F E A T U R E S

Interview: As They Say In The Bible ...
One the movement’s great characters, Public Service Association general secretary Maurie O’Sullivan, is calling it a day. He looks back on his career with Workers Online.

Industrial: Just Doing It
Sportswear giant, Nike, is the first company to sign off on an agreement that purports to protect Australian clothing workers, wherever they labour, writes Jim Marr.

Unions: Breaking Into the Boys Club
For a 23-year-old woman who has never worked in the trade, recruiting young construction apprentices into the union has its challenges, reports Carly Knowles.

Activists: Making the Hard Yards
Mal Cochrane came to the smoke as part of an Aboriginal avalanche that redefined the face of Rugby League. Today, he serves his community through the trade union movement.

Bad Boss: In the Pooh
What do you give a boss who makes his workers labour in raw sewage? A nomination for the Tonys.

Unions: National Focus
In the national wrap Noel Hester finds a Victorian Misso delo who is redistributing lucre from Eddie McGuire into workers’ theatre, South Australian unions taking that Let’s Get Real stuff seriously, an American unionist fronts up at a distinguished ‘meeting of the brains’ in Adelaide and a look at the line up for ACTU Congress.

Economics: Pop Will Eat Itself
Dick Bryan wonders if we can be insured against pop economists promising financial nirvana as well as financial market instability.

Technology: Dean for President
Paul Smith looks at how the internet is helping one Democrat candidate to the front of the primary pack

International: Rangoon Rumble
Union Aid Abroad's Marj O'Callaghan looks at Australia's weak response to developments in Burma.

Education: Blackboard Jungle
Lifelong learning shouldn’t mean cutting jobs, but that's exactly what the Carr Government is proposing, argues Tony Brown

Review: From Weakness to Strength
Labor Council crime-fighter Chris Christodoulou catches up with his boyhood hero, the Incredible Hulk

Poetry: Downsized
Resident bard David Peetz pens the song the Industrial Relations Commission needed to hear

C O L U M N S

The Soapbox
Cleaning Up
Rabbi Laurie Coskey from San Diego adds her voice to the global campaign for just for cleaners in Westfield malls.

The Locker Room
The Name In The Game
In an age of the sportsperson as celebrity it seems that names are overtaking the games, writes Phil Doyle.

Postcard
The Beach
Southern Thailand’s terrorist activities: facts or fiction asks HT Lee

E D I T O R I A L

A Recipe for Conflict
Without making any excuses, Tony Abbott’s hand wringing at this week’s airing of a secret video of picket line violence was a bit like watching Don King condemn boxing.

N E W S

Aussie Workers Cradle-Snatched

Morris McMahon Workers Say Thanks

Violence: Emerson Fingers Abbott

Cowboys Face Contracts Ban

TUTA Rises From the Ashes

Teased Teachers Fight Back

Labor Fails TAFE Test

Coke Called on to Stop the Rot

Bridgestone Drops Doughnut on Workers

AIRC Locked in Dark Ages

Maternity Breakthrough in Hotels

Labour Rights: Even Bush is Better!

Long Winter for Seasonal Workers

Activist Notebook

L E T T E R S

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Pop Will Eat Itself

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Robert Schiller is Professor of Economics at Yale University. He is one of those academic economists who knows how to turn high powered financial theory into a best selling book. He did it a couple of years ago with a book called Irrational Exuberance - an explanation of the volatility inside financial markets and warning about faith in the stock market. And the market fell.

Well, he's back with a new book that is just now being released, and he has embarked on a promotional tour of Australia. The new book is called The New Financial Order, subtitled Risk in the 21st Century. It's not for everyone, but it has a chatty, informative style, and is not at all technical.

I must say that when I read it recently, I came away most disturbed. The essence of the argument is that we can and should develop insurance contracts on everything - not just your house or your old age, but insurance policies against job loss due to technological change and insurance against increases in global inequality. He wants to apply risk management techniques from finance to all facets of our lives so that, to use his phrase, "people can pursue their dreams with greater confidence than they can under existing modes of risk management".

