I feel I have to highlight one of the rare moments when the unseen consequences of governmental manipulation of markets becomes seen:

ENVIRONMENT Minister Peter Garrett will keep his job but thousands of workers will be sacked after the abrupt scrapping of the disastrous $2.5 billion household insulation scheme yesterday.

And Mr Garrett's own department admitted that as many as 80,000 homes across the country may have been left with insulation that does not comply with the official guidelines. Source

We know that when the government distorts the price system through, for example, incentives such as insulation subsidies or grants, the higher prices - which indicate to people where the most urgent shortages as dictated by true consumer preferences currently are - lure entrepreneurs and workers like moths to a flame into that industry. When the program ends, these people are suddenly not needed - they were employed in an area not aligned with consumer preferences. We will have thousands of unemployed insulation installers who might have become plumbers or gardeners or something else actually aligned with the true demands of consumers.

The failure of this program comes as no surprise to anyone who has read Bastiat's What Is Seen and What Is Unseen but 90 per cent of the time the majority of the voting population never look beyond what is seen. It's unfortunate that it took the loss of human life to expose it this time (another unfortunate consequence these programs have a habit of causing) - no doubt the government will be calling for more money, better people and better regulation to 'get it right' the next time.

Treasury Secretary Dr. Ken Henry has stated what everyone already knows: if the stimulus is wound down early, jobs will be lost. Absolutely. No one is denying this. But the problem from a year ago has not changed one iota: government spending cannot create permanant jobs. The state takes its money from the private sector. It does not produce its own wealth. It cannot create any kind of meaningful employment.

"If all the stimulus scheduled to impact in 2010/11 was cancelled that would mean a further detraction of 1.5 per cent from GDP (gross domestic product) growth and the loss of up to an additional 100,000 (jobs)," he said.

The jobs are going to go anyway. I think what Dr. Henry means is that he wants to delay the job losses as long as possible to give his lackeys down at the Reserve Bank enough time to kickstart another fiduciary boom. You see, if we can get enough funny money into the economy before the stimulus is wound down then these jobs created out of nowhere suddenly look sustainable and indeed necessary to businesses around the country. They get misled into thinking we have all been saving more than we actually have been and that capital is abundant when in fact it is anything but.

Eventually we have to bear the costs of these inflationary policies. The longer we delay it, the more painful it becomes. But, luckily for Dr. Henry, Kevin Rudd and Glen Stevens, they will all have retired on fat government pensions by then. Ah, the beauty of short-term solutions!

In other news, Jesús Huerta de Soto has given a speech on the causes of the crisis which everyone should check out if they have the time.

Have a good weekend.

It's late and for some reason I'm trawling the drivel that is the Australian media and stumbled upon a couple of articles which are correct but at the same time horrendously wrong in both their analysis and economics.

The first article - and let me add that as it involves a union it comes as no surprise - states that "...a China FTA could create 12,000 jobs for Australia but take away another 170,000 in the manufacturing industry." Now I'm not questioning their numbers - I'm sure the source (a report paid for by the Electrical Trades Union (ETU), hah) is reliable enough - I'm questioning the conclusions they derive from it. Dean Mighell, secretary of the ETU, goes on to say:

"People in the factories, people on the farms, small business people should have real and serious concerns about the implications of free trade agreements," he said.

"The ETU commissioned this report because we think that if we entered into a free trade agreement with China it is the death knell for our manufacturing industries and many of our food-producing industries."

Dean is correct but the solution he's after, for the government to prevent free, voluntary exchange between individuals is not something the government needs to involve itself in. By 'protecting' the manufacturing and food-producing industries by preventing the "dumping of goods into Australia" and other 'evils' that will lower the price of consumer goods in Australia, he is depriving every Australian of a potential increase in their standard of living. Yes, some small interest groups may lose their jobs, but the cheaper prices brought about by the increased competition will provide everyone in the economy with additional income to spend elsewhere (the savings they now make they can use to acquire more goods than they could before). This savings will then be spent in other areas, increasing demand, replacing the jobs that were 'lost'. Not only will we lose no jobs (in the aggregate), but we've all gained additional products, or wealth (of course, government intervention in the form of rigid wages, union barriers to entry and so on can restrict or delay the reallocation of labour resulting in unemployment).

