“It’s the economy, stupid.” So said Bill Clinton when it came to the 1992 presidential election in the USA. He was probably right, that when it comes to politics people really do care about the economy, because in the end people ultimately care about what affects their own personal finances. But as we approach very uncertain economic times, governments around the world are facing the fact that the levers they have traditionally used to impact the economy, seem either to have disappeared or have become terminally jammed.
In Australia governments have relied on two main levers. The first is fiscal, meaning the government’s ability to impact the economy by its own spending. During the GFC, governments in Australia spent huge amounts of money on things like schools and insulation, resulting in a massive boost to the economy when it was facing tough times. However now the cupboard is bare the debts have to be repaid and the political imperative is to return the budget to surplus. In Australia, as well as most of the world, the lever of stimulus is rusted so tightly that governments will have little ability to move the lever for some decades yet.
The second lever is monetary, meaning that through influence governments can seek for the supposedly independent Reserve Bank to lower interest rates, in an attempt to get credit and the economy flowing. Again this lever looks ineffective, as the banks are unwilling to follow the Reserve Bank tune as their costs of raising money has escalated. In short, the Reserve Bank is probably going to be unable to move commercial and residential mortgage rates by this lever of economic control. The lever might still be there but it seems disconnected from the engine.
Without any control it won’t really matter who governs Australia, as our destiny will actually be in the hands of international money markets (who lend us money), and the Chinese communist government (who buys most of our iron ore). Of course what happens to the Aussie Dollar may also help or hinder our economic future, but again we can’t really rely on a system of currency fluctuations that are determined basically by a casino we call ‘foreign exchange’.
Actually all that sounds bad, but control is probably an overrated concept. Minor things like natural weather disasters, the transmission of disease, the spread of viruses, the outbreak of war, the attacks of terrorists, and a whole raft of things we generally call accidents, are all pretty much beyond our control and most of the time even beyond government control.
All this might lead us to despair. But there are alternatives. We could give up the idea that we are gods that determine our own destiny. We could in humility seek after God by faith, instead of demanding that He impress us by logic or miracles. We could be a little more thankful for what we have and a lot less confident that we have earned our way to prosperity. We may even learn that our quality of life may grow independently of our asset balance, if we stopped worrying about what the government and Reserve Bank is doing and instead determined to work hard, take responsibility, accept that we have had it good for a long time and practice a bit more generosity.
It might even be a good idea to resurrect the ancient spiritual art of prayer.
“Then the LORD answered Job out of the storm. He said: “Who is this that darkens my counsel with words without knowledge? Brace yourself like a man; I will question you, and you shall answer me. “Where were you when I laid the earth’s foundation? Tell me, if you understand.” Job 38: 1-4