Let me begin by saying that I still think the science that suggests anthropogenic carbon emissions are the major cause of climate change is anything but settled. Given the unpredictable nature of the climate and all the scandals involving the IPCC and other government-funded climate science bodies we would be foolish not to maintain some caution; I certainly don’t think we should be rushing into anything that could adversely affect the living standards of many, many people. However – and this is a dilemma I’ve had for a while – it seems both political parties are set on “action”, so the billion dollar question is: which path will cause less damage?

“Personally, I find that the most objectionable feature of the conservative attitude is its propensity to reject well-substantiated new knowledge because it dislikes some of the consequences which seem to follow from it—or, to put it bluntly, its obscurantism. I will not deny that scientists as much as others are given to fads and fashions and that we have much reason to be cautious in accepting the conclusions that they draw from their latest theories. But the reasons for our reluctance must themselves be rational and must be kept separate from our regret that the new theories upset our cherished beliefs” – F.A. Hayek

First, apologies if I have the details of either policy a bit muddled; I honestly haven’t had the time to trawl through them so there might be some parts I have wrong, please correct me if that’s the case. With that said, first up on the chopping block is Labour’s Emissions Trading Scheme.

• Schemes of this nature have enormous administrative costs
• Government allocates emission permits sector by sector, industry by industry
• Government auctioning permits for businesses to continue to do business is a huge tax hidden in a bureaucratic black box
• The government has even more power to pick winners and losers, all of whom will no doubt commit huge amounts of capital to lobbyists to influence the government

Now as someone who is generally very sceptical about giving the government any new authority, I could certainly see how billions of dollars could go “missing” under this scheme. At face value, while it will cut carbon, it will expand bureaucracy and crony-capitalism to even further heights.

As for the Liberal’s “direct” approach, again correct me if I’m wrong, but it looks like, quite simply, “$10b worth of handouts for businesses and farmers to reduce emissions.” As with the above – although this may be more transparent and cost less – it’s almost a certainty that the creation of a new body to simply hand out cash for farmers to plant trees and so forth will reek of pork barrelling and waste. I’ll examine it a bit more in the coming days (honestly, I really don’t have the time – this entire post is being rushed, mainly so I can get the following point out. I will comment on this post at a later date after reading up on both schemes).

So, with both schemes looking rather rubbish, why hasn’t anyone considered a (fully rebated) direct tax on carbon itself as an alternative (I’m only raising this as I feel – with action guaranteed – that it’s the most sound option)? It would avoid the shortfalls of the above options as:

• It would be a straightforward tax on fossil fuels based on each fuel's carbon content
• It avoids the uncertainties of the cap and trade – a carbon tax would provide a clear and candid incentive to adopt energy-saving and carbon-minimising technologies
• The market will be left to determine how to most efficiently order affairs under those new prices (i.e. windmills, solar, hydrogen, whatever – the market will pick the most effective)
• It has a known cost and taxpayers could demand a commensurate reduction of other taxes (e.g. income tax)

That final point is the biggest reason why I would support “action” in the direct taxation of carbon over a cap and trade or Abbott-style scheme. The amount collected from it could be directly transferred back to the taxpayer in the form of a tax reduction elsewhere. The last thing we need is another black box for the government and banks to play with (hello carbon trading bubble!).

Now, let me end with something I think needs to be addressed more urgently, and will do more good for the environment than any of the above schemes: the removal of state-granted monopolies in power generation.

The carbon tax scheme I mentioned above will not work unless there is a free market in power generation (currently as there's no incentive to cut emissions utilities can just absorb the loss – their performance isn’t measured on profitability – or pass on the extra costs in the form of higher prices without even a glance at alternatives. It is also very difficult/impossible for a competitor to enter the market.). It's clear that state-sponsored public utility monopolies and the bureaucratic regulation of their pricing structures and investment options greatly limits the freedom of power markets...consumers lose the ability to choose their provider and the utilities lose their freedom to determine what to charge and what infrastructure to invest in.

If power was returned to the free market we would see more competition, better pricing, more cost-saving (more resources conserved) and more money flowing into green power.

It’s ironic that the government today spends money on adverts telling people NOT to use power during a period of high demand (e.g. a heatwave)...when if markets were in charge, a heatwave would not be looked at as a problem but as an opportunity. Entrepreneurs would be itching to meet demand instead of making excuses, just as they do in every other sector that is controlled by markets.

The real question is how can anyone be serious about helping the environment while these state granted monopolies are allowed to exist?

You need ‘courage’, according to Rudd anyway:

Prime Minister Kevin Rudd has called for world leaders to show political courage at the climate change talks in Copenhagen in three weeks' time.

"What's required is a bit of political courage for everyone collectively to step up to the plate, put behind the familiar, put behind the fears and concerns of the past and embrace instead the opportunities of the future," he said.

"We're at one of those crossover points in the world, one of the crossover points in Australia.

"Let's rise to the challenge rather than simply succumb here at home and abroad to the politics of fear."

The ability of these guys to convince themselves of anything always amazes me.

I have been rather busy over the past week with work and other things so to ease the inactivity I thought I would simply quote from Hazlitt (quoting Sumner) about the Forgotten Man. It is important to always think about the Forgotten Man when considering whatever the latest political ideal floating around is...as Bastiat would say, to see what is not seen, to understand the full effects of a policy, not just the immediate.