The second article - the one I'm more peeved about - involves the OECD scratching the back of a fellow socialist and "new world order" advocate, Kevin Rudd.

"Australia's fiscal stimulus package seems to have had a strong effect in cushioning the decline in employment caused by the global economic downturn," it said.

"Less by the end of 2010 than if no fiscal stimulus measures had been taken," it said.

Now I'm not sure what these guys at the OECD get paid but if it's more than $0 then it's too much. They plainly state the obvious - that the stimulus prevented job losses - without going into any kind of in-depth, critical analysis at all. Of course the stimulus prevented job losses! It simply protected or insulated industries and jobs which are victims of catastrophic, unsustainable malinvestment and prevented the necessary realignment and restructuring of jobs, wages and prices. Is this sustainable in the long term? No, unless of course they plan to inflate yet another bubble and continue the boom-bust cycle, a policy that Hayek noted would eventually collapse on itself or, worse, lead to full blown socialism. To quote [emphasis added]:

"The great problem in all those instances is whether such a policy, once it has been pursued for years, can still be reversed without serious political and social disturbances. As a result of these policies, what not very long ago might merely have meant a slightly higher unemployment figure, might now, when the employment of large numbers has become dependent on the continuation of these policies, be indeed an experiment which politically is unbearable.

"Full employment policies, as at present practised, attempt the quick and easy way of giving men employment where they happen to be, while the real problem is to bring about a distribution of labour which makes continuous high employment without artificial stimulus possible. What this distribution is we can never know beforehand. The only way to find out is to let the unhampered market act under conditions which will bring about a stable equilibrium between demand and supply. But the very full employment policies make it almost inevitable that we must constantly interfere with the free play of the forces of the market and that the prices which rule during such an expansionary policy, and to which supply will adapt itself, will not represent a lasting condition.

"These difficulties, as we have seen, arise from the fact that unemployment is never evenly spread throughout the economic system, but that, at the time when there may still be substantial unemployment in some sectors, there may exist acute scarcities in others. The purely fiscal and monetary measures on which current full employment policies rely are, however, by themselves indiscriminate in their effects on the different parts of the economic system. The same monetary pressure which in some parts of the system might merely reduce unemployment will in others produce definite inflationary effects. If not checked by other measures, such monetary pressure might well set up an inflationary spiral of prices and wages long before unemployment has disappeared, and—with present nation wide wage bargaining—the rise of wages may threaten the results of the full employment policy even before it has been achieved.

"As is regularly the case in such circumstances, the governments will then find themselves forced to take measures to counteract the effects of their own policy. The effects of the inflation have to be contained or 'repressed' by direct controls of prices and of quantities produced and sold: the rise of prices has to be prevented by imposing maximum prices and the resulting scarcities must be met by a system of rationing, priorities and allocations.

"The manner in which inflation leads a government into a system of overall controls and central planning is by now too well known to need elaboration. It is usually a particularly pernicious kind of planning, because not thought out beforehand but applied piecemeal as the unwelcome results of inflation manifest themselves. A government which uses inflation as an instrument of policy but wants it to produce only the desired effects is soon driven to control ever increasing parts of the economy." - Friedrich August von Hayek: Studies in Philosophy, Politics and Economics, pp. 270–76

Apologies for the long quote but I felt it necessary. Back to the theme of this post, the horrible economic (or lack of) analysis provided by the Australian media (it's expected from the OECD), I think I'm going to have to create some kind of award for the worst piece of Australian economic/political journalism, perhaps on a monthly basis, just to highlight how completely oblivious they are on the entire subject. They, well the majority, just blindly regurgitate what the 'experts' tell them without a second thought. Did no one teach these people how to think?

Just one final word on the Hayek quote, mainly the final part about the government being "...driven to control ever increasing parts of the economy." This is something we're seeing in the US as well as here, governments get involved in the first place and then blam the market for problems caused by that very involvement, such as: creating a telecommunication monopoly, turning it into a quasi-private monopoly then blaming the market for it; maintaining a quasi-private health market which drives up the costs for everyone; inflating the money supply causing a financial crisis (and later inflation); and so on. What's the governments response to all of these government-created problems? More government, more regulation and more control. That simply equates to less individual freedom, higher prices and shortages/restrictions of some kind.

