The Case for a Free Market University

When I hear the words “fee deregulation,” I can imagine what comes next. It is usually an arts student from Sydney University who paints the picture of an education factory. They argue that neoliberalism is taking over the world and is now extending its claws into university. We will all become chained to markets and slaves to capitalism, the doomsayers say. This is quite a compelling case; I must admit, even I believed it for a while. However, the question of equity, beyond slogans and fearmongering reveals a very different picture. It challenges the plethora of student voices who either oppose the government’s policies or are afraid of it. The former are a very vocal and sometimes violent minority. The latter are the majority of students who want universities and government to remain in a complicated relationship. Neither approach understands what a free market university actually is. My article puts forward three propositions that are usually overlooked in the deregulation debate. Firstly, student equity is not diminished under free markets. Secondly, equity for broader society only occurs under deregulation. Thirdly, contrary to various assumptions, student equity itself is only possible with full privatization. True equity is when the students who receive the exponential benefits of a degree are liable to its inevitable costs. There is no getting away from the radical bourgeois idea that a person who makes a highly profitable investment should be the same person who pays for it.

There is an intoxicating belief that deregulation will harm the rights of students. It is an often heard maxim of the left that “education is a basic human right” and that it “should be accessible to everyone.” These are all excellent ideals for an educated society. However, they would be better served by looking beyond monetary solutions to wider social problems. Student equity is not diminished when students are liable to pay the full amount of their education.

In the past, one did not have to go to university to have a career with a high income. Today, the best paying careers require a degree. As of 2010, a female who graduates earns $800,000 more than a female who doesn’t go to university. For males, this gap is even wider, stretching over $1,000,000 in a lifetime. This means that poorer students get greater benefits in entering university than the middle classes who can depend on other sources of wealth. Until 2004, Britain had a subsidized fee structure that did not see substantial enrolments from students of lower socio – economic background. A degree was not as profitable then as it is now. Between 2004 and 2014, the government decided to deregulate the prices of university to cover the costs of university funding. Many believed this policy would hurt economically disadvantaged students the most. It has not turned out to be true. 70% of university enrolments during these years came from students with lower socio – economic backgrounds. The relatively higher costs of a degree have not offset its overall return. In consideration of its lifetime benefits, it is understandable that there is an increasing demand for tertiary education amongst less well-off students. Privatization is nothing more than a true reflection of the monetary value of a degree. It does not hinder the entry of students without an alternate sources of income.

There will still be those who say deregulation continues to hurt poor students, even though it doesn’t hurt as much as they’d like to believe. Let’s put this into reverse perspective. Does social mobility increase when students are not charged for tuition fees? The historical answer is no. Whitlam’s free education policy in the 1970s led to almost no changes in accessibility for disadvantaged students. Of the 276, 339 new enrolments in 1975, 80% were made up of students who already came from privileged backgrounds. Whilst a policy may be imbued with good intentions, it is only successful if its leads to positive outcomes. The only good outcome of Whitlam’s policy is the proof that free education does not increase accessibility. Sadly, this fact is largely ignored in the deregulation debate today. This not only distorts the historical facts but ignores the real challenges in education. Ascribing monetary value to a university education is the first step to realizing that money is neither the problem nor the solution to student equity. The greatest factor to determine accessibility amongst all backgrounds is previous school performance. This is where all sides of the debate should be focused, if bridging the socio – economic divide amongst poorer students is their main concern.

I will now show how deregulation is actually the only way to make equity possible. When I say “equity,” I refer not only to the welfare of students. I’m also referring to equity in terms of the entire Australian population. This the missing part of the equation when protestors against deregulation refer to role of government. The monetary benefits of a degree evidently set university students apart from the rest of society. Some students will say that while this is true, federal funds should still be allocated to subsidize tuition fees. They either do not consider, or are unaware of, where government funds come from. Taxes, and increasingly income taxes, are the main sources of revenue for the government. It is this money that turns into the discounted fees for university students, who are essentially living off a million dollar privilege. Nothing spoils true equity than working classes having to subsidize individuals with a profitable degree. Fortunately there has been mounting electoral pressure to cut university funding so as to get off the backs of the poor. Indeed, giving money to universities has reduced and continues to reduce for this very reason. Since 1989, public universities have raised their own income to the point where no more than 25% is provided by government funds. Both as a matter of principle and practicality, governments should not be funding tertiary education. A fully privatized university is one step closer towards the government’s ability to attend to more pressing concerns – like lowering the budget deficit.