In the course of our study, also, we have rediscovered an old friend. He is the Forgotten Man of William Graham Sumner. The reader will remember that in Sumner’s essay, which appeared in 1883:

As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed to remedy the evil and help X. Their law always proposes to determine what C shall do for X or, in the better case, what A, B and C shall do for ... .. What I want to do is to look up C.... I call him the Forgotten Man.... He is the man who never is thought of. He is the victim of the reformer, social speculator and philanthropist, and I hope to show you before I get through that he deserves your notice both for his character and for the many burdens which are laid upon him.

It is a historic irony that when this phrase, the Forgotten Man, was revived in the 1930s, it was applied, not to C, but to X; and C, who was then being asked to support still more Xs, was more completely forgotten than ever. It is C, the Forgotten Man, who is always called upon to stanch the politician’s bleeding heart by paying for his vicarious generosity.

I would also like to quote from Friedman's 1991 discussion of Gammon's law and healthcare as it seems relevant - there is no doubt in my mind that Rudd is going to come out soon, whether as an election promise or a radical pre-election move, and propose to drastically increase federal involvement in healthcare.

"[Gammon] was led to enunciate what he called "the theory of bureaucratic displacement." In his words, in "a bureaucratic system . . . increase in expenditure will be matched by fall in production. . . . Such systems will act rather like `black holes,' in the economic universe, simultaneously sucking in resources, and shrinking in terms of `emitted production.'"

I suggest everyone read the full (brief) article as it will hopefully shed some light on why more government involvement in healthcare is a bad idea.

"Shutting it [the government healthcare venture] down is an admission of failure, something none of us is prepared to face if we can help it. And they need not shut it down. Instead, in entire good faith, the backers can contend that the apparent lack of success is simply a result of not carrying the venture far enough. If they are persuasive enough, they can draw on the deep pockets of the tax-paying public, while replenishing their own, to finance a continuation and expansion of the venture. Little wonder that unsuccessful government ventures are generally expanded rather than terminated."

Sounds familiar doesn't it.

I love how Kevin Rudd justifies his decisions. Here are two perfect examples of deflection and utter nonsense:

From The Age,

[Responding on criticism that the budget is too large] "Australia's net debt will be the lowest of any major advanced economy in the world for the next decade."

From the ABC,

[Responding to the $2m spent on travel during the parliamentary winter break last year which he tried to hide by releasing on the same day as the budget] "I would say that Mr Howard's $20 million travel arrangements when he was prime minister, which have been defended by Mr Turnbull this morning, are quite clear."

"The benchmark - which has been established by the previous government - we've acted within that."

Classic deflection. Has it honestly never occurred to these clowns that just because someone else is doing it or did it in the past doesn't make it right? It's the old childhood story your parents tell you, "if your friends jumped off a cliff, would you follow them?" I can't believe that this defense holds up to any kind scrutiny, the media is really doing a poor job of critiquing Rudd's policies. Are people really so obsessed with left vs right, labor vs liberal that they can't see that, maybe, just maybe, they're both wrong?

Throughout the Howard years the Liberal party preached, as if gospel, that by delivering budget surplus after surplus they were and still are the only party to be trusted to ‘responsibly' manage the economy. In contrast, Labor is demonised as ‘irresponsible' economic managers due to their spend-happy history, which, at present, they appear to be living up to.

This constant debate of Labor deficit vs. Liberal surplus floods the media every day, both sides trading blows with seemingly no resolution in sight. In this brief article I'd like to set the record straight: both parties are wrong and both will cause considerable harm to our economy.

The Surplus
The legacy of the Liberal government as they'll relentlessly stress was the art of maintaining a budget surplus throughout their term in office. They call this fiscal responsibility, prudent management or some other play on words that makes it sound as if a surplus somehow helps the taxpayers. On the contrary, budget surpluses are not surpluses at all; they are simply a result of the government charging too much in taxes. When Peter Costello tries to equate that a budget surplus is, in effect, the same as if a private company made a profit, all he's doing is demonstrating his dishonesty.

Firms make profits by satisfying the most urgent needs of consumers. They manage to keep costs low enough to earn a differential between said costs and the market price of their products. This is in sharp contrast to how the government does business: rather than meeting the needs of consumers, the bulk of government products and services are provided for the people who pay relatively little in taxes.

A government surplus is earned by seizing property from citizens and then not permitting those same citizens to use the services that they are financing. If someone in the private sector attempted to act in this way they would be prosecuted for theft and fraud. Perhaps next time Mr. Costello orders a meal at an expensive restaurant he should pay the bill and then be told that it's "unfair" to "working people" and that the meal will instead go to someone "more deserving".

Throughout their term the Liberal government, while keeping a budget surplus, failed to decrease the size of government at all; in fact, the size of government grew, making it oh-so-easy for Labor to just continue the big government trend at a faster rate.

A budget surplus is NOT a good thing. It is quite simply money that the private sector no longer has to spend. Entrepreneurs have that much less money to meet the demands of consumers; the very needs that the government claims to be "helping" with their spending policies. While the logical response to a surplus should be to lower taxes, the relentless greed for other people's money that is inherent in any government - left or right - the plunder of citizens under the pretence that it's "for their own good", instead results in the opposite - more spending!

This leads us to the budget deficit.