We need reform, but not the kind our politicians are currently undertaking. In fact, if you took everything Rudd and his legion of do-gooders have done since coming to office, doing the polar opposite wouldn't have been such a bad policy response.

[This article is excerpted from "Economics in One Lesson". It was first published in 1946.]

THE ECONOMIC GOAL of any nation, as of any individual, is to get the greatest results with the least effort. The whole economic progress of mankind has consisted in getting more production with the same labor. It is for this reason that men began putting burdens on the backs of mules instead of on their own; that they went on to invent the wheel and the wagon, the railroad and the motor truck. It is for this reason that men used their ingenuity to develop a hundred thousand labor-saving inventions.

All this is so elementary that one would blush to state it if it were not being constantly forgotten by those who coin and circulate the new slogans. Translated into national terms, this first principle means that our real objective is to maximize production. In doing this, full employment—that is, the absence of involuntary idleness—becomes a necessary byproduct. But production is the end, employment merely the means. We cannot continuously have the fullest production without full employment. But we can very easily have full employment without full production.

Primitive tribes are naked, and wretchedly fed and housed, but they do not suffer from unemployment. China and India are incomparably poorer than ourselves, but the main trouble from which they suffer is primitive production methods (which are both a cause and a consequence of a shortage of capital) and not unemployment. Nothing is easier to achieve than full employment, once it is divorced from the goal of full production and taken as an end in itself. Hitler provided full employment with a huge armament program. World War II provided full employment for every nation involved. The slave labor in Germany had full employment. Prisons and chain gangs have full employment. Coercion can always provide full employment.

Yet our legislators do not present Full Production bills in Congress but Full Employment bills. Even committees of businessmen recommend “a President’s Commission on Full Employment,” not on Full Production, or even on Full Employment and Full Production. Everywhere the means is erected into the end, and the end itself is forgotten.

Wages and employment are discussed as if they had no relation to productivity and output. On the assumption that there is only a fixed amount of work to be done, the conclusion is drawn that a thirtyhour week will provide more jobs and will therefore be preferable to a forty-hour week. A hundred make-work practices of labor unions are confusedly tolerated. When a Petrillo threatens to put a radio
station out of business unless it employs twice as many musicians as it needs, he is supported by part of the public because he is after all merely trying to create jobs. When we had our WPA, it was considered a mark of genius for the administrators to think of projects that employed the largest number of men in relation to the value of the work performed—in other words, in which labor was least efficient.

It would be far better, if that were the choice—which it isn’t—to have maximum production with part of the population supported in idleness by undisguised relief than to provide “full employment” by so many forms of disguised make-work that production is disorganized. The progress of civilization has meant the reduction of employment, not its increase. It is because we have become increasingly wealthy as a nation that we have been able virtually to eliminate child labor, to remove the necessity of work for many of the aged and to make it unnecessary for millions of women to take jobs. A much smaller proportion of the American population needs to work than that, say, of China or of Russia. The real question is not how many millions of jobs there will be in America ten years from now, but how much shall we produce, and what, in consequence, will be our standard of living? The problem of distribution on which all the stress is being put today, is after all more easily solved the more there is to distribute.

We can clarify our thinking if we put our chief emphasis where it belongs—on policies that will maximize production.

There's an excellent piece in today's Mises Daily by Chris Brown which highlights a lot of what I've been saying over the past several months: fiscal 'stimulus' is nothing more than a colossal waste of resources. Here's an excerpt:

"It turns out that Australia's Prime Minister Kevin Rudd is going around town breaking windows by, well, demanding they be built. There are over 35,000 construction and maintenance projects planned across Australia over the next 12 months. This includes AU$49 (US$39.4) billion dedicated to "nation building infrastructure," or crudely AU$2,200 in taxes for every man, woman, and child residing in Australia."

As long as people continue to believe that jobs are all that matter, we're doomed to repeat the mistakes of the past over and over again. Even if the 'stimulus' increased GDP in monetary terms and allowed us to stave off a technical recession, it will not create any additional real wealth or production in the economy; at best it will merely divert it.

