monopoly RENT between owners and workforce (as profits, good wages, and easy working conditions).
For this reason, one should be suspicious of any anti-market "consumer movement", and very suspicious indeed of any "consumer movement" that allies itself with organised labour. Someone is going to get screwed, and it's not likely to be the unions.

CONTESTABLE MARKET

A MARKET in which the threat of COMPETITION has the beneficial effects of actual competition.

A supplier capitalises on a MONOPOLY position in a market by maintaining high prices, thus extracting RENT and keeping production at a lower level. Contestability theory states that, under certain conditions, this would allow a new competitor to undercut the monopolist, and that the monopolist avoids this by charging competitive prices.

There are two basic conditions. First, there must be no significant barriers to entry to the market. Most, but not all, such are the result of government regulation (e.g. Telecom's monopoly). Barriers to exit may also exist, as where regulation requires a supplier to offer a service for a particular period. Second, sunk costs must be low: a major outlay may be needed to get into the market, but if most of the capital can be recovered by selling the plant elsewhere, then the sum actually at risk is comparatively small. The airline business provides examples: aircraft can be leased or bought and sold second-hand, so sunk costs there are low; but money spent on terminal buildings is much more likely to go down the drain if the venture fails.

CORPORATISATION

Turning a government agency into a government-owned company.

Term and practice have been extensively used by the Lange government in New Zealand, whose policy has been to convert government agencies undertaking commercial activity into government-owned limited companies. The aim is to capture the benefits of private-sector management (including the bottom line of profit or loss). Corporatisation simplifies subsequent PRIVATISATION. It leaves open the question of whether the new company should retain any MONOPOLY the previous organisation possessed. Corporatisation does little to reduce the difficulty of achieving fair COMPETITION between government-owned and private-sector firms (see MARKETISATION).

CORPORATISM

Strictly, a system in which the legislature comprises REPRESENTATIVES of vocational organisations rather than of geographically-defined electorates.
The idea is that labour/capital conflict will be minimised (cf. CONSENSUS) and the trains will run on time. "Pure" political corporatism has never existed. FASCIST Italy probably presents the closest historical approximation -- although in many respects more in form than substance. British or older usage often has corporativism, corporative, etc.
A way of making big government easier for politicians.
At least three overlapping senses are distinguishable:
1. Situations in which government grants concessions and benefits to powerful interest groups (usually, though not always, sectoral monopolies) in return for undertakings deemed to be "economically necessary" or "socially desirable" (cf. SOCIAL REASONS). Such arrangements are sometimes described as neo-corporatist; the best-known are tripartite bargains struck between government and "peak" bodies representing capital and labour: the CONSENSUS claimed after the 1983 Economic Summit is an excellent example.
2. A policy of government involvement in private-sector commercial activities through government-owned corporate structures: e.g. the Western Australian Development Corporation and EXIM in WA, and Suncorp in Queensland (cf. CORPORATISATION, PRIVATISATION, NATIONALISATION see also QUANGO).
3. Situations in which the representative and legislative functions of parliament are bypassed, government taking the advice of, and sometimes delegating power to, sectoral or vocational organisations (cf. QUANGO).
Corporatist arrangements offer politicians and top public servants the pleasures of big government while minimising the number of actors (groups, corporations, individuals) who have to be consulted or whose particular interests have to be taken into account. Responsibility for implementation can often be transferred to the non-government participants: this both reduces government's workload and helps politicians blame others for failures while remaining well-placed to take credit for successes. Non-government players secure deals which enhance their political and economic power (a wages deal here; a protective tariff there); their REPRESENTATIVES are flattered to be allocated leading roles in the national drama. The small number of participants facilitates CORRUPTION.
Advocates of corporatism claim that it minimises conflict between labour and capital and has beneficial consequences in terms of unemployment, productivity, inflation, etc.: in fact, that it redresses some MARKET FAILURE. Critics respond that the evidence shows only short-lived improvements in economic performance; that corporatism's MONOPOLIES, CARTELS and restrictive practices are accompanied by the normal long-term inefficiencies; and that both the economic and the political arrangements are fine for the players in the game, but exclude those who are not embraced by corporatist organisations, such as consumers, non-unionised workers, pensioners and the unemployed (and cf. GOVERNMENT FAILURE).

CORPORATIVISM

See CORPORATISM, especially sense (1).

CORRUPTION

"The replacement by private relationships of those public relationships among citizens by which the republic should be governed" (Pococke).
A definition such as this, which transcends specific crimes, reminds us of what a REPUBLIC or DEMOCRACY should be. Bribery is corruption, but corruption includes more than bribery. According to the French philosopher of democracy J.-F. Revel,
Being "corrupt" means somehow misapplying political or administrative power, whether directly or indirectly, outside its proper sphere, for one's own financial or material advantage or in order to distribute the gains among one's friends, colleagues, relations, or supporters. ...
Revel distinguishes two main types of corruption, which may coexist.
The first, which afflicts LIBERAL regimes in particular, stems from the possibility of collaboration between political power and business: invitations to tender bids; state markets; the waiving of laws or REGULATIONS; fiscal exemptions and various subventions -- these form the sphere of collusion. The more INTERVENTIONIST and centralist the state, the greater the risk of its occurrence.
Revel's second type of corruption is "more common in COLLECTIVIST or widely NATIONALISED systems", and involve the use of state power "to distribute public money in the form of preferential appointments, subventions, and sinecures".
The vocabulary of corruption.
Before the reforms of the 19th century, England had a rich culture of political corruption, and the vocabulary to describe it. Here are some words we need again:
Burr: A hanger-on (because burrs are not easy to detach) (Grose).
Grace-and-favour government: a situation in which executive, and to some extent legislative, decisions are strongly influenced by personal relationships between the individuals involved: to be successful, you must keep in the graces and enjoy (or pay for) the favour of those who hold executive power.
Job: "A low mean lucrative busy affair" (Johnson); "any robbery" (Grose).
MONOPOLY.
Patronage: "The right or control of appointments to offices, privileges, etc., in the public [sector]" (OED).
Placeman: "One who is appointed (or who aspires) to a position [in the gift of government] from motives of interest, without regard to fitness" (OED); cf. QUANGO.
Place-hunter: "One who seeks persistently for a place or post in the public service. (With unfavourable connotation)" (OED).
Privilege: In the relevant sense, privilege strictly refers to a legal situation in which a favoured person or group may lawfully do something that others may not lawfully do; loosely, it refers to a situation in which administrative discretion is exercised to benefit a favoured person (perhaps by failure to prosecute breaches of the law).
Projector: "A schemer; one who lives by his wits; a promoter of bubble companies; a speculator, a cheat". "Let not the Projector pretend the publike good, when he intends but to robbe the riche and to cheat the poore" (OED).
Turn-server: "One whose motive is his own self-interest" (OED).
Time-server: "Usually, one who on grounds of self-interest shapes his conduct in conformity to the views that are in favour at the time" (OED).
Trim: To balance; to fluctuate between two parties (Johnson).
Trimmer: A time-server (q.v.).

DEFICIT

Budget deficit: the amount by which government expenditure exceeds government receipts.
KEYNES advocated the use of budget deficits and surpluses as tools of MACRO-ECONOMIC management, with the budget balancing out over a number of years. He did not foresee that politicians would run permanent deficits because deficit financing allows them to spend more on vote-winning public services than they raise in vote-losing taxes -- with the cost being deferred until at least after the next election.
The budget deficit can be financed either by borrowing (i.e. selling government bonds), or by printing money (the kind name for the latter is borrowing from the Reserve Bank). Either way, there is a price to be paid. Interest must be paid and bonds be redeemed as they mature (usually this is paid for by selling new ones), which means that as long as deficits continue, more and more revenue must be raised to service the debt. Reliance on printing money to finance the deficit causes inflation, which acts as a tax on holders of cash securities by eroding the purchasing power of their holdings. (For the government, inflation has the twin advantages of an increase in real income-tax revenue through BRACKET CREEP and a reduction in the value of the outstanding debt both as a proportion of GDP and in real terms: inflation has perhaps been the only thing that has kept government debt remotely manageable.)
Some people regard deficit financing as immoral since it leaves a legacy of debt for future generations. This is true if the borrowed money is spent on current consumption (as has occurred in Australia since the 1970s), but not if the money is spent on capital projects with high enough returns to justify the investment. The difficulty is predicting the rate of return (in the broadest sense) of a new road or dam or Parliament House.
Others argue that deficits are no worse than taxes: if the private sector has the foresight fully to discount the future tax liabilities associated with the deficit, then there is no deficit problem. This stretches the imagination a bit. It also implies that deficit financing cannot provide a net economic stimulus even in the short term (cf. MONETARISM), because what is gained on the public sector roundabout would by definition be lost in the private sector swings.
Trade Deficit
The amount by which the value of Australia's imports of goods exceeds that of its exports of goods.
Current Account Deficit
The trade deficit plus the amount by which other expenditure abroad exceeds foreign expenditure here (transport, tourism, interest on loans, aid, etc.).

DEMOCRACY

The word everyone loves.
The German Democratic Republic (East Germany), the People's Democratic Republic of Yemen (Aden), Democratic Kampuchea (Pol Pot & co.): enough said. They don't fool their own people: don't let them fool you.
Government by the people.
That's what democracy literally means. But outside a New England town or ancient Athens (where, as in South Africa, most of the inhabitants simply didn't count) it is impractical to let everyone have their say on everything (Swiss-style referendums come close). Too often, government by the people is simply government by those of the people who manage to seize power; these then claim to be governing in the true interests of the people, and attribute dissent to the machinations of bourgeois REACTIONARIES, imperialists, neo-colonialists, LIBERATION THEOLOGIANS, or COMMUNIST agitators, according to taste. "Government by the people" is not a useful guide.
"The worst form of government except all those other forms that have been tried from time to time" (Churchill).
There's no straightforward test to say whether a country is a democracy in the sense that westerners ordinarily understand the word. It is best to think of democracy as a process, and to look at outcomes rather than at details of electoral machinery, parliaments and constitutions. The following three features seem the most important:
- A general understanding that legitimacy of the constitution and the government rests largely on the active consent of the governed.
- The right to disagree with the government, to express that disagreement, and to advocate changes in policy or in government, alone or in association with others.
- A mechanism for peaceful changes of government in accordance with the wishes of the governed expressed through some formal mechanism, and acceptance by those in power of those mechanisms.
LIBERAL DEMOCRACIES (bourgeois democracies to those who don't like them) share two further characteristics: personal and economic freedom greater than implicit above, and constitutional government, in the sense of generally accepted limits to the power of government agencies over the citizen, with recourse to law administered by an independent judiciary.
By this sort of test, Australia, Britain, Ireland, Italy, Japan, Switzerland, the United States, West Germany, and so on are democracies. Many other countries come close. South Africa misses out because the majority of the governed are excluded from the democratic process; Thailand because legitimacy depends too much on the King and the army; Tanzania and Yugoslavia because the ruling parties monopolise political activity; Singapore because its government worries too much about opposition.
Democracy does not automatically bring a strong regard for HUMAN RIGHTS and the rule of law. As members of numerous groups, including Australian Aborigines, can testify, majority rule can be hard on minorities, and the less the constitutional restrictions on majority government the more they are likely to suffer. Nevertheless, the human rights record of liberal democracies is far better than that of other contemporary forms of government.

DEMOCRACY, INDUSTRIAL

See INRUSTRIAL DEMOCRACY.

DEMOCRAT, SOCIAL

See SOCIAL DEMOCRAT.

DEMOCRATIC SOCIALISM

"The parliamentary road to socialism".

Democratic socialists reject revolutionary seizure of power, relying instead on the ballot box. Having come to power democratically, they face all the problems of SOCIALISM in practice, and are sometimes tempted to hang undemocratically on to power when things go wrong.

Democratic socialists and SOCIAL DEMOCRATS are often hard to tell apart. A distinction worth making is that the former claim socialism as their ultimate goal and make some effort to bring it about, while the latter are content to take their turn in government in a liberal DEMOCRACY. Thus, the Australian Labor Party claims to be democratic socialist, but is now dominated by social democrats (but see also CORPORATISM).

DEPLORE

Praising with faint damns.

As used by public figures, deplore is usually a WEASEL WORD, used to distance the speaker from shameful actions committed by his own side; but one can often tell from the context of surrounding behaviour that the speaker privately admires or excuses what he is deploring.

DEREGULATION

Easing government regulation, especially anti-competitive regulation.

A large proportion of government REGULATION benefits the regulated and the regulators at the cost of the community at large. Most advocates of deregulation distinguish carefully between regulation that enhances safety and protects the public, and other, on balance harmful, kinds. Their opponents often blur this distinction, to discredit deregulators by implying that they want more plane crashes and mine disasters.

DIRECTOR'S LAW

See PUBLIC CHOICE THEORY.

DIRIGISME

Detailed state intervention in economic affairs.

The intervention can be by NATIONALISATION, by legislation governing the conduct of certain kinds of business (location, employees, prices, etc.), or by nod and wink (see CORPORATISM). A French word, from the same Latin stem as "direction". French governments from Louis XIV to Mitterand have tended to dirigisme, as have most Australian governments. Cf. ÉTATISM, INTERVENTIONISM.

DRY

Usually synonymous with ECONOMIC RATIONALIST.

Coined with reference to WET, dry implies political and economic views based on a rational assessment of the realities of a nation's economy.

The original Australian dries were a small group of Liberal Party politicians and advisers who, in the mid-1970s, became concerned about what they saw as unfavourable long-term national economic trends. They became widely recognised as an important minority in non-Labor politics through unsuccessful attempts to get the Fraser governments to implement the deregulatory policies on which they had been elected.

Dries pride themselves on being prepared to make initially unpopular decisions which offer long-term benefits, and on their opposition to CORRUPTION and PRIVILEGE. At first with little economic or philosophical background (one who knows them well says they were "self-educated to the point that none of them had even heard of AUSTRIAN ECONOMICS"), they took pains to acquire it and many now see themselves as in the mainstream of LIBERALISM. They accept the implications of PUBLIC CHOICE THEORY and the ECONOMICS OF BUREAUCRACY.

Dryness has spread to the National Party and to the Labor party, where it is not yet a welcome word. Nevertheless it accurately describes those Labor politicians who share the original dries' economic rationalism and hatred of corruption and privilege.

DUMPING

Selling in a foreign market below the home market price plus transport costs: i.e., using the home market price to subsidise the export.

Dumping is widely thought to be bad for the country receiving the dumped goods. In fact, it means that consumers have the opportunity to buy the goods below cost, i.e. that they are getting a present from the dumping country. This should be welcomed, unless the long-term effect will be to allow the dumper to establish a monopoly. This can only happen if local producers are driven out of business and there is no prospect of alternative suppliers (see CONTESTABLE MARKET, MONOPOLY).

Because of its emotive connotations, uncompetitive domestic producers misuse DUMPING to mean the import of cheap foreign goods and services.

ECOLOGY

See CONSERVATION MOVEMENT.

ECONOMIC MAN

See ZOON POLITIKON; cf. UTILITY.

ECONOMIC RATIONALIST

Usually synonymous with DRY.

The subtle distinction is that dries are eager to do the economically rational thing, while economic rationalists (who outnumber dries in the Hawke ministry) usually accept the rational approach when no other is left (cf. NEO-CONSERVATIVE). A litmus test is the labour market: dries want to DEREGULATE it, economic rationalists would deregulate it if they could think of no other way to maintain employment and growth.

ECONOMICS

See MICRO-ECONOMICS, MACRO-ECONOMICS, SCARCITY, MARKET, etc.

ECONOMICS OF BUREAUCRACY

The study of bureaucracies on the assumption that bureaucrats are only human.

This subject is perhaps not clearly distinguishable from PUBLIC CHOICE THEORY. Probably the best-known work in the field is Parkinson's Law, which showed how bureaucracies tend to increase in size regardless of growth or contraction of whatever they administer. Parkinson proposed two motive factors: "An official wants to multiply subordinates, not rivals", and "Officials make work for each other". More formal investigations model bureaucracies as budget maximisers: "Larger budgets enable bureaucrats to satisfy their preference for salaries, promotion, job security and such non-pecuniary advantages as power, prestige and opportunities to allocate contracts" (MacDME).

The distinguishing feature of a bureau is that the whole or a substantial part of its costs are met out of the budget allocated to it, so its income is not directly linked to the demand for its services. This automatically screws up the incentives for efficient use of resources (see AUSTRIAN SCHOOL OF ECONOMICS, MARKET), and can bring about a situation where an organisation staffed by large numbers of genuinely hard-working bureaucrats may have a negative net effect on the welfare of society.

ECONOMICS OF POLITICS

See PUBLIC CHOICE THEORY.

EFFICIENCY

What comes out compared with what went in.

Efficiency (in the senses that concern us) always involves attaining a given result with minimum means, or maximising the result from given means. In this sense efficiency is something no one can oppose. Arguments about efficiency are usually arguments about what should be measured and how.

Economic efficiency or cost efficiency is the relationship between output and the cost of inputs. Technical efficiency is strictly the ratio of energy input to energy output, but may just describe the relationship between output and the quantity of inputs (e.g. materials, labour, capital). Allocative efficiency relates to alternative uses of resources: could they be better applied elsewhere?