Deregulation facilitates equity not only on a societal level, but for the students themselves. This may be hard to believe, but deregulation is necessary for two reasons. Firstly, it is the only way to sustainably ensure that all students who deserve to go to university can. Secondly, it is fast becoming the sole means by which universities can continue to deliver quality services.

When the HECS system was introduced, it was an efficient solution to student equity and university funding. Just as there were caps on student fees, HECS began in the knowledge that there would be a limit to student entry. The Gillard government however, dismantled this in 2012. They established the demand-driven system which allowed unlimited student admission. This was an excellent idea in increasing accessibility, but makes little economic sense when not followed by an increase in tuition fees. In other words, Gillard established the benefits of a free market university without following through on its inevitable cost. Demand must be paid for if it is to be sustained. The NTEU noted that the strain on teaching staff and the lower quality of education would follow Gillard’s proposal. Indeed, this has been the case where the increase in student entry has not supported by the funds to accommodate it. Full deregulation completes the market process under the Gillard government. It is indeed an applauded goal to allow unlimited demand in university. This is what equity is all about. No student who deserves a place should be barred from entering because of a government cap. At the same time, this policy goal cannot be sustained when the demand does not cover the costs of running a university.

Deregulation is the only way to cover university costs when government funds are declining. It is no surprise that Vice Chancellors have championed it for a long time. Many students protest directly against these authorities, claiming they are solely interested in the bottom line of profits. I find this amusing, considering universities would go bankrupt if Chancellors didn’t take profits seriously. One Chancellor however, strikes me as particularly useful in the case for deregulation. Greg Craven may be the head of Australian Catholic University but he considers himself “a pinko academic.” He supports deregulation, not because he supports the Liberal government but because it makes economic sense. Craven points out that if universities cannot set their own prices, vital research will suffer, quality teaching will decline and international competitiveness will go down. This comes from a university that caters for only 20,000 students. Imagine how much more relevant for Macquarie University with 30,000 students and Sydney University with more than 40,000 students locally. Craven makes the case that there is no other way to funnel resources into the university system. Whether you wish for government intervention within education or not, the reality is that it’s declining. The only way for universities to thrive is to deregulate.

A university that creates unbridled economic opportunities for students. A university that does not impinge on its financially disadvantaged. A university that does not punish those who take a different career path. A university that is accessible to all who earn a place. A university whose quality is superb and competitive. This is the free market university – whose prices I am indeed willing to pay.

American Conversations Part I

Hopefully the punditry is wrong and descent into a Romanesque end isn't the final curtain call, writes Tim Humphries

It began with an interview I did with Libertarian radio host of the popular LRM.FM program Liberty Conspiracy with Gardner Goldsmith. The touchstones of North and South Korea plunged our cordial conversation into Trade, International Relations, Currency and the Economic drivers of same both at home and abroad.

The interlocking histories of Australian, American and Chinese involvement on the world stage also figured prominently. However what grabbed my attention was the idea that America was sliding from the world stage and that her pre-eminence was being usurped by China.

Competing academic debates and visions of Chinese Power in the 21st Century amount to precisely naught if we do not acknowledge the pivotal and relevant role China is playing. With American debts topping 1.17 trillion in November 2012 the question remains where to next for China's biggest customer?

The first instinct would be to answer "straight to the debt collection agency!". However there is a deeper issue at play. This relates not just to the reality of America, but America's vision of itself.

