by Padraic P. McGuinness, presented at the Tasman Institute in 1991

Max Newton died a few months ago after a very chequered career, which began as a brilliant student of economics, passed through the Commonwealth Treasury, and then diverged into journalism.

His career in journalism in its first phase is well known.

This began with his recruitment by Fairfax’s Rags Henderson. He progressed into the job of Managing Editor of the Australian Financial Review, then a struggling and very tame business paper, chiefly noted for its obsequiousness to the great and the good. He ruthlessly shoved aside the old guard, and persuaded the management to allow him to take the paper daily — the first national daily paper. In his quite short time at the AFR he revolutionised the treatment of economic issues in Australia, taking the economic debate not only into a more sophisticated treatment than had been known in the Australian press (with the partial exception of Tom Fitzgerald’s articles when he was Finance Editor of the SMH), but what proved to be important, a new focus on microeconomic issues. That terminology was unknown outside academic circles at the time.

What Newton did was point Australian economic journalism in a new direction, looking at the economic issues and corruption surrounding the use of the tariff system and other forms of industry protection. He realised that apart from a few protesters like Albert Date at the Tariff Board during the fifties, and Bert Kelly’s father before him, government was becoming a captive of domestic policies of such as Black Jack McEwen. This had long been obvious, but it was not until the fifties and sixties that a rational assault on the protection structure began. Hitherto the debate had been dominated by the Brigden Report approach (which argued for protection as a means of raising manufacturing wages), as rationalised in the Stolper-Samuelson theorem (which is, essentially, that protection by raising the price of manufactures will increase the demand for labour, and hence raise real wages in manufacturing at the expense of profits in all industries, and especially agriculture). Max Corden is the Australian economist who did most to destroy the apparently rational argument along these lines.

Let me interpolate here an account of my own sole meeting with Newton in this era. I had graduated in economics in 1960, and worked as a teaching fellow at the University of NSW in 1961. Refusing to accept the “sixty per cent must pass” rule, regardless of standards, in force at that establishment, I did not apply for renewal of the appointment in 1962. Newton’s influence was just then beginning to be felt at the AFR, and during the year I offered to write for the AFR. Go and write something for me, he said. I returned a day or so later with a couple of thousand words on the Reserve Bank’s approach to monetary policy — very critical. He read it, and grunted, “Hmph. That’s the kind of stuff I write. Piss off.” So I went to Britain and worked for the Russians instead. Years later, back working for Bill Hayden, he used to refer to me abusively in his newsletter Incentive as a member of the “Whitlam black panther government”.

The AFR was much more exciting reading under Newton, but staggered badly at being taken daily when the market was really not ready.

He was not happy, and went off to persuade Rupert Murdoch to let him start The Australian as a national daily of politics, economics and the arts, based in Canberra. The AFR was left in the care of Vic Carroll, who did not abandon the new independence of thought, and slaved day and night to build the paper up.

Newton’s career at The Australian did not last long. Inevitably he fell out with Rupert Murdoch. So he went off to found a newsletter empire, and then stepped up his career as an economic guerilla, conducting guerilla warfare against those aspects of government policy, especially with respect to protectionism, of which he disapproved. He was indeed effective. Possibly the high point of his damaging flank attacks on the government of the day was when Jack McEwen had his home raided by federal police looking for supposed evidence of Japanese payments, and payments for information to government bureaucrats (both of which were probably true).

From that time on, things became increasingly murky and Newton became increasingly personally desperate. He dabbled in pornography and related sources of income, drank heavily and declined into bankruptcy. His relations with tax authorities, and other areas of the law, became increasingly dubious, and he finally fled Australia never to be able to return, under threat of prosecution, until his widow brought his ashes home.

But in the United States began one of the most surprising phases of his career, when from absolute rock-bottom he rebuilt himself into a significant economic and financial commentator in the United States. Rupert Murdoch, not an unforgiving man, helped him by encouraging his employment as financial editor of the New York Post, where his energy, shrillness and aggression made him once again a thorn in the side of officialdom.

He embraced monetarism in its purest form with great enthusiasm (his collaborator and guru in this area was David Meiselman, Milton Friedman’s collaborator in waging war against the Keynesian orthodoxy in a classic exchange in the American Economic Review (the senior authors of both sides, Modigliani and Friedman, later collected Nobel prizes, for what that is worth). Unlike many of the supporters of Reaganomics, Max never fell for pure quackery (like that of Art Laffer or Jude Wanniski), however eccentric his positions might sometimes seem to have been.

