The confession of a Fabian, and rebuttal

They always walk among those who cherish liberty as much as the air they breathe but, given their modus operandi of political concealment, it is less commonplace for members of a certain group to conspicuously reveal themselves in public view (an exception is Prime Minister Julia Gillard, whose affiliation with the shadowy group is printed, in black and white, in her parliamentary Declaration of Interests register).

As the title of this blog post explains, yes, I am referring to the Australian members of the Fabian Society, a group dedicated to implementing socialistic ideals by gradualist means. The logo of the Society, of a wolf dressed up in sheep’s clothing, is all you need to know about how these people seek to achieve their objectives – hoodwinking the largely unsuspecting public into the alleged reasonableness of their egregiously liberty-eroding positions is the order of the day for a Fabian.

FabianSocietyLogo

 

When the Fabians do express their affiliation in public it typically comes attached with sweeping statements misguidedly extolling the virtues of larger government. Late last week a Mr Joff Lelliott, a Fabian affiliate, wrote a piece for the ABC Drum website suggesting that Australia is relatively low-taxing compared with high-taxing, high-spending European states and, so, Australia should follow their lead to bankruptcy. A paragraph or two from his piece is below:

If Australians want high-quality services and infrastructure, there needs to be a better understanding of the relationship between the amount of tax collected by governments and what they can provide.

With a GDP of over $1.5 trillion, if Australia taxed at the OECD average, there would be well over $100 billion extra for governments to play with. To put this in context, it is estimated that the National Disability Insurance Scheme (NDIS) and Gonski reforms to education would together cost about $14 billion.

Australia’s tax burden could be increased far less than this to cover the NDIS, Gonski and more, and still see Australia with one of the lowest tax-to-GDP ratios in the OECD.

Now, it is the humble duty of any classical liberal or libertarian (btw, I see them as pretty much one and the same), and indeed just any lover of freedom, to counter economic nonsense wherever it is found. Accordingly, I wrote a response which appears on the same website. The guts of my rebuttal goes as follows:

It seems for Lelliott the amount of Australian GDP absorbed in taxation by Commonwealth, state and local governments is insufficient, and he accordingly provides a rough calculation of the additional amount of taxation revenue to be raised if Australia taxed at the OECD average of 33.8 per cent of GDP.

The magic (or should that be magic pudding?) additional tax revenue figure Lelliott estimates is ‘well over $100 billion extra for governments to play with,’ which could be used to finance proposals such as the NDIS and Gonski and an undefined ‘more.’

Intriguingly, Lelliott suggests that Australia’s overall taxation burden could be increased by ‘far less’ than the OECD average to cover NDIS, Gonski and ‘more,’ but does not provide further detail, presumably preferring that the political class have themselves a bigger economic muck-up day with more taxpayers’ money to burn.

If readers suspect that something is amiss with Lelliott’s analysis, in particular that higher taxing European nation-states haven’t been necessarily travelling well in the economic growth stakes for a fair while, they are onto something.

That is because a larger size of government often reflected in empirical studies through the taxation-to-GDP ratio, or even the ratio of government spending to GDP which has to be financed through taxes anyhow, will harm economic performance even in relatively small-government countries.

An overwhelming number of cross-country studies over the past decade that accommodate econometric innovations and richer data sets, and which often include Australia in the empirical coverage, have found that a larger public sector is associated with slower economic growth rates.

Election years tend, more than most, to be periods in which economically and socially irrational or even malevolent proposals are put forward to the Australian public for their voting consideration. Classical liberals and libertarians certainly have their work cut out to respond to the avalanche of nonsense, but respond to Fabian and other fallacies we must.

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42 Responses to The confession of a Fabian, and rebuttal

  1. Monkey's Uncle

    The fallacy of such an argument (that Australia is a low-tax country compared to the OECD average) is that it assumes everyone should just trend towards the average outcome. But if everyone just trends towards the average, there is no opportunity to look at whether the average outcome is actually correct or whether we should move in a different direction. It is a kind of circular, self-reinforcing belief loop that offers no opportunity for change or reform.

  2. John Mc

    if Australia taxed at the OECD average, there would be well over $100 billion extra for governments to play with.

    The problem is that sentence doesn’t scare people enough. Governments aren’t there to play with your money, nor can they necessarily spend your money better than you can in most situations. Furthermore, when they do play with your money – which is most of the time, and usually to keep themselves elected – they end up pissing your money up the wall and destroying the wealth that would have maintained your standard of living. For an educated populace in a free country, that sentence should send shivers up their spines. But, alas, all too often it doesn’t.