My thinking immediately returned to the question of pre-eminence and the potential for China to replace America as the dominant International hegemony within the next fifty years. Many analysts more experienced then yours truly would scoff at such suggestions. 

However all markers seem to indicate the inexorable rise of China will continue long into this decade and confirm the oft repeated and at times annoying Orwellian mantra that this is the "Asian Century".

Funnily enough as Gardner Goldsmith's North Eastern accent washed over the Skype line and explored the Libertarian angles around our discussion, I suddenly remembered the words of Clive James who said poignantly of America:

Shining because of its decay, ablaze with its consuming fires, a multiple injection of phosphorescent amphetamine's into a sky sick with brilliance, New York [America] is the world's most stunning proof that where there is light there is always darkness. And it's because the darkness runs so deep it burns so bright.

With such an image burned upon my literary retina, I suddenly realised the symbolic importance of my discussion with my New England friend.

Today's America is much like Times Square in New York City. Ablaze with financial, trade and strategic manoeuvres they flash across the screen and burn bright upon the International passersby.

America may seem powerful, however its debt ridden position is reducing that power to the residual glow that flickers and pulses from the decrepit media receptacles that spew forth the decaying and all consuming cultural fire that Clive Jame's words so brilliantly allude to. 

Hopefully the punditry is wrong and descent into a Romanesque end isn't the final curtain call.

Timothy W. Humphries is Assistant Managing Editor of Menzies House and writes from Brisbane, Queensland. 

See Clive James' Postcard of New York for more:

 

 

Thanks to Labor, the ASX200 Index Flounders while the Dow Jones Index Booms

The Dow Jones Industrial Average closed at 12,980 points on 1st March 2012.

The last time the Dow Jones was above 12,980 points was back on the 16th May 2008 when it closed at 12,986 points.

The Australian benchmark index – the S&P/ASX 200 – closed at 4,255.5 points on 1st March 2012.

On the 16th May 2008, the S&P/ASX 200 – closed at 5,931 points.

So while the Dow Jones has recovered, the ASX200 is 1,675.5 points or 28.25% below its 16th May 2008 closing price.

So why is the ASX200 index floundering while the Dow Jones index is Booming?

There are three key reasons.

1)      The RBA/US Fed interest rate differential.

2)      The AUDUSD strength

3)      The systematic political risk of the Gillard government

ASX200 vs DJIN notes

It is fairly obvious from the chart above that the once highly correlated Dow Jones and ASX200 indices started to break down around May 2010 when the then Prime Minister Kevin Rudd along with Treasury Wayne Swan surprised everyone with their planned introduction of the Resource Super Profit Tax (RSPT). As we all know it went down like a lead balloon especially with the mining companies who had probably single handedly saved Australia from the death throes of the GFC.

Ultimately the RSPT cost Kevin Rudd his Prime Ministership. Interestingly, the S&P/ASX200 index closed on the first Monday (23rd August 2010) after the federal election at 4,429 points. So since Julia Gillard has been Prime Minister, our stock market has done nothing. In fact we’re down 173.5 points or 3.9% since the 21st August 2010 federal election. The AUDUSD incidentally was at $0.8930 and as of 1st March 2012 the AUDUSD closed at $1.0802 – some $0.1872 higher (+20.96%).

Since Julia Gillard’s election as Prime Minister on 21st August 2010, the correlation between the Dow Jones and ASX200 has deteriorated even further. We all know Julia Gillard lied when she said 5 days before the 2010 federal election that “there would be no carbon tax under a government I lead”. The lie became reality on the 24th February 2011 when Julia Gillard struck a deal with the Greens to introduce a $23 per ton (the highest in the world) carbon tax on 1st July 2012. The Carbon Tax law passed in the House of Representatives, 76 to 74 on 12th October 2011 and passed into law by the Senate, 36-32 on 8th November 2011.

Also, Greens leader Bob Brown told the world on 26th June 2011 that the carbon price has to result in shutting down the Australian coal industry. Such a statement would make any foreign investor assign Australia as a “sell”.