Reverting to old loves and hates, he wrote a book attacking the policies of the Federal Reserve Board which is much livelier and more effective than another book on the Fed published about the same time, William Grieder’s Secrets of the Temple. This is one of those earnest door-stopper tomes beloved of the US publishing industry, in which unnecessary erudition, or rather gossip collecting, is worn extremely heavily.

Newton’s Australian career resumed in the form of a regular column in The Australian, as well as a newsletter on world financial markets, along the lines of the newsletters he produced in the US. This allowed him to once again play, almost by accident, a guerilla role.

A piece on the Arbitration/Industrial Relations Commission was a typical Newton outpouring — full of hyperbole, abusive, foaming at the mouth, good fun to read, with a fundamentally accurate point wildly overstated.

The IRC did not like it, and invoked section 299 of the IR Act, which reproduces the same clause of the Conciliation and Arbitration Act. This says that a person shall not, among other things, “by writing and or speech use words calculated … to bring a member of the Commission or the Commission into disrepute.”

This is an extraordinarily wide and strong power. Virtually anything said or written about the commission or a member of it which was less than fawning in its flattery could be interpreted as bringing it into disrepute (even a literal description of its activities would often be enough for this). Any effective criticism, [no] matter how moderately expressed, is in effect forbidden by the Act. The word “calculated” has been interpreted by the courts (as for example by Justice Pincus of the federal court in 1989, when he fined Norm Gallagher $250 under section 299) as meaning anything along the lines of “which may be considered by anyone” to bring the commission into disrepute. It means that even by discussing the Commission’s behaviour in this matter I could be in breach of the Act, and the lawyers have already insisted that I should not quote the words Newton used. It is certainly a wider power than that represented by the existing common law with respect to contempt of court — and the IRC and the industrial relations system.

It has been invoked very rarely, but it seems that this time Newton hurt a few feelings, and provoked the Director of Public Prosecutions, apparently at the behest of President of the IRC into launching a prosecution. But Newton was not in reach. Rather than prosecuting the then editor of The Australian, however, the DPP has preferred to attack News Ltd, which has much wider implications still. News Ltd is fighting back by taking the matter to the High Court, on the grounds that such an infringement of free speech cannot be an “incidental” power in terms of the Constitution.

There is a precedent for this in a High Court ruling related to the use of the terms relating to the Bicentennial in 1988. It will be an important case which may lead to the establishment of a much firmer presumption of the right to free speech than has existed hitherto. In addition, a Victorian Liberal backbencher has introduced a private member’s bill to amend this clause of the IR Act — which will have little effect unless the government runs scared in the face of a possible High Court striking down of the clause.

So even from the grave, Newton is continuing to wage guerrilla warfare against the industrial relations system which has done so much harm to the Australian economy.

This concept of guerrilla economics is, I think, a significant one. It refers to the role played by independents, and especially journalists, in opposing the government of the day in issues of economic policy, and indeed of opposing whatever are the easy and conventional orthodoxies.

But is has to be distinguished from mere populism, or the peddling of snake-oil, which becomes fashionable especially in hard times or times of great social change or upheaval. It also has to be distinguished from the merely self-indulgent striking of poses which sometimes is confused with criticism and independence. One of the characteristic features of both academic economics and journalism is the active promotion of product differentiation.

Economists practice it when they look for theoretical curiosa in order to pretend to original discoveries, or the espousal of a trivial theoretical insight, like the Pitchford “discovery” that if you assume away adjustment costs, then external debt is not a long term problem. A rather more interesting example is that of “strategic trade theory”, developed chiefly by Paul Krugman of MIT. This involves the very unoriginal notion of applying the theory of imperfect competition to international trade, and discovering that it will sometimes yield different results to the assumption of perfect competition. Although Krugman made his reputation in this manner, he has had the sense to admit that in most cases, the presumption of free trade is to be preferred, rather than any attempt to implement strategic trade policy. It is rather similar to the equally trivial theory of “second best”, which boils down simply to the proposition that a change in welfare terms does not lead directly to a Pareto optimum but leaves other distortions in place may have a net adverse effect. The trouble with “second best” theory is that it is impossible to apply — like strategic trade theory, its information requirements are immense, and failing their satisfaction the presumption in favour of removing distortions is strong.

But all this is not genuine guerrilla activity.

The target is wrong.

No-one has [ever] mounted guerrilla warfare against the theorists; the target is the mistaken makers of policy and the beneficiaries of policy which derives from logrolling or special interest groups, rent-seekers, to apply the term which has become fashionable among economists.

