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November 28th 2011 print

Peter Smith

Big Green Depression

You can never keep the Greens happy, short of converting Australia into a defenceless, impoverished, wind and solar powered, bicycle-friendly, forested, backwater, albeit criss-crossed with high-speed rail.

Deals to keep the Gillard government afloat are coming thick and fast; it’s hard to keep up. Immediately prior to the elevation of Slipper –I suppose indirectly we could call this the Wilkie/Pokies deal – the government did a secret deal with the Greens to counter and complement another deal with Wilkie on the MRRT; which, in turn, had followed another MRRT deal with Windsor. The Wilkie deal was to shield some smaller iron ore and coal miners from the MRRT, by increasing the applicable profits threshold (when the tax kicks in) from $50 million to $75 million. How do you keep the Greens happy with this? Miners, even small ones, are terribly unworthy planet despoilers.

Well you can never keep the Greens happy, short of converting Australia into a defenceless, impoverished, wind and solar powered, bicycle-friendly, forested, backwater, albeit criss-crossed with high-speed rail. Okay, start again; how do you buy them off on this occasion. Hit the banks is the answer. Miners are beyond the pale but those rapacious banks run them a close second. After all, don’t they fund big business and miners and generally screw the little people who borrow from them?

Bob Brown has crowed about the victory he’s had in getting the government to defer the phasing down of interest withholding tax on banks’ foreign borrowings, to make up for the revenue foregone as a result of the MRRT Wilkie deal. Oh come on, he said, or some such words, let’s not feel sorry for the banks they can afford it. This means more money for teachers and nurses and public servants. I am not sure whether high speed rail came into the mix. We (the Greens) have single-handedly saved the Australian public from losing this money; sums it up.

There is one thing you can rely on when it comes to the Greens; they have not the remotest idea of that part of economics dealing with the incidence of tax; because they have not the remotest idea of the way economies work. They can’t afford to be better informed. They would see through their own snake-oil prescriptions and that would be psychologically scarring.

Banks to them are like those “one percenters” who have to be taxed till they squeal. The only problem is that the owners of the banks pay little, if anything at all, of interest withholding tax. It is a borrowing cost which they largely pass on to those small businesses and individuals, which the Greens profess to love. The ultimate effect of increasing taxes and borrowing costs is to dampen production and economic growth.

Socialists of the soft left variety (Hawke and Keating for example) are into sharing around the fruits of industry but, importantly, as part of that, they understand the need to provide industry with a supportive environment – how else can you increase the pot to be shared? Those on the hard left, of whom the Greens are part, appear to have a complete disconnect in their minds between production and its divvying up. As a result, in their minds, there is seemingly no impediment to industry that they can orchestrate – whether it is a carbon tax, a mining tax, a banking tax, onerous environmental and labour market regulations – that will have the slightest impact on the level of production and economic growth. To the contrary, in their minds, it will all simply produce “better” production to be shared around. They are economic ignoramuses who live in cloud-cuckoo land. The amazing part is that some people vote for them. At least with Windsor and Oakeshott voters can justifiably claim to have been deceived.

The growth of the entitlement society is an enormous threat to the future of capitalism and consequently political freedom. Fewer and fewer people have the burden of supporting more and more people, until the whole situation becomes unaffordable. We are seeing it being played out in Greece, Spain, Portugal, Italy and Ireland, and in other countries, including the United States. On top of this, hamstringing productive businesses with restrictive regulations and taxes, while channelling taxpayers’ money to pie-in-the-sky businesses, will make a bad situation untenable; with no benign way out. This is the way of the Greens and their ilk. They would pull us all down, if they had their way, while being insufferably moralistic about it.

 

Peter Smith, a frequent Quadrant Online contributor, is the author of Bad Economics