Cross Post: Alan Oxley – The G20 is an irrelevance

Last year, John A. Allison, CEO of the Cato Institute in Washington, released a book which cogently explained why the impact of the global financial crisis was prolonged: governments propped up businesses the markets had marked down as failures. Preparations for the G20 Summit in Brisbane suggest governments have still not worked this out and continue the search for complicated strategies to boost growth. Officials seem even to be resorting to numerology and Lego economics.

For example, Joe Hockey recently announced G20 officials were just 10 per cent away from agreement on 700 measures to boost annual global growth by 2 per cent. He was not kidding.

And that agreement was also to start a new global organisation to fund infrastructure and create the building blocks for future prosperity. A new fund will not produce new infrastructure. Risk is the problem. There is plenty of money around, but until governments privatise and deregulate, investors won’t move.

Regretfully, this is about the best the G2O can come up with. So its default strategy is more meetings of – business (B20), labour (L20), civil society (C20), a G20 think-tank and even a Girl 20 meeting. This second-order hoopla contrasts sharply with the intense negotiations among hundreds of officials over the last two years to construct the Trans-Pacific Partnership Agreement. It can lay fresh foundations to boost growth among 12 nations that produce 40 per cent of global GDP. This surely should be where Australia should focus its resources. We can have little impact on China’s growing financial problems, the EU’s financial and monetary muddle, or management in Washington of the US money supply, all of which will shape the short to medium term global economic landscape.

TPP aims to do more than just reduce conventional trade barriers. They are already low worldwide. Future growth depends on opening up services and removing barriers to investment, both heavily regulated across Asia. This should have be the business of the WTO. But a large number of economies outside the Asia-Pacific region don’t want the WTO doing this. So the US, Japan and another ten economies, including Australia, are applying the basic rules of the WTO with the prospect of building the biggest free-trade agreement in the world and underpinning economic expansion in the Asia-Pacific region.

PROTECTIONIST COMPLAINTS

 

Unions, environmental, public health and anti-intellectual property activists and protectionist industries have denounced the TPP. Their common complaint is the negotiations are secret. That is puerile.

No talks, among people business or governments, can succeed if conducted in public. Their real interest is to reserve the right to use heavy-handed regulation to advance their own narrow interests. For example they stridently oppose inclusion in the TPP of a right for investors to trigger legal challenges in international fora if the foreign state fails to meet commitments to reduce restrictions on foreign investment. It is known as ‘Investor State Dispute Settlement’ (ISDS). “Why give foreigners a right to challenge the Australian government when domestic businesses don’t have that right?”, they ask; because Australian businesses will win the same right to see commitments to liberalise honoured in the markets of the other 13 TPP partners.

Australia agreed to such provisions in the FTA recently completed with South Korea. Australian business groups and international trade lawyers support it.

The sentiment is resurgent protectionism. With high tariffs gone, unions now want restrictions on foreign investment. They don’t want foreign investors in union strongholds, such as health and education, who will be less intimidated than Australian management. They also are disinterested in opportunities for our services businesses to expand in foreign markets.

Our Asian and Pacific neighbours understand better that removal of restrictions on investment and services in their economies will boost growth.

With negotiations to open markets in the WTO stalled, momentum to create broad ranging free-trade agreements to boost growth in east Asia and the Pacific is growing. Trade officials throughout the region now anticipate the TPP over time will morph into a region wider agreement embracing including Korea, China, Taiwan and all major Asian Pacific economies. With its focus on liberalising services and investment, a platform for a new wave of prosperity will be laid.

This is where Australia’s international economic interests should focus.

The G2O should be regarded as the Rudd irrelevance it always was.

Alan Oxley is principal of ITS Global. This op-ed first appeared in the Australian Financial Review.