The ordinary state of affairs in which "neither individuals nor firms work as hard, or search for information as effectively, as they could" (Seldon) is known to economists as x-in-efficiency.

ENTRYISM

Trojan equitation.

A tactic of subversive and revolutionary groups (like so many isms, this one was given us by the Trotskyites). Keeping your true affiliation secret, you get your members to go off and join some other political group that wouldn't ordinarily have a bar of you; you all work hard and attend all the meetings, and in no time the few of you are in a majority on the branch committee. Now you keep the meetings going on trivia until everyone else goes home in disgust and you can pass what motions you like. No one will pay attention to the October 22 Faction of the Seventeenth International, but controlling the Moonee Ponds branch of the ALP might get you somewhere. This is how moderate Labour MPs lose preselection.

ENVIRONMENTALISM

See CONSERVATION MOVEMENT.

ÉTATISM

The belief that state power should, and can successfully, be used to achieve social and/or economic-goals. Cf. INTERVENTIONISM.
Nothing is implied about the goals themselves; SOCIALISTS and SOCIAL DEMOCRATS are necessarily étatists, while CONSERVATIVES often are and LIBERALS may be.
State intervention in economic affairs, perhaps in less detail than is implied by DIRIGISME. Cf. INTERVENTIONISM.

EXCISE

A hateful tax levied upon commodities (Johnson).

EXTERNALITIES

The effects of a transaction on persons other than the parties to it.

Most MARKET FAILURE is the result of externalities. A classic example is a factory, whose owners, workforce, and customers all benefit from the lower cost of production if the untreated effluent is simply dumped into the local river. The cost of the pollution is borne by people and industries downstream, who are "external" to the transactions involved in the factory and its products.

On a larger scale, the people involved in logging and clearing in the Amazon basin have negligible incentive to consider the possible effects of their actions on world climate a century hence.

The traditional response to market failure caused by externalities has been government regulation. The growing evidence of GOVERNMENT FAILURE, and the insights of PUBLIC CHOICE THEORY and the ECONOMICS OF BUREAUCRACY, suggest that a preferable approach wherever possible is to "internalise" the externalities by extending PROPERTY rights and widening the area in MARKETS can operate.

FACTION

Informal or formal group within a political party.
If it is to win government, a party needs a single policy platform. But major political parties in a democracy necessarily include a fairly wide range of political views: if they do not, they rapidly become minor parties. This means that there will always be many people in every party who disagree with some of its policies and want to see them changed. A faction begins when like-minded people within a party get together to advance their ideas. In most parties, factions are informal, with loosely defined and shifting membership. They are often centred on a particular leadership candidate.
ALP factions.
The Australian Labor Party spans a wider range (from all-but-COMMUNIST to DRY) than most parties. Partly in response to this, ALP factions have been largely formalised. They are not ordinarily centred on leadership candidates. Most ordinary members of the ALP do not belong to any faction, but most activists and the large majority of parliamentarians do. Members of party committees and ALP Cabinets are chosen on a factional basis. The few non-aligned parliamentarians are disadvantaged by the factions' control of patronage. Policy differences between ALP factions are at least as great as those between the Liberal and National parties, and one can in some ways consider the ALP as a coalition of its factions.
Federally, the factions are: national Socialist Left, national Centre Left, national Right.
Each State has a Socialist Left faction and a "right-wing" faction, the latter known in various States as Right, Labor Unity, or Centre Unity (except for Queensland, where the faction furthest to the right is the Old Guard, which once upon a time was on the left). In New South Wales, there is no organised faction between left and right. In Victoria, there is a small group of Victorian Independents. In other States, there is a Centre Left faction (in Western Australia a Centre Coalition).
In practice, however, the factions are more about power and patronage than ideology. As that expert player of the numbers game, Senator Graham Richardson of the NSW Right, told the 1986 ALP conference, "The three factions have one thing in common -- self-interest".

FAIR TRADE

WEASEL WORD for PROTECTIONISM.

FASCISM

A mere term of abuse.
A's accusing B of fascism often tells us more about A than about B. In Orwellian terms, fascist = doubleplusungood. (Cf. COLLECTIVISM (3)).
Strictly, the movement and ideas that controlled Italy from 1922-1943.
Mussolini named his movement after the fasces, a bundle of rods with projecting axe-head which was a symbol of the authority of the Roman republic, as part of the attempt to restore the glories of ancient Rome.
Generally, movements combining AUTHORITARIANISM and CORPORATISM, often with a feeling that the wrong side won the Second World War.
Italian Fascism, German National Socialism, Spanish Falangism, and their echoes in other countries. Most fascist movements share:
1. Conscious nationalism, including attempts to coopt or convert national symbols to support the movement. This can, perhaps must, include claims that the nation and its people are in some way superior to others: Mussolini's identification with ancient Rome provides an example, and Nazi racialism an extreme.
2. Hostility to LIBERALISM and liberal DEMOCRACY, and a stress on the need for stability, order and authority in society.
3. Distrust of fee MARKETS, CAPITALISM and the international financial system (another factor in Nazi anti-semitism, by the way). CORPORATIST organisation of a COMMAND ECONOMY is assumed to provide the necessary channels of authority and control.
4. The cult of the leader as in some way inspired and super-human.
5. An exaltation of war, or at least of martial glory. The Nazi cult of violence and the Nuremburg rallies are the extreme, but all fascist movements make much use of uniforms and parades.
  Obviously some of these features are shared also by other political movements:
6. by COMMUNIST cults of MARX, Lenin, Stalin, Mao and Kim Il Sung;
7. by parades in Red Square and much of the British CONSERVATIVE Party after the Falklands War; (i), (ii) in part, and (iii) by elements of the ALP. People who point this out often get called fascists.

FEDERALIST

In a FEDERATION, one who stresses the importance of decentralisation of power.

The usage is confusing, because "federal" refers to the central government but a FEDERALIST wishes to limit its power. It dates from the early years of the United States, when there was vigorous debate on how much power the central government needed, or could be trusted with.

FEDERATION

A group of constitutionally-defined states combined in a single sovereignty under a central authority but retaining significant autonomous power.

Federations vary widely in the division of power between the centre and the states. The initial division in each federation is usually, and perhaps necessarily, set out in a constitution. It may, however, vary over time as a result of amendment or reinterpretation of the constitution: both Australia and the United States have experienced a significant centralisation of power.

FISCAL DRAG

See BRACKET CREEP.

FISCAL POLICY

Fiscal policy covers public spending, taxes, and the gap in between: the DEFICIT.

Cf. MONETARY POLICY.

FRONT

A "united front" or "popular front" to rally all marginally sympathetic groups in a common cause behind the banner of the COMMUNIST PARTY, asserting the Communist Party's presence and leadership.
Examples are the National Democratic Front in the Philippines and the Popular Front government defeated in the Spanish Civil War.
An organisation ostensibly independent and respectable, but in fact covertly serving the purposes of some other organisation or nation.
Communists have made most use of front organisations (e.g. the World Peace Council), which have been among the most successful tools of Soviet foreign policy. They have also been used by, among others, Trotskyites and the US Central Intelligence Agency.

GATMINIST

One who believes in more Government Action To Meet Individual Needs.

The phrase is William Safire's definition of an American LIBERAL. The neologism was coined by The Economist, in the not-too-serious hope of rescuing the word liberal, which in the USA had by 1980 become a term of abuse, and which is needed to signify the classical LIBERALISM that informs the US Constitution. But with the end of SOCIALISM as a political force, the distinction between gatminists and others, corresponding to that between WET and DRY, may have become the most important fissure line in Western politics.

GERRYMANDER

Not synonymous with unequal electorates.

A gerrymander can be accomplished with an equal number of voters in each electorate, as long as there are local concentrations of people who vote the same way. You just draw the boundaries so as to put as many of your opponents' supporters as possible into as few seats as possible. Thus your opponents have a small number of extremely safe seats, and you have a larger number of moderately safe ones. This tends to produce oddly-shaped electorates, and the name comes horn Governor (of Massachusetts about 1812) Gerry's salamander. Boundaries can also be drawn to give unequal electorates without favouring either party.

If we consider, finally, the value of a Labor vote in a safe Liberal seat (or vice versa), the slogan "One Vote One Value" seems unsatisfactory at best. See also DEMOCRACY, REPUBLIC.

GLASNOST

"Publicity", or "public relations", rather than "openness".

"Glasnost is not a form of freedom. It's just a new set of instructions on what is and isn't permitted" (Natan [formerly Anatoly] Sharansky, December 1987). Certainly the Soviet press carries more information than before, on a wider range of issues; but much that is taken for granted in the West is forbidden in the USSR (Solzhenitsyn's books, for instance). The occasions in 1988 on which the USSR behaved like any ordinary country, and not like the evil empire, were immensely encouraging: but the changes to date are mostly superficial and all far from irreversible.

See also PERESTROIKA.

GOODHART'S LAW

The MACRO-ECONOMIC equivalent of Heisenberg's Uncertainty Principle.

"Whichever monetary aggregate is chosen as a target variable becomes distorted by the very act of targeting it" (MacDME). See MONETARISM, MONEY SUPPLY.

GOVERNMENT FAILURE

The way in which government initiatives usually produce unwanted side-effects and often leave things worse than they were beforehand.

The term was coined with reference to MARKET FAILURE. Intervention in an attempt to correct a minor market failure can produce a major government failure: the lesson is that INTERVENTIONISTS should always be cautious and always be alert for unintended consequences: cf. MACRAE'S RULE, ROSSI'S IRON LAW. See ECONOMICS OF BUREAUCRACY, EXTERNALITIES and PUBLIC CHOICE THEORY.

GRAMSCI

"The long march through the institutions".

Antonio Gramsci (1891-1937) was an Italian COMMUNIST PARTY leader and theoretician. He tried to reconcile MARXIST theory with common sense and 20th-century Italian conditions. Everyone should know two of Gramsci's ideas: (i) HEGEMONY; (ii) Gramscian infiltration: where there is no prospect of bringing about the revolution, revolutionaries should infiltrate the major institutions of society (universities, schools, trade unions, churches, press, broadcasting organisations, etc.) to undermine the existing hegemony and pave the way for the development of a new hegemony in the course of a "passive" revolution. Some of this has happened in Australia. Cf. COMMIE CAN, ENTRYISM, NEW LEFT.

GREEN

See CONSERVATION MOVEMENT.

GROSS DOMESTIC PRODUCT

A measure of the total flow of goods and services produced by the economy. (Cf. GROSS NATIONAL PRODUCT.)

GDP is a measure of the value of the flow of goods and services produced in the country. It includes products (goods and services) used in final consumption, but excludes those that are inputs to further production processes. It includes capital investment whether this is new or replacement (hence "gross" domestic product).

GDP does not take account of goods and services produced outside the formal economy known to the taxman, health inspector, factories inspector, etc. Even ignoring in-the-home production, all economies have significant "underground" or "black" sectors whose activity is not reflected in the official statistics; estimates of economic growth, employment, and so on may therefore be an unreliable policy guide.

GROSS NATIONAL PRODUCT

GROSS DOMESTIC PRODUCT, plus the income from investment abroad, minus locally-earned income accruing to overseas investors.

H.R. NICHOLLS SOCIETY

A society the members of which believe the Australian industrial relations and wage-fixing systems are imperfect.

It has held meetings and published papers discussing problems and proposing reforms. The name commemorates an editor of the Hobart Mercury who in 1911 was threatened with imprisonment for contempt of the then Arbitration Court over an article criticising it in the light of the doctrine of the separation of powers.

HEGEMONY

Influence of one nation or state over others.
From the Greek hegemon, a chief or ruler. We can talk of Soviet hegemony over the Warsaw Pact countries, of Russian hegemony within the USSR, and -- it is stretching a point now although it was not sixty or eighty years ago -- United States hegemony over Latin America.
Total ascendancy of one class over others.
This is what GRAMSCI meant by hegemony. The ascendancy does not just include political and economic control, but extends to people's understanding of human beings and their relationships, how they perceive the world, and even, according to some, to what might (under a bourgeois hegemony) be thought to be OBJECTIVE facts or scientific theories.

HUMAN RIGHTS

Warm fuzzy.
"Human rights" sounds nicer than "natural rights", and avoids debate on what might or might not be natural. Human rights nowadays usually means a mixture of what used to be called natural rights (see below) and rights that seem unlikely to be natural because they presuppose a certain level of economic and scientific development. Article 25 of the Universal Declaration of Human Rights, for instance, proclaims the right to an "adequate" standard of living complete with "medical care" and "social services": words that cannot meaningfully be applied to the Stone Age. The mixture has the disadvantage, or advantage, that any person or government can accuse any other government of violating its subjects' human rights, simply by being selective about the rights it examines. Thus a LIBERAL DEMOCRATIC government can complain about a COMMUNIST one's denying freedom of speech and movement, while the communist one claims that unemployment in the liberal society is denial of the right to work.
Think of duties, not rights.
A valuable touchstone in any discussion of rights -- not just "human rights" -- is to translate any asserted right into a corresponding duty and see if it still makes sense as something that can be put into practice (e.g., legally enforced). Thus, your right to life is my duty not to kill you.
Negative and positive rights.
Often, an asserted right means completely different things according to whether it is taken to be negative or positive. The touchstone should be applied: your negative "right to work", for instance, is my duty not to prevent your working; but your positive "right to work" -- if it exists -- can only be someone's duty to employ you: but whose duty, in what court can you enforce it, and what kind of job and at what pay? Advocates of positive rights seldom offer satisfactory answers to these questions, and confusion between negative and positive rights is what enables totalitarian governments to blur the difference between their record on human rights and that of the western democracies. ("Positive" rights in this sense are not the same as the "positive" -- i.e. expressed in law -- rights met in jurisprudence.)
Natural rights.
The rhetoric of human rights assumes that human rights, or some subset of them, are natural rights, existing independently of the international conventions, and national constitutions and laws, by which they are expressed and (though not always) enforced. The American Declaration of Independence, for example, says they are "self-evident", but it is questionable how evident they were to one of Thomas Jefferson's slaves. The assumption is vital: if it is abandoned, and human rights are taken to be man-made (e.g. embodied in a "social contract") then men can unmake them (e.g. by a new social contract; cf. INALIENABLE). The Khmers Rouges, for instance, could thus say that their social contract did not extend rights, including the right to be consulted on the terms of the contract, to "intellectuals", "bourgeois" and other "class enemies" -- and could then "validly" claim that their genocide did not violate human rights.
Is the assumption justified? Some people are satisfied with an answer along the lines of "Human rights are part of God's law", but most simply ignore the problem. A modem approach is that of Finnis who, in a complex argument, finds that respect for basic human rights is required by the fact of our being the kind of rational, social creatures we are. Finnis identifies seven basic values, or aspects of human well-being (which can be summarised as life, knowledge, play, aesthetic experience, sociability or friendship, practicable reasonableness, and exploring the ultimate question of Life, the Universe and Everything), all of which we can all in varying ways pursue; he then argues that for anyone to pursue the good of practicable reasonableness in his own life requires him to respect the rights of all other people to pursue any or all of the basic values.

IDEOLOGY

I have well-founded principles, you are the slave of an ideology.

An all-embracing political doctrine which claims to answer questions about the nature of man and society and to provide a guide to, and justification of, political action. Unlike liberal DEMOCRACIES, TOTALITARIAN governments rely heavily on their ideologies (National Socialism, Marxism-Leninism, Mae Tse-Tung Thought, etc.), and the future benefits they promise. Only thus can they justify their maltreatment of their subjects. Interestingly, this accords with the use of ideology in Marxist theory to indicate a set of ideas (not only those which aspire to consistency or completeness) reinforcing a particular economic order.

INALIENABLE

Inalienable rights are rights which cannot be abrogated, sold, or given away even if the possessor wants to.
In English and Australian law, the right to life (the right not to be killed) is inalienable: the victim's consent is not a defence to a charge of murder (this will change if euthanasia legislation is passed). It's another question whether inalienable rights exist in the absence of law that upholds them: see HUMAN RIGHTS.
Inalienable title.
Aboriginal land grants are often on the basis of an "inalienable title" which, unlike freehold, does not include the right to sell or, presumably, mortgage the land. Thus an inalienable title is a weak, not an especially strong, PROPERTY right. As no government can bind its successors, even "inalienable" titles may be expropriated. In practice, people with "inalienable" titles to property tend to be in a subordinate relationship to a governing body, reminiscent of feudal serfs who were "bound to the land".

INDUSTRIAL DEMOCRACY

Part of good management.
People are usually happier if they have some freedom of action and some say in what happens around them. People at the workface are often well-placed to suggest improvements in processes and products. Good management listens to the workers.
A stalking-horse for increased union power.
Employment is a voluntary exchange: employers surrender money (and fringe benefits), employees surrender, for part of each day, freedom of action, and agree, within limits, to put their employer's interests before their own. There is no need for consultative or representative procedures to legitimise the employer's authority to give orders to employees.
Legislated "industrial democracy" as espoused by the ACTU tends to emphasise union rather than worker participation, and complex "representative, consultative and decision-making mechanisms" at all levels of management. While this would strengthen union representation at the highest decision-making levels (see CORPORATISM), it is not clear that it would be any better for workers or firms than voluntarist consultation of the kind outlined in the previous definition.

