Written while I was an AMEC councillor and Australia was experiencing “the recession we had to have“, this article offers four suggestions on how to restart the Australian economy. Submitted to then Prime Minister Paul Keating, there are elements which could be used by both federal and WA government today.
- There is a natural reluctance for politicians to take actions that run the risk of losing votes, perhaps we should call this the “popularity before principles” syndrome.
- Our federal government is now calling for positive input so they may be in a more receptive mode to adopt policies that will allow many of Australia’s stalled projects to proceed.
- I am involved in the frontline of Australia’s mining and exploration industry which brings me into direct contact with many, very capable people in their search for employment so I may feel a little stronger about the need for policy changes, than the average city dwelling Australian.
The four suggestions
1. Focus government involvement on fewer activities.
2. Seek a better understanding of what free enterprise can do for Australia.
3. Overcome the distortions caused by our current selective deregulation.
4. Remove the obstructions to enterprise.
In response to Prime Minister Keating’s request for positive input to reactivate our economy, let us briefly touch on four causes for the serious position confronting Australia and our one million unemployed as we start 1992. Suggested solutions then follow.
Vote buying
The divisive result of successive governments buying favors from various special interest groups (with the high and concentrated benefit to those groups, explaining the extensive lobby pressures) at the expense of the general taxpayers (costs diffused through a large number, thus causing unease and disheartenment rather than organised revolt). Succeeding socialist governments (Whitlam, Fraser, Hawke) have not solved the problem, they’ve only made it worse.
Thomas Jefferson said: “That government which governs least, governs best.” A simple but profound statement. Jefferson also warned us that: “The natural tendency of things is for liberty to yield and government to gain ground.”
To overcome the danger and temptation of vote buying we must limit (by constitutional limits) government activity, to their few legitimate functions and ensure that they do not step outside these boundaries, no matter what interest group pressure is brought to bear (in exactly the same way that we detail by specification, any work to be carried out by a plumber, electrician or contractor).
Why not support the good guys this time?
Also exacerbating the problem has been Australia’s thousands of economically illiterate businessmen who won’t risk offending our political masters and who set their goals to simply seek special political favors for their own industry, at great cost to other industries and Australia in general.
These same business champions that pour funds into political campaigns expecting some pay back will run for cover when asked to contribute to Australia’s free enterprise policy groups and their defence of voluntary arrangements, as opposed to government coercion solutions.
Government coercion has failed in Eastern Europe and the Soviet Union in a big way. Australia’s major domestic interventions — education, welfare, health care, business regulation — are failing for precisely the same reasons. That these interventions came about through a theoretically democratic process, rather than dictatorial order, is ultimately beside the point. Regardless of their origin, denying competition, undermining private property rights (an example is the WA Mining Act’s requirement for the Minister ’s consent to any tenement transaction), and so inhibiting the market process, do not enhance the wellbeing of our society.
If our captains of commerce and industry spent some thought and energy analysing the absurdity and the difference between the stated intent and actual results of government rules and regulations, we would not find ourselves throttled with counter-productive legislation. Some excellent free market think tanks have emerged in Australia and they are worthy of support, for reasons explained by economist Von Mises: “Everyone, in his own interest, must thrust himself vigorously into the intellectual battle… the interest of everyone hangs on the result.”
Why promote economic myths?
These same captains of industry, so skilled in their particular fields, start by silently allowing economic myths to be promoted. One being that the trade unions are entirely responsible for liberating working men from the early horrors of the industrial revolution. It was capital and profits, providing a steady improvement in the tools of their trades, and so increasing output, which liberated working men from their earlier drudgery.
Unions may have had the opportunity to hasten the process but unfortunately they were placed outside the law by politicians bidding against each other for the vote of the newly enfranchised workers. Whilst the Western Australian Goldfields area has had a record of responsible unionism, Australians at large have suffered considerable economic vandalism at the hands of several union bosses with acute megalomania.
I have nothing against unions. Any other group of men would similarly indulge in rorts and restrictive work practices if granted a legislated monopoly over their fellow man. It is only when we have completely voluntary unionism that we will see how many workers actually believe in the current union agendas (which sometimes can only be seen when unions “drop their mask”). Industry organisations such as AMEC operate successfully on a voluntary basis. This forces us to maintain certain standards, otherwise run the risk of disappearing. Only through performance, will we convince those who expect to reap the benefits of economic freedom, that they should contribute to its continued preservation.