Posted in Cross Post, Economics and economy | 4 Comments

Open Forum: October 25, 2014

Posted in Open Forum | 70 Comments

Post-Crash Economics Society – the Australian Branch

This is from a letter to The Guardian in the UK published today:

Ha-Joon Chang powerfully argues the case that it was “an economic fairytale” which “led Britain to stagnation” (Opinion, 20 October). It may be added that our universities bear a heavy responsibility for this situation. Certainly, it cannot be denied that the fairytale paradigm (“supply-and-demand”, competition in the market, and all the rest of it) can be applied to any economic issue. The point, however, is that the currently dominant adherents of this approach deny that any other approach can even claim to be economics at all; indeed, adherents of other schools of thought have very largely been purged from our university economics departments.

Proponents of the fairytale justify this stranglehold by claiming that all former insights into the economy that have stood the test of time have now been incorporated into their own – narrowly quantitative – “modelling” framework: thus, Keynes’s discussions of uncertainty are reduced to “models” of expectations, Hayek’s alternative to neoclassicism into models of “price messages”, Marx’s heritage into models of inequality, Ricardo’s into “rent-seeking”, and so on. Consequently, so the argument goes, there is no longer any basis for the claim that there are different schools of thought in economics. There is only one.

It is the inflexible grip of this intolerant orthodoxy on university economics departments which has so signally distanced academic economics from engagement in discussion and debate outside the academic arena, much of which is directed towards questioning its fairytales. It is, by the same token, very encouraging that students who reject their approach have in the past year or more been reintroducing into university economics departments the kind of vibrant debate which ought to lie at the heart of academic life.

By coincidence, just yesterday I attended the first of these student meetings to be held in Australia. Back in April I noted the birth of what is known as Post Crash Economics. You can read this previous post but basically there is a concern that modern economics, just as the above letter states, is too narrow and shuts out alternative perspectives. As stated in the initial Report that was initiated at the University of Manchester:

This lack of competing thought stifles innovation, damages creativity and suppresses the constructive criticisms that are so vital for economic understanding and advancement. There is also a distinct lack of real-world application of economic ideas, with the focus being on abstract modelling that often seems devoid from reality. Finally, the study of ethics, politics and history are almost completely absent from the syllabus. We propose that economics cannot be properly understood with all these aspects excluded.

Well I agree with all of that, but with me it was Pre-Crash Economics as well. There is a need for wider vistas and a recognition that the various heterodox schools within economics ought to be actively engaged within mainstream discussion of economic issues. With a Deputy Governor of the Bank of England and the endorsement of the Institute of Economic Affairs, there is at least a possibility that the PCE movement may not simply become another leftist rant of no consequence. But they will have to be very careful and deliberate if they are going to avoid that trap.

The chap who spoke at the meeting yesterday had come all the way from Manchester to discuss what they have in mind. And while there were various moments when his own underlying agenda was all-too-obvious to me as a long-ago member of the left, his final slide had these words, “It’s time to challenge the orthodoxy”, and showed a woman with a “power to the people” fist in the air.

I therefore asked the first of the questions from the floor which was more of a comment than a question. And what I said was something like this:

If you would like to set up a group that widens the study of economics and introduces the full range of the various schools of thought to the education of economics students, then I am with you all the way. But if you are going to just use this grouping as another stalking horse for the ragtag left, then you will do nothing other than just create one more meaningless structure which someone such as myself will have nothing to do with. Your presentation was not neutral. You are without any doubt a person of the left which is fine because some people are. But you will only succeed if what you do really is neutral between all of the various groups that find neo-classical economics wrong in important respects. Economics is, however, not an easy subject that someone without formal training can choose amongst theoretical perspectives without serious study. If this is just one more anti-capitalist rant, then you can forget it. You cannot “democratise” the study of economics as you put it, as some kind of all-in enterprise where everyone’s opinion counts for one and no one’s counts for more than one. If you are genuinely interested in broadening the perspectives students receive on the full range of economics as discussed by serious economists, then, but only then, will you have the support of those of us from a more market-oriented perspective.

