Letter: An indecent proposal

THE “modest proposal” Haydn Black suggested on November 10 – while originally penned for the oil and gas sector – has drawn an irate letter from an industry professional who says our senior writer has misdiagnosed the cause of the world’s economic ills.
Letter: An indecent proposal Letter: An indecent proposal Letter: An indecent proposal Letter: An indecent proposal Letter: An indecent proposal


Staff Reporter

Dear Sir,

I feel that I must respond to the untruths and misrepresentations contained in Haydn Black's opinion piece "A modest proposal", International Coal News, 10 November 2015.

Haydn confidently states "it's time to consider where unfettered, laissez-faire capitalism has gotten us" and later, flippantly asks "Why not resurrect Gough Whitlam's idea for a national resources corporation and mandate Australian involvement in Australian projects?"

I am not sure I have been living in the same universe as Haydn, as I have not experienced "unfettered laissez-faire capitalism" in my lifetime.

Our economy and our markets have always suffered beneath the heavy hand of government intervention and, unfortunately in some cases, crony capitalism. By any definition, this is hardly laissez-faire.

Haydn, and others of his ilk seem to think all of our economic woes may be traced back to capitalism and free market economics, when it is almost always the case that the opposite is true.

The Global Financial Crisis, rather than being caused by capitalism, was in fact caused by the incorrect loosening of monetary policy by the Federal Reserve in response to earlier economic wobbles such as the tech stocks bubble.

This is what caused bankers to seek yields by repackaging and slicing and dicing risky mortgages in an act of ratings agency chicanery, in order to achieve higher returns for investors cruelled by ultra-low official interest rates. The Fed's unnaturally low interest rates were the oxygen of the crisis.

Another contributing factor that cannot be ignored were the actions of the government-created and government under-written mortgage agencies, Freddie Mac and Fannie Mae, who wrote the riskiest loans, and were the fuel of the crisis.

The first and the second phases of the resources boom, either side of the GFC also were not caused by "unfettered laissez-faire capitalism".

The first leg of the boom was essentially due to the opening up of China, by a command and control central government, after years of economic oppression by a communist dictatorship. It happened at the pace that the autocrats in Beijing dictated, with our little resources economy carried along like a piece of flotsam on a tsunami wave. No major decision happens in China without government involvement, and any assertion to the contrary is the ultimate in naivete.

The second leg of the resources boom was driven by unfettered government intervention, but this time, rather than playing economic catch up, the Chinese government was playing a dangerous game of Keynsian economic stimulus - a game that never provides any more than a short term sugar hit, followed by an inevitable hangover. Ultimately all that wasteful spending and malinvestment results in severe economic pain as the money runs out and there are no fruits of prior investment to be reaped. This is the current situation in which we find ourselves, both as a result of the economic maladministration of Wayne Swan and lacklustre performance of Joe Hockey, but more importantly due to the sluggish global economy, burdened by debt caused by the actions of governments.

Which brings us to Mr Black's central argument: That we should nationalise our mining industry - at least partially - because this would somehow improve our economy. Black seems to think that when individuals work for the government, they become more insightful, less prone to making errors and more motivated than when they work for private enterprise; a laughable proposition. If this was the case, then our global economy should be flourishing with all the government intervention I have described above. Sadly, it is not.

History is littered with the wreckage of nationalised industries and government corruption. Mr Black mentions one such case study himself, WA Inc, but there are many, many others, including some far more recent examples in NSW. Taxpayers pay enough towards government boondoggles without funding wasteful spending on a nationalised mining industry. It doesn't take a particularly active imagination to think of all the opportunities for corruption and cronyism that Black's proposal would present.

If Australians want to own Australian resources projects, then all they need to do is buy shares in listed mining companies. It is literally that simple. The only reason Australian companies seek offshore funding, or ultimately are taken over by offshore interests is because Australians don't want to invest in them. If citizens won't invest freely in an industry, then what mandate does a government of the citizens have to invest in the very same industry?

Should Mr Black wish to put his money where his mouth is, rather than volunteering other people’s money (taxpayers), I can provide him with a list of resource companies with Australian projects, and their share market listing codes. Anything less from him constitutes an indecent proposal.

Alex Pauza