An Analysis of Paul Howes’ Latest Speech

Untitled David Elson concludes that if Paul Howes articulates what the modern ALP believes, then Australians should hope they lose office and don't regain it for a very, very long time:

There’s a lot of talk that Paul Howes National Secretary of the Australian Workers Union is the new modern face of the Australian labour movement, bringing fresh ideas and an understanding of the economic realities facing Australia in the so called “Asian Century”.

Based on Paul Howes recent National Press Club Address these complimentary commentaries are unfounded.  While there was one shining moment where Paul attempted to distance the Labor from the electorally toxic Greens the majority of his speech was pure unadulterated protectionism, unionism and economically illiterate justifications for extreme market interventions on the part of the federal government.  Nothing we haven’t seen from our current Australian federal government.

Let’s take a look at some of his points and policy prescriptions:

In his introduction Paul echoes Wayne Swan’s stance attacking “billionaires and mega corporations” [as opposed to regular corporations?] who are plundering our public resources without giving anything back.  Assuming he is referring to our states’ mineral resources this is clearly a-non-too-subtle attempt to drum up support for the new mining tax.  The fact of the matter is Australian mining companies pay plenty of taxes already and that their royalty payments have been keeping our state government fiscally afloat for a number of years now.  Attacking these companies with new taxes as China’s economic growth is slowing, and as the storm clouds of a second GFC gather on the horizon is most unwise indeed.

Paul also stated that the media alone couldn’t be blamed for the labour movements [ALPs?] current woes before going on to blame the media, even equating the Sydney Morning Herald’s 1891 hyperbole with current criticisms. He offered the following quote:

“Our greatest peril comes from the intrusion of the labour struggle into the field of politics – only the most extreme and violent men will control the situation.”

In hindsight the above appears oddly prophetic.

Paul provided statistics indicating the current and ongoing importance of China’s economy for Australia’s exports, however he then went on to equate Australia’s investment in the upcoming Olympics with the economic fallacy of  big Government “picking winners” in a free market economy.  Anyone familiar with the recent loses at Ford, the large staff reductions at Holden, the failure of Tim Flannery’s much vaunted hot rocks technology and the ongoing controversies surrounding Solyndra know that it is not so easy for a government driven bureaucracy to “pick  winners” within our current globally competitive world.

Paul then continues on in a similarly economically illiterate manner, mistakenly stating that Australia has only now become a high cost country relative to our competitors (apparently due to the high Australian dollar), ignoring that our Asian neighbours and competitors have consistently had  lower labour costs then Australia for decades if not longer.  Paul then goes on to rule out “racing to the bottom” by apparently reforming our very restrictive workplace employment laws and conditions, this is where the biggest cognitive dissonance occurs in Paul’s partisan speech.  Paul praises the market interventions of our Asian neighbours’ government into their local economics, while glossing over and at times blatantly ignoring that;

  • These countries often intervene to ensure that their cost of electricity is kept low in contrast with Australia which has implemented interventions to increase the cost of electricity.
  • The cost of labour in countries within the Asian region are often much less than that of Australia, even in those nations which are not developing nations (ie South Korea, Taiwan).
  • The organisation of labour is largely absent, despite the title of the dominate nation within the region:-  The “People’s” Republic of China.
  • That unlike most western nations, the people of China, Malaysia, Singapore, and so forth do not have a welfare entitlement mentality and set aside savings to cater for themselves and their families, freeing up a lot of tax monies for investment in public expenditure which have a real return to the government and its people.  It is no surprise that these countries are characterised by financial responsible governments with relatively low debt loads.

There was a short glimmer of hope though.  A light that was as quickly extinguished as it appeared. Paul Howes criticised, with much validity the power of the big four banks within Australia’s financial system [although it should be stressed that it is this strength along with the Chinese driven resources boom that left us largely unaffected by the GFC], Paul correctly identified that it was lack of competition within the banking sector which had led to the current state of affairs.  Sadly the most effective solution to this; relaxing key restrictions to entry and allowing large foreign banks entry to Australia’s market was not proposed, instead stipulating that the government needed to  be more active in forcing these banks to follow the government line.  One can only imagine what method he would use to accomplish this.