INSTITUTIONAL VIOLENCE

See STRUCTURAL VIOLENCE.

INVISIBLE FOOT

The unexpected factors that prevent social programmes from going according to plan.

Adam SMITH coined "INVISIBLE HAND"; Milton Friedman, arguing that society is too complex for us to successfully practise SOCIAL ENGINEERING, coined the "Invisible Foot" which always gets put in it. All social programmes involve getting people to change their behaviour, which they may not want to do.

No social programme, no matter how ingenious, can anticipate and forestall the myriad ways in which people will seek to get their way and thereby frustrate, with or without intent, its aims. (Charles Murray)

See also PLANNING, ROSSI'S IRON LAW OF EVALUATION, SOCIAL ENGINEERING.

INVISIBLE HAND

Adam Smith's term for the way in which, in a market economy, self-interest leads individuals to act in ways that benefit the community.

SMITH pointed out that a profit-maximising businessman:

necessarily labours to render the annual revenue of the SOCIETY as great as he can. ... By ... directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.

The invisible hand can only be expected to work beneficially in an open, COMPETITIVE, MARKET ECONOMY: anti-competitive INTERVENTION is likely to interfere with its operation. If a businessman can maximise his profits by securing anti-competitive REGULATION of his industry, or by otherwise gaining the favour of government (see CORPORATISM, CORRUPTION, PROTECTIONISM), his doing so is unlikely to maximise "the annual revenue of the society".

See also AUSTRIAN SCHOOL OF ECONOMICS, LAISSEZ-FAIRE, MICRO-ECONOMICS, SUPPLY-SIDE ECONOMICS.

INTERVENTIONISM

The belief that government should, and can successfully, interfere in the operation of MARKETS to achieve social or economic objectives.

Interventionism is a feature of all actual CAPITALIST societies (Australia, Britain, France, Japan, Sweden, USA ...). Almost everyone agrees that government intervention is sometimes necessary to correct MARKET FAILURE, but not on how much. An increasingly important school of thought (AUSTRIAN SCHOOL OF ECONOMICS, LIBERTARIANISM, NEO-LIBERALISM) stresses the unlikelihood of successful intervention (i.e. the likelihood of GOVERNMENT FAILURE). See also DIRIGISME, ÉTATISM.

J-CURVE

Things will get worse before they get better.

When a nation devalues, imports cost more and exports earn more in the local currency. This discourages imports, and encourages import SUBSTITUTION and exports, and after a while should therefore improve the trade balance (see DEFICIT). But the immediate effect is to increase the price of imports that have been ordered but not yet paid for: this causes a temporary worsening of the trade balance. (Income from current exports will increase too, but if the trade balance was in deficit to start with this increase will be less than that in payments for imports).

Things are further complicated in practice because several different currencies may be involved. The size and structure of the economy also greatly affect the strength of J-curve effects.

JUNGLE, LAW OF THE

Nowadays, incorrectly, lawless chaos.

Originally, in Kipling's Jungle Books, a set of strong and comprehensive laws which exhorted duty, sharing and support for the less able, and by which life in the jungle was made possible. Now misused to indicate a state of lawless chaos, a Hobbesian state of nature in which an all-against-all struggle persists and the weak must perish.

KEYNESIANISM

A macro-economic policy framework in which government was to assure full employment and steady growth by manipulating aggregate demand by means of FISCAL and MONETARY policy.

J.M. Keynes (1883-1946) was a principal figure in the establishment of MACRO-ECONOMICS as a distinct discipline, and probably the most influential economist in history after MARX. He was also one of the very few to make a lot of money from economics, by successfully playing the commodities market.

Keynesianism was a response to the GOVERNMENT FAILURE that deepened the 1930s Depression. It stressed the importance of aggregate demand in determining the level of employment in an economy. Government was to expand demand by deficit financing when recession threatened, thus preventing job losses, and to contract it (with budget surpluses) to prevent inflation during the up-swing of the business cycle.

Governments planning post-war reconstruction and haunted by memories of the Great Depression were attracted to what seemed a simple tool to assure permanent full employment (so simple that British politicians spoke of adjusting indirect tax rates as "the regulator", as if the economy were a locomotive). Keynesian macro-economic policies formed an important part of the post-war social-democratic CONSENSUS.

The problems of Keynesianism in practice were not widely accepted until the 1970s (although a few economists, especially of the Austrian and Chicago schools, had tried to draw attention to them long before):

Timing. (a) We never know exactly where we are in the business cycle; if we did, it would be smoothed out by the actions of speculators and wouldn't be a problem. (b) The economic indicators, on which policy-makers must rely, lag behind the cycle. (c) It takes time to decide and implement a policy, and more time before its effects are felt. For example, unemployment does not start to rise until well into the down-swing of the business cycle, so expansion prompted by unemployment statistics may well take effect during the next up-swing -- just when counter-cyclical policy should be contractionary.
Political will-power. Keynes assumed that macro-economic policy would be decided by people like himself: brilliant, elite technocrats, above the common round of politics. In practice, of course, it was decided by politicians, who found it easy to expand demand (especially before an election) but much harder to contract it afterwards.
People learning from experience. If government sets out to maintain full employment by expanding demand when unemployment rises, the threat of unemployment does not discourage wage demands. Unions can demand, and employers concede, unsustainable increases in money wages; unemployment in consequence begins to increase; and government expands demand with the intention of boosting employment. The end result is inflation which reduces the real value of the wage increase to a sustainable level. Successful Keynesian economic management turned out to depend largely on MONEY ILLUSION -- people not noticing that inflation was increasing. People are not that stupid. The tendency was for each successive dose of demand expansion administered by governments in the 1960s and 1970s to increase inflation more, and real demand less, than the previous one.
Keynesians tended to discount MICRO-ECONOMIC factors, such as the efficiency of the labour market, as insignificant.

Keynes's theories were actually much subtler than that (although according to Hayek his main aim was always to influence current policy, and "economic theory was for him simply a tool for this purpose"), and much of his work remains influential. All developed countries practice demand management one way or another. But it was "vulgar" Keynesianism as outlined above that captured the minds of policy-makers seeking to assure "full employment for all", and experience has discredited that.

LAFFER CURVE

Diagram illustrating the fact that increasing the rate of a tax can reduce its yield.

If the income from some activity is taxed at 100 per cent, it won't be worth people's while to do it and the yield will be near enough nothing. A zero tax rate obviously also yields nothing. Somewhere between the two lies the tax rate that maximises revenue. The Laffer Curve is a memorable name for this uncontroversial fact.

Laffer -- an American economist -- suggests that many tax rates in contemporary Western economies are in the upper part of the curve. Laffer enthusiasts claim that across-the-board tax cuts would increase revenue (cf. SUPPLY-SIDE ECONOMICS), but the evidence is against this simplistic view. Reductions in top marginal income tax rates in many countries, however, have resulted in more tax being collected from top income earners. The basic point, that high tax rates can be self-defeating, is established.

What tax rate brings most revenue in particular circumstances is another question. At least for income tax, governments seem increasingly to believe that marginal rates above about 40 per cent are not worth the trouble.

LAISSEZ-FAIRE

The belief that the economic affairs of society are best left to the decisions of individuals to the virtual exclusion of COLLECTIVE authority.

Of 17th-century origin, the term can be translated as "non-interference". Laissez-faire as understood today involves the proposition that individuals maximising their UTILITY in a free MARKET will tend to maximise the total wealth of a nation (thanks to the INVISIBLE HAND). The role of the authorities, given this aim, should merely be to ensure public safety, national defence and an efficient system of administering fair and predictable laws (Cf. INTERVENTIONISM, ÉTATISM, PLANNED ECONOMY, COMMAND ECONOMY). Interference with the free working of this natural order will reduce the growth of wealth by misdirecting resources. LIBERTARIANS arrive at similar conclusions from consideration of HUMAN RIGHTS.

There has never been a true laissez-faire society. Only a few libertarians think there ever can be. Laissez-faire society is a theoretical construct with which actual societies may be compared.

People sometimes use laissez-faire, with its overtones of children down coal mines, to smear NEO-LIBERAL or NEW RIGHT ideas in order to avoid having to consider them seriously. This is the only thing laissez-faire has in common with FASCISM.

LAME DUCK

In Britain, an unprofitable company receiving government subsidy to avert its closure.
Companies thus subsidised are likely to be major employers in marginal electorates.
In the USA, a politician whose term of office is expiring.
Some American elective offices do not change hands until weeks after the relevant election; during this period, a defeated incumbent is a lame duck. So is an official who may not stand for re-election: e.g. a President in his second term.
In Australia, a politician not expected to remain in office.
Examples: a Premier whose government is so unpopular that almost everyone expects it to lose the next election; a Prime Minister who is expected to retire shortly.

LEFT

As a rule, the further left, the closer to COMMUNISM.

Not a very useful description, except perhaps in ALP FACTIONAL terms: see SPECTRUM. Left, left wing, etc. often now indicate more a flavour of politics than a set of beliefs (cf. MARXISM). Originally, nearly two hundred years ago, those on the left were those opposed to a powerful interfering state, but so far as the term has retained any meaning at all it has come to mean approximately the opposite. In the West, a combination of some of the following views or principles (not necessarily without inconsistency) usually characterises those on the left:

COLLECTIVISM, hostility to private PROPERTY, and belief in some variant of SOCIALISM, COMMUNISM or MARXISM.
Hostility to traditional forms of order and authority, and their symbols.
Hostility to privilege, inequality of wealth or power, and CLASS distinctions (NEW CLASS lefties pay only lip service to this).
Demands for popular or "direct" participation in government, often coupled with hostility to the established REPRESENTATIVE mechanisms (see SOCIETY).
Stress on SOCIAL JUSTICE; paying more attention to the distribution of wealth than to its creation; putting equality before freedom, equality of outcome before equality of opportunity.
Self-description as PROGRESSIVE, and adherence to "progressive" causes.
Looking forward to the revolution.
Acting, with that intent or otherwise, in ways that advance the interests of the USSR.

Other typically left-wing views or principles are shared by many on the RIGHT:

Elitism: the belief that one's class or party or whatever has special qualities (theory, knowledge, character, etc.) that give it the right to impose its views on others (rather than try to persuade them to vote for them).
Distrust of MARKETS, CAPITALISM, and the open society generally.
A UTOPIAN vision of an ideal society (e.g. communism, African socialism, Rabuka's Merrie Fiji, apartheid, the Thousand-Year Reich) and readiness to impose suffering on real people now in the hope of achieving this later.

The left has been essentially hostile to religion and the traditional churches, but today this hostility is often strikingly unreciprocated: see LIBERATION THEOLOGY. See also NEW LEFT, SOCIALISM, MARXISM.

LIBERAL

"Large-L Liberal".
The Liberal Party of Australia, traditionally a mix of SOCIAL DEMOCRATS and CONSERVATIVES, held together by their abstention from political philosophy (see also UGLIES). Now a mix of DRIES, WETS, and CONSERVATIVES, and showing the strain.
"Small-I liberal".
Equivalent to SOCIAL DEMOCRAT or WET.
Other usages.
1. In Britain, the Liberal Party (now the Social and Liberal Democratic Party) roughly corresponds to the Australian Democrats (except for the latter's pivotal Senate position). LIBERAL as an adjective otherwise tends to refer to CLASSICAL LIBERALISM or NEO-LIBERALISM.
2. In the rest of Europe, liberal usually refers to CLASSICAL LIBERALISM. The West German Free Democratic Party is a liberal party.
3. In the USA, liberal usually means someone "who believes in more government action to meet individual needs" (see GATMINIST). This covers the range from WET (e.g. Senator Edward Kennedy) to far LEFT (e.g. Jane Fonda), and is very different from European and Australian usage: be careful. The 1988 Republican presidential campaign made the most of the pejorative connotations of the "L-word". But Americans occasionally use liberal in the European sense too.
4. In South Africa, a liberal used to be someone who was polite to blacks. Recent van der Merwe jokes suggest that things are changing, if slowly.

LIBERALISM

A political philosophy "favourable to constitutional changes and legal or administrative reforms tending in the direction of freedom and democracy." (OED)
That definition dates from the beginning of this century, but all who describe themselves as liberals would still subscribe to it -- although they differ on what constitutes freedom and DEMOCRACY. In the 18th-century origins and early 19th-century development of liberalism, the key points were civil and economic freedom of the individual (including freedom of thought, religion, speech, and assembly, free enterprise and free trade) and limited, constitutional government (as opposed to autocracy). The US constitution is based on these ideas and remains one of the great achievements of liberalism. Subsequently, liberalism diverged into two main streams. (SOCIALISM, in both Fabian and MARXIST forms, also grew out of 19th-century liberalism.)
Wet liberalism.
One stream emphasised DEMOCRACY (while playing down the need for constitutional limits), equality and welfare (culminating in the WELFARE STATE), and was influenced by the SOCIALIST argument that private property provides freedom for those who possess it only at the cost of unfreedom for those who do not. This stream merged into the SOCIAL DEMOCRATIC consensus that dominated Western democracies until the 1970s.
On many issues, this WET liberalism has reached what to 18th- and 19th-century liberals would be thoroughly illiberal positions. The old liberal position on free speech was that attributed to Voltaire: "I disagree with what you say but will defend to the death your right to say it"; but this is a very long way from present attempts to restrict free speech on anti-racialist and anti-sexist grounds. Some early liberals (like modem LIBERTARIANS) opposed compulsory education because they perceived it as unacceptable government intervention in individuals' lives; by contrast, some modem social democrats or wet liberals want private schools abolished because they perceive them as producing unacceptable inequalities.
Classical Liberalism.
The other tradition, in eclipse until recently, is much closer to the liberalism of Hume, Adam SMITH, John Stuart Mill and others. The emphasis is on private PROPERTY, the rule of law, and voluntary transactions in a free MARKET economy. The role of the state is seen as "holding the ring" and providing a welfare SAFETY NET, rather than playing an active role in the economy and attempting to secure any particular distribution of income or wealth. "Holding the ring", however, includes ensuring that transactions are voluntary by preventing, punishing or redressing deceit and coercion.
Thus classical liberals tend to pay attention to processes where wet liberals and social democrats look at outcomes. In tackling discrimination in public service recruitment, for example, classical liberals would be content to achieve equality of opportunity through "colour-blind" selection policies regardless of the proportions of various racial or ethnic groups in the resulting workforce. By contrast wet liberals and social democrats are likely to count success as a workforce whose make-up reflects that of the whole population, and to achieve this by discriminatory "affirmative action" policies, regardless of the injustice that this may involve in individual cases (see also SOCIAL JUSTICE).
The classical liberal revival.
See NEO-LIBERALISM.
Liberalism and CONSERVATISM.
Many conservatives reject a priori the notion of rational reconstruction of organic institutions in pursuit of an ideal society (cf. SOCIAL ENGINEERING). SOCIALISTS go ahead (cf. UTOPIA). Most LIBERALS occupy intermediate positions: all seem, at least by implication, to accept the notion of rationally-inspired progress towards an ideal constitution; many share the conservative (and LIBERTARIAN) rejection of social engineering; and those that do not reject it prefer Popper's cautious "piecemeal social engineering" to more sweeping schemes.

LIBERATE

Originally, to deliver from tyranny; now, more often, to deliver up to tyranny.

Vietnam, Cambodia, Laos, and perhaps Nicaragua. In a previous generation, Latvia, Lithuania and Estonia had the misfortune to be liberated successively by the USSR, Germany, and the USSR again.

LIBERATION THEOLOGY

The Church too militant for many tastes.

Liberation theology is "a Christian theological movement which views God as acting through historical processes to free mankind from social and political repression" (Barnhart). Three things follow from such a view:

Emphasis shifts from the individual's relationship with God to his relationship with other people, and from people to groups (the poor, the rich, employers, multinationals, the THIRD WORLD, etc.).
Emphasis shifts from trying to live one's life in accordance with the Gospel to trying to re-shape SOCIETY in accordance with SOCIAL JUSTICE (liberationists argue that this is what the Gospel actually requires).
There is a natural sympathy with those MARXISTS who still believe historical forces will in time free mankind from social and political repression and ALIENATION, especially those "liberation movements" or "terrorists" who are actively lending history a hand in the Philippines, southern Africa, or Latin America.

An aspect of (a) is that small-scale, personal actions to ameliorate the lot of the oppressed are denigrated by comparison with attempts to put political programmes into effect: charity has almost become a dirty word, supplanted by option for the poor. This is just like those Marxists who objected to improved conditions for the workers because it would reduce their revolutionary zeal.

The call to re-shape society necessitates political involvement, and this is where liberation theology is most controversial. The involvement has often taken the form of support for atheist, marxist "liberation movements", even those using terrorist tactics. At its height, Latin America seemed full of guerilla priests. The slogan "Kill a colonialist for Christ", whether genuine or not, was bandied about. The conservative critic Auberon Waugh dismissed liberation theology as "any revolutionary rhetoric, justifying violence and murder in pursuit of the traditional appetites, grievances and grudges of the urban mob, when uttered from a pulpit or in a religious publication".