The divergence between the Dow Jones and the ASX200 has never been wider since Labor has been in government. Sure we can lay part of the reason at the feet of the RBA for holding interests rates too high against the rest of the world and the subsequent overvalued AUDUSD. But the overwhelming reason for our poor underperformance of our stock market compared to the USA’s stock market can be laid squarely on the “economic and investor confidence destroying” polices – namely the mining tax and the carbon tax – of the Gillard government.

With federal treasurer Wayne Swan ranting on about his Anti-Market Socialist Ideology you don’t need to be Einstein to know that investors are voting with their wallets and have decided Australia is a “sell” and the USA is a “buy”.

Just follow the money.

 

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When Did Fiscal Conservatism Die?

Front

Keith Topolski examines how the world's longest serving conservative government has sold out-or been bought out.

With a provincial election looming by 31 May, Albertans are faced with a unique question: Will the Alberta Government become the longest serving democratically elected government in history?

The ruling Progressive Conservative party has ruled Alberta since 1971, and its predecessor, the conservative Social Credit Party, reigned from 1935.

Not for 77 years has Alberta been faced with a government that is not of a conservative persuasion.

But is that last statement actually true?

Last Thursday, the Progressive-Conservative Government, now led by Alison Redford, handed down its first Redford budget.

Ms Redford came to the leadership on the back of growing restlessness in Alberta with the big government ways of Ed Stelmach.

However, nothing has really changed.

The Toronto Globe and Mail has praised the Alberta budget as predicting 'a rosy future'.

As any true conservative would tell you, when the Globe and Mail starts praising you, your political hue more resembles a tomato than the ocean.

What is most telling about the key features of this budget is the lead paragraph from the Montreal Gazette, which speaks of 'no tax increases while spending a record $41.1 billion and recording the fifth consecutive provincial deficit'.
Note that the $41.1 billion in spending is a provincial record. Also note that this deficit is No. 5 and counting.

Redford claims that the deficit will be wiped out by an injection of funds from 'new energy revenues'.

However, the Gazette headline promised 'no tax increases'.

Now, either the headline is an out and out lie, or Redford is going to kick back and wait for the economy to grow so she can cash in on extra tax revenues, assuming it does continue to grow with the current Keystone pipeline drama playing out.

Now, one might argue that this is good politics, that letting the province grow out of deficit is a good thing.

Maybe, maybe not. However, what is not mentioned in these articles, but is left to the National Post to mention, is that the record $41 billion spend is an increase of 7% on the last Alberta budget, and Alberta now spends more money on each citizen than any other province, and even more than the Federal Government.

If you do the maths on this, if Alberta froze public spending for this financial year, the budget would have returned to surplus. No ifs, ands or buts.

This raises, therefore, the question of the ideas the Alberta Progressive Conservatives are now based on.

Is this really a party committed to conservative economic policies, or have the progressives hijacked the agenda?

This is a curious question because of the presence of primaries in Canada, combined with one of the longest surviving governments in history.

In Alberta, if it is blue, people vote for it. If it is red, people shoot it, politically speaking. Not since 1921, in fact, has Alberta had a Liberal Government (Liberal in the American sense).

This has not gone unnoticed by many in Alberta's less than sizeable progressive community.

Instead, progressives have now signed up to the Tories, not because they agree, but because they know the only way to be a politician with credibility in Alberta is to wear blue.

This hypothesis is often queried, but the numbers don't lie.

In the 2006 leadership race, the most economically conservative candidate, Ted Morton, polled 15,000 first round votes and 41,000 second round votes before being eliminated as part of the instant run-off.

Last year, the same Mr Morton polled just 7,000 first round votes, and last year featured just one economic conservative.

Credit where it is due to the left, they have infiltrated and succeeded.

However. This raises the question of political apathy on the part of Albertans. Given how strongly the PC party has dominated for the last four decades, what will it take for Albertans to change their government?

History is as important as ideology in this instance.