Unfortunately, Robert Conquest’s second law of politics seems destined to be repeated: “Any organisation not explicitly right-wing sooner or later becomes left-wing”. Given what I saw, it will be sooner rather than later but I shall continue coming along at least for a while.

But let me stress this. The Australians who have done the organisation here are trying to make this work as it is intended to work. I was specifically invited and while only belatedly asked to bring along others, the invitation was sincere. If there is a proper spirit of inquiry – very rare but not unknown – then this could be a very useful and interesting forum. There is never any doubt that those of a leftist persuasion will turn out. More difficult will be to find those of a free-market bent. Economics does need to widen its discourse, but it won’t do that if it thinks that we who would like to bring a different perspective to economic theory are part of some protest movement. We are all serious economists and that must be the approach if PCE is to succeed.

Posted in Classical Economics, Economics and economy | 19 Comments

How did John Faulkner vote?

The AFR has an essay by ALP Senator John Faulkner this morning. He tells a bit of history and makes some sensible points.

The Australian Parliament’s responsibility is clear. It must ensure our intelligence and security agencies have the necessary powers and resources to protect Australian citizens and Australian interests. But these powers can impinge on the values and freedoms on which our democracy is founded – qualities which Australian citizens rightly expect Parliament to protect.

So Parliament must strike a balance between our security imperatives and our liberties and freedoms. Key to achieving this balance is strong and effective accountability.

I don’t think anybody can disagree with that point.

But now [security and intelligence] agencies are again seeking additional powers to meet the current enhanced threat of terrorism. If security powers are to be extended, scrutiny and oversight must again keep pace.

Well yes. At this point things get controversial. I fully understand that the security establishment would like additional powers. They are bureaucracies and like any bureaucracy they have clear incentives to expand their role and powers. Just because they seek additional powers, however, doesn’t mean they should get those powers. If their powers are increased, the scrutiny and oversight must also increase.

The time has also come for a thorough review of the current arrangements for oversight of Australian intelligence agencies.

Not only has oversight of the intelligence agencies failed to keep pace with their burgeoning role and powers, it has been decades since the effectiveness and adequacy of their oversight framework have been critically examined.

It is time to satisfy the Australian community, the Parliament, and the agencies themselves that we have got this right.

Enhanced power requires enhanced accountability. The greater the potential for that power to infringe on individual liberties, the greater the need for accountability in the exercise of that power.

This is not to suggest that our security and intelligence agencies are acting perniciously or misusing their powers. I do not believe that to be the case.

Again, this suggestion is not particularly controversial and I don’t imagine too many people being critical of this idea. Almost common sense.

Now one of the mechanisms that constrains government and its agencies is a free press. Okay – that’s the theory anyway. There is a problem, however, as Laura Tingle describes today (emphasis original):

The whole sense of imminent threat perhaps also explains why it was only after National Security Legislation Amendment Bill (No. 1) 2014 passed in parliament earlier this month that people started to express really loud concern about some of its provisions, or even became aware of them.

Now I don’t know if John Faulkner spoke against that Bill in the caucus room, or even in the Parliament. I do know, however, that he voted for it.

Writing an essay for the AFR on the importance of good governance is cheap talk – voting to increase the powers of the State without any increase in oversight and decreasing the capacity for media reporting and monitoring is not cheap talk at all. I understand that the ALP always vote in a block etc. etc. etc. That in itself is poor governance. Faulkner expects us to take his arguments about good oversight seriously (and they are serious arguments about an important matter) when he himself refuses to exercise effective oversight by voting against a bill that violates the very principles he is now lecturing us on.

This is beyond hypocrisy, it is irresponsible.

It remains to be seen how he votes on the next two national security bills.