More recently, some theologians of liberation are showing an awareness of the intellectual bankruptcy and practical failure of Marxism. Perhaps we shall yet see NEO-CONSERVATIVE theologians: liberationists who have been mugged by God.

LIBERTARIANISM

Often confused with libertinism.
Say libertarian and most people think of morality, not philosophy: sex and drugs, Bloomsbury and Nimbin.
Advocacy of liberty, "especially with regard to thought or conduct". (MQD)
A libertarian originally meant a believer "in the freedom of the will" (OED), contrasted with a necessitarian. The sense of belief in political liberty came much later, about 1870. The modem usage is a response to the appropriation of LIBERAL in the USA by SOCIAL DEMOCRATS. One source of the confusion above is that sometimes libertarianism does not go beyond claiming that everyone, but behaving as if only oneself, is free of the restraints of ordinary morality (cf ANARCHISM).
A philosophy which denies or minimises the right of any individual or COLLECTIVE to tell any other individual what to do.
Libertarians of this kind may be ANARCHISTS but are more likely to accept a minimal ("nightwatchman") state. Typically, they reject state welfare, occupational licensing, health and safety REGULATION, and so on. Another cause of the libertarian/libertine confusion is thus that libertarians argue for the legalisation of absolutely everything (working below award wages, heroin, incest, child pornography) so long as it happens without deceit or coercion. Although all favour the rule of law (except for the anarchists, who offer instead the rule of love), they do not agree what state agencies this requires in addition to a court of last resort. In principle, private law enforcement agencies could act as individuals' agents to maintain their legal rights, and disputes involving voluntary transactions could be settled in private courts of voluntary jurisdiction.
Libertarianism goes naturally with strong and extensive PROPERTY rights and LAISSEZ-FAIRE or AUSTRIAN economics.

MI, M2, M3

See MONEY SUPPLY.

MACRAE'S RULE

Once it's clear we are doing something silly, let's stop it.

Norman Macrae is a former deputy editor and principal futurologist of The Economist. The rule applies to public policy (e.g. PROTECTIONISM) at least as much as to private life.

MACRO-ECONOMICS

The study of the properties and functioning of economies as wholes.

The economies may be regional, national or world. Macro-economists deal with aggregates and abstractions like GROSS DOMESTIC PRODUCT and aggregate demand, and try to describe, explain and predict changes over time in output or production, employment and unemployment, and the general price level. While MICRO-ECONOMICS has a large body of almost universally accepted theory, continual disputes over macro-economic basics reveal the discipline's unsatisfactory state, as do the 1987 comments of the Governor of the Reserve Bank of Australia that "we have -- at least temporarily -- lost the previously-understood link between monetary aggregates, activity and prices".

Many disagreements -- e.g. MONETARISTS v. KEYNESIANS -- are, however, as much about policy as about theory.

MARKET

Primarily an information-transfer mechanism.
What all markets have in common is a flow of information among numbers of buyers and sellers, so that transactions are not carried out in isolation, but are affected by and in turn affect other transactions between other parties. One stall selling mangoes by an African roadside is not a market. Ten stalls selling mangoes in an African town square are a market: buyers and sellers can compare price, quality and supply at the various stalls. Ten stalls spread over a hundred kilometres of road constitute a market too, with the information being carried by travellers.
Free markets.
Does not mean free of rules: effective functioning of a market requires rules, and sanctions for their breach. The rules need do no more than outlaw fraud and coercion, but usually also cover matters of procedure (e.g. terms of settlement in commodity or share markets). A free market is one to which entry is not artificially restricted and in which prices are not controlled (cf. REGULATION, CONTESTABLE MARKET).
Not a zero-sum game.
Voluntary market transactions by definition leave both parties better off, or at least less badly off. On a hot day, I'd rather drink a glass of beer than keep my dollar, and the publican would rather have the dollar than keep the beer. If I wasn't thirsty I wouldn't buy a drink, and -- licensing REGULATIONS apart -- if the publican didn't like my money he wouldn't serve me.
A social institution.
See COMPETITION, AUSTRIAN SCHOOL OF ECONOMICS.
Price and value.
Oscar Wilde defined a cynic as someone "who knows the price of everything and the value of nothing", and critics of market outcomes make a similar claim. Naive or philistine pro-marketeers rejoin that the only possible measure of something's value is what people are prepared to pay for it. Sophisticated and cultured pro-marketeers mount a similar argument more politely (values are incommensurable, while market prices, although a far from perfect measure, can at least meaningfully be compared one with another); and they are readier to admit the existence of EXTERNALITIES and other causes of MARKET FAILURE. See AUSTRIAN SCHOOL OF ECONOMICS.
See also MICRO-ECONOMICS, COMPETITION.

MARKET ECONOMY

Contrast with COMMAND ECONOMY.
Usually, a market economy means an economy in which there is a large private sector and in which the large majority of decisions on investment, production and consumption are made in MARKET contexts by people as individuals or in voluntary groups (e.g. firms and associations), not by government officials. Cf. MIXED ECONOMY.
Free market economy.
See LAISSEZ-FAIRE.

MARKET FAILURE

A situation in which a MARKET does not produce an acceptably EFFICIENT allocation of resources.

What is acceptable depends on the person and the situation. Strictly, market failure occurs whenever a market does not achieve a PARETO-OPTIMAL allocation: but in the real world that is true of all markets. Among the causes of market failure are barriers to entry (see MONOPOLY, CONTESTABLE MARKET) and PUBLIC GOODS and other externalities. Government INTERVENTIONISM is often advocated to "correct" market failure, but two points have often been overlooked: (i) We must distinguish between government action to improve the functioning of a market (e.g. penalties for fraud, stock-market reporting requirements ...) and attempts to supplant the market by REGULAON (cf. BEANBAG MODEL, COMMAND ECONOMY). (ii) It is a fallacy to suppose that the alternative to an imperfect market is "perfect" government; attempts to supplant the market are very likely to exhibit GOVERNMENT FAILURE, so in practice the decision whether or not to intervene should be seen as choice between two evils: pick the one that does less harm. (See also MIXED ECONOMY, PLANNING).

MARKETISE

To expose a government-owned producer of goods or services to market forces.

An unattractive word but a useful one. Marketisation occurs when goods and services whose supply and price have been controlled by government are freed from these restrictions. Marketisation is a kind of DEREGULATION, but the latter is a broader concept and the former implies a thorough removal of anti-competitive restrictions.

Marketisation is sometimes confused with PRIVATISATION. An organisation can be privatised without being marketised (e.g. British Telecom, which retains most of its monopoly after privatisation). Marketisation without privatisation (cf. CORPORATISATION) is possible in theory, but in practice the fair competition between private-sector and government-owned firms is virtually impossible. This is because it is virtually impossible to persuade lenders that a failing government-owned firm would not be bailed out: so it gets cheaper finance because it seems a safer investment.

MARKET SOCIALISM

Attempts to capture the benefits of a MARKET ECONOMY within a SOCIALIST political system.

All socialist governments and most socialist theorists (some Australian and British ones perhaps lagging) now admit the difficulties of the COMMAND ECONOMY and, to some degree, the advantages of competitive MARKETS in encouraging efficiency and innovation. Market socialism attempts to take advantage of markets in this way, without relinquishing overall state control of the economy, or, in COMMUNIST countries, party control of the state. The first attempt at market socialism was Lenin's New Economic Policy (NEP) in the 1920s. Alec Nove has demonstrated that SOCIALISM cannot work without markets, but like others he does not convincingly show how it can coexist with them.

MARX, KARL

"A good second-rate English economist of the 19th century" (Mikhail Bernstam).

Marx's ideas have had more influence than those of any other economist, although the credit or blame for this should mostly go to Lenin. Some of his concepts -- though not his conclusions -- are almost universally used in social science. But when he left economics for prophecy, this German revolutionary was dead wrong. But for Lenin, Marx would probably be almost forgotten today. The first people to suffer from MARXISM were Marx's family, as his economics did not extend to a practical household level and mundane food and clothing came second to bourgeois appearances. RACIST, sexist and a typical Victorian hypocrite, he lived for years on gifts and loans from the CAPITALIT Engels, whose income, according to Marx's own theory, came from exploiting the proletariat. This perhaps foreshadowed SOCIALIST countries' economic dependence on capitalist ones.

MARXISM

"The opium of the intellectuals" (Raymond Aron).

Once upon a time, Marxism involved a fairly specific set of beliefs about the world and the nature and direction of economic and social change. At the heart of it were concepts such as dialectical materialism, the labour theory of value, economic base and legal, political and social superstructure, production relations, modes of production, CLASS struggle, and so on. This is no longer so: modem Marxists are like modern Christians in the variety of their attitudes to what would once have been considered central teachings, and the fact a person claims to be a Marxist now tells us almost nothing about his beliefs. Leszek Kolakowski has described the Main Currents of Marxism in three volumes; there is not space to summarise them here.

MERCANTILISM

The dominant economic philosophy from the 16th to the 18th century, emphasising the balance of trade and PROTECTIONISM.

Reserves of gold (and other treasure) were considered fundamental to national security and prosperity, so foreign trade was controlled in the attempt to achieve a positive trade balance (see DEFICIT) and consequent inflow of foreign exchange (which in those days was bullion). Means included limiting the rights of third countries to carry goods between trading partners, letting colonies trade only with the mother country, subsidising exports and taxing imported manufactures.

Mercantilism is a beggar-thy-neighbour policy (if one country has a trade surplus another must have a deficit) and denies that both parties gain from free exchange. Adam SMITH showed, in The Wealth of Nations (1776), that it benefits the producer at the expense of the consumer and causes inefficient use of resources, but mercantilist instincts endure in many Australian manufacturing industry unions and managers, and in not a few politicians of all parties.

MICRO-ECONOMICS

The study of human behaviour in response to SCARCITY.

[W]hen time and the means for achieving ends are limited and capable of alternative applications and the ends are capable of being distinguished in order of importance, then behaviour necessarily assumes the form of choice. Every act that involves time and scarce means for the achievement of one end involves the relinquishment of their use for the achievement of another: it has an economic aspect. (Lord Robbins)

The basic assumption of micro-economics is that people are by and large rational. From this has been developed a substantial body of theory accepted by virtually all economists (cf. MACRO-ECONOMICS). Micro-economics studies the rational response to various situations of individuals or firms or agencies. The 100 per cent rational, utility-maximising ECONOMIC MAN of course does not exist, but he is quite a reliable predictor of average behaviour. Milton Friedman argues that we can proceed "as if" people are rational.

MIXED ECONOMY

An economy with both privately-owned and government-owned enterprises.

No country is entirely without a private sector (even if it is only a black market: see COMMAND ECONOMY, BEANBAG MODEL), or entirely without state enterprises, but mixed economy usually describes countries such as Britain, France or Italy in which there is a substantial nationalised industry sector in what is basically a MARKET ECONOMY, and in which central PLANNING, to the extent to which it occurs, does not attempt detailed allocation of resources to uses. To AUSTRIAN economists, a mixed economy is the same as a mixed-up economy.

MONETARISM

A MACRO-ECONOMIC policy framework which stresses the effects of changes in the MONEY SUPPLY, especially on inflation.

Monetarism came to prominence in the 1970s, with the collapse of KEYNESIANISM. Early monetarists argued that, in the long term, real output was not affected by Keynesian demand management policies. Attempts to boost growth and therefore employment by demand-increasing policies (e.g. budget DEFICITS) would therefore be futile because more and more of the increased demand would go into increased prices and less and less into increased production. The result would be ever-increasing inflation resulting in economic collapse -- or a change of policy towards monetarism. Government should therefore provide a stable and predictable rate of increase in the MONEY SUPPLY (monetary targeting), thus restoring the conditions for economic growth with steady or declining inflation, and deregulate to let the rest of the economy look after itself. (All monetarists pay more attention to MICRO-ECONOMIC matters and the SUPPLY SIDE of the economy than do Keynesians. They believe in free MARKETS and small government.)

Monetarism in practice has been forced to be less doctrinaire. One reason is the difficulty of actually measuring and controlling the MONEY SUPPLY, especially since the end of exchange controls and other financial DEREGULATION (cf. GOODHART'S LAW, BEANBAG MODEL). Another is that the Keynesians were not altogether wrong: changes in demand do influence output (only in the short term, according to some monetarists). But the main teachings of monetarism have been incorporated into pragmatic, late-1980s economic management.

MONETARY POLICY

Money supply and interest rates.

Monetary policy is one of the two legs of economic management in modem economies, the other being FISCAL POLICY. It covers control, loose or tight, of the MONEY SUPPLY, interest rates, exchange controls. Some kinds of REGULATION of financial institutions can also be counted as tools of monetary policy. See also MONETARISM.

MONEY ILLUSION

Thinking that money has a value apart from what it can buy.

Money illusion was an important, although seldom admitted, factor in KEYNESIAN economic management. As long as people felt five per cent better off after a five per cent wage rise, the system seemed to work quite well. Once they began to allow for inflation, one form of money illusion failed and the collapse of Keynesianism was inevitable.

A related money illusion succumbed in the inflationary 1970s, when people realised that they were "saving" money at 5 to 8 per cent when inflation was 10 or 15 per cent -- i.e. instead of getting a real return on their investment they were losing up to 10 per cent in purchasing power per year.

Money illusion is also vital to the Hawke Government's wages policy and Accord with the ACTU. The significant reduction of real wages in recent years has been achieved by increasing money wages more slowly than the currency has been debased by inflation. It is almost impossible to imagine that, if inflation had been zero, the unions would have allowed, or their members accepted, equivalent cuts in money wages. But this, like other forms of money illusion, probably cannot be sustained indefinitely.

Another money illusion involves FISCAL DRAG, the effects of which do not seem to be taken into account in wage negotiations (but see also SOCIAL WAGE).

MONEY SUPPLY

The amount of money in an economy; the definition of money used is crucial and nowadays needs to include credit.

Before financial deregulation, there were a whole set of successively broader definitions. Here they are, roughly:

M0: Notes and coins (currency) in the hands of the public (including companies).

M1: M0 plus money in current (cheque) bank accounts.

M2: M1 plus bank deposit accounts.

M3 (the most used): M2 plus savings bank deposits: i.e., currency in the hands of the public plus deposits of the public with the banking system.

With DEREGULATION, the distinctions between kinds of institutions and kinds of account were eroded and M3 became an inadequate measure. Wider measures (M4, M5, etc.) were tried, and the Reserve Bank of Australia now publishes a measure called broad money, which is (broadly) M3 plus net private sector deposits with non-bank financial institutions. In a deregulated financial system, accurate measurement or strict control of money supply seems impossible (see GOODHART'S LAW, MONETARISM).

MONOPOLY

Strictly, a MARKET situation in which a single seller controls the entire output of a particular good or service.
The monopoly seller can maximise profit by restricting output and raising prices, thus extracting monopoly RENT. In a free market, this typically happens when a new product or process is initially the preserve of a single firm. The high profits encourage others to move in on the monopolist by developing new products or processes themselves, and after a while this COMPETITION reduces profits to normal (see also SUBSTITUTE).
For a monopoly to endure, there must be barriers to entry into the market. Except in rare cases of NATURAL MONOPOLY, these usually involve government INTERVENTION (industries monopolised by organised crime feature entry barriers of a different kind). In a CONTESTABLE MARKET, a monopolist cannot extract rent.
By over-pricing and under-producing, monopolies tend to cause a less than optimal allocation of resources. In addition, they tend to be less efficient and less innovative than firms in competitive markets. Governments traditionally REGULATE or NATIONALISE monopolies, with the aim of controlling profits and thus preventing exploitation; in practice, however, profits may be controlled but CONSUMERS continue to be exploited, the rent being captured by the workforce of the monopoly, as higher pay and/or easier conditions than in a competitive situation, or otherwise absorbed in monopolistic inefficiency.
Loosely, a situation in which one seller has the lion's share of the market, with no competitor anywhere near its size.
The De Beers diamond "empire" is an example of this kind, and also almost the only monopoly that has endured without support from government regulation, partly by using its monopoly power to deter would-be competitors but mainly because its market-fixing activities on the whole benefit producers and consumers. But then it is operating in a contestable market.
Incorrectly, a market situation in which there are a small number of suppliers.
If they are colluding, they are a CARTEL; if not, the question of monopoly does not arise.
A reward for political or financial support.
Monarchs and dictators strapped for cash, or trying to shore up support for fear of a coup, often grant their supporters monopolies of production or trade in some good. (Charles I of England sold monopoly rights to the highest bidder.) Democratic politicians are of course tempted to do the same, but fortunately for the rest of us are much hampered by never being able to admit that this is the reason for a decision. See also CORRUPTION, PRIVILEGE.
Patents.
Modem patents are grants of temporary monopoly rights in favour of the originator of a genuine invention -- a form of intellectual PROPERTY. They grew out of the Tudor and Stuart "patents of monopoly" mentioned above. They are accepted as an exception to the general undesirability of monopolies. The argument is that without patents, once a new invention appeared on the MARKET it could be copied by other firms without their having to duplicate all the innovating firm's research and development. They could therefore sell the copies cheaper than the original, preventing the innovator from recouping its R&D expenditure. Patents compensate for this MARKET FAILURE by letting innovators benefit from their innovation -- but only for a limited time.

