Paul (Protectionism) Howes

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. 

Comments

[Pip]

1.

The mantra of lower taxes.

Don't you think its as doctrinaire as the Socialist alternative?

I'm just putting it out there as food for thought, thinking outside the square and all that.

I prepared this post in the Masterchef kitchen for a Mining thread by Andy Semple yesterday but its already 3 pages back.

>>>>I came back here hoping that Andy or someone might have ideas for the solution to the two speed economy, but NO, I got an---- "We'll leave it there"

http://pressthink.org/

Second article on this blog plus Jon Stewart's video.

Now please do not do an "I'll leave it there" on Jay Rosen because he's too artsy fartsy for you! Don't you realise that if we leave the progressives in power, the only way to do business will be in the artsy fartsy industries!

Ps Please listen to this as well.
http://www.abc.net.au/rn/latenightlive/
We'll leave it there: Jay Rosen on political journalism
Thursday 25 August 2011

Simply brilliant analysis of the media.

But I digress.

Glenn Stevens said on Friday, 26 August, 2011 that he may have got the interest setting wrong. However he said its too late to decrease them now. He said in a maelstrom, or some such words, it is better to do nothing. Just leave it all alone until the crisis passes.

What do you think?

Should Glenn Stevens, who you say is responsible for the Mining Industry killing every other Industry, by way of the popularity of Australian shares bought in Australian dollars globally and the strength of the Mining Industry, lower interest rates?

Change the settings?

Other?

>>>Gary, I know your solution, the Government should lower taxation. The one leg pony of the Libertarians, sometimes, different horses for different courses? Its not a level track out there, to completely scramble the metaphors.

The Gillard Government is a one trick pony as well. They think by starting the carbon financial bonanza it will start this utopian wizz bang wave of innovative high tech Industries. Gillard et al don't want "tres ordinaire" business, they want sleek, shiny, high tech businesses that create their own water, energy, refuse and carbon disposal and can be marketed around the world as the Gillard solution to everything!

Oh, except they want to create their own history with massive creativity in ART, LITERATURE, BALLET, OPERA etc anything creative and sport of course.

Can't forget sport, all those Olympians, Labor wants more of them.

[Gary]

2.

I'm just going to focus on you Glen Stevens question.

It is immoral to isolate high performing companies as it is individuals for punitive taxation. Taking money from those who create and reinvest it is economically unsound. Stevens is powerless to do anything. The reality is one currency Is failing Australia the way the Euro is failing the EU countries. Simply interest rates are a blunt instrument. The way around this is politically impossible, federal government would never allow the states to succeed economically and give them greater powers over their economic settings.

What if WAand QLD had a different currency to the underperforming states? Boom times for the resource states but the others could manufacture and have a dollar not overcooked.

Having said that my case for less business and tax costs still holds up as valid and sensible for providing relief all round.

Trying to tax mining or impose costs on it in order to use the funds to prop up manufacturing would only reduce jobs in mining where they have an economic reason for existing. The cost then of propping up manufacturing jobs becomes pointless, as it redistributes wealth from an efficient sector to a non-viable one. No sector on subsidies has a market to force productivity and once the boom slows the cost of manufacturing welfare remains but the company profits to rob are no longer available. The cost of such interference is well known.

Flexibility is the key. Being able to transfer investment and employment to high performing industries is paramount. People don't like change and the dynamic market but it's a fact of reality, all attempts o avoid it only delay then exacerbate pain long term.

[Oldman]

3.

It is immoral to isolate high performing companies as it is individuals for punitive taxation.

The mining industry as whole, especially globally, is the epitome of immorality. It is, and has been responsible for some of the more immoral acts against humanity including wars (Central Africa today) and Apartheid in South Africa that it was responsible for at the beginning of the 20th century that lasted until the mid 1990's.

Don't even attempt to mouth morality and mouth morality and mining in the same breath, you lose all credibility doing so.

[Gary]

4.

Wow so i wasn't aware that if your in an industry and one company does something bad every single other company in that industry is immoral by default.

Why is the mining industry the epitomy of immorality? When did i say the mining industry was moral or immoral?

I merely stated that taxation that selects out high performing industries or companies is immoral. Read what i wrote, collect your thoughts and contribute something with more consideration.

If a company does something illegal or unethical i'd be the first to throw the book at them. I am not in the pocket of big business, nor supporting mining due to some tribal affinity for the industry. I simply do not recognise any solid moral or economic argument for singling out proudctive companies or individuals for punitive tax grabs.

You need to prove the mining industry as a whole is immoral, just because you typed the words on a post does not make your emotive vommit fact!

Australian mining companies donate millions to their local communities and have brought regional Australia back in business, they provide thousands of jobs with meaningful life improving wages for sectors of the workforce
that typically under perform the professions.

I fail to see how such a transformation that is immoral! The new Flying octors building in my home town was largely propped up by donated mining company funds.

Your welcome to reference global attrocities by miners, but please refrain from drawing long bows that misread my statments and go off on tangents.

[Grantley]

5.

What Howes and his cronies (Gillard included) ignore and refuse to acknowledge is that there is an impact on employment when you 'price' yourself out of the global market.
Like it or hate it but wages make up the overwhelming contribution to that 'price'.
So Howes & his ALP puppets can bleat all they like, but this is of their doing, their policy, their short sightedness but it is going to end up being Australia's problem that another conservative govt will have to sort out as history repeats itself.

Lets hope that is sooner rather than later before these (ALP) clowns do too much damage.

[Dante]

6.

