Election promises: eating the seed corn that generates sustained economic growth

I have a piece in the Spectator that addresses the importance of savings to provide the capital that underpins wealth creation.  Savings themselves will be severely constrained where the state or other looters can exproproate them or where the state imposes regulatory requirements that devalue the savings and the benefits from their investment.

The following (IMF) data are indicative of the benefits from small government and high savings. This pattern of high savings and small government is present in the earliest European economic take-offs and in those of Japan, the “Asian Tigers” and with Chindia.

Australian government spending tends to be ratchetted up by Labor administrations with the measures not being fully reversed by conservative administrations. The more recent of these have been new policy spending initiatives in education and for people with disabilities.

There is also a mounting hostility to growth by The Greens and to some degree the ALP in political decision-making and this has resulted in growth-inhibiting regulatory policies including:

  • Hostility to the development of and eagerness to tax coal, gas and other resources, which are the nation’s most important exports
  • Determination to ensure the destructive substitution of high cost, unreliable wind and solar for low cost reliable coal for electricity generation
  • Measures that restrain the use of water for farming in Australia’s most important agricultural province, the Murray Darling, and in building new irrigation facilities and preventing land clearing in Queensland

The speed with which the ALP agreed with the Coalition’s proposed de facto subsidy to new home owners in the last week of the May 2019 election campaign, underlines the message that the ALP will never be outspent in election promises by the Liberals. Future policy initiatives by an ALP government suggest a new level of spending and taxing and regulatory measures with the latter focused on corporate incomes and individual savings. Using the intended ALP tax regime and plausible assumptions about inflation, Ergas and Pincus estimate the tax rate on individual savings comes out at 55-77 per cent.

Above all there is climate and energy policy, about which the ALP claim there to be no costs. Those policies involving subsidies to renewable energy and discouragement of fossil fuel developments in the case of the Government were estimated by Fisher to cost $89 billion by 2030; those of the ALP were costed at $400 billion.

In both cases there are almost certainly far greater costs than Fisher’s estimates as a result of the policies undermining the nation’s previously low-cost domestic energy supply.

We cannot achieve sustained prosperity by taxing capital, savers and enterprise in order to distribute the wealth to buy votes.

Election promises in Australia reflect a global malignancy. In our modern narrative, constitutional liberty and freedom from arbitrary taxation was defined by Magna Carta, and similar documents, that prevented kings from obtaining favours from the aristocracy by taxing and regulatiing them without their consent. Gradually this was extended to apply to all subjects and the controls over taxation and other regulatory means of revenue raising were exercised through democracy.

Now democracy itself is transformed from a vehicle that prevents seizure of income by the state into one that divides up the income created by the enterprise of the citizenry through financial and regulatory dispersions. Can such a system be efficient in generating increased incomes? Probably not.

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9 Responses to Election promises: eating the seed corn that generates sustained economic growth

  1. stackja

    Socialism being tried again?
    Surely will work this time?
    Venezuela?

  2. Tim Neilson

    One useful reform that could be made to the Senate is to restrict the voting franchise to freehold landowners.

  3. Ƶĩppʯ (ȊꞪꞨV)

    Hostility to the development of and eagerness to tax coal, gas and other resources, which are the nation’s most important exports
    Determination to ensure the destructive substitution of high cost, unreliable wind and solar for low cost reliable coal for electricity generation
    Measures that restrain the use of water for farming in Australia’s most important agricultural province, the Murray Darling, and in building new irrigation facilities and preventing land clearing in Queensland

    anyone would think the left is anti-capitalist….. …oh wait

  4. tombell

    I was watching an old BBC re-run the other night on Magna Carta and Matt Ridley (Viscount Ridley if you please!) made the telling (if depressingly obvious) observation that the Great Charter had as one of its aims a limitation on the ability of the monarch to tax without the consent of the barons (which ultimately morphed into the consent of parliament) – but now it is parliament itself which has become tyrannical and in need of control. Having posed the problem, I’m afraid no quick fix came to the Viscount’s mind. The democratic process self evidently militates against solutions which seek to limit the role/ representation of careerist bloodsuckers.

  5. Dr Fred Lenin

    An English comedian used to say ,”politicians promise you everything ,give you nothing ,and take it off you before you get it”
    Another of his sayings was ,” its colder now than what it was before it was as cold as what it is now,innit?_
    Billy Russell I think he was called ,back in the days when comedians werent politicians retending to be serious ,can you imagine Billy Connoly trying to be PC ?

  6. Squirrel

    Back in the Post-War days when Australia was a “Tiger” of sorts, with impressive growth rates and low unemployment, we also had a very healthy savings rate.

    This is something I reflect on when I hear the commentariat explain that now, as a “young, growing nation” (or words to that effect), we naturally have a low savings rate and must import the capital we need for development – public and private overspending, of course, has nothing to do with our savings shortfall.

  7. Elderly White Man From Skipton

    Put another column in there: GDP/head in PPP. Then try to tell me that the growth number is key.

  8. John Constantine

    Their looting cartel.

    Private property is theft.

    From each according to his means, to each according to her need.

    How much for the little girl?.

    Comrades.

  9. sfw

    Most of our growth seems to come from mass migration, Japan has no migration and much lower growth. The higher growth nations have zero inward migration, what will it take to get people to realise that destroying your culture and way of life with mass migration is not viable in the long run? What will happen to our growth when we have absorbed all the migrants that our welfare system (taxpayers) can support? Long term stagnation if we’re lucky, civil strife and poverty if we’re not.

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