Elsewhere, the RBA released their latest financial aggregates. Nothing too surprising in there, with monetary growth (M1, M3, broad money, money base, currency etc) all remaining about 15% YoY. Two noticeable changes were the increase in term and other non-government deposits by almost 30% YoY indicating that people are increasing their savings which is a good thing. A more worrying sign is that lending to the government by all financial intermediaries (AFI's) was up 273% YoY, a perfect example of the government squeezing the lending industry. At some stage the banks are going to have to increase the interest rates on their loans at which point the RBA will need to decide whether they a) sit back and watch (possibly raise rates too); or b) start printing money to keep rates down, thereby causing inflation.

Interesting times indeed...

Mr. Rudd states that:

"Treasury's advice to be published in the Budget tomorrow is that the measures that we have put in place will support Australian jobs and significantly reduce the length of the Australian unemployment queues," he said.

"This Treasury advice finds that if the Government had done nothing national unemployment in Australia would have been forecast to reach 10 per cent."

He might be right. We might have had more job losses in certain areas of the economy; it's impossible to attach a figure to this (the Treasury wizards can guess all they like - I recall them saying in 2006 that this boom was going to stay strong for 'many decades to come'). But are job losses necessarily a bad thing? The whole reason the world is going through this recession is because there are fundamental structural problems throughout the world economy. There are resource misallocations, misallocations caused by irresponsible monetary and fiscal policy that need to be fixed. Any attempt to prop up prices, or jobs, by injecting capital into areas of said misallocation is a bad idea. It prevents the market's corrective mechanisms from working; it destroys yet more wealth even after the errors of the bubble have been revealed. Hasn't anyone ever told the people in charge that throwing good money after bad is never a smart thing to do? I suppose if your job involves spending the fruits of other people's labour, with no personal repercussions, then it doesn't matter how much you squander, especially if it wins you votes.

But let's not skirt around the issue: this was never a matter of economics. Our leaders may be very well aware of the fallacies of "stimulus" (although this author is sceptic) and are only pushing these plans for political considerations; in that case, it's an attempt to prop up pet industries (infrastructure comes to mind) and increase the size and power of government (i.e. them). Assuming, as we are told, these expenditures are temporary, what happens when the resources shift out of these areas? There's no way for the government to know where consumer, saver and investor preferences lie and therefore they have no idea whether they will survive in the long run. As I've said before, if these projects actually had merits, they wouldn't need to justify them with moral or sentimental reasoning. Simple accounting would be sufficient!

As Mr. Swan keeps telling us, "...tonight's Budget is about three things - jobs, nation-building and a path back to surplus". To look further at the issue of jobs, we need to ask the question: is it that hard to create employment? Keynes suggested we should bury old bottles with money in them, cover them with garbage, then let ordinary incentives get people out there digging. But this misses a fundamental point: employment is not a goal in itself. Wealth, value and production are the goals. Stimulus may create jobs, but it's likely a net destroyer of wealth.

Can government spending attract resources that are currently unemployed? Given that most of the labour force is currently employed, and that leisure does have a value, it's doubtful. More likely, it will simply divert resources (capital, labour) and increase the cost of capital and labour for the private sector, preventing them from expanding and creating jobs themselves.

Arguably the largest issue with stimulus and deficit spending is the debt created to finance it. Either higher taxes in the future or inflation (through the monetising of the debt) are required. In either case, future wealth will be lost as productive activities are penalised. Will the wealth created today, if any, be worth the cost of future losses in wealth? I highly doubt it.

So if massive stimulus packages and "nation building" investments aren't the way to get ourselves out of this mess, what is? The first thing to keep in mind is that spending that prevents or inhibits the reallocation of resources from areas of malinvestment will only prolong the current recession. Not only is this type of spending not better than nothing, it's far worse than nothing.

We need to allow market adjustments to take place. Prices and wages need to be allowed to realign; only when this happens will economic activity resume and will wealth again be created (of course, if other factors: productivity, technology and so on, somehow manage to increase at a greater rate than that of government wealth-destruction, it is possible to achieve a net gain in wealth in spite of the gross government waste).

Government should also be reducing tax to reduce the demand to hold money and increase the desire to lend, borrow, invest, and consume (notice that tax cuts aren't directed by the whim of a bureaucrat: private individuals are able to allocate resources in line with their own, voluntary, preferences, making them more likely to be sustainable).

However, it's important to realise that a cut in tax must be followed by a cut in government spending. Otherwise there will simply be tax increases or inflation in the future to pay for the tax cuts today. In other words, any cuts must be sustainable.