Reading Gary Knight article one forms the view that the ONLY solution available to save jobs and our way of life is reducing taxes. He goes on a tirade lasting 1608 words, he shows no compassion for the 1000 people that will have their income and way of life disrupted, but his advice to the Government is to “lower taxes and make Australia an easy country to do business in”. This is the panacea that fixes everything and removes all evils. He supports this by saying “every business person can tell you how government regulation and endless taxes are making it hard to earn in this uncertain climate”. Buffett and Gates must be stupid business persons to campaign for higher taxes … but somehow I tend to believe these 2 gentlemen may know more about business than Mr Knight. Not happy with his flawed arguments, he then sees taxing companies that do very well as form of punishment for doing well. Although Mr Knights does not mention it, he is clearly not in favour of the Resource Super Profit Tax (RSPT) despite the fact that Rio Tinto and BHP Billiton are in favour of such a tax. Is Mr Knight suggesting that these 2 companies are run by idiots that know nothing about business?.

Mr Knight ignores the benefits of taxes. He ignores that taxes are essential for a society to survive and prosper. He ignores that this policy of lowering taxes has caused the USA to be where it is today. He fails to acknowledge that the net result of continuously lowering taxes results in concentrating more and more wealth in the hands of fewer and fewer people and this is detrimental to development of a fair and just society where everyone can participate.

The argument Mr Knight presents, taken to its extreme, would see no taxes being paid and people being paid as little as possible, maybe survival wages, but no more!!! A system not dissimilar to feudal and “Gone with the Wind” plantation days.

Yet a simple logic exercise would demonstrate more money is placed in the common hand would result in greater prosperity for everyone. Imagine if a group of 10 people have made by their combined effort $100k. What proportion of that money would be spent within the society where these 10 people live if all of the $100K was given to a single person, the owner? And what would be the proportion spent within the same society if the money was equally distributed? The ‘no taxes and lower wages’ group would argue that the owner has put capital and taken commercial risks for which he needs to be compensate. This is also fair, and hence comes the question: what is a fair share between compensating for the capital and risks versus efforts of others and the social good? The answer is critical because it determines what’s fair and equitable. The RSPT and the various laws governing employment does nothing other than that. It tries to balance these competing factors. Neither extremes are logical and fair. As a society we need to work this balance.

The good news is that we can, and that is what Mr Howes is about. And in Australia we have done exactly that within the past 12 months. There is no reason why we can’t do it again to alleviate the problems faced by Bluescope and its 1000 workers. Let me explain for the benefit of Mr Knight.

Not long ago we had 2 weather events (cyclones Larry and Yasi) that destroyed our banana crop. Rather then importing cheap banana we endured high price and low quality banana. I’m sure Mr Knight paid up to $15/kg for banana for his children, as we all did. Why didn’t we import banana from the Bahamas, Brazil, Columbia, etc.? We did not import cheap bananas because we wanted to protect our growers. Why can’t we do something similar for steel? Why is it necessary for BHP Billiton to make $27B profit instead of $26B? Why didn’t our fruit suppliers in markets forgo the profit and turnover that cheap imported bananas would have given them? Are these businesses run by idiots that have put growers before profits? No, Mr Knight, the fruit importers understood the situation and the critical time bananas growers were going through and they endured lower turnover and profits in order to work, yes work (aka CO-OPERATING) with growers because they understand that we are in this TOGETHER!!!

You see, Mr Knight, it isn’t all about profits at all costs, it isn’t about I, ME, MYSELF, PERSONALLY SPEAKING, we live in a society, and as a society we need each other, and we need each mostly when we have a problem. Taxes are not punishments, taxes are the essential contributions that those that can afford make to our society. Advocating the lowest possible rate of tax is counter-productive in the long run, amassing wealth in fewer and fewer hands is counter-productive (read Marcos, Gheddafi, Mubarak, Sadam Hussein) just as is counter-productive the other extreme (e.g. Lenin and communism).

Extreme views and behaviour are the evils of our society, not taxes. Extreme wealth, obscene salaries, extreme greed (e.g. derivatives and GFC), extreme power of the left or the right, etc. are the evils.

We need to have compassion and a society that is prepared to throw on the scrapheap people and isn’t prepared to share its good fortunes (e.g. Mr Knight acknowledges the large BHP Billiton profit was due to the high Australian dollar, the high commodity prices, and the high grade of our minerals, none of which were of BHP Billiton making!!!) is not a fair and just society.

Hyperboles about passing costs to consumers (last time I checked there are NO LAWS that force companies to pass high cost to the consumers, but well-run and ethical companies may use their discretion and accept a somewhat lower profit instead of maximizing profits at all costs!!!) are just excuses for not wanting to do the right thing, but the right thing is always the right thing to do, no matter how much you object to it.

Dressing everything someone from the other side says as a socialist plot and children eating beahviour is childish, puerile and undignified. You should be ashamed for attempting to belittle Howes’ efforts in attempting to give a 1000 family the dignity of work. Shame on you for not giving a single word of support to these workers. Shame on you for not making any realistic suggestion on how to improve their plight. SHAME!!!

[Zyra Mae]

7.

Dante - life isnt fair - get used to it....it isnt about dancing around a maypole singing songs of how joyus the spring time is.

Stop thinking that beating the goose laying the golden eggs will get you more eggs....taxing the big companies more because they make a profit will lead to that company saying - up yours....we're going where it's feasible......you'll have more than 1000 jobs for Paul Howes to "cry" about then.

No there isnt a law to pass on high costs but the fact is - people dont go in to business out of the goodness of their hearts so that they can feel warm and fuzzy at night. the do it to sell their product or service and make a profit. that is the reality of it. if you want to bend over and accept things which do not need to happen - like the new carbon tax....thats your choice.

Feel free to do the 'right thing' - what ever your interpretation of that may be - but do it in your own time and with your own money. Do not force it on others just so you can fluff your feathers and feel better about your existence.

Save your petty attempt with the moral high horse....championing for the 1000 jobs being lost does not make you a better person.

that is all.