    —————————————

    BTW, I’m a big fan of gradualism. I believe classical liberals don’t understand the power of gradualism and need to get their heads around it soon. It’s gradualism (and a weak constitution) that has allowed socialism to eat into our society like cancer.

    The libertarians amongst us are right that there is a time for reform, but sometimes revolution is better. However, rather than waiting in frustration for the revolution we need to be quietly pursuing our ends. Classical liberals need their own ‘Fabian Society’. We need a society who has the will, the nous and the means to gently but consistently water the seeds of liberty in people’s minds, while acquiring positions of power and influence over public funds, policy and institutions to undermine the socialists at every step and advance the cause of liberty for humanity’s sake.

  3. johanna

    It’s just international pattern-bargaining. They cherry-pick a country or group of countries who are spending more on this or that and claim that we are “falling behind”.

    We see this at a micro level all the time in Australia. Nurses, or teachers, complain that those in other jurisdictions are being paid more than they are, and therefore they deserve a pay rise. Otherwise, they will move to where the money is.

    Of course, this never happens. People don’t uproot themselves solely to earn 2-3 percentage points more. As for productivity, it never enters the equation.

    It doesn’t matter a damn what percentage of GDP we are spending on this or that. As for taxation, it is revealing that some of the worst-performing economies in the world are allegedly ‘benchmarks’. Once again, productivity, ie what we get for our taxes, is never mentioned.

    The whole steaming heap known as ‘international comparisons’ needs to be debunked, and well done for this contribution.

  4. Bruce

    Given that Julia, Wayne and Kelvin Thomson seem to be the most high profile Fabians in the ALP, this would suggest the following equation:

    Fabian = Incompetent

    Lenin, though, would find them quite useful. Although if he were alive today Vlad would probably be an assiduous watermelon farmer.

  5. stackja

    avalanche of nonsense, … Fabian and other fallacies

    Seems to sum up the Left’s agenda.
    How gullible are the voters this time?

  6. entropy

    </blockquote a larger public sector is associated with slower economic growth rates

    to a fabian/green that would be a feature, not a bug…

  7. John Mc

    There is a brilliant little article in the Australian Financial Review from last Friday 1 March 12 (page 4 of the ‘Review’ section) that is worthy of it’s own post on the Cat.

    This is a good example of how we are manipulated by groups in power like the Fabians:

    State has our number if we’re bad at maths

    A new book, “The Physics of Wall Street”, by James Weatheall, tells that story: In 1996, five economists, known as the Boskin Commission, were given the task of saving the government US$1trillion. They observed that if the CPI was lowered by 1.1%, then US$1trillion could indeed be saved over the coming decade. So what did they do? They proposed a way to alter the formula that would lower the CPI by exactly that amount. This raises a question: Is economics being used as science or as after-the-fact justification, much like statistics were manipulated in the Soviet Union?

    Irrespective of one’s political orientation, one thing should be clear: in this brave new world, in which formulas and equations play a much bigger role than ever before, our ignorance of mathematics is being abused by the powers that be, and this will continue until we start taking maths seriously for what it is: a powerful weapon that can be used for good and for ill.

  8. “This raises a question: Is economics being used as science or as after-the-fact justification, much like statistics were manipulated in the Soviet Union?”

    Does that question even need to be asked? Seriously?

  9. Ronaldo

    For people who don’t wish to buy AFR, the article John Mc refers to is available for free at Slate:

  10. Ronaldo

    I don’t know why the link didn’t appear – to get it go to http://www.slate.com and search for ‘Don’t Let Economists and Politicians Hack Your Math’

  11. Jim Rose

    John Mc, the CPI has a well-known annual bias of 1%+ for an inability to measure new goods, quality improvements in existing goods and the substitution by the lower income consumer towards discount outlets.

    how the CPI measures the price of consumer electricals and travel is beyond me.

  12. Jim Rose

    John mc, Comparisons of living standards over long periods of time are fraught with difficulties. Life expectancy is not included as a beginner.

    One estimate has it that median household income in America adjusted using the Consumer Price Index (CPI) was only 18 percent higher in 2006 than it was in 1976.

    the average number of people living in an American household fell between 1976 and 2006 from 2.86 to 2.56 so the 18 percent rise in real median household income turns into a 32 percent increase in real median household income per person.

    Using the Boskin Deflator – which does the best job of adjusting for inflation by accounting for higher product quality:
    • Real median household income rose from 1976 through 2006 by 43 percent
    • Real median household income per person rose by 60 percent

    This far better than the 18 percent figure typically used – a 60% increase in median living standards in 30 years, for some, is just not good enough.