Throughout its history since 1906, Alberta has elected four governments.

No, that's not a typo. Only four separate governments have controlled Alberta over the last 106 years.

Henceforth, when Albertans decide to change their government, there needs to be a major problem for them to act.

Politically, though, as indicated at the last Federal election, Albertans are still attached to their conservatism.

Of the 28 ridings represented in Ottawa, only one is not blue.

So, what happens in there is no conservative alternative?

Well, one is created.

The Wildrose Alliance, headed by Danielle Smith, has almost moved itself into official opposition status.

It takes much searching through the history books to find a political party in any Canadian election which sat to the right of the PCs.

However, this is now reality in Alberta.

And this reality comes with a 'zero-budget' plan as espoused by the Alberta PCs, which has Smith and her classical liberals seeing red, no pun intended.

This 'zero-budget' system sees a budget built from scratch, each year, without any regard for spending limitations or deficits, although this deficit ignorance is not noted officially in the plan.

This is on top of some incredibly dodgy spending from the PCs.

I will let the article carry the words:

Earlier this month, cabinet ministers went on a taxpayer-funded tour to hear from Albertans at a cost of $100,000.

Tory backbencher Lloyd Snelgrove, long disenchanted with the direction of caucus under Redford, labelled the exercise a cynical photo-op and quit to cross the floor and sit as an independent.

That was followed up last week by a $70,000 taxpayer-funded Tory caucus retreat to a Rocky Mountain resort near the ski-getaway town of Jasper.

Critics, including the Wildrose, noted that Tory election candidates who are not in caucus were in Jasper as well. While those candidates paid their own way, critics said their presence turned the Jasper trip into a publicly-funded Tory party election readiness session.

Whether this PC Party situation speaks more of long-term governments or the merits of the primary process where 'recruitment' (Glorified branch stacking might be a better term) is indicative of a good leader remains to be seen.

However, what cannot be disputed, as written by Kelly McParland, is that 'The richest province in the country, which doesn’t need sales taxes because it has oil and natural gas, is running a deficit and siphoning money from its trust fund to pay for short-term spending bonanzas, with no guarantee the money will still be there down the road.'

Will the mix of social conservatism and economic socialism presented by the PCs triumph, or will the classical liberal, almost libertarian, policies, economic and social, of Danielle Smith win the day?

While most will ignore this election as just a small time provincial election, this could present a valuable case study into what people find more important in their politics: economic security, or social values.

Keith Topolski is a former member of the NSW Young Liberal Executive and is studying Communications.

What the Wall Street Occupiers Really Believe

Douglas Schoen’s polling firm interviewed nearly 200 protesters in New York’s Zuccotti Park.

Our research shows clearly that the movement doesn't represent unemployed America and is not ideologically diverse. Rather, it comprises an unrepresentative segment of the electorate that believes in radical redistribution of wealth, civil disobedience and, in some instances, violence. Half (52%) have participated in a political movement before, virtually all (98%) say they would support civil disobedience to achieve their goals, and nearly one-third (31%) would support violence to advance their agenda.

The vast majority of demonstrators are actually employed, and the proportion of protesters unemployed (15%) is within single digits of the national unemployment rate (9.1%).

What binds a large majority of the protesters together—regardless of age, socioeconomic status or education—is a deep commitment to left-wing policies: opposition to free-market capitalism and support for radical redistribution of wealth, intense regulation of the private sector, and protectionist policies to keep American jobs from going overseas.

Sixty-five percent say that government has a moral responsibility to guarantee all citizens access to affordable health care, a college education, and a secure retirement—no matter the cost. By a large margin (77%-22%), they support raising taxes on the wealthiest Americans, but 58% oppose raising taxes for everybody, with only 36% in favor.

Thus Occupy Wall Street is a group of engaged progressives who are disillusioned with the capitalist system and have a distinct activist orientation. Among the general public, by contrast, 41% of Americans self-identify as conservative, 36% as moderate, and only 21% as liberal. That's why the Obama-Pelosi embrace of the movement could prove catastrophic for their party. 