MONOPOLY, NATURAL

See NATURAL MONOPOLY

MONOPSONY

A market situation in which there is a single buyer.

The mirror image of a MONOPOLY: as sellers have nowhere else to turn, a monopsony can depress prices. The employer in a one-company town can have it both ways -- but only if he can keep COMPETITION out and workers in -- underpaid workers who owe dere souls to de overpriced company store.

MULTICULTURALISM

Policies intended to win the "ethnic vote".
See PUBLIC CHOICE THEORY.
The idea that Australian PUBLIC POLICY and public culture should reflect the diverse origins of the Australian population.
One can perhaps trace the following stages:
1. Colonial: Australia should be British.
2. Nationalist: Australia should develop an ANGLOMORPH but uniquely Australian culture to which immigrants must be assimilated.
3. Migrant: immigrants are welcome to keep up their folk-dancing, their cuisine, and any other elements of their culture, but must adapt themselves to the anglomorph public culture -- the English language, the legal and administrative traditions and so on.
4. Multicultural: attacks on the anglomorph "ascendancy" are subsidised from public funds.

NATIONALISATION

Acquisition by government of property formerly in private hands.

Now out of fashion. Traditional SOCIALIST parties wanted to nationalise the "means of production, distribution, and exchange": i.e. the whole of industry and commerce. When actually in power, they tended to start with industries such as transport, power generation and coal mining. In Australia and France, socialist governments attempted to nationalise the banking system. There was a good deal of argument about the principles of compensating the private owners.

Proponents claim that nationalised assets are owned by everyone. This is nonsense: one cannot sell one's share in, say, Telecom, or use it as security for a loan (cf. PROPERTY). Socialists admit the emptiness of the claim when they complain about uneven distribution of wealth but do not include nationalised assets in their calculations.

Other nationalisations are ad hoc attempts to preserve some LAME DUCK from bankruptcy: e.g. the Midland Railway in Western Australia and, notoriously, British Leyland.

Nationalised enterprises and industries have failed to meet the expectations of their original proponents, who thought that removal of the "profit motive" would ensure that they operated efficiently, with harmonious industrial relations, and in the interests of consumers and the community generally. In practice, efficiency, industrial relations, and standards of community service in nationalised industries are notoriously poorer than in the competitive private sector. One reason is that many nationalised organisations are MONOPOLIES legally protected from competition (Telecom, NSW State Rail Authority, etc.). Another is that government-owned enterprises generally cannot "go broke" in the way that private firms can, because they are perceived to be backed by the bottomless purse of the taxpayer, which will be opened by a government anxious to avoid the odium of plant closures and job losses.

See also MARKET, COMMAND ECONOMY, MIXED ECONOMY, NATURAL MONOPOLY, GOVERNMENT FAILURE.

NATURAL MONOPOLY

A MONOPOLY that can endure in the absence of anti-competitive REGULATION.

In theory, an industry in which the marginal cost of production is less than the average cost is a natural monopoly: larger suppliers in such an industry can by definition always afford to undercut smaller ones, until in the end only one supplier survives.

In practice this occurs only under very limiting conditions. For instance, provision of electric mains within a single street or suburb fulfils the conditions for natural monopoly: having run a main down the street, the marginal cost of connecting a house is small compared with the total cost divided by the number of houses; unless the original supplier is startlingly inefficient no new entrant can compete. But this does not mean that there is only room for one firm to service all suburbs, all towns, all States; nor does it mean that generating electricity to feed into the grid is a natural monopoly. Lasting monopolies are almost invariably artificial, their positions secured by legislation or other government INTERVENTION. Some are startlingly inefficient.

Natural Monopoly is also used, incorrectly, of circumstances where a particular MARKET is alleged to be able to support only one efficiently-large producer; see CONTESTABLE MARKET.

NATURAL RIGHTS

See HUMAN RIGHTS.

NEO-CONSERVATIVE

"A liberal who has been mugged by reality".

That is American; LIBERAL translates into Australian as SOCIAL DEMOCRAT or SOCIALJST. Neo-conservative luminaries such as Norman Podhoretz, Irving Kristol and Nathan Glazer were social democrats and supporters of INTERVENTIONIST policies and the WELFARE STATE from the 1940s to the 1960s, but became disillusioned by the consistent failure of government social initiatives (cf. ROSSI'S IRON LAW). The typical neo-conservative position combines a DRY approach to economics and PUBLIC POLICY generally with a CONSERVATIVE, Jewish or Christian, morality.

NEO-LIBERALISM

Classical LIBERALISM as revived in the 1970s and 1980s.

Classical liberalism declined as a force in politics with the rise of collectivist movements (COMMUNISM, FASCISM, SOCIALISM) from the beginning of this century, and as a force in economics with the fashion for PLANNED economies (see also PLANNING) and with KEYNESIANISM's apparent promise that government INTERVENTION could assure full employment and permanent prosperity. By the 1950s, MARKET economics was almost extinct outside the AUSTRIAN and Chicago schools and a few institutions such as the Institute of Economic Affairs in London. Liberalism as a political philosophy was represented only by a few scholars such as F.A. Hayek and Karl Popper.

In the 1970s, however, it became clear that the post-war social-democratic CONSENSUS was not meeting expectations (see SOCIAL DEMOCRAT). Government could not solve everyone's problems. Demand management failed to maintain employment and stabilise inflation, welfare spending spiralled out of control, and NATIONALISED industries in the MIXED ECONOMY became by-words for inefficiency and poor service. The few classical liberals saw their sceptical view of intervention justified, and policy-makers began to listen to them again. The turning point was probably the election of Mrs Thatcher to the leadership of the British Conservative Party in 1975. Since 1980, neo-liberalism has increasingly influenced public policy in developed countries, notably the UK, USA, France, Australia, and New Zealand.

Neo-liberals stress the need for the freedom of the individual to realise his or her life opportunities peacefully and lawfully. They reject utopian approaches to social change and distrust activist social engineering. They accept the teachings of public choice theory and argue for "small government", wanting to confine government intervention to matters such as the maintenance of efficient competition and provision of a welfare SAFETY NET.

NEW CLASS

Functionaries of the WELFARE STATE.

The term new class was coined by Tito's former henchman Milovan Djilas in the 1950s to refer to the self-perpetuating ruling elite in a COMMUNIST state, which he argued had all the characteristics of a traditional "ruling class".

It now also describes the modem professional or quasi-professional employee of government or its agencies. As Western governments took on more and more social and welfare functions after the Second World War, increasing numbers of such staff were employed (teachers, administrators, social workers, planners, hospital staff, etc.). They have identifiable common interests different from those of the public they are meant to serve and the government they are meant to obey (for instance, a pay rise without offsetting productivity increases is in the interest of public servants, but against the interests of taxpaying public and debt-burdened government). They differ from the traditional, professional public servant in their readiness to act openly in their own interests at the expense of the community.

NEW ENLIGHTENMENT

Almost a Synonym for NEO-LIBERALISM or NEW RIGHT.

The term was coined to link the liberal revival of the 1970s and 1980s (NEO-LIBERALISM) with the 18th-century Enlightenment of Voltaire and Kant, and especially with the "Scottish Enlightenment" of SMITH and Hume; to emphasise the sceptical examination of established institutions and processes, the open-mindedness, and the respect for reason that the two movements share; and to beg a lot of questions. It hasn't caught on.

NEW LEFT

An intellectual response to the working class's lack of interest in communism and revolution.

Like so many political terms, New Left covers a wide range, including academics such as Sartre, Foucault, Marcuse and Chomsky; politicians such as Tony Benn, Ken Livingstone and Joan Coxsedge; and terrorists such as Baader and Meinhof.

As with the NEW RIGHT, there is seldom an identifiable "New Left position" on any issue. The following features are characteristic but not all are invariably present:

Heavy reliance on MARXIST theory (but treating MARX's writings as an op-shop from which to pick and choose, rather than following the COMMUNIST PARTY line).
Failure to engage in debate (as opposed to slanging matches) with LIBERALS and other opponents.
Claims that all existing social institutions are oppressive and ought to be demolished (these claims are supported, in rhetoric if not logic, in terms of literally mind-numbing concepts such as "repressive tolerance" and structural violence); cf. BASHING.
Failure (shared with most of the LEFT) to describe the social institutions that should replace the present ones.
An unconcern with practical politics: more New Left energy goes into esoteric factionalism than into changing the world.
Usually, a similar unconcern with the traditional left-wing idol, the oppressed proletariat, presumably because workers the world over have betrayed the cause by preferring suburban comfort to revolutionary correctness. In the 1960s, some attempted to present students, rather than workers, as the oppressed class that would spearhead the revolution.
A readiness to use or excuse violence -- or "direct action" -- in pursuit of political objectives that have been rejected by democratic electorates.
Conscious or unconscious elitism.
The army of the Left has retreated to its promontory, from where it calls down into the mists of modern politics obscure insults and mysterious incantations. Fanaticism thus takes a novel form. It seeks, not to lead the masses, but to conjure mysteries which will secretly achieve the common goal and so make leadership unnecessary. (Scruton)

NEW RIGHT

The anti-COLLECTIVIST revival of the 1970s and 1980s.
The New Right in this sense includes individuals and organisations. New Right describes their ideas and policies. See DRY, LIBERALISM, NEO-LIBERALISM, NEW ENLIGHTENMENT. In this sense, New Right has a fairly clear and useful meaning, although RIGHT has AUTHORITARIAN connotations that in this context are misleading.
All groups (including the above) opposed to SOCIALISM and the post-war SOCIAL-DEMOCRATIC CONSENSUS.
This usage is encouraged by people on the LEFT and in the trade union movement, for whom its advantage is that it pre-empts debate. The term smears DRIES, NEO-LIBERALS and CLASSICAL LIBERALS, who provide the effective opposition to COLLECTIVISM and CORPORATISM, by associating them with REACTIONARIES and UGLIES. New Right has thus been used to describe almost anything and everyone that displeases the ACTU leadership, from the lunacy of the Joh for PM campaign through the scholarship of the Centre for Independent Studies to social democrats like Knopfelmacher.
This tactic has succeeded to the extent that the man in the street probably thinks "the New Right" is basically an anti-union movement (politically-naive employers have unwittingly encouraged this view). New Right is now best avoided by people more interested in information than emotion.
"The New Right".
There is no one organisation that is, or can speak for, the New Right (in either of the above senses). The New Right Report is a NSW-based newsletter that represents only the views of its publishers.
Overseas usage.
New Right elsewhere usually has much the same core meaning as in (1) above. In the USA, however, it is often associated with the (often fundamentalist) religious right (e.g. the Moral Majority). In France, it is associated with the present intellectual revulsion against Marxism. Everywhere, it is burdened by the unpopular connotations of RIGHT.

NON-MARKET FAILURE

See GOVERNMENT FAILURE.

OBJECTIVE

What we should try and be.
Objectivity is out of fashion these days, not least in those fields, such as journalism, where it is most important. This is the result of a half-understood mishmash of MARXIST and Freudian concepts and NEW LEFT academic ravings; plus the claim that as perfect objectivity will always elude us it is not worth striving for. Cf. COMMITMENT.
Judging by effects only.
We owe this useful sense of objective to the COMMUNISTS, who used to denounce their SOCIALIST rivals as being objectively on the side of CAPITALISM, because instead of trying to hasten the revolution they were trying to improve the conditions of the working class (which would therefore be less discontented with capitalism, and less ready to revolt). Similarly, the "Joh-for-Canberra" campaign of 1986-7 objectively favoured the ALP. The "peace" movement, whose actions are directed principally at the Western Alliance and the USA, is objectively on the side of the USSR, regardless of the extent to which it may be controlled and funded by it (cf. CONSERVATION MOVEMENT).

PARETO OPTIMUM

A state of affairs in which nobody can be made better off without somebody else being made worse off.

This was a key concept in the development of economics; but like so much else in economic theory, it is never actually achieved in practice. Real political decisions usually involve making some people better off at the cost of making others worse off, and the Pareto optimum is no help there. It's a static concept: if a Pareto optimum is reached, trading stops. See MARKET; cf. BEANBAG MODEL.

PATENT

See MONOPOLY.

PEDANT

One who prefers his statements to be true. (Bertrand Russell)

PERESTROIKA

The attempt to modernise the creaking Soviet economy without upsetting too many of the apparatchiks who think they are all right, Ivan.

COMMUNISM cannot transform itself into a free society. That would be squaring the circle. What it can perhaps do, and what is now being attempted in the Soviet Union, is to make improvements in various economic and cultural areas, while keeping them, ostensibly at least, within the framework of the existing IDEOLOGY. ... The Soviet leaders' attempt to reform the system is not inspired by some noble recognition that the system is unjust or poorly regarded abroad, but by strict necessity. (Milovan Djilas).

See also COMMAND ECONOMY, COMMUNISM, MARKET SOCIALISM, GLASNOST, TOTALITARIANISM.

PILGERISE

To rewrite recent history to suit a PROGRESSIVE agenda.

Named after the left-wing Australian journalist John Pilger (now perhaps better-known in Britain).

PLANNED ECONOMY

See COMMAND ECONOMY.

PLANNING

The best laid plans o' mice an' men
Gang aft a-gley.

Burns actually wrote "schemes", but the popular misquotation is, as usual, valid. See also COMMAND ECONOMY, SOCIAL ENGINEERING, INVISIBLE FOOT.

POLITICS, PLAYING

An insult that should be a compliment.

This is almost always intended as an insult when used by politicians and polemicists to describe the activities or arguments of opponents. Often, though, what is complained of is merely an attempt to subject an issue to the publicity and examination of DEMOCRATIC politics. Cf. BASHING, CONSENSUS.

POPULAR CAPITALISM

The belief that the ownership of capital should be widespread.

Citizens will therefore have a personal interest in the CAPITALIST economy and will be able to rely for some measure of personal security on their private assets. Although inconsistent with a fully-developed WELFARE STATE, popular capitalism is perfectly compatible with a welfare SAFETY NET. Belief in popular capitalism is a major motive in the British PRIVATISATION campaign, in which share issues are stacked in favour of small investors.

POPULIST

Politician who says only what he thinks his audience wants to hear.

A demagogue. It is impossible to devise a test to distinguish a populist from an ordinary DEMOCRATIC politician in kind, but there are differences in degree. A typical populist promises to reduce taxes while increasing government spending. Populists assume voters are stupid. Sometimes they are proved wrong.

POVERTY LINE

A moving target that ensures that poverty cannot be eliminated.

The Australian poverty line is based on relative, not absolute, incomes. This is in some ways reasonable: we usually talk about people with much less money than most of us as being "poor". The trouble, however, is that as average living standards rise, so does the poverty line. This matters, because it means that even though the poor may be getting better off, the number below the poverty line will not decrease. This means that the welfare lobby can continue to demand more resources. If this relative poverty line is taken as the definition of poverty, the number of poor people can only be reduced by a more even income distribution -- regardless of whether average incomes rise or fall.

People on the poverty line in Australia have a weekly income higher than the annual income of people on the poverty line in China.

POVERTY TRAP

A situation where an increase in earned income leads to a decrease in net income.

Usually caused by the interaction of income tax and income-tested welfare benefits. For example, a worker might find that $10 extra income from overtime might result in a $5 reduction in one benefit, a $3 reduction in another under an independent means test, and $2.50 income tax liability, leaving him $0.50 worse off for his extra work. The pensioner health benefits card is another example: a dollar extra income could make one ineligible for a card which could be worth over $20 per week. These situations can usefully be regarded as effective marginal tax rates greater than 100 per cent.

Poverty trap may also be used loosely to refer to the disincentive effect of high effective marginal tax rates on low income earners.

PRIVATE GOODS

See PUBLIC AND PRIVATE GOODS.

PRIVATISATION

The reverse of NATIONALISATION.

Privatisation involves transferring government-owned assets -- usually firms or industries -- to private sector ownership. Since the beginning of the 1980s privatisation has been undertaken in many countries, including some COMMUNIST ones. Best known is the British experience, where subjects of privatisation range from industries such as telecommunications and water supply, through bus and haulage operations, to council houses. Procedures vary widely to suit circumstances. Council houses are sold to tenants or housing associations; companies may be sold or even given to their employees; commercial QUANGOES may be CORPORATISED, and floated on share markets (often on terms designed to encourage POPULAR CAPITALISM).

The reasons for privatisation are sometimes partly IDEOLOGICAL; but privatisation is attractive to governments mainly because it is likely to improve the performance of the organisations involved. Even if inefficiency and poor service continue, there is a chance that the public will blame the new owners.

PROGRESS

Onward and upward!
Most progress with progress occurred in the 19th century when biological notions of gradual evolution were conscripted to serve political ends. Despite resistance from evolutionists such as Darwin and Spencer, "Social Darwinism" -- the vulgar application of their ideas to social phenomena -- soon caught on. In due course it was noticed that progress was not all it was cracked up to be, and the usage below is now more common -- a shame, because with some OBJECTIVE criteria (see SOCIAL ENGINEERING) it can be an informative concept.
Change desired by the speaker.

