There but for the Grace of God

I catch the flight home in half an hour but I must say seldom has any trip of mine been so complete. All my interests – economic, political and historical – came together so seamlessly that I only wish life was always like this.

Economically, the meeting on J.-B. Say and the Entrepreneur was an outstanding success. This being the first such meeting, it is of major significance that there is a casting about for some kind of successor paradigm to the fault-ridden neo-classical synthesis so accurately represented by Paul Krugman and Joe Stiglitz. As just a minor point, what became evident is that economists are useless at predicting the future so have substituted GDP estimates for actually knowing anything at all about the economy. If I tell you that Australia over the past twenty years grew by 50% and China by 150%, you would not have any idea about what either was really like, the kinds of economy each is or what is actually going on. Economists have substituted statistics for actual knowledge. It is all pretty useless, but if your aim is to pull wool over people’s eyes about what is taking place, GDP is a great number since it is almost meaningless as a statement about anything of significance.

Politically, it has been amazing to be here for the transition to a more market-oriented socialist Prime Minister. Every country is a hopeless case since the freeloaders have now overrun the productive. But if you are trying to manage the place, even the most dense political leader trying to re-engineer a recovery cannot help noticing that only those who make a net contribution to output actually create more value than they use up. A tremendous amount of capital to run through in our Western economies, but we are managing to do it. Fascinating to see it all in action in a place you would not normally expect it.

Historically, there are two sides to it. In relation to why I am here, I am part of a group that is trying to save Jean-Baptiste Say’s factory in Auchy-les-Hesdins for posterity. There are not many – any – places in the world that are actually historical sites in which economic issues are at the forefront. Auchy is astonishing in that it combines an ancient cotton mill – where the waterfall that ran the mill can still be seen – with the writings of one of the greatest economists of all time. If you are in France in the north-west around Calais or Normandy, and you have any interest in these things at all, you must come visit. The website I am told is coming but you should see it for yourself. The best way to describe the positioning of Auchy is to note that it is half way between Azincourt and Crecy. See all three, but if you have an interest in economics and its history, this place will astonish you. There is nothing like it on the planet and, as with everything related to Say, is only now in the process of being rediscovered.

Lastly there has been my following the trail of historical battles, with the last few days on the WWI battle fronts. Went to Villers-Brettoneaux yesterday which is the Australian Vimy Ridge. Very moving places both of them. Two things I found particularly noteworthy. The first was the direction finder in the tower pointing out various places of significance on the Somme battle grounds. But amongst the 20 miles to this and 30 miles to that was the arrow that pointed to 14,235 miles to Canberra. It was a long way from home for those young Australians who lie buried in the fields of France.

The other was a grave to some young lad who died on this battlefield in 1918. His name was S. Keates. It was quite a strange moment. It is truly the case that there but for the grace of God go we all.

Posted in Classical Economics, History, International | 10 Comments

Wish you were here: Mont Pelerin meeting in Hong Kong

While Steve Kates was selling Say’s Law to the socialists, three other Cats were soaking up the genteel fervor of the Mont Pelerin Society’s Hong Kong meeting.

Highlights for the first day or so included Vaclav Klaus who reckons the threats to future posed by the global warming scam and its policy ramifications have been added to by transnationalism. An important aspect he considers is the EU and its “undemocratic arrangement” where big shots see themselves at the vanguard of a new historical progress. His concerns about global governance are that decisions are being taken by functionaries, “cosmopolitan elites”, who want to impose their own ideas.

Although Klaus did not detail particular harmful policies, we see them in “fair trade”, and green organisations imposing standards like those covering forest products. By requiring producers to delve all the way back into their supply chain this prevents the “I Pencil” story where Milton Friedman shows how prices simplify information gathering and allow markets to operate economically and speedily.

This theme of democracy was picked up in the context of China. MPS President Allan Meltzer boldly declared that China will never make the transition to an entrepreneurial society that did other than copy innovations unless it became democratic. He maintained that the memory stick, google, cloud storage and all the other innovations that have transformed society came only from free societies for good reason. Others warmed to that theme including, in muted form, the censored Chinese speakers.

