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.