Posted in Federal Politics | 18 Comments

Friday Forum: October 24, 2014

Posted in Open Forum | 503 Comments

Such hyperbowl

This is from Tim Blair and it must be shared as widely as possible. “Kevin Rudd reviews Gough Whitlam’s career, and reveals the gigantic aircraft component that brought Whitlam down”:

Of course, where the Australian heart lies and lay then is in parties of the compassionate and reforming centre who were mindful of the challenges that we faced in the world, in the economy, but still committed with an open heart to giving opportunity for all. That’s what Gough Whitlam stood for, through thick and thin, and despite this enormous conservative fuselage unleashed against him.

Posted in Australian Story | 64 Comments

Rafe’s Roundup 23 October

UPDATED

The voyage of life.

Weather Channel man speaks. No significant warming at this time.

Books. Classics, fun book covers, New books at Connor Court.

A tribute to a great libertarian, Leonard Liggio.

Corporate welfare in New Zealand. A new report.

Around the town. IPA HEY. The Sydney Institute. Australian Taxpayers Alliance, Quadrant on line, Mannkal Foundation, Centre for Independent Studies.

Gerard Henderson’s Media Watch Dog [new addition will appear on Friday mid-afternoon]. Don Aitkin. Jim Rose, feral and utopian!

Sites of interest. Richard Hammer, Free Nation Foundation. Aust NZ libertarian students. Powerline. Econotalk a “must read” for nerds too!

For nerds. Melvyn Bragg’s radio program. Stephen Hicks, always interesting for nerds. Interesting commentary on rural research: farmers are smarter than you thought. Econotalk. Conference at the Karl Popper Foundation.

From 18 to 21 February 2015 the Karl Popper Foundation at the University of Klagenfurt is organizing a symposium to mark the 70th birthday of Manfred Lube, the former Librarian of the University. Dr. Lube was responsible for planning and setting up the Karl Popper Library, and everyone who has visited this library within a library agrees that he has done a superb job. Dr. Lube has also developed and maintained the formidable online bibliography of Popper’s writings and secondary literature. The theme of the symposium, The Written Word, combines Dr. Lube’s professional interests with the philosophy of Karl Popper. The speakers who have been invited will present papers that bear on Popper’s theory of world 3 in various ways, both critically and constructively.

Posted in Rafe, Rafe's Roundups | 3 Comments

How to stop greenies in their tracks

I went to hear a quite entertaining presentation by the former comedian, Rod Quantock today, speaking on global warming. Well, we are all doomed and he has a pitch that is well honed and nicely presented. And myself now being ready to believe that we are past peak oil and may well be heading into very rocky terrain no matter whether the planet is warming, cooling or doing nothing at all, I asked what he thinks we should do. So he said, as a joke I suppose, that what we should be doing is starting twenty years ago. Since in his view we are anyway locked into massive heating with water and oil running out in the reasonably near future, and since there is nothing that can now be done about it, I cannot see why he believes it’s his duty to go around terrifying young children about a world with no Tim Tams (well I guess it’s a living). I am a bit on the aged side so most of this when it happens will be well past my bedtime (and his as well since we were born in the same year, apparently), so I might as well keep flying and enjoying life, along with Al Gore and the American President. No self restraint of mine today will make the slightest difference so why bother trying?

Yet in the conversations afterwards although not with him, I trotted out my global cooling story which really is a great pleasure for me in such moments. Because if you really do think we are at peak oil, and who is to say we are not, and we don’t switch pronto to some form of nuclear power, there is no story so pessimistic that it may not fit the facts of the world as it will unfold if oil really does become scarce. I don’t know and you don’t know what is happening. But David Archibald, who teaches strategic energy policy in Washington, wrote this in his Twilight of Abundance:

The logistic decline plot of world oil production shows that the year of peak output arrived in 2005. The oil market began tightening slightly earlier, in June 2004. The oil price today is three times what it was in that year, but oil output has not increased in response to that price signal. The reason it has not is because it cannot. Almost all of the world’s oilfields are producing as fast as their owners can make them. There is only a little spare capacity on the planet. Global production of conventional oil has been flat since 2005. The logistic decline plot tells us that the world’s supply of conventional oil will fall away soon, and rapidly.