If this is what the next generation of ALP leaders believe, then following the next election we should hope that the ALP will be entering the political wilderness for a very long time.

The full text of Paul Howes’ speech can be found at: http://australianpolitics.com/2012/05/22/paul-howes-npc-address.html

David Elson is a senior public servant who has long taken an interest in the economic impact of Federal policies particularly those pertaining to environmental or social issues and in the cultures of Australia's Asian neighbours.  He lives in Brisbane, Queensland with his Taiwanese wife and is an avid squash player.

Paul (Protectionism) Howes

Picture1 Gary Knight explains  how free trade and small government is the only way for our economy to survive:

Recently in light of the shedding of some 1000 jobs by steel maker Bluescope, CWU chief Paul Howes has called for a return to protectionism to shelter trade exposed industries from the negative effects of the high Australian dollar. In particular he has called on government to regulate mining companies to be forced to buy Australian made steel. 

Mr Howes connections to The Socialist Alliance are well known, as are his claims to abandoning his socialist beliefs and recognizing the power of the market to provide prosperity. I wonder then why at every opportunity he advocates policies that could be described as none other than socialism by stealth. Surely there has not been a more ridiculous claim in recent years from the unions to use government to dictate where one industry must procure such an integral part of its operations, steel. Although, I do believe to be left leaning in your politics stems from an inability to properly integrate economic history with current events. 

Unintended consequence! Sometimes it is so obvious maybe it is intended.

Mr Howes economic genius was best expressed on a recent MTR segment on the 23rd of August featuring Steve Price and known conservative Andrew Bolt. Mr Howes expressed the view that if we had the Resource Tax on mining in place, the dollar could be down and allow our steel to remain somewhat competitive. His basic message is he wishes to use government to punish companies for productivity and reward those who do not compete via government enforced redistribution. 

Mr Bolt engaged in a futile back and forth where Mr Howes was unable to have the consequences of his economics explored in full. Mr Bolt was able to ask some questions but they were readily dismissed by Mr Howes as he continued his Rant on protectionism.

Mr Bolts questions boiled down to these two essentials questions:

Will such a measure force up the cost of mining the iron ore that feeds the manufacturing of steel? Will this cost be passed on?

It does not take a business degree to be able to recognize that a measure to force mining companies to buy more expensive Australian steel will add further costs to the actual mining of iron ore.

Firstly the cost will be passed in full back to the Australian steel manufacturers; making their product more expensive to customers outside the mining sector. It will drive all but there government enforced customers away due to added input costs passed on from the iron ore companies. 

Secondly it will establish a government monopoly for Australian steel manufactures allowing them to set monopoly prices to the mining industry and remove any pressure to innovate and improve their manufacturing process to become more competitive. Put simple, it is moral and economic hazard.

Lastly by putting upward pressure on mining costs we then make our mining operations less competitive on the international scene. Australia has high grade resources but we are not the only country, new deposits of various base metals and energy are being brought online around the globe every day to fuel China's appetite. Australia already has expensive labour and tax costs; facing possible Mining and Carbon taxes, a measure such as that proposed by Mr Howes would simply allow foreign competition in mining and the already killer competition in manufacturing to damage our big industries driving prosperity and employment to new shores.

Mr Howes inability to grasp the consequences of his policy demands is staggering but not surprising. The left still pushing a raft of failed theories of economics from Keynes to Protectionism leaves me know doubt they are unable to integrate proven historical economic failures with current events threatening the global and domestic economic situation.

The arguments against protectionism are well founded, and the removal of a raft of protectionist policies in the 1980's are one of the biggest factors in transforming our country into the prosperous powerhouse it is today. The inability of Mr Howes and the current Federal Government to understand our countries success and how open market policies drove it through the last two decades is having very real consequences as we go into a new wave of uncertain times.

 

Australian manufacturing is under threat so if not protectionism, what?