The Deficit
In stark contrast to the Liberal party, Labour claim that budget surpluses are evidence of the government ‘underspending'. To them, it's not because taxes are too high. Indeed, they baulk at the suggestion of a tax cut, because the result is that the government will be deprived of revenue that it "needs" to help the "battlers". Using this logic, if surpluses aren't the result of too much tax, then the huge budget deficits that Labor enjoys running are not the result of taxes being too low but rather too much spending (and they should cut spending and not raise tax to end them).

The current Labor leader, Kevin Rudd, is a self-proclaimed "economic conservative". Funny how as soon as he was elected he discovered a great number of exceptions that required more funding and moved from economic conservative to socialist, spouting phrases such as a "new world" and how everyone has to "do their part [i.e. pay more tax]".

Deficit spending hurts Australians more than surpluses, on that there is no question. The so called (Keynesian) justification for it, to "fill the void" left by the private sector, is a myth that has been disproven so many times that it's not worth citing. Deficit spending only diverts capital resources from more desirable to less desirable uses, with a side effect of increasing the size of government. That aside, here are some other side effects of deficit spending:

• Higher interest rates (if the government borrows domestically)

• Increased inflation (if the RBA monetises the debt)

• Weakened export markets (if the government sells debt abroad)

• Tax hikes

• All the above in some combination

In addition, while the deficit spending is continued, entrepreneurs in the private sector will have to guess about the particulars of the deficit accommodation, hedge as best they can, and take their chances. If they guess wrong, they stand to lose a lot of money. While the private sector may be good at satisfying consumer demand, it's not very good at guessing what (or where) the next "road-to-nowhere" is going to be. As a result of this, many would rather stay liquid until the deficit is gone to avoid potential losses.

The result of every deficit and all of this increased government intervention for "our own good" will, in the end, have to be paid for by the taxpayers. Rather than selling government owned enterprises to private entrepreneurs or raising the prices charged to the customers to a level where no deficit remains, the government interventionists would rather take from the "wealthy". Somehow it's "fairer" for these people to bear the burden of someone else's consumption. The problem is that this imaginary pool of money that the rich people are "hoarding" can't last forever; there's only so much the interventionists can take before they start simply taking from each other! To quote Ludwig von Mises,

"The interventionist in advocating additional public expenditure is not aware of the fact that the funds available are limited. He does not realize that increasing expenditure in one department enjoins restricting it in other departments. In his opinion there is plenty of money available. The income and wealth of the rich can be freely tapped. In recommending a greater allowance for the schools he simply stresses the point that it would be a good thing to spend more for education. He does not venture to prove that to raise the budgetary allowance for schools is more expedient than to raise that of another department, e.g., that of health. It never occurs to him that grave arguments could be advanced in favor of restricting public spending and lowering the burden of taxation. The champions of cuts in the budget are in his eyes merely the defenders of the manifestly unfair class interests of the rich."

Left? Right? Irrelevant.
What we need is a balanced budget. We need to gradually remove governmental services and move towards a smaller government, not a larger one. This involves a progressive decline in government expenditures, privatisation of government enterprises, a reduction in the regulation burden and massive tax cuts (to follow the spending cuts - remember, we don't want a surplus either). We need to ween the dependant class off the ‘welfare teet' that we've created and Kevin Rudd is intent on expanding. We need to work harder and more efficiently, save more, invest more, and produce more. That's the only way to increase wealth and income for everyone. If these reckless policies continue, the "trickle-up poverty" effect will destroy a considerable amount of wealth and lower the standard of living for all Australians (except of course the politically connected, or nomenklatura).

Earn or Learn: that's the message the government is now sending to the Australian Youth,

"Any Australian under 25 will need to be either working, studying or training under a new plan agreed to by the Federal Government and state and territory leaders."

The government, together with the unions[1], have progressively increased the cost of youth labour to the extent that the government feels obliged to pass yet another law to fix "youth unemployment". This is nothing more than a bandaid policy aimed at fixing a problem caused by government intervention. Rather than forcing youth to do what a group of bureaucrats think is "right", how about first they allow them to choose whether or not they want to work or study. As it stands right now, with the minimum wage at a staggering $14.31 per hour (set to increase further in 2009), it's no wonder fresh high school graduates can't find work. They're products of an education system that leaves them barely qualified to operate a dishwasher yet alone function in the workforce; they're being systematically dumbed down by compulsory state-run education and this move will do nothing but add yet another taxpayer-funded burden to our economy.

Businesses are already being subsidised by 'free' government education. They don't see the need to invest in their staff because they're (being forced into) paying for training already. As the direct beneficiaries of training and education, if the government gradually removed their involvement in the education industry and allowed the market to function, business should and would bear the costs, voluntarily. It would probably be a lot cheaper, practical and relevant to boot! Who can honestly say that what they learnt in high school is useful to them in the workforce; I had to 'unlearn' most of what I was taught as soon as I left!

If our leaders are serious about 'helping' "...young people avoid slipping into long-term unemployment", then they should repeal the minimum wage laws. They should let people work at the level where the cost of labour is equal to labour productivity. Every young man and woman willing and ready to work should be allowed the opportunity to do so. A free labour market would welcome young people, which would not only exhort and restore the spirit of work but also improve labour skill and know how. The labour productivity of Australian youth would likely rise and exceed the ominous minimum levels that presently condemn millions to idleness.