Writers like Max Newton understood the notion of the political economy of rent-seeking long before an economist ever formulated the obvious. And what makes him, and many other economic journalists over the last thirty years, unusual in Australia has been the acceptance of the idea that the job of an economic journalist is to criticise the assumptions of policy and to be “agin the government” — meaning whoever in the bureaucracy and in politics is temporarily in control of the levers of power.

But it is necessary to distinguish between genuine guerrilla activity and the perversion of economic debate which arose in the sixties, and which oddly enough has now taken a new twist and become for the most part a nostalgic search for a return to the supposed certainties of thirty years ago, concepts which were not radical even then, and now are intellectually and politically conservative in the extreme. In the sixties and seventies there was, of course, a rediscovery of marxism (what turned out to be its intellectual last gasp), which masqueraded under the name “radical political economy”, or even just “political economy”.

In accordance with the intellectual fashions of the time this became enmeshed in grand schemes for social change, and many quite competent economists were seduced by it into not just dissent from existing power structures and existing modes of economic policy, but a total rejection of rational economic analysis.

The hangover of this is the quite absurd usage of the term “economic rationalism” as a term of abuse. It is of course just another version of the denunciation of logical thinking amongst the romantic who laid the basis for Nazism.

There was a total misappropriation of the interesting work of Thomas Kuhn on the structure of scientific revolutions, and the term “paradigm” became a way of arguing that there was no such thing as logical or scientific structure in economic or social science propositions, and that anyone was as good as another. You just had to change the paradigm, and Jack was as good as his master; or black became white. All this rubbish, along with related stuff about imperialism, dependency theory, unequal exchange, and so on has gradually withered away.

But its ageing adherents in Australia have seized upon the leftovers of Keynesian economics and the crude interventionism of regulation which grew out of the Depression and the Second World War as if they were the new “paradigm” which could extricate them from their theoretical and practical confusion.

The wave of fashionable monetarism which gathered force through the seventies and seemed to be triumphant at the beginning of the eighties made the ageing “political economists” feel like a beleaguered minority, and so encouraged them, especially as the deregulation of the financial system which sprang from this also destroyed the neat foundations of monetarism, to believe that somehow their critics had been discredited and therefore it was possible to revive the previous orthodoxies. Keynesianism (which of course always has to be distinguished from the economics of John Maynard Keynes) was always the ideology of the bureaucracy, the public sector expansionists, and the vested interests which thrive under such auspices.

So as Keynesianism became the fallback position of the “political economists”, increasingly they identified themselves with the past, and with the dominant vested interests of the high Keynesian era, and what in Australia is best described as McEwenism. Thus was forged an unholy alliance between Marx and McEwen, between BHP and the Victorian Socialist Left, between old capital and new unionism.

This of course had long roots in Australian history — the “new protectionism” which was marked by the Harvester Judgment of the Arbitration Court in 1907 was an historic compromise between old and new interests at the expense of our export industries. In its more recent version, it is marked by the dedication of the conservatives of the Left to “national capitalism”, with foreign ownership excluded, that is a system which they felt they could support and cosset in order to be able to share in its benefits.

So the genuine dissidents, the economic guerrillas, once again tended to find themselves in opposition to, and criticising, vested interests and those who sought to benefit from entrenched privilege and the maintenance of existing economic structures.

It would be good to think that most if not all economic journalists would find themselves in the ranks of the economic guerrillas, and that even some academic economists and private sector economists might find themselves there also.

But Newton’s role was a lonely one in the sixties.

However, he was in a long line of dissident economic commentators in Australia, especially in the 19th century, when economic debate was largely in the hands of non-academics, and none the worse for that.

It is probable that the decline in public debate in the 20th century was largely the fault of the newspapers, or rather of the journalistic trade, in that the standard of education expected of journalists declined quite markedly. Even the so-called quality newspapers, to the extent that they participated in the debate, tended not to develop their own resources.

Of course there is much to be written about the economic debate in the period up to World War II, and through the Depression era; the impression that it was dominated by a few great names like Brigden or Giblin is in itself a construct of the academic economists, who always pretend that it is their concerns and interpretations which are the best informed and most penetrating. Even the major non-Australian academic names of this period who dealt with Australian economic policy have been virtually forgotten — like Frederick Benham, who is barely remembered, and only as a textbook author — or suppressed.

