Let’s not blame China

The Fairfax Media have come a long way since the GFC. This piece by Mark Kenny at least accepts the idea that the Rudd government overreacted to the GFC and spent too much. Even then he makes excuses.

With the clarity of hindsight, it is clear Labor overdid the effort to stave off recession but the risk of doing too little was correctly assessed as the greater sin.

But he also makes a very common error – to be fair both sides of politics have consistently made this error.

… and our good fortune in being a major commodity supplier to China, insulated us from the worst effects of the global financial crisis.

Good fortune had nothing to do with it. Yes it is great to have paying customers. The challenge for any business isn’t paying customers, but having a product to sell in the first place.

Coal and iron ore are not rare commodities. When these commodities are exported it isn’t just the coal itself or the iron ore itself that gets put on a ship. It is the institutional environment that supports the contracts and investment that led to the coal and iron ore being mined and then sold. Australia has a comparative advantage not so much in coal and iron ore as in an institutional framework that means that we don’t suffer from the resource curse and/or expropriation of investment. That is somewhat rare.

It is that institutional framework that the current government has trashed. Now if you think that all that matters is paying customers then you won’t care about the institutional framework and that is the consistent policy error this government has made. The notion that the economy will perform well irrespective of the institutional and supply-side damage causes by government intervention has led to the current under-performance both here and abroad.

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5 Responses to Let’s not blame China

  1. stackja

    Let’s not blame China

    We cannot of course blame the ALP.

  2. John A

    With the clarity of hindsight

    HA! the humour brigade are at it again.

    There is also the clarity of foresight – we have seen the history of government over-reactions to so-called crises before.

    History repeats itself because we refused to listen last time!

  3. johno

    What an appalling load of crap from Mark Kenny.

    Usual Green/Fairfax b******t about higher taxes on evil evil evil banks being a good thing.

    Shame on you Sinclair for getting me to read it.

  4. JamesK

    I see the Mark look-at-me-I’m-a-reasonable-balanced-commentator-not-a-leftist-cross-my-heart Kenny thinks the Greens plan to supertax the banks just makes sense – without him quite being easily quoted saying it.

    He also thinks that super-taxing banks is on “the savings side” of Greens policy.

    So Mark Kenny is like Obummer – taxable income is the government’s and it’s really a matter of how much of your income/profit the government should decide it is tolerable to allow you keep.

    If the government needs to “save” – why then you don’t get to keep so much.

    I can see why Mark Kenny left News Ltd.

    Too much in-house competition with George ‘Treasury-and-me-are-smarter-than-Costello’ Megalogenis

  5. ken n

    Good observations Sinc.
    But I am not sure the the Libs understand the importance of the institutional framework.

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