On a more cynical note (seem to be doing this a lot these days...), what's the bet that the next Australian Bureau of Statistics (ABS) unemployment data will show a remarkable decline in unemployment, considering that the government has literally made it illegal for under 25's to be unemployed. Kevin Rudd will be grinning with glee at the success of his latest scheme...but it's just a superficial, statistical, (at best) short-term 'gain', just like every other government initiative designed to "help us". The cost to production, to wealth, whether in lost labour or the cost to the taxpayer who has to foot the bill, will be untold.

[1] Just a quick note: I have no problem with voluntary unionism so long as they're not backed by the government, don't receive government handouts, 'favours' and so on and don't make any contributions to government or party officals. In other words, unionism is fine as long as the union doesn't engage in coercive or violent activity (sadly, that's the definition of the modern union!).

Finally, Kevin Rudd has indicated that the First Home Buyers grant is coming to an end,

"It's had a real effect, we're still measuring its full effect, but I think it's very important that as a community we understand that deadlines are imposed for a particular purpose," he said.

"It's had strong useful results so far, but I've got to say, that all good things must come to an end." -- Source

The property industry is already complaining, with Stockland's managing director Matthew Quinn coming out and saying "...we think that the market, the first homebuyer market, does have another six months to go before all of that underlying demand is soaked up and it will result in a rush of buyers towards the end of June" [ibid].

I'm not sure exactly what he means by "underlying demand" but I can only assume he means that an artificial lowering of the price (through low interest rates, first home buyers grants) will increase demand. Well obviously; the lower the price of any product, ceteris paribus, the greater the quantities that buyers will be willing to purchase. Add to that the constant trickery that interest groups have using on home buyers, such as: "you've just been wasting money on rent for the last 5 years, wouldn't it be nice to own your own place instead"; "it's just another, safer, form of investment!; and "interest rates are so low, plus this homebuyers grant will only be around for a while, if we keep enjoying life and decide to buy in five years, who knows how high they're going to be!" and you get more people buying homes -- younger and younger -- at the top of the credit bubble.

The government has misled, even if only indirectly, millions of people into levels of debt that they can't possibly service and even if they can, a lifetime of debt repayments. A house is not an investment. It's a consumer good that you have to upkeep. It's also a liability that you have to deal with if you lose your job. Fair enough, there may be non-economic reasons for home ownership, but if you're doing it because "house prices always go up", then it's time to consider renting instead. The government never offers you money to do intelligent things with it. As Ronald Reagan once said, the nine words you should be most afraid of in this world are "I'm from the government and I'm here to help".

Good riddance to the first home buyers grant; it was nothing more than a subsidy to the housing industry (and those related to it, building etc) at the expense of the taxpayer. It never helped the economy, it merely diverted resources from more productive means. In fact, as I mentioned earlier, I would go the other way and say it has (together with artificially low rates set by the RBA) probably resulted in many, many young Australians having a debt burden that's going to weigh them down for years to come, destroying families and lives in its wake.

There is a growing consensus amongst economists and pundits alike that stimulus packages, job protection and other means of “insulating” the economy from “market failure” are in the interests of all Australians. The argument goes like this: the private sector has dropped off, it is afraid to invest, to spend, and it’s only appropriate that government picks up the slack, or the “idle capacity”, until the situation improves. This is the foundation of Keynesianism, and ignores the need to destroy unneeded capacity and the capital deployed there, as quickly as possible, as the surest means of sustainable recovery. The cure is individual adjustment of prices, costs, and wages to each other - the return of coordination. All of this can be brought about automatically only if the competitive forces of the market are given free play.

The Keynesians are correct in one sense: the current stimulus and budget will have short-term benefits in terms of measured GDP. But then again, so do natural disasters and I don’t think anyone would be advocating the need for another round of Victorian bush fires or Queensland flooding.

Economists and politicians will relentlessly cite carefully selected and “adjusted” data to stress the successes of their programs, but one thing they neglect to tell us is that the results will only be temporary. Not only that, but they come with an immeasurable (debt and malinvestment) cost to the economy in the long run. But in the words of the master himself, “in the long run we’re all dead”, so who cares? It is the political dream: being able to boost the statistics in the short term, to justify increases in government involvement, with complete disregard to what will happen in five, ten, twenty years down the road. This is the attractiveness of Keynes: whether the theory itself is correct or not is irrelevant!

Whilst socialist policies currently being implemented may cause GDP to rise (or fall less) in the short term, it is not the same thing as causing an increase in prosperity or wealth. GDP, a flawed (government) statisticians' tool, builds in a bias towards disguising the costs of government and over-counting its benefits. Government spending doesn’t “spur” economic growth; it doesn’t “fill the void” left by the private sector; it only diverts capital resources from more desirable to less desirable uses. This is yet another fallacy of Keynesianism - they chronically confuse "income" in terms of paper money with real income in goods and services. Of course it is possible to increase paper money income to any amount by debasing the currency. But real income can only be increased by working harder or more efficiently, saving more, investing more, and producing more. This is why we can't get too carried away or be too impressed by the economists and politicians citing the increase in dollar incomes, in dollar GDP, to show that we've never had it so good!

As pointed out in the Wall Street Journal "Review and Outlook" of March 6, 2009, “Recessions don't last forever, but bad policies can prolong the pain.”

Recovery and growth are impeded, not stimulated, by the threat of less competitive labour markets, regulatory uncertainty, the threat of increased protectionism, certain higher tax burdens in the future, especially on capital income, and the use of the tax system explicitly for purposes of redistribution of income.