There are seven billion on the planet. If we run out of oil without a cheap replacement a very large number of us will not survive into old age. We have the technology to build safe nuclear power but those, too, are off every green agenda. So just for fun, next time you are in such a conversation, do what I did:

Agree that we are running out of oil, in fact insist on it

Point out there are no cheap substitutes for oil

Say you think hundreds of millions if not more may die and relatively soon if some cheap source of energy is not found

Point out that neither wind nor solar are cheap and reliable and cannot be used as a replacement

Ask what should we do?

You will by doing this outdo any green-leftist on the planet with your pessimism. You will leave them as the optimists in the room and you as the only stone cold sober realist. The only problem then comes when you start to wonder yourself whether you might in fact be right. Because what if you are? What do we do then?

Posted in Global warming and climate change policy | 92 Comments

Guest Post: Zeev – New neighbourhood residential zones contribute to Victoria’s housing affordability crisis

Despite the difficulties ordinary Victorians face in renting or finding a home to live in, we now find new calls for restrictions on property development. The Liberal Democrats firmly believe that solving the housing crisis can only be achieved by relaxing zoning laws and reducing the incredible cost of Victorian housing. Foreign investment and negative gearing are red herrings in the housing affordability debate.

The government’s latest campaign is for the introduction of ‘neighbourhood residential zones.’ This new zoning designation prevents people from developing any residential property to over two stories in height. It is being introduced primarily in most of the South Eastern suburbs covered by the Bayside, Boroondora and Glen Eira Councils. But recently Labor has called for its introduction in Brunswick (and presumably Moreland). 80% of the residential properties in those areas will be covered by these zones. As The Age reported, based on past applications, Boroondara may well experience a “27 percent reduction in dwelling approvals across the municipality.” These zoning laws will artificially inflate housing prices.

Artificially inflated housing prices will leave low-income earners, singles, couples and those elderly who do not own their homes worse off as they will find it harder or impossible to own or rent their own homes. Indeed, they already have this effect, so it’s no surprise that homeless support and social housing organisations are reporting record homelessness in Melbourne and a lack of available housing. Minister Guy’s own advisory committee has described these new zones, however, as being “very likely to compromise the ability to meet [Melbourne’s target] projected growth in households in a way that also addresses choice, affordability and diversity in housing supply.”

Additionally, and contrary to popular belief, negative gearing and foreign investment do not decrease housing affordability. Negative gearing is simply a tax refund for moneys invested in attaining income—typically rental income—from property. Getting rid of it is another way of raising taxes. As for foreign investment, it is simply another source of investment capital. These issues simply do not affect the housing supply at all. Relaxing zoning laws will increase the housing supply and increase housing affordability, not outdated protectionism or tax increases.

The Liberal Democratic Party understands this. We want zoning laws relaxed so that property becomes affordable again. We believe mixed use zoning should be implemented across the State and that the Urban Growth Boundary should be abolished. Mixed use zoning allows developers to construct medium density multi-storey residential, commercial or industrial developments.  Implementing mixed use zoning state-wide and abolishing empower people to own and buy their own homes and drive investment and productivity in Victoria.

The Victorian Liberal Democratic Party will also replace our current permit system with one that does not pose a barrier to genuine, reasonable development. Permits should be considered by independent, private town planners, not local Councils. And if a planner fails to make a decision in 60 days then the application should be automatically approved. Giving planning powers to Councils and VCAT has proven an incredibly burdensome process that has delayed developments for years. This costly litigation benefits no one, and replacing it with a simple system will mean that reasonable developments will be approved. Building surveyors already do much the same with building permits. Property construction costs will drop as a result.

Cutting construction costs and winding back zoning laws is an easy way to stimulate development in this State at no cost to the taxpayer. And it helps people take back their property rights. Two birds in one stone.

If the Victorian LDP sounds like the party for you, now is the time to show your support and join us. We are also fervent believers in civil liberties—including repealing the State equivalent to section 18C of the Racial Discrimination Act. But we can only get on the ballot in this State if you show your support. Sign up now for free online at www.ldpvic.org.au/?r=cat.