    HT: Middle-class stagnation? – Pittsburgh Tribune-Review http://www.pittsburghlive.com/x/pittsburghtrib/opinion/columnists/boudreaux/s_768615.html#ixzz1o2l1DnXR

  13. m0nty

    Funny how Abbott doesn’t list memberships of any societies at all. Another aspect of the small target strategy.

  14. John Mc

    Hardly a small target strategy. As a heterosexual white male with a traditional family and a religious background the media has as big a target as they’ll ever want.

  15. Fisky

    m0nty, could you please explain why Gillard is not on course for a crushing victory, as you predicted? I’m genuinely perplexed.

  16. John Mc

    And did you poo your pants in the pool today? Word on the street is that you have some issues in that area?

  17. C.L.

    Abbott is a member of the NSW Volunteer Rural Fire Brigade and the Queenscliff Surf Life Saving Club.

    Here he is risking his life for others earlier this year.

  18. C.L.

    Has Julia Gillard ever risked her life for somebody else?

    Has she even ever placed herself at the service of anyone else?

    Like, ever?

  19. jupes

    Has she even ever placed herself at the service of anyone else?

    Wilson and Blewett.

  20. John Mc

    Has she even ever placed herself at the service of anyone else?

    Craig Emerson?

  21. JohnB

    They always sell you half the picture. Why would we want to model ourselves on the OECD countries with about 8% unemployment and spiraling debt? The model for improving living standards and low unemployment are some of our neighbors in Singapore and Hong Kong. Who are seeing 5% growth and unemployment rates below 4%.

  22. Fisky

    Speaking of Fabians. A UK Labour by-election candidate, John O’Farrell, said he was disappointed that Thatcher was not killed in a terrorist bomb attack, and that he wanted Britain to lose the Falklands war to the Argentinian fascists.

    Labour leader Ed Miliband failed to denounce the candidate. Toxic stuff from the Left as always.

    http://yootuubee.com/video/7Jp5rAnIDtU/prime-minister's-questions:-27-february-2013

  23. Tel

    If you count superannuation as a tax (which from a libertarian perspective it is, given that people are forced to pay it against their free will) and you count compulsory worker’s comp insurance, and compulsory vehicle insurance also as tax for the same reasons, Australia ends up pretty high in the tax count.

    Mostly, the modern world is about governments finding sneakier ways to hide what they are doing… so these tax comparisons are pretty meaningless.

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  25. Jim Rose

    unemployment is 25% in spain

  26. Fire and Ice

    This post hits on so many issues at the heart of all thats not only wrong, not merely incompetent but evil in Australian politics and taxation, that I dont know where to start – but others have already identified the issues:
    – Use of the tax/GDP ratio as an indicator of the appropriateness of the tax take. (our government takes well in excess of half of our combined earnings + profits as it is, and the other half goes to the banks due to the burdensome regulatory environment)
    – Since when did a comparison with other countries’ taxation rate make sense here? How do we know that they are not sub-performers as well? What about the high performing economies with very LOW tax rates?
    – Just whose money is this anyhow, to ‘play’ with?
    – Its just automatically assumed that the money will be spent wisely or as efficiently as the voluntary sector – which has been thoroughly and completely discredited. Governments have the singularly worst record of wasteful spending – just look at any of the fucked up policies of the current incumbent party. Is there a single one that has added value?

    All Australians should be outraged at this evil. But the Greek outcome is more likely in Australia – even then, the people still will not wake up. The pollies know this and exploit it.

  27. dover_beach

    and you count compulsory worker’s comp insurance, and compulsory vehicle insurance

    We can largely thank the ‘law and economics’ crew like Calabresi and Posner for that.

  28. Julie Novak

    A fairly interesting mix of comments all round, so thanks.

    I want to pick up on what Tel said. I agree that the conventional fiscal measures of the size of government tend to understate the true extent of public sector interventions, partly because governments use regulations to enforce individuals and businesses to expend their own funds for certain purposes (e.g. compulsory super, effectively compulsory private health insurance).

    Greg Smith published a useful paper about this a few years ago, I said something about this in an opinion piece for the Canberra Times in 2011, and I’ll have more to say sometime soon.

  29. Dantanica

    I don’t understand why our tax rates, the treasurer’s world rating and the performance of our economy need so much attention and comparisons with other countries.
    It’s developed into something like the Oscars. No doubt there is a department in the Government spending heaps of time and money working on these things and flitting around the world.
    When it’s all said and done, we have to survive with the hand dealt by the mob in Canberra. Some boffins from overseas won’t have the answers.
    Of course in our case, the hands we have had to play over the past five years would be the worst in history. Granted those dealt by the pomaded and witless ponces in the 70’s weren’t far behind.