As Adam Smith put it many years ago in a 1755 paper,

“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about the natural course of things. All governments which thwart this natural course, which force things into another channel or which endeavour to arrest the progress of society at a particular point, are unnatural, and to support themselves are obliged to be oppressive and tyrannical.”

The cost in lost freedom as a result of current (socialist) government policies may be immeasurable. The cost to our economy will be enormous. We owe future generations better. We owe them a free and prosperous country. History and theory show us the way to achieve both, and it’s not through the fallacies of Keynes.

So, are we all Keynesians now?

Thankfully, not yet.

THE amount of tax paid by the average Australian has jumped by up to 40 per cent in just five years, according to new statistics -- Source.

Who would have guessed, taxes are increasing already! Just wait until the bill arrives for the Rudd National Broadband Network, stimulus packages and various other 'nation building' projects. Perhaps a return to the 1950s of 75% tax is on the cards in the near future?

Wow, would you look at the size of government soar!

Could we be on the way back up? I think so thanks to all of that Ruddness we're lucky enough to be getting! Stay tuned for an upcoming post on economic growth and government size.

The original post on 01/04/2009 was revised slightly and reposted on 09/04/2009

Mr. Rudd, along with his counterparts in the UK and US, are using this apparent “failure” of capitalism to further their socialist and power goals: a "New World" with the ultimate goal of increasing the size, power and control of the state. They are seeking to extend and expand the sphere of their operations, their interference in everyday life, leaving little room for anything to happen of its own accord, under the manifesto that Government Knows Better [1].

"Government debt paves the way for government control. Consider: Debt leads to taxation to pay interest. Taxation leads to more economic control over the people by the same government that ran up the debt in the first place. It's hardly extreme to conclude that escalating debt is part of a plan, such as a plan to establish a new world order." -- John F. McManus

The state has a poor investment track record, and its attempts to soften today's 'financial crisis' impact merely push malinvestment into the future, adding to today's debt burden in the process. Government's focus instead should be on the creative destruction of capital resident in over-capacity sectors of the economy.

The “false god of unrestrained financial markets” basis on which their respective propaganda machines are endeavouring to convince people to accept further intervention is unfounded in fact. We have not had “unfettered free markets” as they will have us believe. To see just how far we have strayed from a market-economy, or capitalism, one simply has to look at Karl Marx’s Communist Manifesto, which reveals their intentions [italics added].

1. Abolition of property in land and application of all rents of land to public purposes. – We currently have Eminent Domain laws in Australia, allowing government to seize land at will. This manifesto is not completely fulfilled but it’s hardly ‘free market’ – where individual property rights are of the utmost importance and there is no 'public' land.

2. A heavy progressive or graduated income tax. – Our tax system is one of the highest in the world. Not only that but there are countless ‘hidden’ taxes. A recent report by the Regulation Task Force estimated that the regulatory burden is effectively a 25% hidden tax-slug on all Australians [2].

3. Abolition of all rights of inheritance – While there is no direct inheritance tax in Australia, recipients must pay full capital gains tax on income and assets acquired from deceased estates.

4. Confiscation of the property of all emigrants and rebels – Not yet at least, albeit "hoon" laws come close.

5. Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly – We have been operating with a central banking cartel, the Reserve Bank of Australia, since 1911 (formerly known as the Commonwealth Bank until 1959). It alone is allowed to produce legal tender, and central banks are the cause of many of the world's current woes.

6. Centralization of the means of communication and transport in the hands of the state – The Rudd government is rolling out a National Broadband Network and a National Internet Filter. Much of our road network along with the majority of our public transport is either state-owned or extremely regulated (e.g. taxis).

7. Extension of factories and instruments of production owned by the state; the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan – The Government is seizing control of various industries through "bail outs” and other forms of market manipulation. Even before the crisis they effectively controlled production in many industries through subsidies and tariffs.

8. Equal obligation of all to work. Establishment of industrial armies, especially for agriculture – Not yet, but how far away can it be?

9. Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country – Not yet.

10. Free education for all children in public schools. Abolition of children's factory labor in its present form. Combination of education with industrial production, etc – Our ‘private’ schools receive the same amount of state funding as our public schools. True private education doesn’t exist.

Australia scores seven out of a possible ten of Marx’s Communist Manifesto. If this is not proof enough that we have not had “unfettered free markets”, then let us look at the method used to justify or support policies without valid economic argument. Manipulation in the form of moralism is used to refute logic; against theory is emotional prejudice; and against argument is reference to ‘the will’ of the state.

The crisis we are suffering is not a failure of free markets. It is the failure of interventionism and of the state. Anti-capitalist policies led to this crisis: central banks around the world manipulating interest rates and money supply; the regulatory burden (which has been poorly drafted by lawmakers and poorly executed by inefficient watchdogs); and  excessive levels of taxation (and the distortions they cause to the real economy); to name a few.

The so called ‘greedy capitalist’ leaders of big enterprise, contrary to the free market, no longer cared whether or not they satisfied the needs of the consumer in the best and least expensive way. They worried only about keeping up “relations” with state officials, protecting their interests with regard to tariff rates, wage negotiations before arbitration boards, and in governing bodies of cartels. In return, they contributed to non-busi­ness concerns – election funds, public welfare institutions, lobbysts and the like. This is not capitalism. This is not the “unfettered free market” at work.