PROGRESSIVE

Reforming, democratising, opposed to privilege.
Progressive in this sense entered political language in the late 19th century, and could be used of LIBERALS, RADICALS, etc.
COMMUNIST, SOCIALIST or LEFT-wing.
Since the 1930s, progressive has been almost exclusively a term of self-description of the political left. Now that most "progressive" governments have admitted their lack of PROGRESS, sense (1) may again become available. (Cf REACTIONARY, MARXIST.)
Opposed to PROGRESS.
People who account themselves progressive in western countries today are often opposed to aspects of modernity in those countries: for example, automation, fusion power research, MARKETISATION and PRIVATISATION. They may cultivate a pseudo-ruralism with beards, sandals and "natural" foods (cf. CONSERVATION MOVEMENT).
Of a tax, at higher rates on richer taxpayers.
Personal income taxes are usually progressive, at least on paper. Other taxes seldom are, at least on paper. The effect of a tax can be progressive or regressive even if on paper it is at a flat rate. Thus, steep taxes on caviar, fur coats, and luxury cars are progressive in the sense that only the rich pay them (although they also put these goods firmly out of the reach of ordinary people). Likewise there's no point in a progressive tax that the rich can evade. Cf BRACKET CREEP, LAFFER CURVE.

PROPERTY

Most generally, the right to control the use of something.

If something is your property, you have a bundle of rights in relation to it. These may include the rights to possess, use, use up, lend, sell, give away, or destroy. All are in practice defined or limited by law, and by the nature of the thing. You may own a motor-car, but the law limits the use you may make of it. If you own land, the law restricts the uses to which you may put it, the buildings you may erect, and (e.g. by restricting subdivision) the terms on which you may sell it. Fair trading and pure food laws limit the rights to transfer many kinds of goods.

Property does not just involve tangible goods. Buying a book transfers property in the paper and ink and binding from the seller to the buyer, but does not affect the copyright-holder's property in the words. At common law, the doctrine of ancient lights meant that owning an established building included the right to prevent neighbours erecting new buildings that would block the light.

Property in something can be divided up: the rights to draw water from a river, or to fish in it, can be transferred separately from ownership of the riparian lands; a successful author can sell paperback, film, TV, translation, and stuffed-toy rights.

People's attitudes to land and goods are affected by, among other things, whose property they are (the problem of the commons: "if something belongs to everybody, it belongs to nobody"; cf. NATIONALISATION). "Give a man the secure possession of a bleak rock and he will turn it into a garden: give him a nine years lease on a garden, and he will convert it into a desert" (Arthur Young): cf. EXTERNALITY, MARKET FAILURE. See also INALIENABLE.

The considerations in the two preceding paragraphs have led LIBERTARIANS and some AUSTRIAN or MARKET economists to argue that the environment would be better protected by a massive increase in private property rights, than by further restrictions in rights to engage in environmentally-damaging activity. For example, if people downstream had a right to clean water, a polluting factory would have to clean up, or compensate all the people who had to put up with its dirty water, or close down. Economists agree that such an approach would tend to use resources better than the present method of making a political decision whether to allow the pollution or force a clean-up. But there are obvious practical problems in identifying and compensating all those who are affected by an activity.

PROTECTIONISM

The belief that tariffs, quotas and other import barriers should be used to "protect" domestic industries from overseas competition.
"Protection is interwoven with almost every strand of Australia's democratic nationalism. It is a policy of power; it professes to be a policy of plenty" (Hancock). Yet protection is deleterious, except in a few special cases. It enables the protected industries to charge higher prices, thus to operate profitably despite higher costs than their overseas counterparts. The other side of the coin is that CONSUMERS must pay higher prices for the protected products, and thus have less to spend on other things. That is, protection lowers living standards of the community generally. Because necessities of life such as clothing and footwear are heavily protected, the effect is that of a regressive tax.
The intended beneficiaries of protection are the owners and workforces of the protected industries. In the short term, new or increased protection permits increased profits, investment and/or wages. This does not last: the most highly protected industries in Australia are not especially profitable, nor do they pay especially high wages by Australian standards, nor has protection prevented reductions in their workforces.
Adam SMITH put it this way:
In every country it always is and must be the interest of the great body of people to buy whatever they want of those who want to sell it cheapest. The proposition is so very manifest that it seems ridiculous to take any pains to prove it; nor could it ever have been called in question had not the interested sophistry of merchants and manufacturers confounded the common sense of mankind. Their interest is, in this respect, directly opposite to that of the great body of the people. (The Wealth of Nations)
The cost of protectionism is borne partly by consumers but mainly by exporters who have to sell their goods at world prices or not at all, but who must pay high Australian prices for their inputs of labour and materials.
All this has been known for decades if not centuries. Why then does protectionism survive? First, because owners and workers in protected industries would suffer in the short term from the abandonment of protection. They have a concentrated interest in its continuance, which can outweigh the community's diffuse interest in free trade and influence the political decisions on protection (see PUBLIC CHOICE THEORY). Second, because politicians, many of whom have MERCANTILIST instincts, are also influenced by the traditional arguments for protection:
- "Protection increases employment." Oh no it doesn't. It may protect jobs in the protected industries, but only at the cost of more jobs elsewhere (there are in theory exceptions to this, but only under very limiting conditions). The cost per job of protection in the most sheltered industries can be so high that Australians would be better off if the workers were paid to do nothing and the goods were imparted duty-free at world prices.
- "Infant industries need protection in their early years against mature, powerful overseas competition." This argument is valid in theory where the industry is one in which the country will have a comparative advantage once it is established but in which import COMPETITION makes the start-up unattractive. In practice, however, it is extremely hard (a) to identify such industries in advance, and (b) to withdraw protection from an industry that has become used to it. For instance, after forty years Australia's motor industry is as dependent on protection as ever.
- "Protection gives a breathing space in which necessary economic restructuring can take place without unnecessary disruption." This doesn't work in practice: many years of protection plans for the motor vehicle, textile, clothing and footwear industries have not managed to restructure the industries so they can manage without permanently gouging the consumer.
- The need to maintain allegedly strategic industries. The argument is that national security requires the ability to produce tanks, or aircraft, or radars or munitions, or whatever, and therefore various industries must be protected. But restricting the importation of cars and television sets does not increase Australia's ability to build front-line fighters and advanced military electronics. National security rather requires adequate stockpiles of materiel and a strong network of alliances. If the cost of protection of "strategic industries" was borne on the defence budget (as it should be), the services would rapidly decide that local production had a low priority.
- The balance of payments. It seems obvious that because protection makes imports more expensive to buy, it will reduce their volume and thus reduce the trade deficit. An increase in protection does this in the short term, but the harmful longer-term effects on export industries and economic growth soon more than wipe out any benefit.
Protection and arbitration.
From the early days of Federation there has been a link between import barriers and wage-fixing in the arbitration system. At its strongest, it was held that the tariff on a product should be set at a level that would enable the manufacturer to pay award wages and still make a fair profit. This destroyed the incentive for Australian manufacturers to match overseas competition.
Trade wars.
Most people, even among those who concede that free trade is preferable to protectionism, argue that it would be foolish for one country to lower its trade barriers unless its trading partners did so too. Most of the time, this is not so: unilateral lowering of trade barriers is likely to benefit the country that does it, by giving consumers access to more and cheaper imported goods. (The benefits will be greater if trading partners lower their barriers too.) The removal of protection and barriers to trade and commerce has always led to periods of exceptional economic growth: for example in Britain and then Germany in the 19th century; in West Germany, France and Spain in the 1950s and 60s.
From the most ancient times, free international trade has been a major cementing force in good international relations as well as being chiefly responsible for the spread of prosperity, knowledge and cultural enrichment. However the role of free trade in benefiting mankind and promoting peace is not, as a rule, taught in courses on "peace studies"
See also DUMPING.

PUBLIC CHOICE THEORY

Why you can't keep the bastards honest.

Public choice theory uses the tools and concepts of MICRO-ECONOMICS to explain and predict political behaviour. Its respectability as a branch of economics was certified by James Buchanan's 1986 Nobel Prize.

The premise is that, on the whole, people act as rational UTILITY-maximisers in political roles (politicians, voters, etc.), just as they do in the rest of life. Each voter will choose the party that he considers offers him the greatest utility from government activity (which may or may not be the party that promises the biggest and most active government). Each party will try to offer policies that attract enough votes to win the election, by benefiting particular groups in the hope that members of the groups will vote accordingly.

There is an important asymmetry here. A substantial benefit can be given to each member of some favoured group at a small cost in taxation to each member of the whole society. The result is that it is worthwhile for members of the group to bear the costs of organising and lobbying to gain or retain the benefit, because their individual gain is large; but the individual gain to the rest of the community from denial of the sectional benefit would be so small that it is not worthwhile for individuals to organise to resist it. It is, however, worthwhile for them to seek special benefits for whatever sectional groups they belong to.

In fact, there is a general tendency for identifiable, particular interest groups to be served at the expense of the PUBLIC INTEREST. Such groups, which often overlap, include farmers, trade unions, manufacturers and their workforces, public servants, and business (not so much for its direct voting power as for its usefulness as a source of funds). Vote-maximising becomes a matter of building a "coalition" of interest groups, amounting between them to more than 50 per cent of the vote.

Another factor is that major parties can largely rely on their traditional cores of supporters, but must compete for the favours of the "median voter" or "swinging voter". This gives democratic governments a bias to the centre that continually disappoints party zealots of LEFT and RIGHT. Director's law is the theory that for this reason, and despite what they claim and what justice demands, the net effect of government taxing and spending is to redistribute money from both rich and poor to the middle. Cf. CHURNING.

PUBLIC AND PRIVATE GOODS

A private good may be enjoyed by one person to the exclusion of others; a public good cannot be.

Technically, a pure public good has the characteristics of non-excludability and non-rival consumption. In English: (i) no one in the community can be excluded from enjoyment of the good (as long as it exists or is produced), and (ii) one person's enjoyment does not reduce its availability to others. Classic examples of almost pure public goods are defence and streetlighting. Everyone benefits from a secure society, and everyone who uses a street at night benefits from the lighting: but it is not possible to defend only the lives and property of certain citizens while allowing others to be invaded, nor to turn out the lights when a non-resident comes along without leaving the residents in the dark.

Pure private goods are SCARCE, and people can be excluded from their enjoyment. If I buy a bar of chocolate, (a) there is less chocolate available to the rest of the community, and (b) no one else may eat it.

In real life, goods are seldom purely public or private. Education, for example, is a basically a private good. People can be excluded from it, consumption is not non-rival, and it may be used for the personal benefit of the possessor. But (assuming educated people are more productive, cooperative, and law-abiding than uneducated people) the existence of an educated population is a public good, and hence education is itself partially a public good.

Economics says that a MARKET system will not produce public goods (or not in adequate quantity), because there is no way of excluding people from the enjoyment of the good and hence no incentive to pay for its provision (except philanthropy). Provision of public goods therefore requires government action (cf. MARKET FAILURE, INTERVENTIONISM). Some goods (roads, for instance) are private according to the strict definition above, but the transaction costs of treating them as such (e.g. paying your share of the maintenance of your street and paying tolls time you used every other street) would be prohibitive, so in practice we treat them as public goods.

PUBLIC INTEREST

The general interest or common good.
Public interest, general interest and common good are approximate synonyms. Distinguish from particular, sectional, private or vested interests. See PUBLIC CHOICE THEORY. Roger Scruton points out that what is in the public interest is not necessarily in the interest of the state or even of the majority of the population (DPT). All sides in politics claim that their policies are in the public interest, even when they appear blatantly self-interested to everyone else.
Left-wing.
In the title of an organisation, public interest is usually code for a LEFT and/or CONSUMERIST orientation. This is especially true of public interest research groups (PIRGs). Cf. PUBLIC POLICY.
A magazine.
The Public Interest is an American NEO-CONSERVATIVE quarterly.

PUBLIC POLICY

The rules and actions of all organs of government, considered in terms of their objectives and their results.
Anything that government (or the state, or SOCIETY) could in principle do, or refrain from doing is at least potentially a matter of public policy.
The PUBLIC INTEREST (1).
This is the usual meaning in legal contexts, especially when judges are giving reasons for their decisions.
NEO-LIBERAL or NEO-CONSERVATIVE.
In the title of an organisation, public policy usually indicates some kind of NEW RIGHT alignment.

PUBLIC SECTOR BORROWING REQUIREMENT

The sum of all public sector DEFICITS.

Federal, State, local, semi-government, etc.

QUANGO

A government agency or corporation that has some independent power and is not part of the ordinary public service structure.

A British word that has not really caught on in Australia. quango actually stands for QUasi-Autonomous National Government Organisation, but here the States as well as the Commonwealth have created many hundreds of quangoes: energy commissions, housing commissions, licensing authorities, marketing authorities, the disastrous Victorian Economic Development Corporation, and so on. Quangoes are an important tool of big government and are often assigned the role of peak organisation for an industry in corporatist arrangements. Their (limited) independence means that a minister can avoid responsibility more easily if a quango is incompetent or corrupt than if his government department is. Managements of some quangoes have learned this lesson and set up corporate subsidiaries that dilute accountability still further. Quangoes also provide a useful supply of jobs for boys.

RACISM

Racism and racialism.
Properly, racism is "the theory that distinctive human characteristics and abilities are determined by race", and racialism is "belief in the superiority of a particular race leading to prejudice and antagonism towards people of other races ..." (OEDS).
Racial prejudice.
The above distinction is too subtle for TV news and the UN General Assembly, and is irretrievably lost. Racist now means racialist, or is just a general term of abuse like FASCIST.
For a long time, racism, in public discourse at least, referred only to racism or racialism by whites in or from Western countries. Guilt-ridden Westerners are now realising, however, that racialism exists in many human cultures. Recent events in Fiji brought this home to Australians, but consider also relations between Tutsi and Hutu, Chinese and Tibetans, Japanese and Koreans, or the experiences of African students in Moscow or Peking.

RANK AND FILE

Originally, corporals and private soldiers; now, union members.

Theirs not to make reply,
Theirs not to reason why,
Theirs but to do or die.
(Tennyson)

REACTIONARY

One who is indiscriminately opposed to change.

To be distinguished from CONSERVATIVES who oppose change which may create instability. The term was introduced by 19th-century philosophical radicals, with the implication that since reactionaries merely "react" to change, and do not initiate it, they need not be taken seriously by PROGRESSIVES. Thus it often denotes little more than disagreement with the speaker's position.

REAGANOMICS

"The economics of looking on the bright side" (The Economist).

The idea was to stimulate economic growth by tax cuts, but Congress could not pass the spending cuts that should have accompanied them. The result was a deficit blow-out. Reagan's loonier advisers seem to have believed that the LAFFER CURVE meant that the tax cuts increase revenue overall. More realistically, Reaganomics was an attempt to implement a programme of SUPPLY-SIDE ECONOMICS, and to transform attitudes to INTERVENTIONISM. The long spell of economic growth and strong employment growth testify to success; the growing debt, burden means that the success can only be judged partial.

REGULATION

Government INTERVENTION "which whether by use of fiat or inducement persuade[s] business entities to pursue their commercial interests in ways they might otherwise not have chosen". (A.J. Moran)

That definition comes from the head of the Commonwealth Government's Business Regulation Review Unit, and he should know. The BRRU estimates the gross cost of regulation as between 9 and 19 per cent of GROSS DOMESTIC PRODUCT; the net cost is lower but still significant.

Regulation can be broadly divided into economic and social, although the categories often overlap. Among the objects of economic regulation are control of MONOPOLIES, promotion of COMPETITION, and correction of MARKET FAILURE. Among the objects of social regulation are health and safety standards, anti-discrimination programmes, minimum wage laws, and so on. In practice, however, regulation often turns out to protect the supplier or worker from the tyranny of the CONSUMER, not the other way round. Very often, regulatory systems are administered to give current members of the industry an easier life at the expense of would-be entrants and of consumers. See also DEREGULATION, CONTESTABLE MARKET.

RENT, ECONOMIC

Payment over and above that which is necessary to maintain the current level of use. Loosely, extraordinary profits.

Suppose you own a gold mine. Gold sells for $400 an ounce. Mines with costs of production (including cost of capital) up to $400 are viable. You are blessed with costs of only $100/oz: you could keep mining if the price fell to $100. At $400, you are laughing and receiving $300 economic rent.

Rent is a characteristic of MONOPOLIES, CARTELS and resource-based industries. Extraordinary profits -- sometimes known as quasi-rents -- in free MARKETS are temporary, because they attract other firms and are in time competed away. They can appear as the result of changes in the COMPETITIVE environment in which the producer operates (changes in CONSUMER preference, factor cost or productive ease, such as the weather) or they can be generated by exploration for new methods, markets or exploitable resources. In the latter case they may be regarded as the necessary reward of the research or exploration process and are not rents at all. See also CONTESTABLE MARKET.

REPRESENTATIVE

There are several kinds of representative, and it is important to know which is meant.