Indeed, the period of the Second World War and its aftermath is interesting in retrospect partly because it involved the invention of the myth of Australian economics as the economics of public sector intervention, with Keynesianism as the ideology of the burgeoning bureaucracy.

There developed a triadic approach to economic policy, with the three elements of the triad being the arbitration process, protection policy and monetary policy implemented by means of quantitative controls.

It is only necessary to remember the role played in the establishment of the post-war form of the arbitration system and its academic deification by such as Horrie Brown of the ANU to be reminded how the academics tried to establish that system, and a Swedish-style of national wage determination, as necessarily the best approach to wage determination.

There were some who stood out from all this, like for example the Institute for Public Affairs in Victoria or such figures as Judge Kelly of the Arbitration Court (who R.J.L. Hawke, when he became ACTU advocate in the early sixties — transferring, it must be remembered, direct from the ACTU, whose academics long considered him their great contribution to public life — liked to refer to as “the Irish pig farmer”).

Unhappily Australian economists dismissed and sneered at economists like Colin Clark, whose great works of futurological economics, The Economics of 1960 (1942) and The Conditions of Economic Progress (1940) pioneered the study of long term economic growth and the world economy. Clark had also pioneered the study of national income statistics, and in his work A Critique of Russian Statistics (1939) was one of the first and most effective debunkers of the “Soviet model”.

His superiority to the whole collection of third rate academic economists was so great that he was systematically excluded from the Australian academic scene. (The late Sid Butlin, who in the first volume of his history of the Australian war economy contributed much to the mythology of Australian economics, was so hostile to competition in his own bailiwick that he blocked the appointment by Sydney University of a second professor of economics from 1947 to 1961, as also the creation of a chair of economic history.)

By the fifties the academic debate on economic policy in Australia was almost entirely dominated by Keynesians (not very sophisticated in theoretical terms) and academic labourism. A rare exception was Gifford at Queensland University, an eccentric adherent of the quantity theory of money.

But as far as policy debate in the newspapers was concerned, there was little of importance. There were a few dissidents, but none remarkable.

It was only towards the end of the fifties that real debate began once again to emerge, and that entrants into journalism of sufficient training in economics and intellectual calibre to make a contribution began to make their presence felt, and of course the biggest bang was made in the sixties by Max Newton, who effectively formed a generation of younger journalists who felt it important to combine academic insights, criticism of policy, and a questioning attitude to authority and official economic policy-making.

Before that the field had been dominated by the financial journalists, of whom there were relatively few in any case.

Newton’s refreshing difference was that he did not care much about the stock exchange, balance sheets, or share-tipping, let alone what is now called “personal finance”. He called the share price pages in the AFR “the Chinese pages”, since they read from top to bottom instead of from left to right. His attack on business has since sometimes been misinterpreted, since it was essentially an attack on business getting into bed with government, not an attack on business per se.

Many, both on the right and the left, then and since, confused the two and thought that economic journalism was about attacking business.

This became of significance in the seventies and after as the naive products of the anti-Vietnam War movement (now, because of their inability to learn anything new and stop feeding on the nostalgia of the “great days” of their youth best described by analogy with the Returned Services League as the Anti-Vietnam War RSL, or AVRSL) moved through the universities and some found their way into journalism. Based on the decade 1966-75 as the peak years of this movement, and the most-affected age groups being the 15-24 age group, this would put them now in the age span 30 to 48. Given their direct influence on those immediately younger and on their children, this means that the generation at present under 25 is going to reject most of what the middle-aged anti-Vietnam war veterans now treat as obvious and necessary truth.

Hence the increasingly shrill and hysterical denunciation by the AVRSL of those who do not share their system of beliefs (they are disrespectful of their elders), and above all are not, unlike the “practical men” to whom Keynes referred in The General Theory, merely parrotting what they learned twenty or thirty years ago at university.

But the economic guerillas were always those who stood out against and were critical of current orthodoxies and vested interests in the field of economic policy, whether in matters of macroeconomic or microeconomic policy.

And it was in the seventies that economic journalism as the art of guerrilla warfare against vested interests really blossomed.

A whole group of people, with some formal education in economics, began to make themselves heard.

The degree of formal education varied. For example, Max Walsh who first brought economic policy to the centre of Canberra press gallery reporting, completed his degree at Sydney University under enormous difficulties. It was typical of the anti-intellectual bias in journalism at the end of the sixties that, working at the Daily Mirror in Sydney, his news editor used to invent assignments whenever he thought Max might be working on a university essay.