If the state continues to use price, wage, interest rate and other controls to thwart the market and stop it from acting as a regulator of production then crisis is inevitable. Our current crisis as we degear from a leverage burden some 20 times global GDP has little to do with a failure of the free market, and more to do with the heavy hand of government intervention.

"A man who chooses between drinking a glass of milk and a glass of a solution of potassium cyanide does not choose between two beverages; he chooses between life and death. A society that chooses between capitalism and socialism does not choose between two social systems; it chooses between social cooperation and the disintegration of society. Socialism is not an alternative to capitalism; it is an alternative to any system under which men can live as human beings." - Ludwig von Mises, Human Action.

Only time will tell. It's going to be interesting period in history to say the least.

That's right folks, the government estimates that the new National Broadband Network (NBN) they're going to fly solo with will cost working-aged Australians (15-64) approximately $2,935 each. That's assuming the project is completed -- our government has a bad habit of either quitting mid-way (i.e. after an election) or having the project substantially increase in both duration and cost.

• Government rejects all five private sector bidders for the national broadband network, saying they do not provide value for money.
• National broadband "fibre-to-the-home" network now to be built over eight years by a company established by the Government.
• Network will give 90 per cent of homes, schools and businesses a connection of 100 megabits a second, 100 times faster than now.
• Those remaining will get a service of 12 megabits a second through wireless technologies.
• Will support 25,000 jobs a year for each year of construction, with 37 000 jobs in the peak year of construction.
• PM Kevin Rudd says infrastructure project is the biggest ever undertaken by an Australian government.
• Majority share of the company will be held by the Government, with private sector investment capped at 49 per cent.
• Up to $43 billion will be invested by the company in the project, including the $4.7 billion already allocated by the Government.
• Once the project has been up and running for five years, the Government will begin selling its stake in the company. -- Source
  

The government, in their wisdom, decided that the private sector couldn't provide 'value for money'. I suppose nothing would provide government with value though, those pesky private sector companies actually have to think about their customers and shareholders, while the government doesn't pay for anything themselves -- they simply take it from the taxpayers! How is the government creating these jobs? Everyone knows that the government doesn't produce anything, don't they? These 'jobs' are simply jobs that the private sector can no longer create (productive jobs I might add). They're jobs for something the people, individuals, aren't demanding: not only that, but they're jobs plus a layer of bureaucracy, in other words wasted capital.

All day the government has been stressing this is 'stimulus'; yet it's nothing more than fulfilling #6 on the Community Manifesto! We're moving further and further towards a socialist state and the noose around our necks has just been tightened again. If they really wanted Australian's to have fair internet, they would remove all of their regulations and controls on the industry; they would allow the market to function. But we all know Rudd doesn't have the people's interests at hand.

Then they have the galls to say they're going to start selling their stake -- that will surely end well! Why don't the government just skip this middle step (the NBN) and allow private competition with previous government monopolies (Tel$tra) to be free and unhampered!? Privatising this network, when the time comes, is hardly fair: the government has taken from taxpayers around the country to fund this project and is going to ask us to pay them, again, for the privilege of privatisation? Why is the government entitled to the revenue from this taxpayer funded project? It's ridiculous.

I'm not looking forward to being an Australian taxpayer when we eventually have to pay for all of this Ruddish. Expect either inflation (courtesy of the banking monopoly the government has: the RBA) or massive tax hikes or both in the future -- perhaps a return to the 1950s of 75% income tax is on the cards?

Rudd is planning a "Robin Hood" budget for later this year, stealing from the wealthy (savers) to pay for the poor (debtors). I always thought that Robin Hood stole from the state (the kings, royals and their friends) and gave back to the people? This is equivilant to the king stealing from his people then handing (some of) them back a small amount and asking them to say thanks! It's just another step towards a larger government, creating disincentives to work and save along with wealth destruction and moving us ever closer to serfdom. How much longer can this nanny state continue? Not only have they already horse drawn and quartered capitalism in this crisis (capitalism was NOT the cause!) but it's almost as if they're deliberatly getting every policy response wrong.

Our leaders wouldn't have anything to gain from socialism, would they? Great.

In today's Unleashed, Bruce Haigh wrote an article entitled "What can Rudd do to restore a healthy economy?", outlining his thoughts on what the Rudd government should do to make sure our economy gets back on track. Initially I thought he was on to some good points, stating that Australian's haven't learnt much from the past...before unleashing against capitalism and promoting full-blown socialism.

Mr. Rudd has a responsibility in times of a shrinking economy to provide a minimum wage, housing, health care, transport and education for adults and children least able to financially cope in the forthcoming straightened circumstances. This is survival spending, it is not designed to create jobs; it is to keep people alive and healthy and to provide the means for their children to participate in and help engineer a revitalised economy when the global economic sickness has passed. This is basic humanitarian assistance; it will not in the short to medium term, of itself, rebuild the economy.

The only thing Mr. Rudd has a responsibility to do is to make sure this doesn't happen again. He needs to do exactly the opposite of what Bruce recommends above and avoid any and all involvement in the economy, financial system, education, health care and so on. We haven't been living with capitalism; on the contrary, we've had statists masquerading as 'capitalists' to suit their own personal endeavors. Rudd himself was a self-proclaimed believer in the market until this crisis happened, but he sure jumped ship quickly (he was always a socialist). There is no middle-ground (see The Myth of the Failure of Capitalism by Ludwig von Mises, 1932.