Put simply I do agree with Mr Howes assessment of a high dollar driven by high commodities as the main cause of our manufacturing industries decline. It is however not the only cause; as we know manufacturing has been dying the slow death for over two decades in this country due to global competition. High labour costs, heavy regulation especially on labor, and burdensome tax rates imposed by all levels of government are three major government created issues which are in our means to control. Global competition is not something in our control, how our government impacts our businesses is!

Taxation – Australia needs to be an easier place to do business!

The elephant in the room taxation. It is understandable but unforgivable how unions so tightly weaved into the power structure of the ALP refuse to acknowledge how hard all levels of government make it for every single small business through to large company to compete domestically and abroad. I always wonder why we never see unionists denouncing the Carbon and Mining tax despite the obviousness of their soon to be felt impact of jobs and living costs. 

Union leaders always support these tax measures which will hurt every Australian provided their particular industries of concern receive nice healthy compensation packages from the government. Could rent seeking and payed support be so obvious? Unions then wonder why their membership and general community support wanes much like the manufacturing sector in this country.

Union leaders by their nature must be tribal and look after their members interests, but they do so at the expense of every other Australian and whichever singled out industry is poised to be shaken down by the ever cash hungry government.

Union members must demand their leaders to fight the Carbon and Mining tax for their own well-being and for the rest of the Australians whose living standards are under threat from big government far more so than competition abroad.

Labour costs will never compete with developing countries but they can be reduced by removing payroll tax. This abhorrent tax pushes employers for doing a moral and economic good of making people productive. Union bosses should be all over this tax if they really want to keep their members gainfully employed.

 

Unions like the ALP, simply out of touch!

It seems plain to me that union leaders such as Mr Howes are either wilfully ignorant of economics or deliberately exploit a form of class welfare between high and low performing industries to extort protection from government for their members industries. They do this with reckless abandon for the consequences to industries and workers outside (not entirely) their union membership.

It is no surprise the Federal Labor government has brought forward part of the 100 million dollar assistance package to the steel industry in Australia, it amount to nothing more than paying people like Paul Howes and his fellow union bosses to keep quiet. They get a handout whilst other companies and individuals will take the brunt of a new raft of government imposed costs on living and producing. 

The better you perform as a company or individual the less likely you are to receive assistance. The productive part of the economy which exists because it efficiently meets market demand pays for those who do not. Short term such measures are affordable and politically popular, in the long term however it is unsustainable and will come back to bite us. It happen in the recent past and we responded, why do we now take a step backward?

No private industry should ever have to rely on government handouts to exist. Markets can only work if they are set free to work, otherwise scare resources are poured into economically unsustainable investments and it is only a matter of time before the government money runs out. Once these funds dry up those businesses much like the solar and insulation installers which made up the first stimulus response post GFC find they have no business and close doors and lay off workers. The market forces innovation, it is a creative destruction, but countries that embrace it are best able to meet future uncertainty than countries whose economies need welfare to exist.

Union leaders will continue to drive membership levels south if they refuse to properly understand economics and continue to support anti-prosperity measures put forth by the federal government. The alienation of union bosses with their members is analogous to Federal Labor's alienation of the Australian public. Nobody in power is listening to who they are entrusted to protect and it seems power, special privilege and perhaps protectionism are the defining themes of this horrendous political paradigm now steering us head long into uncertain economic times.

Big government get out of the way!

The debate should not seek to force high performing companies to prop up lower performing companies but look at what is really making it hard for all Australian businesses to compete. Blaming some industries for doing well then punishing them is as immoral as it is dangerous; exploiting it to push protectionism, a character flaw. 

Every business person can tell you how government regulation and endless taxes are making it hard to earn in this uncertain climate.

 We cannot alter world economic conditions or competition. We can however lower taxes and make Australia an easy country to do business in, be it manufacturing, mining and everything in between!

Gary Knight is a former high school teacher turned apprentice electrician in the mining industry. This piece was originally published on his personal blog, Operation Libertarianism