By the mid-seventies, economic journalism in Australia was dominated by a few people, chiefly Max Walsh, Alan Wood, Ken Davidson and of course myself. Terry McCrann was just beginning to emerge through the National Times, and Ross Gittins at The Sydney Morning Herald was at the end of the seventies just beginning to fight his way out of accountancy and the Salvation Army.

Some names do not receive as much prominence as they should, because of the anonymity of editorial work. Chief of these were Vic Carroll and Peter Robinson — Vic Carroll remained a force at Fairfax until his retirement; Peter Robinson after editing the AFR went for a few years to the IAC, and only then began writing regularly again.

It has also to be remembered that in the period prior to the election of the Whitlam government the Tariff Board under Alf Rattigan had played an important determining role in the course of economic journalism, in that it had realised the importance of getting information out to the public through journalists. McEwen of course realised this, and the struggle between him and the Tariff Board was one of the many guerrilla wars conducted in a semi-clandestine fashion.

With the centrality of the debate on economic policy, which was increasingly widened through the seventies to embrace more and more issues, and the activist role of both the Whitlam and Fraser governments, not to mention the increasing problems of the Australian economy, economic journalism became a more attractive field. Probably the high period of economic journalism in the post-war period in terms of sheer numbers has been the eighties, with more and more young journalists seeing it as an attractive field in which to gain a name, and a path to promotion and influence.

Moreover, there has to be taken into account the struggle within newspapers between their head editorial offices and the Canberra press gallery bureaus.

This is a large theme in itself in the understanding of the media, but essentially it is the case that bureaus have for many years now been attempting, with a considerable degree of success, to wrest editorial control away from editors and to control the coverage, slant, and interpretation of political and economic policy making.

That is, there has been a strong centripetal, Canberra-centric development. Editors have allowed and encouraged this in many cases for logistical reasons, for reasons of sheer overwork (the hands-on style of editing in Australia, favoured by management and journalists, means that editors are often even more ill-informed than their subordinates), and because of strong personalities in some Canberra bureaus.

It is always a good principle of management to allow a young, able and energetic person a great deal of latitude. But there has been a continuing see-sawing back and forth in influence, and it has become an important part of the unstated ethos of the gallery to assert and try to impose its primacy. Editorial power has never been totally centralised in any newspaper.

The Canberra-centric tendency of economic journalism reached its high point in the eighties. This was partly because of the absence from the writing scene for the most part of the leading economic guerrillas of the  seventies, who had gone on to editorial roles, or had even temporarily left newspaper journalism altogether.

So although some independent economic writers remained outside Canberra, the burden was increasingly taken up by younger writers in the press gallery, who were determined to assert their role, and to try to promote their own interpretation of events as much as possible.

In this they were encouraged by the bureaucracy, which increasingly began to distribute vital and often scarce documents only to the gallery. They knew that if copies were dropped under the gallery boxes, few would even be looked at, fewer still read, and those few journalists who had the knowledge and the interest to follow up issues were easier to control.

But the high point of the emasculation of the press gallery economic journalists (and it must be said that some of those in the metropolitan offices were equally subverted) was the result of the brilliant media management of the Commonwealth Treasurer, who from his accession to the job in March 1983 successfully persuaded, educated, bullied and seduced the economic journalists into an uncritical, often worshipping, approach.

This dove-tailed into another area of journalism, that of industrial relations and arbitration system reporting. The transfer of the Commonwealth Department of Industrial Relations to Canberra had already shifted some of the balance of power of industrial relations and labour market policy reporting to Canberra. The metropolitan industrial relations reporters, especially in Melbourne where the ACTU is located, had always tended to be not only pro-union and pro-Labor (not necessarily a bad thing, and inevitable in terms of the need of access to spokesmen), but often enthusiastic members of the Industrial Relations Club, admiring propagandists for the system and its personnel. In this they were the heirs of the academic labourism of the universities.

But the advent of the Labor government in 1983, with two strong personalities, Keating in Canberra and Kelty at the ACTU, tended to bring the strands of industrial relations journalism and economic journalism even closer together.

Again, the relative youth of the people involved must be remembered. By 1983 there was in Canberra, apart from one or two veterans who despite occasional forays were never well enough versed in economics to be serious economic journalists, however competent they were as political journalists, a group of young, inexperienced journalists who had largely been educated in the decade before.