Now you may think that there's nothing to get disturbed about - it is just the ravings of an eccentric academic, looking for 15 minutes of fame and a lot of royalties. But what I find disturbing is that we can already see this sort of trend emerging.

With the decline of the welfare state, we are being asked to invest more and more of our lives' income in privately securing basic living provisions - a house, education, health, and an old age income. They are themselves a form of personal lifestyle insurance - money you have to invest in material security. That's something we now live with.

The next logical extension is to insure your income - because if that dries up because of redundancy, that's the end of your privately secured house, education, health and old age insurance. The next phase is to insure your lifestyle itself. So you've got all the facilities for a good lifestyle, but you want to make sure it lives up to expectations. Perhaps we are talking happiness insurance here.

Now the techniques for writing such a contract and pricing it do actually exist. But when economists come along saying that this scenario is the path to pursuing your dreams, I think the main insurance we need is insurance against economists.

THE COMING FINANCIAL CRASH?

When is the financial market crash going to hit? There has for more than a year been talk of the stock market being overheated, and there are now explicit statements from investment houses and even the Reserve Bank that capital city housing prices are unsustainable.

The evidence is pretty substantial - record growth in stock and housing prices cannot last forever. Moreover, there are record levels of debt exposure. People have borrowed to buy shares and committed huge proportions of their incomes to housing loan repayments. Should prices turn down, and if there is an interest rate rise along the way, these borrowers will find themselves with debts greater than the value of their assets. They will be exiting the market in droves and gently falling prices will start spiralling down.

At least that's the scenario - the version that is seeing the potential for a repeat of 1929.

So with all these preconditions, why is it not happening? Several reasons.

First, the Australian economy is standing up better than the US economy - in particular interest rates are not rising. But that difference cannot last forever. In a globally-integrated world Australia has to come back to the pack.

Second, most of the housing growth has been in investment properties. Capital appreciation has been very good in the last year, so with a couple of flat years, even falling prices could be sustained by all but those who bought at the peak. Moreover, the costs of selling - in terms of stamp duty, capital gains tax and other charges are high. To get out of the housing market now and then buy back in a year or 18 months time is expensive. To make it profitable, the housing market would have to fall a lot - as much as the worst case scenarios or worse.

And besides, if you sell, where do you park your money? Not in the share market. Not in local banks, where interest rates are low.

Not in international banks. Interest rates there may be higher, but the Australian dollar is expected to rise - you'd lose in a year's time when you convert your high interest US dollars or Euros back into Australian dollars.

The third reason the collapse is not happening is associated with the fact that most shares are managed by financial institutions - superannuation and pension funds. They tend to lock certain proportions of their funds into the Australian stock market. Sure they'll jump from company to company, but they won't leave the market as readily as the day trader or those who have borrowed to enter the market. Indeed, some of the evidence being marshalled to indicate that the stock market has not bottomed is that trading volumes are still high, indicating that there are buyers as well as sellers - the stock market is not being abandoned, and this is due to the prevalence of superannuation and pension funds.

So does this mean that the markets won't fall dramatically - that there won't be a crash? We wish. Who can tell? The issues I've just raised probably tell us that if the markets crash, they won't crash in their usual way.

But that's hardly surprising. Part of a crash is panic selling and the key to panic is uncertainty and unpredictability. There are surely enough market analysts out there who are charting market movements in such detail and hedging their positions so carefully that historical patterns of market crashes have all been predicted, and are therefore not likely to occur.

But a recent change - over the last decade - is that financial markets are becoming increasingly integrated. Crashes in one part of the market in one location in the world, should they occur and for whatever reason, will spread more immediately than they did in the past. So right now, we don't know from which direction a crash may come, but if it does come it will hit quickly and widely.

Dick Bryan teaches Political Economy at Sydney University

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Last Modified: 15 Nov 2005