Why Gillard’s left-wing agenda will weaken Australia’s society and make every Australian poorer.

 

PCoulson1 Peter Coulson demonstrates how the Gillard-Green government, and its preoccupation with same sex marriage and euthenasia while neglecting our economy, will weken Australia and make us all poorer:

The best Government is that which governs least.

This is the central premise of libertarian political theory and is designed for two main aims. Firstly it protects the rights and liberties from a government pursuing a course of action that requires coercion of the public to achieve its desired outcomes. The second reason for this theory is the belief that government should "focus on its knitting": providing a stable economic management framework, with robust and predictable rules within which the market can effectively operate to create wealth for its participants. The second reason is why the Gillard Government's leftist Greens-dominated agenda will make Australia poorer.

Briefly, let me outline why it is preferable for a Government to be restricted in its actions for the protection of rights and liberties. There has long-been the recognition that a stable society requires a state with certain powers to facilitate an orderly and secure society within which its individuals can thrive. One of the first principles however of allowing a state to be ruled by a central governing power is that the powers given up by individuals to the government must be regulated and restricted lest the power of the government to coerce individuals be improperly and excessively applied. By restricting the operations of government to a limited number of areas, the number of individuals in society who are likely to oppose the government's decisions are likely to be reduced. By reducing the number of opponents who require coercion, the utility of society is maintained, whereby the good of the state is facilitated by the coercion of the fewest number of individuals as possible. Thus the rights and liberties of the general population is protected, because the litmus test of liberty is not the freedom of the majority, but the price paid by those whose rights are trampled by the state. 

In relation to the latest announcements by the Gillard Government, those of gay marriage and euthanasia, some might say that the rights of marriage and death are being trampled by the state. However, by way of response I would say that there has never been a right to marriage by homosexual couples. The power to grant such a right does not lie with the state but with the church for the fundamental reason that marriage is not a creation of the state in legislation but a creation of religion as stipulated in the Bible. Thus proponents of gay marriage are not resisting the withdrawal of a right, but advocating the creation of a new one; one that is not within the authority of the state to provide. 

In that regard, I fully support the proposal of homosexual partners to celebrate their commitment and love for each other through a civil union and I believe that a secular recognition of this nature is the most reasonable outcome.

In relation to euthanasia there are very strong arguments with layers of merit that warrant the restriction on assisted suicide. For brevity's sake I won't cover these here, but would simply say that euthanasia falls into a category of private actions for which the state should have a right to mandate outcomes for the betterment of society. Simply put, it is not in society's interests that society should support the death of its members. 

It is my opinion that by making these radical changes to society, The Gillard Government is raising issues to national importance which are divisive and engage passionate interests on either side of the debate. While the debate should occur, the national government should not be focusing on these issues at the cost of other actions.

This leads into the economic arguments of why the Gillard Government's leftist agenda will weaken Australia's society and make us poorer. There are two reasons why Julia Gillard's announcements will make Australia poorer, and they both stem from the fact that in raising these radical social issues to such levels of importance Gillard is increasing the scope of the federal government and simultaneously eroding the focus of its operations.

In contrast the Gillard Government, the 1996-2007 Howard Government was the best example of strong economic management in Australia's economic history since the Second World War. The reason for this was its uncompromising focus on economic issues as its single-most important responsibility. From economic reforms such as Industrial Relation, the GST and scrapping multiple inefficient taxes, trade relations, centralised companies regulation and income tax reform; right through the competent day-to-day management of economic affairs through the Asian Financial Crisis of 1997 and other international crises such as 9/11, the Howard Government sets the benchmark for competent economic management and it is against that legacy that the Rudd/ Gillard Governments should be measured. 

The Howard Government contrast provides this criticism of the Gillard Government, namely that the central focus on economic affairs is being weakened as cabinet discussions, Prime Ministerial attention and parliamentary observation is squandered on pet issues of a party that regularly struggles to attract the support of more than 10% of the national electorate. By weakening the focus and resolve of the government, over time, the Gillard Government will continue to drop the ball on the day-to-day economic management of the country's affairs. Already we have seen open warfare between members of the Reserve Bank and the Treasurer, guarded disagreement between the Treasury Secretary and the Treasurer and serious disruption between the Labor Backbench and its leadership. All of these events points to a PM and her cabinet that have lost their central focus (if they ever had it) and are pursuing legion subsidiary issues at the expense of the central issue of economic management.

In that way, the lack of focus on economic management will make Australia a weaker society, and therefore poorer.

Pete Coulson is a Brisbane-based student of economics at Griffith University. He is a keen observer of Queensland politics and shares his thoughts at Queensland Politics, where this post is cross-posted

 

On socialism’s failure; a lesson from Queensland

PCoulson1 Peter Coulson uses the failures of Queensland's solar hot water program to illustrate the failures of big-government central planning. 