It can't happen overnight -- the state is so involved in everything we do it's going to be a slow process but these are the types of policies we need. From Friedrich Hayek in a 1975 Meet the Press:

"No, but it goes back to the same cause. The unemployment of which you speak, which is the initial cause, is due to labor being temporarily directed into places or activities or industries where they cannot be maintained without further inflation. Therefore you can only cure that by achieving a new redistribution of labor between employments. Adaptation to a condition in which aggregate demand need not progressively increase to maintain that employment."

"We mustn't assume that all problems are solvable in the short period. There are problems that we cannot solve or which trying to solve them quickly may do more harm than good."

Hayek was saying (he was talking about the U.S. economy) to do the opposite of what Bruce is recommending. The government created this distortion in the allocation of labour and the market needs to redistribute it to more productive areas. Any short-sighted attempt to "save jobs" will do more harm than good. Back to Bruce,

"Mr. Rudd will need to take some drastic and decisive action, taking into account the lessons learnt from the last Great Depression. He will need to cancel some overseas defence orders and rethink defence requirements and strategies, utilising local capacity, particularly in ship building. He will need to take over the local car manufacturing industry, which can also be used for defence production. These decisions will protect and provide new jobs as well as build a local defence production capacity in what will be uncertain times."

I agree with the removal of our (due to our alliance with the US Empire) overseas troop contingent but I'm not sure how to read the rest -- is Bruce really suggesting we mobilize our economy 1930s style to prepare for some (looking at his words, inevitable?) upcoming war? This won't protect jobs. This won't create wealth. Times are only uncertain because people such as Bruce are advocating full-on socialism as a response to the continued failures of the state!

The government needs to regulate the banking industry and get back into the business of banking. It needs to take over Telstra, railway infrastructure and rolling stock and providing an air service in remote Australia. The tyranny of distance demands it. User pays has failed, particularly in rural Australia.

No, the government has had its turn at running banking, telecommunications and public transport into the ground. It needs to remove ANY and ALL involvement in these industries as soon as possible. It needs to remove the red tape completely. It needs to stop creating monopolies through regulation and laws. It needs to let people decide what they want!

The federal government needs to take over the management of water and abolish water licences, as a short and long term stimulator of the economy, particularly the rural economy.

The water debacle is a creation of the government. How will more involvement solve anything? This is a touchy one though, because the state is so involved already (massive property rights issues) you can't just privatise the whole thing in an instant.

The private schools must fend for themselves, that's what private used to mean and the funding of public education significantly increased, particularly in the area of skill creation. Pulling out of depression will require it.

Here's an idea: cut all funding for schools and return the tax dollars used in it back to the parents. As with all of the above, spending needs to be cut dramatically and the market needs to be allowed to provide these services. Private schools can fend for themselves perfectly well -- that is, of course, unless they're competing with these "super schools" with endless pockets and no profit motive!

Import replacement needs to be encouraged and funded, directly, and from loans through the government bank.

Absolutely not. People should be free to choose where they buy their goods from. If there's a market for it, and people really care as much as you think about saving local jobs, then there will be an opportunity for profit (by charging premiums for "made in Australia" products) that entrepreneurs will capitalise on. Why should the government make this decision for us, at our expense? We need to remove all tariffs, subsidies and "import replacement" schemes as soon as possible.

This depression is a direct result of Globalisation. Australia should seek future protection from the buffeting of overseas financial institutions by exercising more control, discipline, stimulus and protection of its own economy.

You're right -- the U.S. Federal Reserve is the key culprit in this crisis, fuelling banks across the world with cheap credit and encouraging consumer debt. But we should not, under any circumstances, revert to a protectionist state-run economy. This cannot work and will serve only to lower our standard of living considerably. We can insulate ourselves against this sort of thing by abolishing the RBA, significantly shrinking the size and involvement of the state, and allow free banking (in other words, let banks create their own currency, backed by commodities of the markets choosing).

Despite what he says, Bruce obviously hasn't learnt anything from the past failures of the policies he advocates.

Some more union back-scratching from the Rudd government masquerading as a measure to "help workers and their families who lose their jobs through no fault of their own" as Rudd announces $300m for (unionised) retrenched workers:

Retrenched workers will now be able to immediately access help to find a new job under a $298.5 million plan announced by Prime Minister Kevin Rudd today...

...Those seeking assistance will now have access to a $550 credit for computer courses, training for heavy vehicle licences and work boots and equipment.

They can also access help for career advice, job applications and skills training.

Last week the Government committed $155 million to encourage employers to keep apprentices on despite tougher economic times

Please. As I mentioned last week and as many people have shown before, this kind of spending does nothing to help our economy. All it does is divert resources away from the areas that need it (i.e. productive industries) and give it to the areas that don't. I'm going to avoid the "through no fault of their own" part of Rudd's explanation (people who were living above their means are guilty as well) and rather focus on why this won't work. For one, how could Rudd possibly know that the market is clamoring for computer skills, heavy vehicle drivers and construction workers? The short answer is he can't! No one can know that, only the market can determine where labour should be efficiently allocated (it's not perfect, but it's better than Rudd!).

The issue we have here, as usual, is Rudd using 'emotion economics' to satisfy his union buddies -- the ones who helped him get to where he is today. This is nothing more than union back-scratching at its best, propping up his mates at the expense of every other Australian. If you complain about this idiotic economics on a logical footing, you're "heartless" or you "don't care about jobs", as the Liberal party is finding out the hard way.