Union bosses would have us believe that a strike is merely a collective withholding of labor services in the face of unacceptable terms of employment offered by an employer. But that is not all there is to it. A strike is a collective withholding of labor services, but it is also an attempt to shutdown an employer by cutting off his access to replacement workers, suppliers and customers. It is one thing for a group of like-minded workers to withhold their own labor services from an employer. It is quite another thing for them to attempt to force other workers, suppliers and customers to refuse to do business with the “struck” firm. Such attempts are acts of trespass — in broad terms, acts of violence — against the voluntary exchange rights of non-strikers and the strike target.
The picket line’s only purpose is to interfere with exchange activities between non-strikers and the strike target. If “peaceful” acts of interference with the exchange activities of non-strikers are permissible, then strikers cannot be blamed if they feel that recalcitrant non-strikers must be convinced of the folly of their ways by using more “persuasive” tactics. The problem is not the right to strike, but the right — by intimidation or violence — to force other people to strike, and the further right to prevent anyone from working in a place in which the union has called a strike.
Today, most people recognise that the employment relationship is not one of exploitation, it is one of contract. In today ’s competitive environment, if mutually acceptable collective bargaining contracts cannot be implemented, mutually acceptable individual contracts, i.e. union-free operation — will take their place.
Alexander Solzhenitsyn, when fleeing from communism said: “The task must be to banish from mankind’s thought the idea that anybody has the right to use force against righteousness, against justice, against mutual agreements.”
Stifled by taxes and regulations
Put into simple language, it should be no surprise that our economy is collapsing because if you tax something, you get less of it. If you subsidise something, you get more of it. In Australia today we are taxing work, growth, investment, employment, savings, productivity, initiative and ability, whilst we subsidise non-work, consumption, welfare and debt.
The kind of spending to which our governments are devoted, along with the power that spending confers on them, results only in a lowered standard of living — less disposable income for clothes, food and other consumable goods — but also a greatly diminished sphere of personal freedom for the average Australian. Instead of government working for us, we work for the government.
Isn’t it time to reverse the equation and get back into the game with a winning formula?
We have seen how federal and state governments have tried to balance their budgets by widening the tax wedge and have driven us into recession and further deficits. The way to reduce existing government spending on the welfare safety net (in the Kalgoorlie Goldfields area we already have 9,500 people receiving welfare) is not to remove the net that protects the poor and weak, but to reduce the number of people “trapped” in it, by providing an expansion of economic opportunity through real non-inflationary growth. We do not want more government created jobs, as we already are paying too many people to explain to our fellow Australians how to fill in the forms to obtain their ‘entitlements.
As economic conditions have deteriorated, we have seen the standard government attitude to mining and resources change from hostility, to mild tolerance. Only when our politicians fully appreciate the delicate link between our country’s welfare and our resource industry will we see their tolerance turn to uninhibited enthusiasm.
In Western Australia alone, there are 450,000 new jobs on hold because various approvals have not been granted. The mining industry can provide real jobs if it can be given economic space to operate and expand. At this vital pivot point of Australia’s history there needs to be some significant philosophical and political changes so that our elected leaders stop penalising the producers and instead, encourage investment.
If our leaders, both in industry and politics can thoughtfully reflect on the current state of the Australian economy, they will see the simple and inseparable link between all the various taxes on production, and unemployment. There are plenty of such taxes. These range through payroll tax, training tax, fringe benefits tax, superannuation tax and the list goes on, but as we get more of these taxes, we unfortunately get more unemployment.
I have detailed the damage already being done by the training tax and similar comments apply to all the other taxes on production.
Our minimum wage laws also represent another example of unintended damage to our economy. These widely approved labor market controls discriminate against their supposed beneficiaries, the least preferred workers, by raising their cost and thus reducing the demand for their labor. All these regulations and taxes on production, at a time when our mining industry really should be let loose to generate those jobs and excitement for the nation. In summary:
- Let us restrict government to their few legitimate activities and ensure that they do these well.
- Support educational activities that explain how effectively, responsible free-enterprise can reactivate our economy and benefit our society.
- Overcome the distortions caused by the current “selective deregulation” and extend deregulation right through to the work place.
- Remove the shackles to production caused by over-regulation and taxes on production.
There is no magic formula for shifting painlessly from a highly government regulated economy to a voluntary exchange economy. However, the potential rewards are so great that, if the shift can be achieved, transitional costs will pale into insignificance.