Home > Economic policy > She who pays the piper

She who pays the piper

March 26th, 2014

I’ll be on Radio National Bush Telegraph this Friday, talking about the proposals for massive tax expenditures on a “Northern Economic Zone” being pushed by Gina Rinehart, her lobby group Australians for Northern Development (ANDEV) and the Institute of Public Affairs, now heavily reliant on funding from wealthy individuals of whom Rinehart, directly and via ANDEV is the most prominent.

Back in 2000, the IPA was describing the Alice Springs to Darwin rail link, a heavily subsidised Public Private Partnership, as “the modern equivalent of the stupendously wasteful Ord River irrigation scheme“. This was one of the rare occasions on which I agreed with the IPA.

And it has historically been critical of deductions, rebates and other tax expenditures, correctly describing them as a disguised form of public spending
. Again I agree. It’s very rare to find a tax subsidy that achieves a public policy goal more cost-effectively than direct spending.

Having been exposed to Ms Rinehart’s persuasive mode of argument, the IPA has changed its tune, and plays a melody sweeter to her ears. It’s now fully on board with dams, tax subsidies to promote Northern development, and even special visa conditions on migrants, a policy that ought to be repugnant to libertarians of all kinds.

I’ll be interested to see how the IPA reconciles its former free-market line with its current position as advocate for yet more subsidies for someone who is arguably the world’s greatest welfare queen.

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  1. Luke Elford
    March 28th, 2014 at 15:32 | #1

    Of course, in the time it took me to write my comment, Professor Quiggin has uploaded a post with the same analysis. Damn! I must learn to write faster!

  2. Fran Barlow
    March 28th, 2014 at 15:35 | #2

    @J-D

    It’s unclear what your point is here. They did federate, for reasons that at the time were almost certainly unfounded but which were regarded by most as adequate. The people in charge were as far as can be told, for the most part racist or at least saw racism as useful since wide swathes of the populace were too. Another reason for federation was to ensure uniform race laws that would keep out ‘races’ deemed undesirable by the overwhelmingly British population.

    That the reasoning was wrong and also offensive is moot now of course.

  3. March 28th, 2014 at 22:48 | #3

    @Patrickb

    If I recall my primary school education correctly, Western Australia did vote to secede in the 1930′s, but it went no further than a vote.

    If libertarians are against federation, then that is hardly surprising, as their starting point is that every man is an island…

  4. TerjeP
    March 29th, 2014 at 04:01 | #4

    The interest in special economic zones that is held by most Australian libertarians I know is not based on the work of the IPA. The IPA proposal for Northern Australia may or may not be a good idea but it taps into something pre-existing. Which is the notion that it may be easier to liberate people by providing a proximate opt out rather than trying to fix things through traditional reform processes. This thinking is inspired more by the following sorts of things:-

    Charter Cities – Paul Romer
    http://www.ted.com/talks/paul_romer
    http://www.theatlantic.com/international/archive/2013/07/should-struggling-countries-let-investors-run-their-cities/277720/

    Seasteading
    http://www.seasteading.org

    Principality of Hutt River
    http://en.wikipedia.org/wiki/Principality_of_Hutt_River

    Hong Kong – an interesting British experiment near China

    If you only look at one link I’d recommend the first one, a TED talk by Paul Romer.

  5. J-D
    March 29th, 2014 at 12:37 | #5

    @Fran Barlow
    I’m sorry if I wasn’t clear to you. I’m not sure which of my comments you are now responding to. I got into this discussion originally to respond to TerjeP, but in my most recent response to you I was dealing with points raised by you, whereas in my most recent response to Ikonoclast I was dealing with points raised by Ikonoclast.

    Ikonoclast objected to ‘alternative histories’ as ‘foolish fantasies’. As best I can understand that, part of what Ikonoclast was suggesting was that imagining an Australia that didn’t federate is a fantasy. This observation appeared to be intended by Ikonoclast as some kind of rebuke.

    If Ikonoclast’s comment was intended as a rebuke of me, I do not accept the rebuke. I did not in fact engage in any speculation about what Australia might be like if it hadn’t federated, and from my very first comment I emphasised the point that Australia did federate and that decision is not going to be reversed. I did engage in the thought-experiment of time-travel to the 1890s, but thought-experiments, even if they are pure fantasy, are not therefore all foolish. As it happens, I read a good deal of fantasy, and it’s often entertaining and sometimes instructive. If Ikonoclast does not want to engage in that kind of discussion, Ikonoclast doesn’t have to, but that’s no reason why other people shouldn’t.