Finally, it's critical that we overcome the fallacy of "jobs" and instead focus on what matters: wealth. A jump in job data does not necessarily equate to an increase in standards of living; let's not forget that some of the poorest places in the world have close to "full employment". Stimulus and grandeur spending promises are nothing but a recipe for wealth destruction. With wealth creation, jobs will follow and prosperity is increase for everyone. With a focus on jobs, it's unlikely that wealth will follow. Indeed, we're more likely to see "trickle up poverty" than "trickle down wealth". Contrary to what they tell us, the free market, or a focus on wealth, is a plan for the people; a focus on jobs, or big government, is a plan for the politicians and wealth destruction. The free market had nothing to do with this crisis: interference in the market by government, the refusal to allow production and consumption to coordinate, is what caused this mess. More of the same will not restore prosperity, it will only destroy it. Blaming 'greed' is akin to blaming gravity for airplane crashes.

Tonight's budget should go down in history as one of the most irresponsible acts ever committed by an Australian government. Deficit spending of $60 billion dollars, or almost 10% of our GDP, will be a burden we're going to have to bear for decades. Unfortunately I fear that the propaganda machine, already in full gear, will distort public opinion to the contrary. The budget will go down as our "saviour", and the old Keynesian mantra of "imagine how bad it would have been if we did nothing" will be utilised to it's full extent. It's a rigged debate that the market can't win.

Mr. Brumby yesterday announced that he will ‘stimulate’ 68,000 jobs through a capital works and training program. But in doing so he ignores the century’s old lesson of one Frédéric Bastiat; he ignores the unseen and only focuses on what is immediately in front of him.

The creation of these jobs is financed by taking money from the taxpayer. In doing so, their wages are reduced by the same amount that those of the building industry are increased by. In effect, there are no jobs created. All that will occur is a reallocation of jobs—as public spending is always a substitute for private spending. While it may well support one worker in place of another, it adds nothing to the economy when taken as a whole.

The claim that public infrastructure spending “creates jobs for the workers” is an incredibly dangerous proposition. It serves no other purpose than to automatically qualify the most absurd spending decisions. If a road or railway has sufficient utility to justify the capital outlay then that argument alone should be sufficient in justifying its creation. But if, as is the case with Mr. Brumby, that’s not possible to do, he’s forced to resort to the fallacious position of “creating jobs”.

When considering your support for these programs, ask yourself this: what would the taxpayers have done—and can no longer do—with the same billions that are now being spent on public enterprise. There’s no question that these projects will give jobs to certain workers. That’s what’s seen. But it deprives other workers of employment. That’s what’s not seen.

If you give people money to do something, of course their going to do it. From the ABC:

The Federal Government says strong uptake of its solar hot water rebate is proof that its economic stimulus package is working.

More than 6,000 Australians have applied for the $1,600 rebate since it was introduced last month.

The Environment Minister Peter Garrett says it is good news for jobs and small businesses.

"This marks a really, really positive day for Australian industry, for the solar hot water industry, for the retailers, for the installers, for the plumbers, for the tradies, this is going to drive economic activity through the sector," he said.

"It 's environmentally friendly, it stimulates the economy and it's stimulating local jobs and local manufacturing. That's the critical thing.

"So we have positive proof that the Government's decision in the economic stimulus package to provide a non-means tested rebate for solar hot water systems is paying us immediate dividends."

Absolutely. Everyone who has applied for or installed a solar panel is benefiting immensely, along with the solar industry and all of their employees. But this was not the way to go about doing it. Mr. Garrett is missing the bigger picture: who did you steal from to pay for these rebates? What industry is now suffering or was never created because you wanted to subsidise the solar energy industry? How about you stop subsidising electricity (excuse the wikipedia reference but I'm feeling lazy: the Australian government pays $9-10bn a year keeping the electricity price down) and then maybe people would actually choose for themselves where to get their electricity?

Stop complaining about people using too much power causing outages or killing our planet. If you allow the market to determine how much individuals are willing to pay for electricity (hint: scrap the subsidies/rebates etc), in other words let the price system work, we wouldn't have power outages. The electricity companies in Australia are just one of many government institutions (water, transport are others) that actually advertise telling people not to use their product! What kind of self-respecting business goes around telling people not to buy their product?!