Here’s FOX News Bill O’Reilly’s take about the occupiers.


 

Both Schoen and O’Reilly are spot on – these occupiers are just a rabble of radical leftists who want to burn the capitalist system down.

Capitalism isn’t perfect, but it’s the best system we have. Capitalism allows anyone the greatest opportunity to succeed on their own.

Update:

"Occupy Wall Street" Protests Cashing In on Capitalism?

 


 

 

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Occupy Chicago gives rousing Welcome to Communist Party USA

Andys RantRebelPundit has been all over the Occupy protests in Chicago. Check out the crowd of several thousand giving a “warm welcome and overwhelming applause” to John Bachtell from the Communist Party USA.

 


  

There you go – people using their freedom of speech to protest about taking away your freedom.


 

Ah yes…”wonderful” communism is trying to make a comeback to save us from the “evils” of capitalism.

Never forget, that under Stalin, tens of millions of people were murdered, either shot or they starved to death.

Did you know a delegation of German Gestapo and SS came to the Soviet Union to learn how to build concentration camps? That Stalin authorized children to be shot from the age of twelve?

Communism is pure evil and yet we now witness people applauding 21st century communists!

WTF!

 

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US CEOs Earned More Than Companies’ Tax Bills

Not the best look for capitalism…

Twenty-five of the best-paid chief executive officers in the U.S. earned more in salary and other compensation in 2010 than their companies’ federal income tax expenses as disclosed in public filings, according to a report by the Institute for Policy Studies.

The Washington-based nonprofit group’s report, released today, examined 100 publicly traded U.S. corporations with the highest-paid CEOs. It found that companies whose CEOs’compensation exceeded reported tax expense in 2010 had average global profits of $1.9 billion.

Companies in this group, according to the report, included EBay Inc., General Electric Co., Verizon Communications Inc., Boeing Co. and Dow Chemical Co.

Continue reading US CEOs Earned More Than Companies’ Tax Bills

Andy Semple

Follow him on twitter @Bulmkt

Why Australia Should Celebrate BHP’s Record US$21.7 Billion Profit

Andys Rant This is good news. No it’s sensational news. BHP at the market close today ($38.21) announced a record financial result – EBITDA up 51% to US$37.1 billion, underlying EBIT up 62% to US$32.0 billion and Attributable profit (excluding exceptional items) up 74% to US$21.7 billion.

This profit is bigger than the combined profit of our top four banks.

Now I know there will be a lot of people who will hear about this fantastic BHP profit and say these guys make too much money – they should pay more tax which is exactly what Swan, Brown and the Unions will parrot tonight and tomorrow on the airwaves.

Well I can tell you that BHP in deed does pays its fair share of taxation. (Company tax rate in Australia is set at 30%)

Below is the unedited excerpt from the BHP full year 2011 financial report.

Excluding the impacts of royalty related taxation, exceptional items and exchange rate movements, taxation expense was US$10,082 million representing an underlying effective tax rate of 32.1 per cent (2010: 30.9 per cent; 2009: 31.4 per cent).

Government imposed royalty arrangements calculated by reference to profits after adjustment for temporary differences are reported as royalty related taxation. Royalty related taxation contributed US$828 million to taxation expense representing an effective rate of 2.6 per cent (2010: US$451 million and 2.3 per cent; 2009: US$495 million and 4.3 per cent).

Exceptional items decreased taxation expense by US$2,128 million (2010: increase of US$59 million; 2009: decrease of US$1,209 million) predominantly due to the reversal of deferred tax liabilities of US$1,455 million following the election of eligible Australian entities to adopt a US dollar tax functional currency, as well as the release of tax provisions of US$718 million following the Group’s position being confirmed with respect to ATO amended assessments.

