It’s good to see that the Prime Minister is concerned that Australian bankers make bigger profits. This is from her speech to the Business Council of Australia:
In total around sixty per cent of the world’s GDP is either subject to a carbon price today, or has one legislated or planned for implementation in the two or three years ahead.
International carbon markets will cover billions of consumers this decade. Ask the bankers at your table whether they want Australia to clip that ticket. We’re going to help them get their share.
I’ve written previously about this artificial market. It’s one thing for bankers to create new products within existing markets that reduce transactions costs or better allow resources to flow to their most efficient use. But arguing for bankers to ‘clip that ticket’ for an artificial market is a form of corporate welfare – a non-transparent form but no less pernicious than the Government writing a cheque for tens of millions of dollars and sending it to the banks (or, probably by electronic transfer). At least the latter would appear as a budget expense.
The latest argument running in the US is the need for a carbon tax / ETS to help balance the budget. But if one really believes that a tax increase is warranted – usually that is a proposal by those who lack the courage to cut spending – than surely an efficient tax should be imposed? A carbon tax is like a tobacco tax – it is supposed to reduce the consumption of a bad (although there is no way that CO2 emissions can be considered a bad like tobacco). That’s it reason to exist – and gathering revenue is a secondary matter. It is not the most efficient way to raise revenue.
Bankers know enough about how to make money. They have been very successful in socialising their losses. But now they want an artificial market to supercharge the capitalisation of their gains.
I love banks and bankers. But I hate when they get in tight with government. They then compromise their integrity, and inevitably reduce their efficiency and take their eyes off the ball. Usually the shareholder does pretty badly, even if the management does pretty well. So the principal-agent problem is writ large when it becomes the principal – (agent + government) problem.