This is just another state band-aid on a state-caused problem at the taxpayers' expense. Wake up and smell the bacon Mr. Garrett, quit wasting our money.

The Motor Traders Association is suggesting that we destroy all of our old vehicles to "stimulate" the industry,

The Motor Traders Association of NSW has written to Treasurer Wayne Swan explaining the benefits of the initiative, while the Motor Traders Association of Australia (MTAA) has commissioned think tank Access Economics to produce economic modelling on the costs.

The MTA NSW has asked the Government to pay up to $3000 to crush cars more than 10 years old.

Once the car was destroyed the owner would get a certificate to be presented at a car dealership to receive $3000 off a new car.

That sounds logical, right? Wrong. They're confusing need with demand. Just because the government and interest groups think we all need to replace these old vechicles, it doesn't me we're entitled to them. We have to produce something, to accumulate purchasing power before we can demand ! However, I do agree with the comment below that this will help the auto industry, in the short term about this there is no doubt,

"We need to help the industry, including 103,000 small businesses that make a living from the car industry and 318,000 workers."

While this "stimulus" may create more work for the car industry and small businesses supported by it, it's actually just a diversion of demand to this industry from others. While these guys are out building cars that no one is actually demanding , other products, the ones people do actually demand, are never created. If the arguments put forth above are really true, then why doesn't the government immediately wreck our old plants, planes, houses, whatever and recycle (or just junk) the old parts? How do they know when something needs to be replaced? Quite simply, they don't.

There exists an optimum level of replacement, a period when the benefits derived from replacing an old piece of machinery overtake the benefits of keeping it. This isn't for the government to decide, it's for the individual. They alone should decide if the vehicle has no value to them anymore and needs to be replaced.

Even if this "stimulus" does increase GDP in monetary terms (i.e. raising prices or 'national income'), it will not be creating any additional wealth or production in our economy: it will destroy it. It's the same reason why most natural disasters result in an increase in GDP, because GDP only measures output, not real wealth.

The sad thing is, this policy is just stupid enough to appeal to the economic illiterates that run this country.

The government today announced it's going to slash the number of skilled migrants allowed into Australia to "save local jobs",

"We don't want people coming in who are going to compete with Australians for limited jobs."

Senator Evans says he sees little chance of a change to policy next year.

"What we'll look to do is run a smaller program and keep the capacity to make sure we can bring in any labour we might need as the year develops," he said.

Surely the opposition would object to this, given that the economics behind it are completely false? Nope, not our Malcolm,

Opposition Leader Malcolm Turnbull says the Government should act to cut further if unemployment worsens.

"We've been calling for the Government to cut its immigration intake for months now in light of the worsening economic situation so this is a welcome move," he said.

"It's good that they've finally recognised the gravity to the threats to jobs in Australia and acted to reduce the immigration intake."

...and of course the union has chipped in with their thoughts as well,

The ACTU says it is prudent to make the cuts when unemployment is on the rise.

If the goal of both sides of the political fence is to impoverish us as a nation, then a job well done to all involved! This is just further evidence that neither side has a clue about what's going on and the whole political system in Australia is a sham: left, right - the only difference is who they steal from and who they 'redistribute' to.

Nothing depresses me more than listening to Julia Gillard, I don't think anything she says makes sense. From the ABC,

"The political party in the Australian Parliament that is spitting in the face of the Australian people and refusing to recognise that mandate is the Liberal Party, with Mr Turnbull dithering on one side, looking over his shoulder to see what Mr Costello is going to say to him next."

What Julia doesn't understand is that their new IR laws will destroy jobs. Unfortunately she can't see beyond the few short-term jobs it will "save" and definitely can't see thousands of jobs that will never be created because of these "reforms". Of course the unions are in full support,

Ms Burrow says a national union poll shows workers want new laws to protect them during the global financial crisis.

"People know that the rights and protections that are in the government's IR bills are more important than ever in an economic downturn," she said.

"Unfair dismissal protection is absolutely central to people's security, they must be put in place."

Any policy that increases the cost of labour above the market rate (when I say market rate, I mean the fair rate) will increase unemployment and lower the standard of living of the nation as a whole. The government has made it nearly impossible to tell if someone is 'employed' or not, the ABS definition is a joke:

"Employed persons comprise all those civilians aged 15 years and over who worked for one hour or more in the reference week or who had a job from which they were absent. Work is taken to mean work for one hour or more during the reference week, undertaken for pay, profit, commission or payment in kind, in a job, business or farm, or without pay in a family business or farm."