A delegate, a person instructed by others to say or do specific things and therefore not authorised to use her judgment.
A person authorised by another person or persons to use his judgment to defend or promote certain interests of the latter (e.g. lawyer/client, MP/electorate).
As for (ii), but appointed by a third party (e.g. guardian/ward/court).
A person possessing relevant characteristics of the person(s) or thing represented (e.g. the recipients of Maundy Money are, and represent or symbolise, poor people).
A spokesman or organisation who, despite protestations to the contrary, represents no one but himself or itself (e.g. the leader of an association of social workers may claim, while lobbying government, to represent the poor).

The same person may represent the same people in more than one of these senses simultaneously or in rapid succession. Representatives in senses i, ii or iii may well be representative in sense iv as well; delegates may have limited discretion; and so on. But the distinctions are important, and many people who call for better representation of women, homosexuals, cripples, ethnic minorities and so on in the political process fail to appreciate that between sense ii and sense iv. It is also too often the case that politicians present decisions as having been taken by representatives (ii) when in fact they have been taken by representatives (iii), (iv) or (v): the Hawke Government's "Summits" are a case in point.

REPUBLIC

More than simply "not a monarchy".

To use republic to describe equally Pinochet's Chile, Mao's People's Republic of China, Verwoerd's South Africa and Amin's Uganda -- and the USA -- is to empty it of meaning. Vital to historical conceptions of a republic is the notion of consent of the governed, this being more important than the precise mode of election or selection of the head of state and other office-holders.

In this respect, constitutional monarchies are more like republics than like traditional monarchies, which were founded on obedience rather than consent. Australia is in most significant respects a republic already: the de facto head of state is in practice chosen (and can be removed) by the elected government, and there is no doubt that the monarchy would a not survive long without the consent of the people.

If the form as well as the substance of a republic is nevertheless desired, the biggest problem Australian republicans face (sentiment apart) is the allocation and exercise of what are now the reserve powers of the Governor-General. So many republics have found generals and colonels exercising reserve power because their constitutional processes failed in a crisis, that this must be seen as a major weakness. The problem appears to be one of assuring a source of legitimate authority, insulated from political crises, yet only emerging from the background when the ordinary machinery is breaking down. Although far from perfect, the record of the world's constitutional monarchies is more encouraging than that of its republics. (The USA, with its carefully divided authority and famous checks and balances, is one of the few exceptions -- and one can argue that the Founding Fathers only achieved this by designing a permanent constitutional crisis.)

RIGHT (ON THE)

Sounds clear, means little.

Right is an even vaguer term than, at the other end of the SPECTRUM, LEFT. Two senses must be distinguished:

Something (or everything) in the region of REACTIONARY, AUTHORITARIAN, traditionalist, law-and-order, etc. (with connotations of bring-back-the-birch, barefoot-pregnant-and-in-the-kitchen, and children-down-the-coal-mines, not to mention Franco, Pinochet and Greek colonels).
DRY, classical LIBERAL, LIBERTARIAN, etc.

The first sense is the traditional one; the second has recently come into prominence (cf. NEW RIGHT, CONSERVATIVE). All they have in common is that the views they describe run counter to those of SOCIALISTS and people who would describe themselves as on the left; the word is used in the second sense mainly to discredit ECONOMIC RATIONALISTS by linking them with the traditional right (see LEFT for common ground between left and light).

RIGHTS

See HUMAN RIGHTS.

ROSSI'S IRON LAW OF EVALUATION

"The expected value of any net impact assessment of any large-scale social programme is zero."

Peter Rossi is an American specialist on the evaluation of the WELFARE STATE and its programmes. "Net impact" includes benefits and costs across the whole community. Rossi's "Stainless Steel Law" says that "the better designed the impact assessment ... the more likely is the resulting assessment of the net impact to be zero". Rossi says that US experience in the last twenty years "sustains the proposition that over this period the American establishment of policy-makers, agency officials, professionals and social scientists did not know how to design and implement social programs that were minimally effective, let alone spectacularly so."

See INVISIBLE FOOT, PLANNING, SOCIAL ENGINEERING.

SAFETY NET

A welfare system that provides no benefits except to those who cannot earn their own living.

Contrast with the WELFARE STATE's complex web of redistribution and CHURNING. Cf. SOCIAL WAGE.

SCARCITY

The reason for economics.

A situation where there is less of a good or service than people would like (i.e. not enough to satisfy demand at zero price: see MICRO-ECONOMICS). Dishwashing machines, Ferraris, beer and wheat are scarce. Air is not: it is abundant. The whole economic problem is one of apportioning scarce resources in an efficient and socially-acceptable way.

MARKETS achieve EFFICIENCY, but many people find their distributional outcomes offensive. SOCIALISTS concentrate on distribution at the expense of efficiency and wealth creation. MARX simply implied that scarcity would not be a problem under COMMUNISM, requiring his followers to believe "that the comrades in West Africa [would] freely decide to supply cocoa and bananas in just the right quantities to the comrades in Western Europe" (Alec Nove) and that no more people would want harbour views and Snowy Mountain chalets than the landscape would accommodate.

SINGLE-ISSUE POLITICS

Letting one issue count for more than the rest put together.

In a LIBERAL society, single-issue pressure groups must be expected (the "right-to-life" movement is an example). Members of such groups will not vote (or their leaders threaten that they will not vote) for political candidates who disagree with them on the single issue, regardless of the candidates' qualities or views on other issues. They set their single issue ahead of all and every other aspect of politics. This is regrettable, and can be a danger to DEMOCRACY if there are a number of large single-issue groups with incompatible views.

Single-issue politicians are more of a worry. In a democracy, one of the most important functions of politicians is to integrate the demands of all the various interest groups into policies that will serve the general interest. This is why their zealous supporters are continually disappointed by their readiness to compromise. A single-issue politician, whether anti-nuclear or anti-death-duties or whatever, is a politician who refuses to perform this integrating function. In a finely balanced legislative chamber like the Australian Senate, a tiny number of single-issue politicians, able to swing the balance of power, could paralyse the democratic institutions. The lesson is that voters -- who are, after all, ultimately responsible for the way democracy works -- should think carefully before they vote for any single-issue candidate, however appealing.

SMITH, ADAM

Scottish moral philosopher and economist.

Adam Smith (1723-1790) was a key figure in the Scottish Enlightenment. One of the first (after Hume) and perhaps the greatest exponent of the efficacy of economic freedom, as manifested in the free MARKET and free trade, as a promoter of human well-being. Though he wrote before the Industrial Revolution (which his work indeed helped to bring about), Adam Smith's writings remain virtually ageless. See also INVISIBLE HAND, PROTECTIONISM.

It surprises most of Smith's opponents, and many of his proponents, to find that he was also a profound moral philosopher.

SOCIAL DEMOCRAT

In Europe and Australia, a supporter of a MIXED ECONOMY in a WELFARE STATE.
Usually thought of as "left-of-centre", but social democrats are not confined to labour or socialist parties. "Butskellism" in 1950s Britain, combining the names of Conservative chancellor and Labour opposition leader, labelled the social-democratic consensus that endured until the 1970s. Cf. DEMOCRATIC SOCIALISM.
In some American usage social democrat means SOCIALIST.
Cf. LIBERAL.

SOCIAL ENGINEERING

Attempting to change society in accordance with some plan or ideology.

Objects of change may be behaviour, attitudes, relationships, or institutions. Means range from TV and newspaper advertisements to Dachau and Belsen.

Sir Karl Popper makes the useful distinction between "UTOPIAN" and "piecemeal" social engineering. Utopian social engineers have such faith in their distant goal that they are prepared to destroy present SOCIETY as a first step on the road; but this done, they are unable even to devise objective measures of progress towards the goal. Piecemeal social engineering, by contrast, involves a cautious selection of a limited goal to be achieved by incremental change. Most DEMOCRATIC politicians would endorse this. Popper also insists, however, that OBJECTIVE targets must be specified at the beginning so that success or failure may be judged, and that progress must be scrupulously monitored. So far, unfortunately, Sir Humphrey Appleby and the Rt Hon. Jim Hacker have resisted this proposal.

LIBERTARIANS and some CONSERVATIVES reject any form of social engineering (not so the Thatcher government, which has deliberately set out to change Britain into a society of enterprise and POPULAR CAPITALISM). Almost all other governments practise it to some extent, whether it's an Australian "Life. Be in it." campaign, Mr Lee Kuan Yew exhorting Singaporean graduates to have more children, or the collectivisation of agriculture in the USSR.

See also INVISIBLE FOOT, PLANNING, ROSSI'S IRON LAW.

SOCIALISM

Common control of the means of production.
The core of most versions of socialism is that the means of production -- land and capital both financial and physical (i.e. plant) -- should be controlled by the community as a whole and used for its benefit. Socialism sees the social and economic position of individuals as determined by their relation to the means of production, and argues that a change in the economic base from private to public or social control will change the social relations from being class-based and discriminatory to classless and equal.
In practice, "common" ownership or control tends to be state ownership or control (see NATIONALISATION, SOCIETY). The power of the rentiers is not diffused among the battlers, but concentrated (and joined to state power) in the hands of a NEW CLASS of state officials. With common control comes centralised PLANNING (see COMMAND ECONOMY). MONOPOLY state-owned enterprises, protected from COMPETITION, become inefficient and unresponsive; the CONSUMER suffers. Socialism turns an economy into a disaster area (e.g. Poland, Hungary, the United Kingdom in 1979; and see SWEDISH MODEL).
Consequently, most Western "socialist" parties have abandoned the goal of common control, and now seek merely to ensure that privately-controlled means of production are used more or less in the PUBLIC INTEREST. Many would argue that the Australian Labor Party today falls well short of even that goal.
See also DEMOCRATIC SOCIALISM, MARKET SOCIALISM, SOCIAL DEMOCRAT.
The road to communism.
For MARX, socialism is the transitional stage between the collapse of CAPITALISM and the historically inevitable development of COMMUNISM. State ownership (NATIONALISATION) of the means of production -- especially of heavy industry -- was to ensure rapid economic development, the benefits going to the workers. The state would persist as an administrative machine, upholding a new order of legality and a new system of RIGHTS, permitting the emergence of "true" common ownership. Once communism was achieved, SCARCITY would vanish, the state "wither away", and everyone would live happily ever after. It's a fairy story.
Note Marx's emphasis on industrial development and economic growth: he would have despised today's TRENDY, GREEN socialists.
Something to scare the voters with,
As in the phrase "The Hawke socialist Government".
Something to encourage the voters with,
As in the phrase "The Hawke democratic socialist Government".

SOCIALISM, DEMOCRATIC

See DEMOCRATIC SOCIALISM.

SOCIALISM, MARKET

See MARKET SOCIALISM.

SOCIAL JUSTICE

Useful in rhetoric but a hindrance elsewhere.

Those who use it do not define it. According to Hayek, "with reference to a society of free men the phrase has no meaning whatsoever". Scruton points out that "social" and "justice" pull in conflicting directions, "the first towards the whole condition of society, the other towards the self-affirmation of the individual" (DPT). It involves "equity", "equality", "access" and "participation" -- also considerations which may conflict with one another. It is usually spoken of as if requiring some particular (but unspecified) distribution of goods in the community, nation, or world, and, in particular, more generous government welfare programmes.

Pace Hayek, the problem is not that social justice is an empty concept, but that it is such a fuzzy one. This vitiates debate, because people can mean quite different things by the term in the course of a couple of sentences, even without intending to mislead. The concept is almost useless in considering PUBLIC POLICY, because we can never say "social justice requires that this person adopt this course of action" unless we have already said "equity [or common decency, or some other good] requires it."

SOCIAL REASONS

WEASEL WORD for vote-buying.

Social reasons can be found for many things, such as keeping uneconomic railways running and building dams in marginal electorates.

SOCIAL WAGE

A device to moderate wage claims by counting government benefits and services in workers' standard of living.

Because government welfare benefits and other services, charged for -- if at all -- below cost, impinge on the lives of virtually all Australians, it seems reasonable to take them into account in consideration of living standards and wage fixing. But it's something of a PR trick too, because social wage exponents ignore the fact that the government services must be funded by taxation raised from the very wage-earners who are to receive the services (CHURNING). Thus the cost of administration (and any government inefficiency) mean that people would be better off, on average, without the social wage and without the tax. The reduced freedom of choice is another cost. (None of this undermines the case for a welfare SAFETY NET to supplement the incomes of the poorest).

SOCIETY

"How are society's needs to be articulated, the choices made, and by whom?" (Alec Nove).

Many people speak of society as a COLLECTIVE with an existence independent of the people that constitute it: "Society must decide what is to be produced and how." Nove rightly insists "the words 'by society' are literally meaningless as they stand. It is like saying that 'the people' will decide the timetable of the London-Paris air service or the number of onions to be planted. In the real world, millions of millions of interrelated MICRO-ECONOMIC decisions can only be made in offices (and by officials)" -- or, in a MARKET ECONOMY, by the millions of people most directly involved.

SOUTH, THE

See THIRD WORLD.

SPECTRUM, THE POLITICAL

Simplistic to the point of uselessness.

The language of LEFT and RIGHT conceals a fraudulent conceptual package deal and should be avoided in careful political discussion. The left-right spectrum is based on who sat where in the French national assembly nearly two hundred years ago: the supposition that a person's or party's political position could adequately be described by a single dimension was dubious then and is downright misleading now. See LEFT and RIGHT for why.

STATISM

See ÉTATISM.

STRUCTURAL VIOLENCE

Law and order.

NEW LEFT sociologists, critical legal studies academics, terrorists and revolutionaries sometimes argue that the ordinary mechanisms of law-making and law enforcement in "bourgeois" (i.e. DEMOCRATIC) societies systematically and repeatedly do violence to certain groups, even though their legal RIGHTS (or "rights") are upheld and no hand is raised against them. This imperceptible "violence" they hold to justify actual violence on the part of the allegedly oppressed groups or their self-appointed REPRESENTATIVES.

It is to be expected that extreme groups claiming to act on behalf of Aborigines will bring this argument forward; the position of Aborigines in Australian society (and prisons) gives it a certain plausibility (but see sense (3) of DEMOCRACY).

Concepts like structural violence and repressive tolerance are literally mind-numbing. They blur or conceal important distinctions. If you believe in structural violence, it is easy to believe that the suffering caused by the Great Depression in the West is on the same moral plane as the tens of millions of deaths caused by Stalinism in the USSR and eastern Europe. If you believe in repressive tolerance, it is easy to believe that Cuba or Nicaragua are really freer than Australia or Britain.

SUBSTITUTE

More or less close substitutes exist for practically all goods and services.

Private car, hire car and taxi; buy or rent; beer and wine and spirits; microwave link, satellite and land-line; road and rail; air and surface; and, as Marie Antoinette perceived, pain and brioche. There are two main consequences:

MONOPOLISTS can only extract RENT to the point at which consumers find a substitute more attractive (and entrepreneurs will try to develop new and closer substitutes: see COMPETITION).
REGULATION that limits the supply, price or quality of some good or service will encourage entrepreneurs to come up with unregulated substitutes: for instance, the growth of non-bank financial institutions during the years when banks were strictly regulated.

SUNSET

Sunset industry.
One whose decline is inevitable but can be postponed by government protection or subsidy. Causes of decline include technological change (blacksmiths and slide-rule manufacturers), lower-cost competitors or SUBSTITUTES (Australian cars and British coal), etc.
Sunset clause.
A provision to limit the life of legislation or REGULATIONS. Thus a law may be made that will repeal itself after a number of years, or a government agency be established whose continued existence must periodically be given explicit Parliamentary approval. The term is modern and American, but the principle of laws with limited life goes back a long way in the struggle between Crown and Parliament in England. Sunset clauses are sometimes used in Australian legislation establishing a QUANGO to perform a one-off function (metrication, the Bicentenary...), but because it is usually easier to begin than to end government programmes (see PUBLIC CHOICE THEORY) there is a case for sunset clauses in most legislation and regulations. Victorian and South Australian regulations now routinely include sunset clauses, and other States are tending to follow this lead.
Sunset as a noun is beginning to be used for the lapse of regulations caused by a sunset clause; likewise the verb to sunset. Ugh!

SUPPLY-SIDE ECONOMICS

Concentration on an economy's productive performance.

Supply-side economics is a MACRO-ECONOMIC doctrine that produces MICRO-ECONOMIC policy prescriptions. Priority is given to the need for flexible MARKETS for the factors of production -- labour, land, capital and entrepreneurship. Supply-siders therefore call for removal of disincentives to work and invest. They support tax reform, DEREGULATION, the ending of MONOPOLIES including trade union monopoly power, and the concept of a welfare SAFETY NET. Supply-side economics is in many ways a return to the concerns of the classical economists.

"Supply-side" was a buzz-word in the early years of the Reagan administration, but the naive, gung-ho version espoused by some White House staff is better called REAGANOMICS -- especially since there is hardly a government in the world that is not trying hard to improve the supply side of its economy.

Cf. AUSTRIAN ECONOMICS, LAISSEZ-FAIRE.

SWEDISH MODEL, THE

The mixture of policies that accompanied Sweden's economic success from the early 1950s to the late 1970s.