But there were a few voices – well mainly me – pointing to the tensions of democracy and growth. This is epitomised by the “47 per cent” who would eat the whole cake. A glib remark was that if Hong Kong achieved true democracy that was being urged on China, in ten years time it would be like France. And though there are forebodings about the sustainability of Chinese growth on the basis of economic liberalism alongside political repression, it remains a beacon of growth.

On the other hand Korea was evidenced as a nation that had achieved continuously impressive growth with democracy (Taiwan too, though it is a forbidden topic). And in a masterly demolition of international aid, William Easterly pointed out that it was no coincidence that aid recipients were mainly autocratic nations. Work exploring the tensions between democracy (in its populist unconstitutionally constrained form) and economic efficiency is somewhat overdue.

Others also pointed to the deficiencies in property rights in China as a major downside to sustainability. Some tend to over-egg this contention. Chenggang Xu from HK University even suggested in his speech that property rights in China were among the least secure in the world though under questioning he agreed that informal reforms in the late 1970′s, the Civil Law in 1986 and formal recognition of private property rights in 2004 had been vital in allowing the economic take-off.

Aside from the economic development theme, there was the how-do-we-get out of the stagnation theme. Here most answers were unpersuasive. Japan’s Yoshinori Shimizu plumped for a massive infusion of money, a Friedmanite tinged Keynesian solution that has as much chance of working as any previous government induced money gluts. To be fair, he also advocated deregulation but this is an outcome unlikely to be agreed in a Japan that continues to motor on growthlessly. John Taylor gave an excellent review of the macro calling for an end to quantitative easing and steady monetary growth with the reserve banks choosing firm monetary rules and sticking to them. As a solution this too has caveats in not doing much for the supply side, not mending the budget or reversing the regulatory excesses, failing to address flagging savings and not really recognising the extent of the meal investment shedding that is required.

Doubtless by Friday we will have the blueprint for the future.

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Q&A Forum: September 1, 2014

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La situation de la France est l’exige

Le Figaro keeps pressing the new government to grasp the nettle of necessity. Today it’s asking why the debate over the 35-hour week has ended even before it began. I was here back in the 1980s when it was introduced and I was at an Employer meeting at the OECD where we tried, amongst other things, to convince the French not to do what they then proceeded to do. Bad luck to them but these things take a long time to ruin you since most of what keeps an economy going is inherited capital and not the latest production. Amongst other things, a reason why GDP stats tell you next to nothing about the future provenance of an economy.

Things are, unfortunately, pretty bad everywhere. Everywhere we have had socialist solutions applied to capitalist problems and therefore pretty well everywhere things have become decidedly worse.

My conference on Say was run and organised by people of the left. They therefore look at the entrepreneur in the way that Marx looked at the entrepreneur, as a stage in the development of an economy that will one day be transcended. How will it be transcended, I asked. This they did not know. I ended up the one of the few people at this conference on Say that actually thinks Say’s way of thinking provides proper guidance to the management of an economy, not just today, but as far into the future as you might care to look.

Posted in Classical Economics | 17 Comments

Guest Post: Brad Emery – Greens leader’s fantasy speech a job killer.

I often wondered where Greens politicians go on their winter break from Parliament. Well at least I now know where Greens Leader Christine Milne chooses to holiday: New Zealand.

Yes, I am certain Milne travels to rural North Island of New Zealand to spend time touring the sets of Lord of the Rings and the Hobbit, immersing herself in the sights and sounds of Middle Earth.

She must, because the speech she presented to Federal Parliament on her first week back was the stuff of pure fantasy. It’s bad enough that many Greens supporters look like they walked straight out of Mordor, but Senator Milne’s speech on her job-destroying Bill to abolish the diesel fuel rebate for the mining sector would have caused the great Tolkein himself to cry ‘that’s just bloody ridiculous!’

The Greens Mining Subsidies Legislation Amendment, seeks to remove the diesel rebate for the mining industry. The Bill’s central platform is to abolish the diesel fuel rebate because ‘…since the carbon price repeal, mining companies no longer pay a cent in tax for their fuel, compared to ordinary Australians who pay 38 cents per litre.’

The fuel excise was introduced in the 1950’s to generate revenue guaranteed to be spent on the upkeep and improvement of our nations’ roads.

The diesel fuel rebate acknowledges the fact that heavy mining vehicles do not operate on public roads, but in underground and open cut operations. They cause no wear and tear on our roads and are therefore exempt from the tax.