Then (and only then) print off this form and post it to the VEC at:

Victorian Electoral Commission
Reply Paid 68780
Melbourne VIC 8001.

This one will come down to the wire, folks. Every member counts if we are to hit 500 members writing back to the VEC in the next 2 weeks. There is a political home for classical liberalism in this State—join up now and become part of it.

Vladimir Vinokurov is a solicitor and Victorian State PR officer for the Liberal Democratic Party.

Posted in Guest Post | 15 Comments

Guest Post: Rabz on the pernicious impacts of “Broad Based Taxation” in Australia

Here is a current list of taxes that can be levied by government on individuals residing in this country:

  • Airline Fuel Tax
  • Airport Access (taxi) Tax
  • Airport Departure Tax (Passenger Movement Charge)
  • Alcohol Excise
  • Boat License Tax
  • Boat Mooring Tax
  • Capital Gains Tax
  • Cigarette/Tobacco Excise
  • Council Rates (including rated land value tax)
  • Customs Duties
  • Development Tax (on improvements to properties owned by individuals)
  • Dog/Cat Registration Tax
  • Fishing License Tax
  • Goods and Services Tax
  • Insurance Tax
  • Land Tax
  • Landlord Tax (level and type varies across jurisdictions)
  • Luxury Car Tax
  • Marriage License Tax
  • Medicare Levy
  • Medicare Levy (additional component for those without private health cover)
  • National Park Access Fees
  • NDIS Levy
  • “One Off” Levies such as Gillard’s Qld Flood Levy
  • Parking Tax
  • Personal Income Tax
  • Personal Income Tax – Deficit Levy
  • Petrol Excise
  • RET/Green Levies on Electricity
  • Road Tolls
  • Shooting License Tax
  • Stamp Duty on Property Purchases
  • Superannuation Tax
  • Utilities Tax (including charges on electricity, gas, water and telephone/internet)
  • Vehicle License Tax
  • Vehicle Purchase Tax (stamp duty)
  • Vehicle Registration Tax
  • Wine Equalisation Tax

These are the taxes that I know of, although not included for example, are taxes on gambling – which for the purposes of this piece, shall be treated as an entirely voluntary tax, similar to speeding fines.

If anyone knows of any taxes applicable to individuals that have been omitted, please feel free to point them out in the comments, barring of course, taxes paid by individuals operating a business.

The “incidence” of these taxes falls directly on the taxpayer. What is also important to consider is the indirect incidence of the myriad taxes (not to mention regulatory costs) that are imposed on businesses, which serve to drive up costs for consumers – that is, the producer passes on most if not all of these taxes directly onto the consumer.

Of the taxes identified above, income tax and the GST would probably constitute the most significant imposts on individuals year to year. Obvious exceptions would include the purchase of a property, meaning a stamp duty slug that may be the equivalent of an individual’s yearly income tax bill (which is then defrayed over the period of ownership of the property). Incidentally, I would argue that property stamp duty is a de facto CGT on an individual’s home, paid up front, as opposed to when the property is sold.

What infuriates me the most about the list above (apart from the sheer number of taxes) is that we are constantly and incorrectly, lectured by various leftist dunderheads that “Australia is a low tax country”.

I defy anyone to calculate their actual total annual tax bill based on the inclusion of all the taxes that might be incurred above and then still agree with that leftist assertion in the previous paragraph.

I’d also be interested in hearing from commenters who may have had a go at calculating their actual tax burden as a percentage of their gross income, as opposed to for example, just their personal income tax rate. Needless to say, people would also need to offset these taxes against any government benefits, rebates, etc, that they may receive due to their (often unwilling) membership of the new bought and paid for welfare beneficiary class.

As certain Perfesser might opine, the need for regulatory reform is obvious.

Posted in Guest Post, Taxation | 195 Comments