That is they were second rate products of Australian university economics, humanities and law departments which were themselves dominated by the anti-Vietnam War generation, and had been brought up on a political diet embracing the demonology of the Dismissal and the vilification of Fraser. They mostly took the half-baked ideological orthodoxies of the time as Holy Writ. They were not well educated in economics (with perhaps one or two exceptions), and in some cases had been burdened with the non-information and lack of analytical training perpetrated by the so-called “political economists”. (It has always impressed me how carefully people looking for jobs as economic writers try to convey the impression that they have real economics degrees when they only have this kind of phony training.)

So, being young, not possessed of very strong personalities, ill-trained and starting from a basic sympathy for the Accord as well as for the Hawke government there was a predilection to develop as they did — as, effectively, poodles of the Keating-Kelty push. Far from being economic guerrillas they had become economic camp-followers. But it has to be said that they were not entirely to be criticised.

And some of them, happily, evince native intelligence and a capacity for growth.

In the first place, there is no doubt that many of the early initiatives of the Hawke government, including the Accord, had much to commend them. The wage push-induced recession of the last phase of the Fraser government had created a short-term need for some kind of incomes approach to wage control. The strong intellectual resistance amongst economists (academic labourism again) to the notion that there was a trade-off between real wage levels (and increases) and unemployment was crumbling. And despite some views to the contrary, the weight of evidence was in the first couple of years of the Accord that is was unambiguously beneficial — it allowed a substantial recovery in employment by delivering wage restraint. But by 1985 it had become clear that the Accord was shoring up the old IR Club, and hindering further flexibility in the economy. Keating was defeated, by an unholy alliance of the social welfare, union and business lobbies, in his attempt to move Australia towards a broadly-based consumption tax.

The followed the “banana republic” collapse of the Australian dollar in 1985-86, and a serious and successful move towards imposing fiscal discipline on the Commonwealth on a scale unprecedented in the post-War period.

Overall, Keating won the hearts and minds of his younger Treasury officials, and the support of their elders — he was effective in Cabinet and could deliver in terms of acceptance of policies approved by Treasury.

So there was a good deal of justification for the way in which the younger economic journalists came on board the Keating cart in the first three or four years of the Hawke government. But, to use his own phrase, the wheels very soon began to fall off the cart.

A division in economic journalism began to clearly develop, whereby there were sceptics and critics of the government, most of them outside Canberra, who gave it credit where it was due but pointed out the defects of policy, the problems of the Accord and the increasing arrogance of the Treasurer.

Then there were the press gallery economic journalists and a couple of others, who operated as a pack of adoring little dogs romping around the Treasurer’s feet. It did not last. Increasingly, as the mistakes and stuff-ups of economic policy became apparent, some of the pack became disaffected and turned into snarling little terriers, snapping at the Treasurer’s heels.

It was an unedifying spectacle. Since there was a certain discomfort in having been poodles, the terriers began to turn and try to rend each other, and the economic journalists who had never been part of the pack.

But enough of the canine metaphor.

Probably, there has never been more disunity amongst the ranks of journalists, and greater willingness to indulge in mutual criticism and recrimination, not confined only to economic journalists, than has existed over the last couple of years.

This is partly because of the aftermath of the collapse of the economic boom, and the growing rash of company failures, ill-considered bank lending for speculative takeovers, and general financial confusion, the old orthodoxy of Keynesianism, with its assertion of stale radicalism from the seventies, sees a golden opportunity to reassert itself.

But far from being an attack on privilege and vested interest, this is the last gasp of the old.

Max Newton, whatever his defects and eccentrics, never stood still and never allowed the guerrilla warfare of yesterday to become the defence of entrenched positions of today.

A few economic journalists working today similarly maintain a running, fluid and continually adaptational attack on the bastions of privilege.

I await with curiosity and confidence the emergence of the next cohort of recruits into the never-ending war of permanent protest, the Sisyphean task of guerrilla warfare against the smug, the complacent, and the orthodox.

Discussion

Ray Evans:

It seems to me that when he came back from England he challenged almost all of what was then Australian Economic Orthodoxy. I would be interested to know what Paddy knows about the teachers who influenced Newton in Britain and elsewhere.

Paddy McGuinness:

I’m afraid I can’t help you much there Ray because I never really knew Max and never had the opportunity to discuss it with him. I think you should address that question to John Stone or indeed to some of those who where at Cambridge about the time that Max was, but I never knew him at school or as an undergraduate either, so I don’t know how much developed in that time at Cambridge and how much was determined earlier.