Exchange rate movements decreased taxation expense by US$1,473 million (2010: increase of US$106 million; 2009: increase of US$444 million) predominantly due to the revaluation of local currency deferred tax assets arising from future tax depreciation of US$2,481 million, partly offset by the revaluation of local currency tax liabilities and deferred tax balances arising from other monetary items and temporary differences which amounted to US$1,008 million.

Total taxation expense including royalty related taxation and the predominantly non-cash exceptional items and exchange rate movements described above, was US$7,309 million, representing an effective rate of 23.4 per cent (2010: 33.5 per cent; 2009: 45.4 per cent).

What should concern all Australian taxpayers however is the split in taxation between Australia and overseas.

Out of the US$7,309 million paid in taxation – US$3,503 million (47.9%) was paid to the ATO and the balance of US$3,806 million was paid to foreign taxation departments. Now that’s worth worrying about.

Let no one be under the impression that BHP doesn’t pay enough tax – they do. Now it is moot to debate the incoming MRRT as BHP and RIO have agreed to terms with the Government, but the added burden of the MRRT and the Carbon Dioxide Tax could well see BHP earning more of their revenue from overseas operations and thus the tax take for Australia over time could decline.

It was also good to see that the evil commodities of Petroleum (EBIT US$6,330 million), Metallurgical Coal (EBIT US$2,670 million) and Energy Coal (EBIT US$1,129 million) contributed to BHP’s bottom line.

It also highlights that the Gillard Government’s MRRT and Carbon Dioxide tax are hypocritical taxes. On the one hand, they want BHP to export like there is no tomorrow Coal and Petroleum and on the other hand they are ok to slug Australian based businesses and its citizens considerably more for the same commodities used here to power our businesses and households.

How the politicians from the Gillard Government can sleep straight at night just astounds me.

Not withstanding this double tax hypocrisy, we should all be really proud like when Cadel Evans won the Tour, that BHP is one of the world’s biggest profitable companies in the world.

In fact, according to CNNMoney’s Fortune 500, BHP’s profit today is greater than Chevron, Wal-Mart, IBM, Apple, Microsoft, AT&T, Intel and Coca-Cola to name but a few.

And unlike this Government’s approach, the best way to share in BHP’s prosperity is to buy BHP stock.

Go Entrepreneurialism, Go Capitalism, Go Growth. Go Liberty.

Update 1:

BHP boss Marius Kloppers says the carbon tax will hit coal investment.

This, if you boil it down to its barest essentials, is a tax on coal exports from Australia,” Mr Kloppers told reporters in London.

“And that is a tax which competing countries like Indonesia, South Africa, and so on, do not have.

“I think that like any other cost impost, and therefore it is what economically would be called a dead weight cost, it's an economic dead weight cost because it's basically just an export tax, and those costs get discounted into investment decisions.

“I wouldn't be so presumptuous as to speak for the industry as a whole, but on average if you increase the cost you will get less investment than you had before. Axiomatically that is always the case over time.”

Treasurer Wayne Swan took news of BHP's record annual profit as justification for the government's proposed Mineral Resources Rent Tax (MRRT).

“This result shows just how important it is that the Liberals don't succeed in blocking our resource tax reforms, which will deliver a boost to superannuation and substantial tax relief for businesses which aren't in the mining boom fast lane,” Mr Swan said.

In response, Mr Kloppers credited BHP for the healthy finances of hundreds of thousands of Australian families.

“The fortunes of 600,000 Australian families and more, are tied to the outcomes here,” he said.

 

Andy Semple

Follow him on twitter @Bulmkt

Andy owns BHP shares in his SMSF. 

Arguing with Idiots: In the Defence of Capitalism Part 3

Andys Rant Andy Semple presents part 3 of Arguing with Idiots: In the Defence of Capitalism.

“We need a new kind of Capitalism, one where the Government has more control.”

Thanks for reading my post, Chairman Mao. Actually, if you agree with that statement your views are closer to those of French President Nicolas Sarkozy than those of Mao. In January 2009, while hosting a two-day economic conference titled, “New World, New Capitalism,” Sarkozy said that “in capitalism of the 21st century, there is room for the state.