The "Swedish model" had four main ingredients:

A fairly tight FISCAL POLICY.
Free product MARKETS. Swedish firms were exposed to domestic and international market forces.
Wage policy objectives that included maintaining international competitiveness and reducing differentials. The latter helped productive firms to expand while making things harder for unproductive firms and industries, thus speeding structural change.
Activist labour market policies to keep unemployment down. These included both measures to improve the mobility of labour and other aspects of labour market efficiency (retraining schemes, removal allowances, job vacancy information services) and measures to conceal unemployment and transfer the costs from the individual to the community (job creation schemes -- which do however help keep the unemployed in touch with the labour market).

This worked well until the second half of the 1970s, when the combination of high energy costs and cut-price competition from Asian countries (especially in steel and shipbuilding) produced adjustment pressures the system could not handle. More recently, pro-union legislation made the labour market less flexible, and public-sector unions, not exposed to COMPETITIVE forces, have broken the consensus on an internationally-competitive wages policy.

TERMS OF TRADE

The relationship between prices of imports and prices of exports.

Take an index of prices a country receives for its exports; divide it by an index of the prices it pays for its imports; multiply by 100 for convenience; and you have an index of terms of trade. Deteriorating terms of trade (a falling index) mean that a greater quantity of exports are needed to pay for a given quantity of imports. This is analogous to workers having to work longer hours to maintain their standard of living in the face of either pay cuts or price rises.

THATCHERISM

MONETARISM with handbag and perm.

Unfair. The lady goes on and on, but she is much too astute a politician and too sensible a person to be a doctrinaire adherent of any MACRO-ECONOMIC theory. In her own words, "The fundamental belief is that the better you do yourself, the greater your obligations and responsibilities to your own family, to your community, and to your country."

THIRD WORLD, THE

"Under-developed countries with over-developed susceptibilities" (Edmund Crispin).

The 100-odd countries of the third world don't even have that in common. The term wasn't much use except for rhetoric when it was invented more than 30 years ago -- and 30 years was more than long enough for Japan and West Germany to recover from wartime devastation and become world economic powers. Other formerly third world countries -- e.g. Singapore and South Korea -- are following suit; best to abandon a classification that puts these in the same category as Peru and Burundi (not that these two have much in common either).

The South (as opposed to the North) means as much, or as little, as the third world. And it's a bit awkward that Australia and New Zealand are North while Bhutan and Nepal are South and Greenland is forgotten.

TOTALITARIANISM

"Everything within the state, nothing outside the state, nothing against the state" (Mussolini).

Totalitarian states allow no freedom of association. Official trade unions, professional bodies and even social and sporting organisations are organic parts of the state or the ruling party; unofficial ones are proscribed. State and party deny the validity of any morality or legitimacy apart from official IDEOLOGY. Institutions, such as the church, capable of independently inculcating values and morals, or claiming a legitimacy independent of the state, are suppressed or strictly supervised. Cf. AUTHORITARIANISM, COMMUNISM, LIBERALISM. See Orwell's Animal Farm and 1984.

Totalitarianism is a twentieth century invention. Earlier tyrants would no doubt have liked it, but lacked the technology.

TRADE BALANCE

See DEFICIT, PROTECTIONISM.

TRENDY

Despised by Old LEFT and NEW RIGHT.

UGLIES

AUTHORITARIAN DIRIGISTS, often given to socially-divisive rhetoric.

Uglies blame the nation's troubles on Aborigines, the unemployed, feminists and trade union officials; although they use less polite terms. In times of economic crisis they seek personalised or group scapegoats. Formerly widespread in the Liberal Party in some States, now seldom seen outside the National Party.

UNITED NATIONS

Forum for the THIRD WORLD to abuse the West.

"The most concentrated assault on moral reality in the history of free institutions, and it does not do to ignore that fact or, worse still, to get used to it". (William F. Buckley, Jr)

UTILITY

Satisfaction, welfare, happiness, money, whatever makes you feel better.

"To say that someone derives utility from a good or event is to say that they prefer the good to exist rather than not to exist" (MacDME). Damon Runyon said people do the best they can for themselves and their families, which comes to much the same thing in practice. Utility is a concept with little explanatory or predictive power: to say people want to maximise their utility is to say that they want to do whatever it is that they want to do.

PUBLIC CHOICE THEORY and the ECONOMICS OF BUREAUCRACY examine the problems that arise when individuals' utility-maximising leads to actions that do not best serve the interest of the employer or community. Archbishop William Temple put it better when he said that the problem is to arrange things so that "self-interest prompts what justice demands".

UTOPIA

An imaginary, ideal state or society.

The name comes from Thomas More in the 16th century but the tradition of inventing perfect societies is much older, going back at least to Plato, and continues to this day. Details of people's utopias need not concern us: what is important is that inherent in the very notion of utopia is stasis. Utopia is a REACTIONARY society: perfection having been achieved, any change must be for the worse.

The creator of a utopia must therefore either posit a change in human nature so that no one will want any change, or provide a means of suppressing any citizens who attempt to change things. In the latter kind of utopia, innovation in all areas -- ideas, artistic expression, technology, fashion, etc. -- would have to be strictly monitored for potential social effects, if not prohibited altogether. As Orwell and Huxley saw, Utopia tends to be totalitarian.

Most utopias are literary exercises, but some are associated with political movements. COERCIVE UTOPIANS believe it is possible to build a better society (through SOCIAL ENGINEERING perhaps including revolution), that they alone know how to do so, and that this future prospect justifies the present use of government power (or revolutionary violence) against those who stand in the way. The phrase is sometimes used simply to smear those on the left (guilt by association with those ultimate coercive utopians, Pol Pot and the Khmers Rouges: cf. new right); but coercive utopians are found on both sides: some conservative groups -- e.g. the religious right in the USA -- are as ready to impose their beliefs on others as are those on the left (and they are often less frank about it).

Sir Karl Popper points out that the utopian approach logically requires (a) the Platonic belief that there is one absolute and unchanging ideal form of society, (b) rational methods of finding out once and for all what this ideal is, and (c) rational methods of finding out the best way to achieve it. But, he says, even Plato himself would admit that "there is no rational method for determining the ultimate aim, but, if anything, only some kind of intuition".

WEASEL WORD

Euphemism used to avoid facing up to what the thing described really is.

"In our time, political speech and writing are largely the defence of the indefensible. ... Thus political language has to consist largely of euphemism, question-begging, and sheer cloudy vagueness." The higher end of the conflict spectrum, negative patient outcomes and revenue enhancement programmes. Ugh! War, death and taxes. "Such phraseology is needed if one wants to name things without calling up mental pictures of them."

The quotes come from Orwell's "Politics and the English Language", which everyone working with words or in politics should read at least every three years. Credit for the phrase weasel word is claimed by F.A. Hayek, who had in mind "the essential slipperiness of the animal".

WELFARE SAFETY NET

See SAFETY NET.

WELFARE STATE

Social security from cradle to grave.

The typical welfare state -- Britain, Sweden, the Netherlands -- (i) has a MIXED ECONOMY; (ii) has a SOCIAL-DEMOCRATIC tradition of government; (iii) undertakes to provide health care, education, and income support to all citizens regardless of their means or earning power. Hospitals, schools, universities, etc., are owned and run by the state, which also provides invalid and old-age pensions, unemployment benefit, student grants, child allowance, district nurses, chiropodists, pharmaceutical benefits, and on and on. The system is paid for by high taxes on average incomes (there are just not enough rich people), with the accompanying costs (see CHURNING, LAFFER CURVE). Large parts of the system share the disadvantages, for CONSUMERS, of all NATIONALISED industries and MONOPOLIES.

Declining birth rates, and the increasing ability of medicine to keep very sick people very expensively alive, mean that all welfare states face crisis in the next few decades as the number of active taxpayers declines in relation to the number of welfare recipients. The comprehensive welfare state is likely to be replaced by a more modest WELFARE SAFETY net.

WET

A politician with a soft heart and short sight.

In English public schools, wets ran blubbing to Matron when ragged by bullies and rotters. The term came to describe politicians, usually CONSERVATIVES, who cannot face hard decisions and who, for considerations of short-term popularity as well as a genuine concern for the welfare of the poor, consistently take the easy option even when they know this is storing up trouble for the future. In Australia, wets are (usually) LIBERALS and tend to favour a high level of INTERVENTIONISM, industry PROTECTION, and welfare spending. Cf. DRY.

ZOON POLITIKON

See CLAPHAM OMNIBUS, MAN ON THE.

BIBLIOGRAPHY

Many textbooks, reference books, and other sources have been consulted and/or quoted. An incomplete list follows. Initials at the beginning of an entry (e.g. DGI, OED) are the abbreviated reference used in the text.

-- (British Labour Party), The Communist Solar System, Industrial Research and Information Service, London, 1957.

Axelrod, R., The Evolution of Cooperation, Basic Books, New York, 1984.

Barnhart, C.L. et al., The Second Barnhart Dictionary of New English, Barnhart, Bronxville NY, 1980.

Bannock, G., R.E. Baxter & R. Rees, The Penguin Dictionary of Economics, Penguin, Harmondsworth, 3d edn 1984.

Bernstam, Mikhail, interview on Asa Briggs's TV series Karl Marx: the Legacy, shown on ABC-TV.

Bullock, A. & O. Stallybrass (eds), The Fontana Dictionary of Modern Thought, Fontana, London, 1977.

Bullock, A. & R.B. Woodings (eds), The Fontana Biographical Companion to Modern Thought, Fontana, London, 1983.

Carew, E., The Language of Money, Allen & Unwin, Sydney, 1985. A dictionary of finance and money markets, not economics.

Crispin, E., The Glimpses of the Moon, Penguin, Harmondsworth, 1977.

DGI: Button, J., A Dictionary of Green Ideas, Routledge, London, 1988. At least as idiosyncratic as this volume (in a very different direction) and with other flaws, but comprehensive and up-to-date and with a saving lightness of touch.

DPT: Scruton, R., A Dictionary of Political Thought, Pan, London, 1983. Excellent, wide-ranging.

Djilas, M. & G. Urban, "Djilas on Gorbachov", Encounter, September 1988.

Finnis, J., Natural Law and Natural Rights, Clarendon, Oxford, 1980.

Flew, A., Thinking about Social Thinking, Blackwell, Oxford, 1985. A guide to logical thinking in the social sciences.

Grose et al., A Dictionary of Buckish Slang, University Wit and Pickpocket Eloquence, Chappel, London, rev. edn 1811.

Hancock, W.K., Australia, Benn, London, 1930.

Hayek, F.A., "The Keynes Centenary: the Austrian Critique", Economist, 11 June 1983.

Hayek, F.A., Social Justice, Socialism and Democracy, CIS, Sydney, 1979.

Jaensch, D. & M. Teichmann, The Macmillan Dictionary of Australian Politics, Macmillan, Melbourne, 2d edn 1984. Provides formal definitions ("leader of the opposition", "money bill") but otherwise a disappointment.

Knopfelmacher, F., "The Case against Multiculturalism" in R. Manne (ed.), The New Conservatism in Australia, OUP, Melbourne, 1982.

MacDME: D. W. Pearce (ed.), Macmillan Dictionary of Modern Economics, Macmillan, London, 3d edn 1986.

Minogue, K., "On Hyperactivism in Modem British Politics" in M. Cowling (ed.), Conservative Essays, Cassell, London, 1978.

Moran, A.J., "Business Regulation -- its Scope, Costs and Benefits in Australia", in M. James (ed.), Restraining Leviathan: Small Government in Practice, Centre for Independent Studies, Sydney, 1987.

MQD: Macquarie Dictionary, Macquarie Library, Sydney, 1981.

Murray, C., In Pursuit of Happiness and Good Government, Simon & Schuster, New York, 1988.

Nove, A., The Economics of Feasible Socialism, Allen & Unwin, London, 1983.

Oakeshott, M., Rationalism in Politics and other essays, London, Methuen, 1962, page 127.

OED: The Oxford English Dictionary.

OEDS: Supplement to the Oxford English Dictionary.

Orwell, G. "Politics and the English Language", Horizon, 76 (April 1946); reprinted in Shooting an Elephant (Secker & Warburg, London, 1950), Selected Essays (Penguin, Harmondsworth, 1957) and Inside the Whale and other essays (Penguin, Harmondsworth, 1962 and many reprintings).

Pass, C., B. Lowes & L. Davies, Collins Reference Dictionary of Economics, Collins, London, 1988. Many excellent definitions; many disappointing omissions for such a recent work (e.g. public choice, economics of bureaucracy, Goodhart's Law).

Pococke, J.G.A., The Machiavellian Moment: Florentine political thought and the Atlantic republican tradition, Princeton University Press, Princeton, 1975.

Popper, K. The Open Society and its Enemies (5th edn), London, Routledge Kegan Paul, 1966.

Rathbone, C. & M. Stephenson, Guide to Political Quotations, Longman, Harlow, 1985. Puts its rather small selection of mostly British quotations usefully into context.

Revel, J.-F., "The Varieties of Corruption", Encounter, March 1987 (reprinted in Clear Thinking, January 1989).

Robbins, L., An Essay on the Nature and Significance of Economic Science (2d edn), Macmillan, London, 1935.

Root, H. (ed.), Henry Root's World of Knowledge, Weidenfeld & Nicholson, London, 1982. "A dictionary of common sense"; useful misinformation for dinner party conversations.

Rossi, P., "The Iron Law of Evaluation and Other Metallic Rules", in J. Miller & M. Lewis (eds), Research in Social Problems and Public Policy volume 4, JAI Press, Greenwich Connecticut, 1987.

Schumpeter, J.A., Capitalism, Socialism and Democracy, Harper, New York, 1942.

Scruton, R., Thinkers of the New Left, Longmans, Harlow, 1985.

Seldon, A. & F.G. Pennance, Everyman's Dictionary of Economics, Dent, London, 1976. Getting a bit dated, but the most perceptive one-volume dictionary of economics.

No comments:

RICHARD J WOOD

Today, those who subscribe to the principles of individual liberty, limited government, the free market, and the rule of law call themselves by a variety of terms, including conservative, libertarian, classical liberal, and liberal.

I see problems with all of those terms.

"Conservative" smacks of an unwillingness to change, of a desire to preserve the status quo.

Only in Australia do people seem to refer to free-market capitalism — the most progressive, dynamic, and ever-changing system the world has ever known — as conservative.

Additionally, many contemporary Australian conservatives favour state intervention in some areas, most notably in trade and into our private lives.

"Classical liberal" is a bit closer to the mark, but the word "classical" connotes a backward-looking philosophy.

Finally, "liberal" may well be the perfect word in most of the world — the liberals in societies from China to Iran to South Africa to Argentina are supporters of human rights and free markets — but its meaning has clearly been corrupted by contemporary Australian liberals.

The philosophy that animates my work has increasingly come to be called "libertarianism" or "market liberalism."

It combines an appreciation for entrepreneurship, the market process, and lower taxes with strict respect for civil liberties and scepticism about the benefits of both the welfare state and foreign military adventurism.

The market-liberal vision brings the wisdom of the Australian Founders to bear on the problems of today.

As did the Founders, it looks to the future with optimism and excitement, eager to discover what great things women and men will do in the coming century.

Market liberals appreciate the complexity of a great society, they recognise that socialism and government planning are just too clumsy for the modern world.

It is — or used to be — the conventional wisdom that a more complex society needs more government, but the truth is just the opposite.

The simpler the society, the less damage government planning does.

Planning is cumbersome in an agricultural society, costly in an industrial economy, and impossible in the information age.

Today collectivism and planning are outmoded and backward, a drag on social progress.

Market liberals have a cosmopolitan, inclusive vision for society.

We reject the bashing of gays, Japan, rich people, and immigrants that contemporary liberals and conservatives seem to think addresses society's problems.

We applaud the liberation of blacks and women from the statist restrictions that for so long kept them out of the economic mainstream.

Our greatest challenge today is to extend the promise of political freedom and economic opportunity to those who are still denied it, in our own country and around the world.

My ever-growing areas of expertise include the environment, deregulation, workplace relations, energy, and governance.

On these and other topics I speak at conferences, lectures and seminars, and publish a wide variety of magazines, occasional papers, and comprehensive issue backgrounders.

I also participate in the mainstream debate, appearing in newspapers and journals worldwide.

Take some time to look around my website.

I have currently an enormous range of papers, publications, commentary and issue analysis online, as well as information on upcoming events around the country.

Countdown:

Policy Papers

Australian coastal shipping: the high price of protection (1990)
Too few jobs: why governments can't cure unemployment (1990)
Vested interests and the public interest: Submission to EPAC (1990)
The destruction and creation of jobs (1990)
The Telecom monopoly, natural or artificial? (1991)
Australian grain marketing: achieving lower costs (1991)
Towards efficient transport (1991)
Higher education in Australia: a way forward (1991)
Empty bed blues: Australian health care policy (1992)
Free to fly: practical airline deregulation (1992)
The sources of union power (1992)
What do our children know?: a study of educational standards (1993)
Who pays for protection (1993)
Deregulate or decay: the lesson of the 1930s for the 1990s (1993)
Fiscal anarchy: the public funding of multiculturalism (1993)
Apprenticeships (1993)
Industry protection, a primer (1995)
The economics of mineral export licences (1995)
A new approach to defence: the Wrigley report and after (1995)
Dividing the spoils: markets, government and corruption (1996)
Honest money (1997)