Question:

I noticed in all the tributes and obituaries that were written when Max died, there was very little reference to his time when he was proprietor of the Sunday Observer. Now you touched on it briefly describing alcoholism, pornography etc., but to me it seemed that he was very keen observer then and really made a lot of comments which persuaded young people, people of that anti-Vietnam war generation that the time had come to change. Could you comment on that please?

Paddy McGuinness:

Again I can’t say too much in personal terms, but I can say yes, indeed of course, Max was on the genuinely radical side all his life. At the time of the Vietnam war there was much that was objectionable and obscene about American policy and about Australian policy. There was much to be protested against, quite rightly, and Max automatically sympathised with such people, but of course 20 years later when people are still repeating the same phrases, they have become conservatives and that was also Max’s point. One of the reasons I am not a member of the anti-Vietnam war RSL in Australia is that I was demonstrating on the subject in London. I was working for the Russians who said “it’s a bit rough, you shouldn’t be doing things like that, for God’s sake don’t get on television”. I was moving in different circles.

When I came back to Australia at the beginning of the 1970s and looked at all these dreary people who call themselves radical but most of whom were quiet little conservatives when I was getting into trouble in my university days, I thought isn’t it funny how people become radical when they get old, when it no longer costs them anything.

Ron Horne:

Do the laws of libel in Australia hinder how much the press, distinguished from the fawning press, can say to change our society, especially in the economic field?

Paddy McGuinness:

Yes, but sometimes it’s exaggerated. Some of the people who complain about the defamation laws really object to the fact that they are not allowed to smear anybody they feel like whenever they feel like. But yes, it is a problem, partly because it’s so unpredictable. In fact, I’m still involved in a dreadful case which has now dragged on for seven years, where I made a comment about the decision to go ahead with the Aussat satellite, in which I mentioned no names, didn’t have anyone specific in mind and the defamation laws have operated in such a way to effectively make it difficult for the Australian Financial Review to debate that issue honestly for seven years. Now that is criminal because that is a major economic issue in Australia. But if I want to get up and say that such and such a businessman is a crook and a goanna or a drug dealer or what ever, I think I should have a very good reason for saying it, before I simply say it because it comes into my head.

John McLeod:

Paddy, I think you have done a great service in your lecture tonight. It is an excellent lecture. Writing up the history of economists in Australia has become a bit of a fad lately and in my opinion you have rightly pin-pointed that a lot of the giants have been ignored totally by some people who think the only people who made a contribution were at universities. In pointing to the contribution which Max and others have made, you have done a real service and I hope somebody will take it up and write a proper history of those who made a contribution including those who made a contribution including those you mentioned.

I would now like to turn to a question. I wonder, if Max was starting out today, how would he handle the TV news people?1

Paddy McGuinness:

Well quite frankly I think he’d ignore it. TV is not a good medium for a serious discussion on economic issues in the first place. Also, you know that the people who are involved in TV all get their ideas from the newspapers anyway. But even the good ones in morning television stations get up early to read the papers so they can get some ideas on what to talk about, what the issues are, what to follow up. They will try to vulgarise or popularise those things partly because of their limited imagination, and the difficulty of visualising economic concepts. You know one of the clichés in television, — unemployment; picture a factory with people looking out glum. In other words, they are visual clichés. I suspect Max would have done very much of what he did. He would have tried to take on the challenges of the written medium, because that’s what determines, in the long run, what television and radio talks about anyway.

John Stone:

I think Max Newton would have been brilliant on television because he had a natural wit, quickness of mind and articulateness which would have enabled him to deal with any interviewer superbly and he also had a great gift for comic, gift of parody, if you like ridicule which would have, I think, made a very brave interviewer who would have sought to interview him in any offensive or hostile manner. I think he would have had the capacity to find, at a moments notice, the unforgettable phrase which would have left the interview in the minds of the audience. I think its a great shame in a way, that by the time television came to prominence, Max Newton had, in fact, passed beyond his time in Australia as a prominent member of the media.

Paddy McGuinness:

Yes, that’s a good point John. I don’t disagree with you, but I was thinking in terms of television as an educative and a teaching medium. I agree that some of the best television programs I have ever seen have been discussion programs, but they are not beloved of Australian television journalism. The best discussion program I have ever seen on television was in France. The program was called “Right of Reply” (Droit de Response). It was a discussion run by a very effective journalist Michel Polac who was a newspaper journalist, and was extraordinarily exciting because it allowed real argument. No real argument [is] allowed in Australian television. As soon as somebody starts to develop a point, or even some heat, they say “Oh no, the next person has got to have a turn”. That is where Max could have had his problem of course. I mean, the only way Max could operate with people like that would be to walk over them and they would not like that.