Now, I’m not exactly sure when Australia started taking advice on capitalism from socialist France – but plenty of people seem to be listening anyway. From German Chancellor Angela Merkel (If governments “are not in a position to show that we can create a social order for the world in which such crises do not take place then we’ll face stronger questions as to whether this is really the right economic system”), to former US Fed chief Alan Greenspan (“It may be necessary to temporarily nationalised some banks in order to facilitate a swift and orderly restructuring”), to Newsweek magazine’s cover (“We Are All Socialists Now”), there seems to be no shortage of voices begging the government to take more control over private markets.

And that’s exactly why we should ignore them all. It’s easy to get caught up in the headlines and make decisions based on emotion, but it’s much harder to objectively look at the decades of evidence that conclusively prove that the state runs things only one way: Right into the ground.

The reason why combining the government with private companies always fails is simple: Their motives are completely different. Private companies exist to create wealth, the government exists (at least in theory) to provide protections critical to life, liberty and the pursuit of happiness. Private companies closely manage expenses and ensure every dollar has a return. The government attempts to spend every dollar it’s given and measures returns in campaign donations and polls.

Their constituencies are also different. Corporations serve shareholders and customers, the government (again, at least in theory) serves taxpayers, which means they have to serve politicians, special interest groups and the established bureaucracy first.

The incentive to earn a profit goes hand in hand with the ability to operate efficiently and effectively. Take one away and the other will vanish faster than the taxpayer dollars that are continually wasted trying to overcome the simple rules of economics.

Here are two examples of how a few high-profile public/private partnerships played out in real life.

One: NBN Co

The NBN will cost taxpayers 24 times as much as South Korea’s but deliver just one tenth the speed, according to one of the world’s most respected economic research organisations.

A paper released by the Economist Intelligence Unit criticises Labor’s broadband network on a range of fronts, including its cost per household covered.

The research body marks Australia down in its government broadband index because of “the huge cost to the public sector” of the NBN.

It also loses points due to limited private-sector involvement, high government intervention and the exclusion of state and municipal authorities from the plan.

Liberal MP, Malcolm Turnbull, co-founder of OzEmail, lists the eight reasons Labor’s broadband plan will be a white elephant.

The 36-page so-called "NBN Co Business Case Summary" was a complete joke. If it's at all an accurate indicator of what's in the full Business Case, NBN Co CEO Mike Quigley and his irresponsible minister Stephen Conroy should both be sacked.

And we now find out that National Broadband Network has more staff than it does customers.

NBN Co, which has 784 staff, has at most 607 customers after Julia Gillard and Communications Minister Stephen Conroy launched the first NBN site on the mainland in Armidale yesterday, with just seven users. And none of the network’s users is a paying customer yet.

We all know how this NBN story will end, badly for the taxpayers of Australia.

Two: Home Insulation

As far back as April 2008, Minter Ellison Consulting warned the Rudd Government its free insulation scheme was a bureaucratic disaster.

Results so far:

Most of the untrained workers who rush to install the insulation turn out to be backpackers and foreign students.

Four of the workers die.

They laid foil insulation that turns the ceilings of an estimated 1000 homes “live” with potentially deadly currents.

They set fire to more than 80 houses.

At least half the insulation is actually imported, stimulating foreign companies instead.

An estimated 400,000 homes have insulation installed that is so sub-standard that it’s useless.

Taxpayers must now repay not only the $3.7 billion spent on the scheme, but the millions it will cost to fix the damage.

I can’t remember a scheme that was so misguided, achieved so little of its aims, caused so much harm, wasted so much money and left us with so little to show.

 

Andy is Stockbroker, novelist and general antagonist. He is the Assistant Managing Editor here at Menzies House and his personal motto is "Speak without Fear. Question with Boldness."

 

References: Just the facts, Man

Sarkozy, Merkel, Blair, Call for New Capitalism.

Public welfare may require it.” Ronald J. Pestritto, William J. Atto, American Progressivism.