It's hard to believe this is Australia in 2011. People are complaining milk is too cheap. The government wants books to be more expensive. And unions are demanding that steel imports be either banned or have tariffs on them at such high levels they may as well be banned.
It's as though the last 30 years of Australian economic and political history never happened. Up until the 1980s Australian governments put the interests of producers first. Since then governments have put the interests of consumers first (the glaring exception to this being the treatment of the motor vehicle industry). The result of this policy change is obvious for all to sec. This is not to say that change has been easy, because it hasn't. What changed 30 years ago is that politicians stopped trying to prevent competition. Eventually politicians realised it's better to alleviate the negative consequences of competition and take advantage of its benefits.
Thirty years ago politicians at least had an excuse. They had no idea how prosperous the nation could be if the shackles of protectionism were broken. The notion that Australia should embrace free trade had been killed off at the time of federation in 1901, and within a few decades free trade had become practically an alien concept. Whatever ideas of economic liberalism that did exist in this country resided in the works of foreign economists like Friedrich Hayek and Milton Friedman, and in the writings of people like the marginalised Liberal backbencher, Bert Kelly (whose Modest Member column appeared in The Australian Financial Review).
The standard of living we now enjoy is a direct result of the decisions of successive Labor and Coalition governments in the 1980s and 1990s to reject protectionism and its handmaiden, economic myopia. Sure, there's been a degree of good fortune involved in the boom of the past few decades. Australia is lucky we've got lots of iron ore and coal, and we're lucky Asia is at our doorstep, but these advantages could easily have been squandered. The worst thing we could do is to assume that the decisions of government don't matter. They do.
The Labor government believes that because its stimulus spending "saved" Australian consumers from the global financial crisis, consumers won't mind too much if they're saddled with a range of government-inspired cost of living increases, such as imposing a "carbon price".
A return to the bad old days of protectionism and tariffs would be a disaster. Yet the Australian Workers Union with its new campaign against "cheap imports" has signalled it is quite happy for Australia to return to a pre-1980s world. Our union leaders and politicians should know better.
Larry Summers, economic adviser to both Bill Clinton and Barack Obama, put it succinctly a few months ago. "Rising protectionism is emerging as a major threat to global economic growth. In the end, protectionism makes people poorer, makes nations more hostile to one another, reduces opportunities for business and for workers and it is as good as being a zero-sum game. It is actually a negative-sum game that destroys value."
Few members of Julia Gillard's cabinet have the courage or the capacity to stand up for economic liberalisation. Once there was Lindsay Tanner, but he's now gone.
Trade Minister Craig Emerson is one of the very few ministers left who is not willing to disown the Hawke and Keating legacy. Last week Emerson did what the Prime Minister or the Treasurer should have done. When Australian Workers Union boss Paul Howes -- fresh from launching his fight against free trade -- declared war on Rio Tinto, it was Emerson who made the obvious point that it wasn't particularly productive for companies and unions to spend their time beating up on each other. When Wayne Swan was asked whether he supported Emerson's comments, Swan declined to answer.
At the moment an air of unreality pervades the decisions coming out of Canberra. There's a feeling that because the China-led boom is going to go on and on, government doesn't count any more. We can afford bad decisions because there's money to burn, and we don't need to make good decisions because things are as good as they're ever going to get. Policy is on autopilot. At the moment policymakers think they face only two issues. The first is how government can squeeze as much money as possible out of the boom. The second is how government can spend that money.
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