David Sharp:

As a lawyer I was interested to hear your comment that Maxwell Newton is, as it were, crusading from the grave on a question of free speech on a case yet to be decided. But it seems to me that one case in which he has made quite an achievement insofar as the law is concerned, and perhaps civil liberties as well, is the search warrant case which he fought during the 1960s. I think you touched on it when you referred to the raid made on his offices. To me that was a major achievement and, if for no other reason than that, he should go down in legal history. I would just like your comment on that particular case.

Paddy McGuinness:

Well, it hasn’t stopped the government raiding newspaper offices. They recently raided the Australian Financial Review offices on the most trivial of pretexts, for a matter of information issues that were not very important. It was just that somebody in the bureaucracy got upset about the publication of something fairly trivial.

In that respect of course it is why I call it a task of Sisyphus — what Max did and what we all try to do. Always the authorities will try to behave like this. Always we will oppose them, always we will have small victories, but we will never win.

Ross Parish:

Paddy, you took a swipe at the theory of the second best, it seems to be intellectually absurd in policy making to pretend you’re dealing with a first best world when you’re not, and advocating policies which for all you know may be pushing things in a direction you don’t want to go. Now I know there are tactical arguments, and I think you made the tactical argument basically that we are so ignorant of the state of the world that to make the sort of fine judgements you need for second best type policy formation is beyond us. Now I think that may well often be the case, but I don’t think it’s always the case, to think that it is always the case would be absurd because surely we make them all the time when we make judgements about the relative magnitude of various distortions and so on. So I would like to dissent from your view on that.

The view you are taking is essentially what my colleague Quong calls the third best policy making, when, if you think that the world is so complicated that you have no idea, you go for the first best answer and hope in the end that if you do that often enough, you’ll get it right.

Paddy McGuinness:

Yes, well — and this isn’t a personal attack Ross — but you are talking about the difference between the politics of hedging and the politics of risk. The idea that there is a second best which is identifiable, is a fantasy. It is very hard to identify the first best. The second best, or third or fourth or fifth are essentially the in area of bureaucratic hedging. Of course we don’t know absolutely what will happen if we remove such and such a distortion, probably we know it won’t be enough. Quite often it will even have seemingly adverse effects like the problems of financial deregulation in the last few years, what we’ve seen is a classic speculative boom of the kind that we’ve seen in the last 150-200 years, (or longer if you go back to the Dutch tulip boom) of modern market economies. But the theoretical argument of second best has always been a trivial one. It has made the very simple point that of course the removal of a single distortion may lead to the increase of the effect of other distortions which has hitherto been counterbalancing. It’s an interesting intellectual point, worth ten minutes in a lecture and that’s the end of it.

Conclusion – Michael Porter:

We are delighted to have had this opportunity to have a scholarly insight, and indeed provocative, lecture on economic issues around the journalistic profession and honouring in particular the role that Max Newton played. It is our intention once a year to invite an economic guerrilla — someone who will stand up and fight in terms of economic ideas and principles — to these premises to keep the fire burning, because we think it is a very important cause.

I found myself most deep in thought about what had happened and I recall I thought the 1970s were a very interesting period in journalism — Robert Haupt and Brian Toohey and so forth. There was a lot of independence and creativity. When I look at what is going on now I find it extraordinarily disappointing. I think Paul Keating’s attack on Kenneth Davidson from The Age was indeed warranted. The irony, of course, was that he was abusing him for not abusing them and I think that The Age’s total lack of autonomy and independence has been one of the great problems in this Victorian economy. If there had been a few more Paddy McGuinness’s perhaps the State of Victoria would be rather more enjoyable.

Footnote
  1. Note from the editor of Economics.org.au: The answers of Paddy McGuinness and John Stone to this question do not appear to acknowledge, that, as I read in Clyde Packer, No Return Ticket (North Ryde, NSW: Angus and Robertson, 1984), p. 127: “John Singleton, who was running a sort of interview programme on Sydney’s Channel Ten at that time, asked Newton to become a permanent guest. Newton and Olivia commuted to Sydney each week for Newton’s TV appearances.” I have not yet managed to track down those shows, but I hope they will provide an answer. I have not seen any of this John Singleton tv series. Is it worth tracking down, and if so, where would I find it? I know that Singleton and Newton were heavily involved with the Workers Party, and have plenty of that literature to put up eventually. ↩