  30. Julie Novak

    Hi Dantanica

    There ought to be some attention paid to inter-regional and inter-country tax rates and burdens, to the extent that these variables influence relocation decisions by the owners of mobile factors of production.

    That said, the lefties of this world tend to look at the Australia v the rest comparisons through the incorrect lens. They observe a relatively smaller tax-to-GDP ratio in Australia, and claim that Australia can lift her tax-to-GDP ratio to that of high-taxing, big-spending Europe with no or minimal adverse consequences.

    My point is that increasing the relative size of government can render economic damage even for regions or countries with relatively smaller governments. Heavier tax burdens means fewer economic opportunities, which is why the leftie narrative on size of government in Australia is both so misleading and dangerous.

  31. Rabz

    I’ve commented on here before that anyone who thinks Australia is a low-taxing country is an idiot. I’ve also listed all the taxes and charges we’re slugged with apart from income tax.

    The rate of taxation on the average salaried schlub would be in the vicinity of 40-50% of their income.

    What part of “that’s too much tax” are imbeciles like joffrey unable to understand?

  32. Ellen of Tasmania

    BTW, I’m a big fan of gradualism. I believe classical liberals don’t understand the power of gradualism and need to get their heads around it soon.

    I’m really interested in this idea because I wonder whether it’s easier to ‘gradualise’ more in one direction than the other.

    I’m not saying it’s impossible, or one shouldn’t try, just that our democratic system seems to feed the leftist agenda well.

  33. m0nty

    m0nty, could you please explain why Gillard is not on course for a crushing victory, as you predicted? I’m genuinely perplexed.

    Still way too early to call it one way or the other, Fisky. Have fun with individual data points, by all means.

  34. John Mc

    Still way too early to call it one way or the other

    F*ck that is funny!!!

  35. John Mc

    I’m really interested in this idea because I wonder whether it’s easier to ‘gradualise’ more in one direction than the other.

    I’m not saying it’s impossible, or one shouldn’t try, just that our democratic system seems to feed the leftist agenda well.

    Nope, Teh Left are just the masters of it. They are more willing to compromise their principles, more ruthless in the sense of the ends justifying the means, much better at appealing to emotion on a mass level like ‘climate justice’, and willing to take bigger risks such as setting huge traps for their opponents like running big deficits that impede future growth and leverage the political debate towards running even bigger deficits.

  36. John Mc

    In short, Ellen, we need to be both smarter and a little more Machiavellian ourselves.

    Our strengths still remain: our ideas are logically consistent and they will actually work when applied.

    Faced with this, our opponents got very good at getting sensible people to buy into arguments that undermined morally sound, rationally consistent, pragmatic positions.

    We need to combat that. Teh Left have been very good at turning what should be our biggest strengths into our biggest weaknesses: that we are all too willing to work hard while minding our own business, that we trust people to act with decency, that we are happy to give if someone really has a good cause, that we believe we should live off our own sweat and not be parasitic on others, that we really pay taxes and don’t claim welfare etc.

  37. Ellen of Tasmania

    John Mc, I guess I’m referring to the fact the socialism tends to appeal to our vices (envy, laziness, irresponsibility etc.) and as you suggest yourself, our message tends to appeal to our virtues (self-reliance, responsibility, hard work etc.)

    It’s easier to appeal to our vices, especially if the government can somehow make them sound like virtues. So eg. it’s O.K. to steal from our neighbour as long as we do it via the govt. system.

    I’m all for being smarter, but if ‘winning’ means compromising principles and ends-justifying-means kind of stuff, then I would suggest that the win would be a loss after all.

  38. If the political “right” in Australia compromise any more principles they will go into negative territory.

    The problem with the political “right” isn’t that they are too principled. Public choice theory tells us that people are rationally ignorant and so the two easiest ideas to sell in three seconds are “keep it the same” and “something for free”. So we get the statist quo of a conservative welfare state that has a one-way ratchet towards bigger government.

  39. Ellen of Tasmania

    John, yes, well said.

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  41. TerjeP

    The logo of the Society, of a wolf dressed up in sheep’s clothing

    John Quiggin’s article, linked above, points out that the logo of the Australian Fabians is actually a turtle. Looking at the website of the Australian Fabians suggests that be is right. So I suppose we will have to criticise the Fabians for their thinking rather than for their logo. That still leaves huge scope for criticism.

  42. Mark

    Didn’t even get as far as the wolf in sheep’s clothing. Was laughing too hard at the description of the Fabian Society – which has been around since the 19th century and of which at least four Australian prime ministers that I know of have PUBLICLY been members – is a “shadowy group”.

    It’s about as shadowy as your local RSL.

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