The fact is that mining in Australia does not operate within a vacuum. We compete for limited mining investment with overseas jurisdictions in South East Asia, India and the Americas. Over the last 12 months mining in Australia has been battered by low commodity prices and a stubbornly high Australian dollar.

If the diesel fuel rebate for mining was abolished, the added cost burden would send a shockwave through the domestic mining sector.

Thousands of jobs would be lost as mining operations down-sized or closed. The flow on effect would see thousands more jobs lost in industries that service the mining sector. Mining royalty revenue that helps pay for services like hospitals, schools and roads would be slashed. One of the pillars of economic stability in this country would be significantly weakened.

This reality is somehow lost on the Greens Leader. Therefore, here within is a dissection of the Senator’s fanciful recitation from start to finish, along with the facts she so eloquently ignores.

Paragraph 2: “Supporting mining and fossil fuels puts them at a huge advantage compared to other sectors of the economy.”

Mining doesn’t compete with other sectors of the economy. In fact, mining stimulates economic activity in a vast array of other industries from manufacturing, hospitality, accounting, law, transport, and health. In NSW alone, there are 10,000 businesses from a range of sectors who engage with and supply NSW mining, from mechanics in Western NSW to component manufacturers in Western Sydney.

Paragraph 3: “As a nation… we should be increasing Newstart, not condemning people to poverty.”

Across Australia nearly 244,000 workers and their families rely on mining for their livelihood. It’s estimated that for each mining job, three additional jobs in other industries are supported. With potentially thousands of jobs being lost as a result of the Greens proposal, how does cutting the fuel rebate prevent people being ‘condemned to poverty’? If anything it increases the chances of more people being forced into financial hardship.

Paragraph 4: ‘We can do all these things and more, like bringing dental care into Medicare for everyone, by standing up to the big mining companies, and big banks and demanding a fairer contribution to the whole community.’

How exactly does job losses and a sharp decline in mining royalties ensure a ‘fairer contribution’ for the community?

For example, as a result of the fall in commodity prices, the high Australian dollar and the number of mines operating in NSW declining by 11 in the last 4 years, mining royalties in the state are falling. Between 2011-12 and 2013-14 mining royalties in NSW have fallen by $100 million.

If the Greens proposal were adopted, this would be magnified exponentially, resulting in even less public resources for services like Medicare. It would be like putting two jockey’s on a Melbourne Cup hopeful and demanding it run faster.

Paragraph 6: ‘If mining companies didn’t get so much government assistance, then renewable energy would be more competitive.’

‘Pants on fire’ doesn’t quite cover this nonsensical claim.

Firstly, in its annual Trade and Assistance Review, the Productivity Commission found that the effective rate of government assistance to the mining industry in Australia is ‘negligible’.

More to the point, renewable energy sources are not competitive compared to coal and gas for the simple reason that they cannot provide the same base load power supply required to meet our society’s power needs. The current renewable energy sources available require too much land and simply don’t produce enough power.

For example NSW’s largest wind farm near Bungendore has 67 wind turbines that take up 35 square kilometres of land. The entire wind farm produces enough electricity to power 60,000 average homes a year.

At the time of the 2011 census, there were 2,864,531 private dwellings in NSW. So to power only the private dwellings in NSW solely using wind power – not taking into account heavier users of electricity like factories, schools, hospitals etc – NSW would require another 47 wind farms similar to the Capital Hill project.

This represents land use of 1,670 square kilometres – twice the size of Tonga.

By contrast, total mining in NSW accounts for just 630 square kilometres or 0.1 per cent of NSW land.

In fact, the land required in the Capital Hill example to power just the private dwellings in NSW, is almost the exact land use of all current mining operations across Australia – 1,676 square kilometres.

But surely the Greens offer something valuable in exchange for the thousands of lost jobs, the ocean of families forced onto Newstart and the drastic reduction in government services their Bill would leave in its wake?

The answer stands out like a vegan at Hungry Jacks in paragraph 5: “This Bill could counter Abbott’s cruel budget by saving cuts made to ABC, SBS and CSIRO…’

That’s right; Senator Milne is more than happy to let thousands of mining families go to the wall, so that Tony Jones can take Q&A on even more overseas junkets. The Greens would rather see the ABC, their political haven – the left wing, anti-Israel, anti-mining, anti-capitalism, anti-anything that doesn’t contain the word ‘socialist’, ‘alliance’, ‘climate’ or ‘change’ in its title – given more taxpayer funds than see food on the table of hard working mining families across the country.

