Why nations fail
The Australian government’s energy market intervention bill will be rammed through both houses of Parliament today with the support of the Greens and independent David Pocock. Less than a week old, the whole process has been rushed to the extent that the competition watchdog, the ACCC, failed to define what it meant by “new gas field”, and Treasury officials struggled to answer questions.
I was skeptical of the bill when it was first announced. Given the rushed process, I’m now extremely pessimistic about it producing anything but negative outcomes for the country. The unintended consequences of this thing – inevitable given the speed at which it has gone from conception to reality (members had just 12 hours to review it) – will be felt for years to come. And much of it will remain unseen:
“Inclusive economic institutions foster economic activity, productivity growth, and economic prosperity. Secure private property rights are central, since only those with such rights will be willing to invest and increase productivity. A businessman who expects his output to be stolen, expropriated, or entirely taxed away will have little incentive to work, let alone any incentive to undertake investments and innovations.”
That’s from Why Nations Fail: The Origins of Power, Prosperity, and Poverty, by Daron Acemoglu and James Robinson. We’ll never know how much future productivity (and wage!) enhancing investment will now be lost due to the increase in sovereign risk this extractive process has unleashed.