    It appears that we are in agreement that people in 1890s had their reasons for federating, but that they were faulty reasons, and also in agreement that whatever happened in the 1890s there’s no unscrambling the eggs now (one point of my original response to TerjeP). If you think there’s any other aspect that we might still be in disagreement about, please let me know.

    Ikonoclast seems to think there were good reasons for federating in the 1890s, but I still haven’t seen them, so Ikonoclast and I may still be in disagreement about that.

  6. J-D
    March 29th, 2014 at 12:50 | #6

    @John Brookes
    The story of the Western Australia secession movement (which did go somewhere further than a vote) is an interesting one.

    Australia was, I have read, one of the countries worst hit by the Great Depression, and governments struggled. Over a period of five years, from 1929 to 1934, the Commonwealth, New South Wales, Victoria, and South Australia all voted out non-Labor governments, putting in Labor ones, and then voted out the Labor governments, restoring non-Labor ones, while Queensland, Western Australia, and Tasmania all voted out Labor governments, putting in non-Labor ones, and then voted out the non-Labor governments, restoring Labor ones.

    In Western Australia, the Coalition government of James ‘Moo-cow’ Mitchell, voted in in 1930, saw an opportunity of doing what we would now call ‘wedging’ Labor by seizing on the issue of secession, which had been raised by a vocal grassroots movement. The secessionists were devout British Empire loyalists and wanted the government to appeal to the UK government to allow Western Australia to secede from the Commonwealth. Mitchell and the Coalition calculated that Labor, being more inclined to be centralisers, would be reluctant to support secession, but being more inclined to favour radical democratic measures, would find it difficult to oppose a position supported by popular vote. So a referendum on secession was scheduled to coincide with the State election due in 1933. Labor responded by announcing an officially neutral position on the referendum and promising that if Labor won the election and the YES vote won the referendum, a Labor Government would take up the cause of secession in London. The YES vote did indeed win the referendum, but it turned out that Labor had come off best in the strategic contest with the Coalition: not only did Labor win the election, but Mitchell and every single one of his ministers lost their seats. As promised, the newly elected Labor Government made representations in London on behalf of secession. The UK Government responded by saying that the Constitution of the Commonwealth of Australia was a matter for the Commonwealth Government, not any State Government, and that representations on the subject could only be formally received if they came from the Commonwealth Government (which didn’t support secession and never had, if that’s not obvious). The advocates of secession, being devout British Empire loyalists, had no Plan B to deal with a situation where London refused them assistance, the movement died away, and as economic conditions gradually recovered the Labor Government moved smoothly on to re-election, being able to say accurately that the promise to lobby in London for secession had been honoured and it wasn’t Labor’s fault, in the circumstances, if the attempt had failed.

  7. JKUU
    March 30th, 2014 at 03:13 | #7

    @J-D
    Yes, “The UK Government responded by saying that the Constitution of the Commonwealth of Australia was a matter for the Commonwealth Government, not any State Government, and that representations on the subject could only be formally received if they came from the Commonwealth Government” is formally the reason that the UK Parliament decided not to respond to the WA secession attempt.

    A complementary reason is that the Act to constitute the Commonwealth of Australia was a statute of the Imperial Parliament (1900), and in the Preamble, the union is described as an “indissoluble Federal Commonwealth.” The use of “indissoluble” was no doubt deliberately used in an attempt to prevent the strife that befell the United States, whose Preamble and Constitution do not contain any such language. [Even with such wording, the U.S. civil war would have still occurred]. I suspect that the British lawmakers of the 1930s would be reluctant to second guess their earlier colleagues by ignoring “indissoluble” in the Australian Constitution Act, and so declined to consider WA’s petition.

  8. Jim Birch
    March 31st, 2014 at 09:14 | #8

    The Bush Telegraph program audio can be found here:

    http://www.abc.net.au/radionational/programs/bushtelegraph/nt-tax-free/5344540

  9. Jim
    April 1st, 2014 at 11:22 | #9

    I was feeling a little depressed this morning and needed a laugh to pick me up. So I went to the ANDEV website and had a read. At first I laughed out loud. All those wacky ideas…..

    Then I realised that some of what they are proposing will probably happen over the next few years under the current Coalition administration. Now I am even more depressed….

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    April 5th, 2014 at 04:04 | #10

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