Paragraph 14: ‘The Greens believe in a safety net that will prevent people from crashing into poverty and homelessness when they are facing difficult circumstances.’

Following the Greens’ proposal would relegate thousands of families to the bread line. As mining investment heads overseas and operations in Australia close, an economic tsunami would sweep our regions and our cities, sinking thousands of jobs across a broad range of industries. Power prices would soar as energy is imported to supplement inadequate domestic renewable electricity generation. Government spending would be slashed as billions in mining royalties disappear, instead filling the tax coffers of our international competitors.

Paragraph 16: ‘I commend the Mining Subsidies Legislation Amendment (Raising Revenue) Bill 2014 to the Senate.’

Based on job-destroying policies like this, let’s hope the Greens continue their electoral downward spiral from the last federal election, and are themselves commended to the political rubbish bin of history.

Brad Emery is Director of Media for the NSW Minerals Council

Posted in Guest Post | 52 Comments

Monday Forum: September 1, 2014

Posted in Open Forum | 1,221 Comments

Words have consequences

Theodore Dalrymple on an unfamiliar topic for him, how the meaning of words applies to “austerity”:

I was irritated rather by the fact that the author of the article accepted that the policy of the present British government can properly be described as one of austerity. What the alleged austerity amounts to is this: that in the current year the government will borrow only one in six of the pounds it spends instead of one in five, as it did last year. As to the reasons for this less than startling decline in its borrowing requirements, it was not because the government was spending less but because it was receiving more taxes, from the speculative housing bubble which it has done much to fuel. . . .

One would not say of a man who passed from smoking sixty cigarettes a day to fifty that he had given up smoking, or that he had exercised great self-denial. And one would not, or rather should not, say of an organization that had balanced its budget once in fifty years (the British government) that it was practicing austerity merely because it had to borrow a slightly lower percentage of what it spent than it did the year before. This is to deprive words of their meaning.

But the word “austerity” is not used by those who support balanced budgets but by its enemies. Why anyone still believes high levels of public spending can do anything but harm for the nation overall remains a mystery.

Posted in Classical Economics, Economics and economy | 19 Comments

Guest Post: A Lurker – A question on 18c

I have some questions to pose to the Coalition Government, and to PM Abbott in particular.

In keeping 18C as is (and given the premise that events similar to Rotherham might be happening here in Australia) do you think that it is more or less likely that victims, or the friends and families of victims, would feel empowered to speak out about what was going on?

In keeping 18C as is (and given the premise that events similar to Rotherham might be happening here in Australia) do you think it is more or less likely that public servants employed by the State would feel empowered to speak out about what was going on?

So, referring back to your answers in the previous two questions, I have one, final question that I’d like you to answer.

In keeping 18C as is, do you think that it is more or less likely that events similar to Rotherham in the UK might occur here in Australia?

Posted in Guest Post | 24 Comments

Fromelles and Vimy Ridge

We have been travelling almost parallel to the trench lines of the first World War in a France that has had almost no mention that we can see of the fact that the war began exactly a hundred years ago this month. But we have been to both Fromelles and today to Vimy Ridge to see the Australian and Canadian memorials. Fromelles was a disaster but Vimy Ridge was a famous turning point during the war (famous in Canada anyway). The interesting point made by the guide today was that it was always seen as a great source of comfort to have either the Canadians or Australians on ones flanks since everyone felt a kind of security in knowing that such reliable forces were at their side. I can still see why that would be.

But the absence of any particular reflection about the events of a hundred years ago – and I don’t mean just at these sites but in the whole of France – is truly striking. I don’t know what I did expect but I didn’t expect nothing at all.

Posted in Cultural Issues | 22 Comments

Unweaving the web of Aboriginal welfare dependency won’t be easy

In The Australian today
“It is not easy to imagine a less controversial statement than Tony Abbott’s claim that the arrival of the First Fleet was the “defining moment in the history of this continent”. Nor could it possibly be contentious that British settlement provided the foundation for Australia to become one of the most prosperous societies on Earth.”

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