No matter how well an enterprise may be managed, it will fail if it does not know how to protect its interests in the drawing up of the customs rates, in the negotiations before the arbitration boards, and with the cartel authorities. To have 'connections' becomes more important than to produce well and cheaply. -- Ludwig von Mises, The Myth of the Failure of Capitalism (1932)

These handouts need to stop. They are only going to prolong this crisis, cost thousands more jobs and reduce the wealth of our nation.

I stumbled upon two pieces of news today, appearing at first unrelated but after connecting the dots the real culprit became glaringly obvious. The first article was published on Business Spectator, entitled Low pay, high stakes.

"For the past three hearings, the commission has operated in an economy where aggregate demand was rising, and its economic modelling rightly suggested that increasing the minimum wage would have virtually no impact on employment...

...Not surprisingly, Harper is telling the key bodies that make submissions to the commission - unions, employer bodies, and governments - to recalibrate their economic models to factor in falling aggregate demand."

Ah economic modelling, my old friend. Any economist worth his salt (not many these days) knows that economic modelling is about as capable at guiding decisions as is a blind man is at guiding a car down a street. Luckily we have the brilliant Professor Harper at the helm (that is, of course, until the new Minimum Wages Panel arrives -- ugh!), making sure the models that failed to predict the current situation are sufficiently up to date so that they may fail again in the future. What fantastic use of our tax dollars!

The inaccuracies of economic modelling alone should tell us that their figures on the minimum wage are off the 'mark' -- but the bigger problem is that the Fair Pay Commission's 'mark' is about, oh, $14.31 too high! That's right, there shouldn't be a minimum wage. I don't want to get into the fine details about this right now, so i'll just borrow a few words from Mises himself:

"The market wage rate tends toward a height at which all those eager to earn wages get jobs and all those eager to employ workers can hire as many as they want. It tends toward the establishment of what is nowadays called full employment. Where there is neither government nor union interference with the labor market, there is only voluntary or catallactic unemployment. But as soon as external pressure and compulsion, be it on the part of the government or on the part of the unions, tries to fix wage rates at a higher point, institutional unemployment emerges. While there prevails on the unhampered labor market a tendency for catallactic unemployment to disappear, institutional unemployment cannot disappear as long as the government or the unions are successful in the enforcement of their fiat. If the minimum wage rate refers only to a part of the various occupations while other sectors of the labor market are left free, those losing their jobs on its account enter the free branches of business and increase the supply of labor in them. When unionism was restricted to skilled labor mainly, the wage rise achieved by the unions did not lead to institutional unemployment. It merely lowered the height of wage rates in those branches in which there were no efficient unions or no unions at all. The corollary of the rise in wages for organized workers was a drop in wages for unorganized workers. But with the spread of government interference with wages and with government support of unionism, conditions have changed. Institutional unemployment has become a chronic or permanent mass phenomenon." -- Ludwig von Mises, Human Action

Now for the good part! In an article later in the day, Kevin Rudd announced that the government was going to fund apprenticeships around the country, costing taxpayers about $1 or $2 billion (what's the difference, right?!).

Thousands of school and university leavers will also be offered special assistance to find work under plans for a national "jobs compact".

Companies seeking a slice of lucrative infrastructure contracts may be forced to take on young workers, as the Rudd Government pushes for an apprentice-led recovery.

So companies no longer want to employ young workers. In other words, as employers will only pay the value of an additional hours work, the (government induced) credit crisis has resulted in many workers with low productivity (usually those with low education, job experience, and maturity) to be laid off by their employers. So rather than scrapping minimum wage laws and allowing people to work for what they're worth (shocking, I know!), the Rudd Government plans to 'redistribute' income from the rest of the nation and hand it to the people that their own policies put out of work! Our leaders truly are incompetent, both liberal and labour. To quote Donald Horne from 45 years ago (sadly nothing has changed),

"Australia is a lucky country run mainly by second-rate people who share its luck. It lives on the other people's ideas, and, although its ordinary people are adaptable, most of its leaders (in all fields) so lack curiosity about the events that surround them that they are often taken by surprise" -- Donald Horne, The Lucky Country

Maybe one day we'll stop riding on other people's backs, living off of nature's gifts (resources) and get our act together. We can dream...

This year, taxpayers will receive an Economic Stimulus Payment. This is a very exciting new program that I will explain using the Q and A format:

Q. What is an Economic Stimulus Payment?
A. It is money that the federal government will send to taxpayers.

Q. Where will the government get this money?
A. From taxpayers.

Q. So the government is giving me back my own money?
A. Only a smidgin.

Q. What is the purpose of this payment?
A. The plan is that you will use the money to purchase a high-definition TV set or some such thing, thus stimulating the economy.

Q. But isn't that stimulating the economy of China ?
A. Shut up.

Below is some helpful advice on how to best help the Australian economy by spending your stimulus cheque wisely:

If you spend that money at Kmart, all the money will go to China .
If you spend it on petrol it will go to the Arabs.
If you purchase a computer it will go to India .
If you buy a car it will go to Japan .
If you purchase useless crap it will go to Taiwan .

And none of it will help the Australian economy.

We need to keep that money here in Australia . You can keep the money in Australia by spending it at garage sales, going to a cricket match or footy game, or spend it on prostitutes, beer and wine (domestic ONLY), or tattoos, since those are the only businesses that may still be owned by Aussies

Source: Unknown