Needless to say, even if you aren't 'employed' according to the above definition (one hour a week? are they kidding?), you have to fill several criteria before you're considered 'unemployed'. If you saved for a rainy day and never have to step foot in a Centrelink office, chances are you're not unemployed by their definition.

The term 'CUB' has been floating around Australia (in particular in Western Australia courtesy of the mining boom) since early 2006 and refers to a type of young, white, mainly working-class male. They're generally uncultured, uncouth, poorly educated and are ostentatious with their money, easily falling prey to slick marketing.

I came across an article in the West today which was sympathising with a 29 year old tradesman who had recently been made redundant. He fit the 'CUB' definition perfectly, he: was earning up to $1,700 a week prior to the crisis; has no education; married young; has children; and has multiple cars and a large 4-bedroom house. He is now employed in the fruit picking industry at $550 a week.

The article went on to blame immigrants for "takin our jobs!" when hard working locals should have them. The glaring flaws in that argument aside, the real question is why does this guy deserve our sympathy? During the government-created boom, he was living the high life, far above his means. He splurged on cars, tvs, holidays and much more and now has to bear the cost of that lifestyle. It's a painful slap in the face, but there's no reason that hard-working, prudent savers should have to foot the bill and bail out the 'CUBs' for the same reason that the banks, auto-makers and other failed companies shouldn't be bailed out. Doing so would further send us down the welfare state road by removing yet another incentive to act responsibily: personal losses (free health, free education, welfare benefits, child bonuses, housing bonuses...the list goes on: all of them discourage individual responsbility).

It's time to start living within your means. Real savings are the only road to prosperity, wasteful consumption is nothing but a destroyer of wealth. Plan for the future, don't spend all of your savings and then beg (or in the case of bailouts, take) from people who planned for the inevitable storm and lived within their means. People aren't 'doomed' to be poor: it's a life choice. In the free market there is profit and loss, removing the loss side of the equation has disasterous consequences for both businesses and individuals. Let them live with their choice, through the good times and bad.

Why is the government only focusing on jobs? Earlier today there was this article, then we also had $155m for employers to keep their apprentice's. Earlier in the week (surprise surprise) we had the unions telling us that we're talking people out of jobs. Right.

The issues we're facing have nothing to do with jobs. The focus needs to be on increasing wealth or value in our economy, not on full employment. Full employment is easy to achieve: Cavemen had full employment; the Egyptians had full employment; prisons have full employment. As lord Keynes once suggested, we can bury old bottles with money in them and then ordinary incentives will get people out there digging! Unfortunately this will do nothing to ease the crisis and get us back to where we need to be. In fact, it will only delay the restructuring process by keeping people in jobs where resources have been inefficiently allocated.

The only way to achieve greater wealth or value, thereby improving our economic well being and possibly (if the state doesn't get involved -- hah) achieving full employment, is by increasing production. Full production needs to be the goal. So why can't the politicians see that, why do they still harp on about jobs? It's quite simple really: they don't know the truth (politicians are generalists not economists); they're probably receiving their advice from 'brains for sale', people with vested interests in not achieving full employment; and emotion sells (or in this case buys votes). Here's a quote from Henry Hazlitt that sums it up nicely,

It would be far better, if that were the choice—which it isn’t—to have maximum production with part of the population supported in idleness by undisguised relief than to provide “full employment” by so many forms of disguised make-work that production is disorganized. The progress of civilization has meant the reduction of employment, not its increase. It is because we have become increasingly wealthy as a nation that we have been able virtually to eliminate child labor, to remove the necessity of work for many of the aged and to make it unnecessary for millions of women to take jobs. A much smaller proportion of the American population needs to work than that, say, of China or of Russia. The real question is not how many millions of jobs there will be in America ten years from now, but how much shall we produce, and what, in consequence, will be our standard of living? The problem of distribution on which all the stress is being put today, is after all more easily solved the more there is to distribute.

We can clarify our thinking if we put our chief emphasis where it belongs—on policies that will maximize production. -- Henry Hazlitt, Economics in One Lesson