Stan Grant: Economy is destiny, so what does an ideal society look like?

Stan Grant: Economy is destiny, so what does an ideal society look like?

Stan Grant: Economy is destiny, so what does an ideal society look like?

Updated 7 February 2018, 17:10 AEDT

Nation's economies shape their destinies and we hold the keys.

"It's the economy, stupid!" Politicians ignore Bill Clinton's words at their peril.

In so many ways, economy is destiny.

As a correspondent I saw it first hand in China: half a billion people lifted out of poverty.

The Chinese leader Deng Xiaoping declared "to get rich is glorious", lighting the fuse of economic reform that has the nation on track to become the biggest economy in the world. By some measurements, it already is.

I have seen it elsewhere: economics was crucial to ending "The Troubles"; the conflict between Catholic and Protestant faith in Northern Ireland.

The census revealed that Irish Catholics were often locked out of work or funnelled into low paying, less skilled jobs.

Policies of fair representation were implemented, leading to affirmative action.

Following the Good Friday peace agreement, fair employment and treatment legislation was strengthened.

Better jobs, a stronger economy gave people a peace dividend.

Economic growth has shaped our lives

Economics are never far from our headlines: look around today — global stock markets in free fall; fears of rising inflation and hikes in interest rates; fears of a debt crisis in China.

Economists require a mathematician's brain and a soothsayer's powers of prediction: little wonder it is called "the dismal science".

Tiring of "on the one hand, and on the other" analysis, US President Harry Truman famously asked to be sent a "one armed economist".

Economics is in many ways, a defining story of our age.

Economic growth has transformed the world and accelerated democracy. It has been the engine of progress.

In his book Free Market Fairness, political philosopher, John Tomasi, quotes the economist Robert Fogel:

"It took four thousand years to go from the invention of the plow to figuring out how to hitch a plow to a horse. And it took 65 years to go from the first flight in a heavier-than-air machine to landing a man on the moon."

Tomasi reminds us how economic growth has touched our lives, making us richer than our forebears could have imagined:

"Americans today find themselves some eight times wealthier than their ancestors in 1900."

Of course there has been recession and depression but also reinvention and recovery.

The tax question

The global financial crisis of 2008 shook the foundations of the world financial order; recovery has been slow.

But the International Monetary Fund is forecasting global economic growth of 3.9 per cent this year; what is driving it? Taxation.

Donald Trump's sweeping US tax cuts were likely to boost investment bolstering America's trading partners.

Here too, taxation is front and centre.

It is emerging as a battleground in the lead up to the next election.

There is a clear choice: The Liberal-National coalition is banking on cutting tax for companies and trusting it will trickle down into more jobs and increased wages.

Labor is blocking the cuts, supporting a reduction for companies earning less than two million dollars a year.

Opposition Leader, Bill Shorten, says he is aiming to support families struggling with rising prices and stalled wage growth.

This is the politics of our age: as former Liberal Party federal director Brian Loughnane has written lately, "we are descending into tribes."

Who gets what? The age-old question

Amidst the numbers — who gets what? How many jobs are created? How much growth is generated? — there is a fundamental philosophical question: what sort of society should we have?

How do we deliver fairness? How do we distribute wealth?

These questions have occupied the great minds for centuries.

John Stuart Mill warned of the dangers of a free market economy where "the rich regard the poor, as, by a kind of natural law, their servants and dependents".

Mill made the distinction between the production and distribution of wealth. As John Tomasi writes:

"The transformation of liberalism from a doctrine of strictly limited government to one of more expansive government begins here".

At the other end of the spectrum are those like Economist and philosopher, Friedrich Hayek, who valued individual liberty above all. As Tomasi points out, for Hayek the idea of social justice "is a piece of incoherent nonsense".

Hayek is seen as the father of neo-liberalism, the dominant economic model of our times: a free society was founded on the pursuit of individual purposes, not interventionist governments pursuing social or distributive justice.

John Tomasi says "liberalism has long been divided between a 'free market' tradition and a 'democratic' one."

Contemporary politicians have softened the hard edges of the rival traditions, but as voters we are asked to make a choice.

Economic theory is all about the battle of ideas: what would an ideal society look like?

It is a contest spelled out in Thomas Hoerber's Hayek vs Keynes: Hayek arguing the pursuit of profit is the moral foundation of society, generating wealth spread out from the top to the bottom — from entrepreneurs to workers; Keynes dismissing the drive for profit alone arguing for planning and government intervention to deliver fairness and protect liberty.

Here is the philosophical question we are all being asked: those advocating cutting tax at the top argue that it will trickle down to the poorest; it will generate jobs and wealth will be redistributed in higher wages.

Those sceptical point to growing inequality, arguing the rich will hoard the wealth.

Is growth always good?

Financial Times journalist David Pilling questions the whole obsession with economic growth in his book "The Growth Delusion": he describes it as an "arms race between individuals who must always stay one step ahead of their neighbours".

If economic growth is just about making the rich richer and the least advantaged work harder and harder, Pilling writes, "… then you are entitled to ask what, precisely, is all this growth for?"

The noise is going to get louder, the contest more fierce between now and the next election: the temptation, understandably, is to focus on the short-term pay off: what's in it for me?

The harder question is "What's in it for us?"

Do we believe in free market fairness or do we believe it is fundamentally unfair?

Do we believe in the ultimate freedom of the individual or do we surrender some freedom to a greater good?

It is the economy, stupid! And economy in so many ways, is destiny.