In his seminal 1944 piece, The Road to Serfdom, F.A. Hayek said that the main features of socialism were the withdrawal of the means of production from private enterprise (anti-privatisation) and central-planning to circumvent the market and defeat competition. While many believe that the evil tentacles of socialism are dead, a recent example from Queensland highlights the importance of unending vigilance.

Hayek was very clear on the dangers of these types of actions. Competition, he argued, was the most efficient method of allocating resources towards meeting needs. Furthermore the use of centralised planning would require “conscious social control” – in effect mandating the use or action by the population and forbidding the freedom to contract at will. Tying into the inefficiencies of government planning is of course the unseen effects of the particular government action. This is limited not only to the opportunity cost of those taxation monies that are applied to the particular endeavour; but also to the general cost of allowing the state to assume the right to make any intervention on the private sphere. Every small incursion grants the allowance of further government intervention, just like slicing a stick of salami, until the state assumes total control.

One example of public policy in Queensland, the solar hot water program, contains a number of lessons for further policy makers and governments to consider. This example will be considered in light of the writing of Hayek and others from the libertarian perspective.

At the 2009 election, the leader of the Labor Party, Premier Anna Bligh announced a new policy designed to foster the uptake of solar power. She used the importance of overcoming climate change as an argument for impetus to make a State foray into the private market with the result of crushing competition.

Bligh announced that if re-elected, her government would enter the market and purchase 200,000 solar hot water systems which would be made available to the public for $500 each – fully installed. It was also announced that the government would bear no cost for the systems, because the economy of scale would in turn drive down the cost.

Bligh also announced that the program would prefer local manufacturers and therefore provide an impetus to a local solar hot water/ photovoltaic manufacturing industry.

Following the Bligh Government’s election in March of 2009, the program was immediately commenced; however the first hot water system was not actually installed until late November 2009 – more than six months later. In the intervening period, the market for solar hot water systems was utterly destroyed. Orders for solar hot water systems with a cost above $500 dried up as consumers waiting for the promised systems from the Government. There were no systems at that time with a market price of $500 or below.

Meanwhile, the Bligh Government had all manner of problems with sourcing a supplier who could provide the systems at the identified price. It appeared as if the Bligh Government’s promise would fail until a German supplier who until then had no market share was prepared to supply to the program for close to the designated cost. However, the supplier the Government had contracted with to supply and install the units was not actually licensed by the Building Services Authority to contract out plumbing work. Although the sub-contractors used were licensed, they operated under a contract held by an unlicensed organisation.

According to the budget estimates in July 2009, the Government was required to make a contribution to the program, for which an amount of $39 million had been identified. However, this did not cover the cost of the bureaucracy in administering the program.

The debacle was finally put to the sword in March 2010, almost a year to the day of its announcement, when the Bligh Government announced that the solar hot water program would be cancelled, and replaced with a two-tiered grant.

The failure of this policy and its authors is complete, but the fact that the program would fail was entirely foreseeable.

As Hayek said, the allocation of resources by the Government through planning designed to undermine competition and defeat the market, is grossly inefficient as compared to the market forces allocating the same resources.  As can be seen, the announcement that the Government could defeat market forces belies the utter economic ignorance of the Bligh Government’s policy makers.

The lesson for policy makers is to beware attempts to undermine market forces while in the pursuit of social benefits. This applies in two respects, firstly, the effect on the market between the announcement of the program and its actual start, a period of some eight months saw the market for solar hot water systems paralyzed while consumers waited for the promised cheaper systems.

Secondly, the assumption that direct government intervention into the market to reduce the price of solar hot water systems was proven to be a fallacy. The policy makers in the Labor Party erroneously accused solar hot water suppliers and manufacturers of making unreasonable profits, whereas the outcome of this example suggests that there were not unreasonable profits in the industry that would allow the supply of systems for the amount they wanted.

Finally, although the program did not progress to the final stages, at some point the question of demand would have been required to be addressed. The Government simply assumed that 200,000 homes desired a solar hot water system. But what would have happened had the actual demand been insufficient? It is quite likely that the Bligh Government would have mandated the use of such systems in new homes (a suggestion which has been previously mooted by members of the government). As Hayek foresaw, at some point the central planning by government would require conspicuous social control by government over private capital. To conclude this example warrants quoting Adam Smith:

The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had the folly and presumption enough to fancy himself fit to exercise it.

Pete Coulson is a Brisbane-based student of economics at Griffith University. He is a keen observer of Queensland politics and shares his thoughts at Queensland Politics.